On its way to bringing a much needed change to the Foreign Exchange markets, FXCH Ltd. - the Spot-FX Clearing House, which in July, settled the first FX trade on the Blockchain - is attempting to disrupt again: The first round of financing of the Irish Startup begins this week with an Equity Crowdfunding campaign on Seedrs.com.
We asked Franck Mikulecz, FXCH's Managing Director, why the use of Crowdfunding when traditional sources of investment are not in short supply for FinTech in general, and Blockchain implementations in particular. "First, Equity Crowdfunding epitomises the spirit of Open Source, from which we have benefited over the years. It is a way for us to give back, allowing the crowd - private investors - to join our efforts in disrupting the markets", says Mikulecz. "Then, you have the buzz that a successful campaign brings to a Startup business. We are trying to lead the Foreign Exchange market out of an impasse, where doing things the way they have always been done (banks settling FX trades bilaterally) is not working anymore. I think Crowdfunding attracts people who want to do things differently. By starting with Crowdfunding, I think we send the right message."
But FXCH is not a student garage Startup with little experience in Foreign Exchange. Some of the founders have worked together for over 20 years, beginning in the FX Futures markets when the NYBOT-Finex set up shop in Dublin in in 1995. Their experience in Futures is where the central clearing concept bug took shape. A few attempts were made to partner with established Exchanges to offer a Cleared Spot-FX service. But for budget reasons or just cultural differences, it never took off.
Marc Despallieres, Director of APAC at FXCH says: "When we traded on the Futures pits in France many years ago, we did not realise how advanced the central counterparty model was, the hidden gem behind the exchange's open outcry system". "What we are bringing to the OTC world of Spot-FX with FXCH is this streamlined simplicity of a Clearing House. Our usage of the Blockchain reinforces that simplicity with transparency."
This Crowdfunding campaign is not the only source for the €8.5 million that the company is raising. There are already strategic investors - not VCs - in discussion to participate right after this round. "Of course we want to disrupt the way the market is structured. But with the support of established names in the Investment Banking, Broking and Hedge Fund Sectors, and even the possibility of an Exchange, we can establish the Clearing House's credibility and get a faster consensus around this concept", says Mikulecz.
Seedrs.com is a British platform that has been particularly successful in FinTech fund raising. It operates via nominee vehicles so all investors, small or large, have the same investment conditions and protection. In addition, HMRC is supporting the Startups movement in the UK with the very generous S/EIS tax credit scheme for private investors (up to 50% tax rebates). With a permanent base in London, FXCH is able to benefit from the scheme.