Singapore-based cryptocurrency copy-trading player 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 firm, its 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 in an initial coin offering, where token sales target retail investors, this round of fundraising was done among only accredited investors and venture capital firms.
The fresh funds will be used to hire more people, particularly developers. Alpha Impact currently has six employees, which it plans to ramp up to 20 by the end of the year.
The firm was founded in September last year and graduated from venture capital firm Antler’s startup generator programme in January. So far, it received $100,000 from Antler and has generated some 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.
How copy-trading platforms work
Alpha Impact, which will start selling its tokens on Uniswap in May, will also launch its copy-trading platform early 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. So the idea for us is to give everyone access to different investing strategies,” Hughes said.
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 they are screened by Alpha Impact first. They aim to expand their network to 100 traders by the end of this 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 the users’ account to follow its traders, but it will not be able to access the users’ 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, and they aim to have 5,000 users by the end of this 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, and they knew what the problems were, and how to bring in these users,” 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 the exchanges instead of spending time talking to VCs. 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 its technical operations.
Interest in crypto
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 software products 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 licence for providing payment services, including digital payment token services.