Investment into portfolio companies will typically be tranched by defined milestones. These will be smart contracted with blockchain technology to eliminate the inefficiency of brokers, lawyers and any potential disputes (i.e. over the wording of defined conditions in paper contracts).
Some will be routed to offline keysets for human approval but automation will be maximised over time.
For example, if a portfolio company patent is granted by the IPO, blockchain software is able to confirm its publication via the online registry, thus releasing a tranche of investment previously agreed. Historically, using a paper contract would still require a broker, lawyers on each side and a significant time delay in the exchange of documents.
The same inefficiencies occur in capital raised by a fund.
The PIPE Fund will streamline this process with a well defined and legally approved smart contract. The terms of the investment are immutably coded into the blockchain ledger so that investors have greater security than traditional certificated instruments, their assets being automatically distributed upon receipt of the investment by the company.
Profits distributed to the Fund are recorded by the ledger, as are the resulting profits being allocated by the Fund for reinvestment, management fees and distribution to shareholders. The system shares more information with investors than a traditional fund, and it does so in a transparent, immutable and completely auditable format.
This reduces counter party risk and boosts investor confidence while reducing the administrative effort of recording and accumulating the details of these different payments.