Fintechs are finding it harder to attract funding this year compared to last. Venture capital fell by more than a third in the first six months of 2020 compared to 2019, with investors preferring medtech, biotech and cleantech projects over financial technology.
Early and growth stage funding hasn’t dried up completely, as evidenced by crypto storage firm Metaco this month attracting CHF17 million from a consortium of investors. Bank Vontobel recently invested a “small single digit million” sum into the newly created Yapeal fintech bank.
But despite some notable successes, the overall trend points to a tightening of belts in the fintech sector. Young companies might need to find funding from alternate sources. Crowdfunding and crowdlending are on the rise in Switzerland, reaching close to CHF600 million last year.
Gentwo, a rising Swiss star, is tapping into its own innovation to find other alternatives for raising funds. The fintech turns illiquid assets into bankable securities and builds digital platforms that allow companies to independently issue their own securities.
This has allowed Barry Films to widen the range of contributors to an investment fund to finance future movies. Gentwo has also securitised a digital token issued by the company Finka that links investors to the future profits of the Bolivian La Pradera cattle farm.
Now Gentwo is turning its own equity into tradable securities. It has already created a securities issuing platform for the asset manager Clarus Capital Group. This is now being used to create certificates that track Gentwo shares. Each certificate will be backed by a Gentwo share, giving investors indirect exposure to the fintech’s equity.
If Gentwo’s share price goes up, the certificate will gain in value – and vice versa. The financial product is designed for institutional investors, such as family offices, who want to incorporate a slice of the growing company into their managed portfolios.
Gentwo is looking to raise CHF10 million to finance growth into other countries. The conventional fundraising campaign ran straight into the coronavirus pandemic and a consequent dipping of risk appetite from venture capitalists.
“These are unprecedented times in the markets,”
says Gentwo CEO Philippe Naegeli.
“It’s more difficult than a year ago.”
On the positive side, Naegeli says business for Gentwo has been booming in the few months like never before. Digital financial solutions are in demand. The Gentwo share tracking certificate may therefore give the fundraise just the boost it needs.
Naegeli is hopeful that the certificate can raise around CHF3 million. Gentwo is valued at CHF40 million at the moment – a figure that would rise to CHF50 million if its overall fundraising campaign reaches its target.
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