Japan’s Gumi forms $30M crypto fund, unveils investments in 5 blockchain startups

Gumi CEO Hironao Kunimitsu
Photographed by Takeshi Hirano in May of 2017

See the original story in Japanese.

Japanese gaming company Gumi recently announced on Thursday the establishment of the Gumi Cryptos fund for investment in cryptocurrency and blockchain technology-based services. It was set up as a limited liability company, and as a fund will add the scheme of silent partnership.

The fund is worth $30 million US, with Gumi investing through its venture capital subsidiary Gumi Ventures, and about 10 major Japanese financial institutions also participating.  The company names are not disclosed. Miko Matsumura, the founder of Evercoin is appointed as a co-partner of the fund. He has also been managing other funds as a partner.

Gumi Cryptos has already invested in US-based crypto bsinesses. Specifically, it has invested in five companies: Basis (cryptocurrency issuer), Robot Cache (decentralizsed game content distribution platform), Origin (sharing economy marketplace), Pryze (blockchain-based sweepstakes platform), and Theta (decentralized video distribution platform).

Tokyo-based Unicon, the startup behind the Bitinvestors crypto evaluation and comparison site, is expected to support the fund in terms of managing tokens.

Gumi Cryptos uses SAFT scheme to invest

Various methods have arisen with regards to investments in unlisted companies, especially in startups, such as classified stocks and convertible notes. The feeling is that these formats have been maturing in the last ten years even in Japan.

At the same time, investment through cryptocurrency is undergoing something similar. Initial Coin Offering or ICO, which one commonly hears, is actually closer to crowdfunding than investment, and usually does not include the right to control corporations like through stock voting rights. On the other hand, it causes controversy because of dividend scheme like Airdrop and capital gain functions.

Amid such differences, what kind of method do the Gumi cryptos use to invest in and collect gains from unlisted companies? According to Gumi CEO Hironao Kunimitsu, at present it is customary to use the SAFT scheme.

First of all, crypto investments began with crowdsales or ICO. It is possible for anyone to purchase tokens, and as the reader may be aware, the ability to assign development costs with fluctuating prices due to the expected value of projects has spread like wildfire. Exchanges handle “listings”, and it is recent that they began to handle security-like elements. However, with this method, the investor protection method that is used in the regular stock market was not applied at all and a lot of fraud occurred.

Therefore, a new method was adopted which involved shifting to selling only to a few experts, such as qualified investors and affluent people, and as a result a new version of “SAFE (Simple Agreement for Future Equity)”,  “SAFT (Simple Agreement for Future Tokens)”, was born.

Without going into details, SAFT first provides the initial development costs in order to promote project development. Following this, after the project development has been successfully completed and it is at the stage where ordinary users can buy and sell tokens on exchanges, the fund will have priority in making purchases.

There was also talk that a future scheme may have the initial offering as common stock and preferred stock, after which investors would be able to convert them to tokens. Additionally, the Gumi Cryptos Fund is denominated entirely in dollars, if it is necessary to purchase in cryptocurrency the rate will be determined at the time of investment.

Translated by Amanda Imasaka
Edited by Masaru Ikeda