SINGAPORE -- Singapore-based cryptocurrency copy-trading platform Alpha Impact has raised $3.1 million in a funding round led by LuneX Ventures, Genesis Block Ventures, Solidity Ventures, SMO Capital and an undisclosed high-frequency trading company, co-founder Hayden Hughes told DealStreetAsia.
Other investors in the round included Axia8 Ventures, Krypital Group, Spark Capital and angel investors.
Alpha Impact raised the $3.1 million through a private sale of its tokens, which it plans to list on the crypto exchange Uniswap in May. The investors -- who have a lock-in period of six months -- bought 15% of the company's tokens, valuing Alpha Impact at about $20 million, Hughes said.
He added that unlike an initial coin offering, in which token sales target retail investors, this round of fundraising was done among only accredited investors and venture capital companies.
The fresh funds will be used to hire more people, particularly developers. Alpha currently has six employees but plans to increase headcount to 20 by the end of the year.
The startup was founded in September 2020 and just recently emerged from venture capital company Antler's startup-generator program in January. So far, it has received $100,000 from Antler and has generated revenue through advisory work to family offices on crypto investing.
Hughes said that having blockchain and cryptocurrency-focused investors like Hong Kong-based Genesis Block Ventures and Singapore-based LuneX Ventures helps lend credibility to the company and establish trust with customers.
LuneX Ventures was spun out from Golden Gate Ventures in 2018 as one of Southeast Asia's earliest cryptocurrency and blockchain funds. Genesis Block Ventures, meanwhile, has invested in about 100 startups to date since it launched in October.
Alpha Impact, which will start selling its tokens on Uniswap in May, will also launch its copy-trading platform early in the third quarter, Hughes said. A copy-trading platform allows users to mimic the trades of more experienced traders. Users on Alpha Impact will be able to choose the trader to follow based on their risk appetite.
"There's a lot of noise [in the crypto market]. It's very hard and very confusing for new investors to understand the space and to separate fact from fiction," Hughes said. "So the idea for us is to give everyone access to different investing strategies."
So far, there are 15 traders who have agreed to allow users to copy their trades, including Hughes and his co-founder Austin Chaird. These traders, which include those working for high-frequency trading companies, will appear anonymously to users but are first screened by Alpha Impact, which aims to expand its network to 100 traders by the end of the year.
Alpha Impact will charge users a 1% fee for every transaction, which will be shared with the traders. The traders will also have a social media profile on the platform for them to share details about their trading strategies.
To use Alpha Impact's platform, users will first have to open an account with an exchange like Binance. Alpha Impact will connect users' accounts to follow traders, but will not be able to access user funds.
"We get limited permission to trade from their exchange account [but] we're not selling crypto," Hughes explained. "Nobody deposits crypto with us, so it's a noncustodial way for customers to gain access to crypto investments."
About 1,200 people have signed up to be test users ahead of the web-based platform's launch, Hughes said, who hopes to have 5,000 users by the end of the year.
While there are already a few copy-trading platforms available, such as eToro and Zignaly, Genesis Block Ventures' partner and co-founder Leslie Tam said they are confident in Alpha Impact's ability to execute their platform smoothly as Hughes and Chaird are knowledgeable about the crypto market and are working to ensure there are "no teething problems on the product side."
"There's a lot of new UX UI that needs to be created [for] social trading needs [and] we thought they were professional," Tam said.
He added that raising funds through tokens benefits both the startup and the investor. "We generally only invest through tokens [because] we can trade it. We don't need to be forced to trade it somewhere, we can trade it wherever we want [or] we can hold it [and] use the tokens as a stake," he said.
Crypto startups trying to raise money can sell their tokens on exchanges instead of spending time talking to venture capital companies. And the market decides the value of the company through the tokens. "It's beautiful because it's so self-regulating," Tam said.
Hughes was previously the head of distribution for blockchain technology investment bank Techemy and an institutional sales manager for Crypto.com. Chaird was formerly a vice-president at JP Morgan handling technical operations.
Interest in the crypto market has increased lately.
Other firms that have raised funds recently include India-based cryptocurrency exchanges aggregator CoinSwitch Kuber, which raised $25 million from Tiger Global Management, and Enjin, a Singapore-based blockchain ecosystem builder that raised $18.9 million in a funding round led by Crypto.com, DFG Group and Hashed.
According to a report published by OpenNodes, Temasek, IBM, PwC Singapore, EY and SGTech, the number of blockchain companies in Singapore grew by 50% year on year to 234 in 2020.
Singapore has also moved to regulate the industry. Last year, it introduced the Payment Services Act, which requires companies to obtain a license for providing payment services, including digital payment token services.
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DealStreetAsia is a financial news site based in Singapore that focuses on private equity, venture capital and corporate investment activity in Asia, especially Southeast Asia, India and greater China. Nikkei owns a majority stake in the company.