Leading global digital securities platform iSTOX has announced that two government-backed investors in Japan have concluded an agreement to invest in the company, as iSTOX closed its Series A funding round with a total of US$50 million raised. The two investors are: the venture capital arm of Japan Investment Corporation (JIC), or JIC Venture Growth Investments (JIC-VGI), and Development Bank of Japan Inc (DBJ), which is a financial institution wholly owned by the Japanese Government. Also joining iSTOX as new investors are Japan’s Juroku Bank and Mobile Internet Capital (MIC), a venture capital firm.
In this latest round of financing, existing investors Singapore Exchange (SGX), Japan’s Tokai Tokyo Financial Holdings and Korea’s Hanwha Asset Management also made fresh investments. Other existing investors of iSTOX include Temasek Holdings subsidiary Heliconia Capital Management and Thailand’s Kiatnakin Phatra Financial Group.
Founded in 2017, iSTOX is a financial technology company regulated by the Monetary Authority of Singapore (MAS) as a multi-asset platform for the issuance, custody and secondary trading of digital securities. The mission of iSTOX is to democratise the private capital markets, putting previously out-of-reach investments in the hands of underserved investors. iSTOX graduated from the MAS Fintech Regulatory Sandbox in February 2020.
Oi Yee Choo, Chief Commercial Officer of iSTOX, said, “The support of government-backed investors JIC-VGI and DBJ as well as other new investors in this round signals a rising confidence in the iSTOX digital securities platform and our business model. Existing shareholders SGX, Tokai Tokyo and Hanwha have also added to their holdings, which shows that investors who have engaged with iSTOX for some time continue to have strong conviction in our mission and our potential.”
She added, “Capital markets are transforming rapidly because of advancements in technology. The regulator MAS and our institutional investors have been far-sighted and progressive, and they support the change wholeheartedly. With the new financing, iSTOX will expand our footprint both geographically and in terms of investment offerings. We will roll out private issuances by blue-chip issuers that individual investors on our platform can subscribe to in bite-size portions. Our expansion in China, where we recently signed an agreement with Chongqing city, will continue apace. Also in the iSTOX pipeline are issuance deals involving other regions, including Europe and Australia. The digital securities space will grow by leaps and bounds in 2021. iSTOX will lead the competition globally and bring positive change to the world of finance.”
Launch of the next generation of digital financial services
Hideki Yarimizu, Chief Executive Officer of JIC-VGI, said, “We have decided to participate in the launch of the next generation of digital financial services and platforms covering Asia. We believe that this project will also contribute to the development of Japanese financial services. We look forward to working with iSTOX’s management and shareholders.”
The Series A announcement takes place at a time when private markets are outperforming public markets. In the past decade, global private equity returned 13.2% on average, approximately double the returns from global public equity. Private market assets under management grew to US$6.5 trillion in 2019, almost 2.7 times more than in 2010.
iSTOX has made important strides in the past year and is well-positioned to contribute to this wave of private market growth. After obtaining a full MAS license in February 2020, iSTOX signed a memorandum of understanding (MOU) with the Chongqing Monetary Authority in November 2020 to set up a digital securities exchange in Chongqing to serve the Chinese market, marking the first overseas expansion by iSTOX. In December 2020, iSTOX listed the world’s first unicorn fund in digital securities form.
iSTOX allows multi-asset issuances of fractionalised private market securities, including equity, bonds and funds, making them accessible to a much larger pool of investors, not just institutions or private banking clients. Through the creation of security tokens using blockchain and smart contract technology, iSTOX automates manual processes that have hitherto made it impossible for traditional issuers to handle large numbers of smaller investors. This enables iSTOX to reduce minimum investment ticket sizes to US$20,000 or less, from the US$1 million minimum usually required for private market investments. The proprietary exchange iSTOX has built also allows the secondary buying and selling of securities among investors, enhancing the liquidity and value of those investments.
With the efficiency gains from tokenisation, companies that issue securities benefit from lower fees, a lower minimum fundraising threshold, faster speed to issuance and less uncertainty. The access companies get to a larger pool of investors and capital allows them to stay private for longer, giving them the freedom to focus on long-term growth, rather than the short-term profits required by the public markets.