It might be considered slightly off-brand for a company based on blockchain technology and trading in cryptocurrency to raise money through traditional methods. After all, it’s hard to justify a value proposition for the currency of the future when the methods of the present are fueling a company’s growth. Case in point: Ternio. The blockchain-based FinTech whose mission is to open up crypto to everyday spending has taken a decidedly unorthodox view of fundraising, one that invites its users to fund the company rather than a group of wealthy VCs.
According to Ternio Co-Founder and CEO Daniel Gouldman and his colleague, COO Ian Kane, the company is focusing its energies on building out and connecting crypto, blockchain and payments rails in a bid to expand the payments ecosystem. That kind of growth will take capital investment and other companies might go to an initial public offering (IPO) or a traditional VC round to get it done. To that end, said Gouldman and Kane, Ternio is raising $12 million through what is known as a “Regulation A+” offering that exists, in general terms, as an alternative to a traditional (small) IPO that Kane said also expands investor access to the fundraising and equity process to accredited and non-accredited investors alike. They told PYMNTS CEO Karen Webster that the new fundraising comes on the heels of an equity offering last year through a crowdfunding campaign.
Of that earlier effort, Kane said, “it was oversubscribed by a ton of people that have interest in the digital currency space and don’t necessarily want to buy digital currencies themselves. They’d rather invest in the companies that are enabling that broader infrastructure to be successful.” He added that, rather than go through traditional channels (marked by institutional investors) the Regulation A+ form would be beneficial as it would put tens of thousands of investors in place who understand and use the company’s products and can act as “advocates on the ground.”
“There are some people that don’t own cryptocurrency, but they’ve invested in us because they believe in this space,” said Kane. “There are also people that have owned bitcoin, the traders, the miners, the long-term holders, they’re all using our products. And the other nice thing too, is that some of the people that invested in us are not really sure about the space and this is their first foray into it. And we have the entire investor database of people that have supported us. They’re constantly emailing, asking questions and trying to connect us with other people.”
The funding will be used to grow the business, said the Ternio executives (who said the company is already cash flow positive), both in terms of staffing levels and new product launches across the European Union, Latin America and APAC.
“We’re at about 25 people today, and we want to get to about 75 people … we need to ensure we have the firepower to compete,” said Kane.
That firepower will be needed as market dynamics in the crypto space have accelerated dramatically, even since the New Year. One of the most important developments has come from Mastercard, which surprised many observers recently by detailing its plans to work crypto into its payments network. Beyond the big names in crypto, of course, central banks have been exploring —and in some cases issuing — central bank digital currencies (CBDCs). Smaller countries like the Bahamas (with its Sand Dollar and new program from Mastercard and Island Pay that uses a prepaid card to convert digital currency into Bahamian dollars to pay for goods and services) have been jumping into the digital currency fray.
“Bitcoin is essentially a peer-to-peer payment network,” Gouldman said. “We know Mastercard has gone heavily as a stable token platform, and Visa [is] running it as well. In fact, both of them are running stable tokens on their rails and testing it. That is the future. And then it’s just a matter of finding the locations for the countries where they’re embracing it. So they’ll have the technology capability and then it just becomes a regulatory and compliance question.”
Early Days
The rise and pre-eminence of bitcoin can be illustrated in any number of ways that underscore that it’s early days yet. As Gouldman noted, in a throwback to other comments made in this space, bitcoin has cemented its place as the “Model T” of cryptocurrencies. Way back in the 20th century, he said, Henry Ford’s Model T kicked off a revolution. But, of course, the revolution — for autos and cryptos alike — has given rise to a global landscape of choice (and no small amount of competition).
“If you think about the automobile industry today,” said Gouldman, “you have an SUV, you’ve got motorcycles, you’ve got any number of types of cars that exist in the world now, electric too. There’s a diverse set of transportation options.”
Such is the case with cryptos, he said. And according to Gouldman, bitcoin is no Ponzi scheme, as there is a scarcity value and a 12-year trading history.
Kane offered another illustration: “Bitcoin is the gateway drug” for cryptos,” he said. “It is somewhere in between digital gold and digital real estate … it’s a store of value. We don’t really know how much gold is out there … with bitcoin you have a finite amount. And that’s really where the volatility comes in. But I think it’s a tremendous store of value.”
Kane pointed to the fact that a growing number of companies have been putting bitcoin on their balance sheets, holding the crypto alongside cash and other assets (Tesla is but one recent example), in anticipation that appreciation and gains on sale will bring outsized returns. He pointed out that with the price appreciation that has been a hallmark for bitcoin and its brethren in recent months, a growing number of users want to leverage those gains into buying power and, in the parlance of Wall Street, take a bit off the table.
Some crypto players have even been using a number of digital currencies in a manner akin to arbitrage, netting out profits to pay for everything from gas to Netflix accounts. The question becomes, of course, how to make those gains and appreciation spendable.
Ternio, as Kane and Gouldman stated, makes it possible to integrate with several blockchains (among them, said Kane, bitcoin) and, with the firm’s white-label crypto card, use crypto in a retail setting.
“If you take a gain on bitcoin and you need an easy off-ramp, we make it really easy for you to basically tap into that value when you [swipe] your card,” said Gouldman.
Gouldman and Kane said that remittances — using digital fiat to cross borders in peer-to-peer (P2P) or account-to-account activity — represent some low-hanging fruit for these initiatives. Cryptos, they said, also can be an attractive hedge against hyperinflation in countries where cash holdings eventually can prove worthless.
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