Nivaura, a UK-based graduate-from from Microsoft’s Accelerator programme for start-ups, has developed an Ethereum blockchain-based service to make raising money simpler and cheaper. This could transform how businesses attact investor funds.
Nivaura offers automated bond issue in a cryptocurrency on a public blockchain platform. Not only does this reduce the need for middlemen, and the costs associated with regulatory clearances, a broader range of investors can participate – because an offering is public.
Avtar Sehra, Chief Executive and Chief Product Architect at Nivaura, said: “What we’re showing is you can use open public infrastructure for regulated financial instruments, and this is a very critical step, because from the earliest stages we’ve always believed that public blockchains are the way forward. As cryptocurrencies or tokenised fiat-currencies become an accepted form of payment mechanism it won’t be long before automated crypto-denominated deals become standard practice. The fact that we’ve successfully executed a private placement transaction with retail investors puts us in a really good position to help those who follow in LuxDeco’s footsteps.”
The Nivaura platform
Nivaura has chosen to run its platform on Azure because Microsoft’s cloud platform complies with guidance released by the UK’s top financial regulator. The FCA released guidance in July aimed at aiding firms from the financial services sector as they move workloads online – from deciding to outsource and selecting a provider, to monitoring how their data is handled. JPMorgan, Allen & Overy and Moody’s helped with Nivaura’s bond issue, which had a week-long maturity and paid 10% annual interest – a premium was added to manage volatility in the currency.
The use of blockchain technology matters because is a database which one can add to but not modify. This makes it secure. Each entry, or block, links to the previous one.
Nivaura’s bond automation
Nivaura’s technology automates:
- the creation of the necessary legal documents
- the coordination of covenants, conditions and bookbuilding
- assembly of the required e-signatures
- the creation of the asset and money registers
- delivery versus payment of the instrument
- ongoing management of bonds, all on a public platform.
Allen & Overy partner Phil Smith added: “This is a really exciting development … for the debt capital markets as a whole. The Nivaura platform has the potential to open up the markets to those smaller companies that previously saw cost of execution as a limiting factor. We believe we’re likely to see some really interesting shifts in the funding landscape as a result.”
What does it mean
Nivaura hopes banks and law firms will use its platform to help small and medium-sized companies access new sources of funding. That funding, by design, aspires to come from a wider base of investor participants than is normally practical with public fund raising.
Therein lies one possible rub. Though there is involvement by the FCA regulator, participating in a bond issued via the Nivsura platform does not have the same assurance as normal bond issuance. Caveat emptor still applies.
Perhaps more bothersome for such a bold-sounding initiative, there is a paucity of information about Nivaura itself. Its web site consists of one page, with no technical detail nor discussion of how Nivaura operates. Instead there are many employee profiles.
This does not comfort. If Nivaura wants to be taken seriously it needs some rapid upgrading of its own public persona. Gilding itself with the golden names of Microsoft, JP Morgan, Allan and Overy and Moody’s is insufficient, despite the attraction of the promised blockchain automation.