Asset management startup Superstate, which in June filed a registration statement with U.S. regulators to offer a short-term government bond fund with a secondary record of ownership on the Ethereum blockchain, has closed a $14 million Series A capital raise, the company announced on Wednesday.
The San Francisco-based company announced that it would use the funding to expand its workforce, introduce private funds targeting institutional investors and “create a framework for compliant, tokenized registered investment funds.”
“The future of investments are programmable, compliant, and transparent,” said Superstate co-founder and CEO Robert Leshner, who is the founder of lending protocol Compound, in a statement. “To date, first-generation tokenized funds fall short; they either function within private blockchains, or exist in off-shore entities, removing access for U.S. investors. Superstate aims to bring on-chain advantages to U.S. investors.”
The funding comes as blockchain technology plays an increasing role in the development of new financial products that are meant to be more user-friendly and secure, among other potential benefits.
CoinFund and Distributed Global led the capital round with participation from Breyer Capital, Galaxy, Arrington Capital, Road Capital and Modular Capital, among others. In a June seed round, Superstate raised $4 million with ParaFi, Cumberland and 1kx in the lead.
Superstate’s self-custodied funds will aim to give investors the opportunity to purchase traditional assets through on-chain investment products with the speed and other advantages of tokenization, the company said. Investors will be able to move and settle funds quickly with compliance in real-time, and the tokenized assets will be “composable with on-chain contracts and applications.
In the June 26 registration filing with the Securities and Exchange Commission (SEC), Superstate said that its “ultra-short duration government securities fund” would likely invest “at least 95% of its net assets in short duration U.S. government securities, including U.S. Treasury securities and U.S. government agency securities.
Superstate will use a traditional financial services organization as a transfer agent to document ownership, but it will also record “certain fund shares on one or more blockchains, initially the Ethereum blockchain, in the form of the Secondary Blockchain Records.”
“The Adviser believes that a blockchain-integrated recordkeeping system may provide operational efficiencies and enhance shareholder experience without negatively impacting the quality of the services provided by the Fund’s transfer agent,” the filing said, adding that “shares might also be available for purchase, sale, or transfer from one shareholder to another shareholder (or potential shareholder) ‘peer-to-peer’ on a blockchain by utilizing Secondary Blockchain Records.”
“The Transfer Agent’s Official Record would be reconciled and matched routinely with the Secondary Blockchain Records to effect any peer-to-peer transfers of shares,” Superstate said in the filing.
Through a spokesperson, the company could not predict when the initial government bond fund might launch or the timing of additional funds. Superstate will add five to 10 people to its current eight-person team, mostly in engineering, over the next 12-18 months.
In a statement, CoinFund founder and CEO Jake Brukhman said that “Superstate’s approach to tokenization will bridge the gap between high-quality compliant financial products and the massive advantages and innovation DeFi is poised to offer to traditional finance.”