Brave Souls: ‘Unicorn’ Crypto Project Ties Value To Equity In Emerging Growth Companies
Alex Konanykhin is a brave soul.
He started a cryptocurrency project at the start of a war in Ukraine, decades-high inflation in the U.S. and Europe, Fed monetary tightening, and the potential for food shortages driving up commodity prices. He seems to have anticipated the meltdown of the traditional coins as his February 23 press release touts Unicoin as the “solution to the high volatility of cryptocoins.” His idea stems from a notion popularized by Warren Buffet, a famous Bitcoin
Cryptocurrencies are not backed by the good faith and credit of a nation, let alone the start-up founders or their venture capitalist investors. It isn’t backed by hard assets either. It’s not like Dogecoin
So if you can create a joke coin worth tens of billion maybe you can create a coin backed by emerging growth companies in the revenue stage. “Our idea is to create a crypto 2.0,” says Konanykhin. “Something that can be understood by the market. Bitcoin is created by an anonymous person for other people seeking anonymity. It doesn’t pay interest. What if your coin was backed by venture capital investments in scaleups? That’s what we are doing.”
Of course, scaleups – as they are known and not to be confused with the pre-revenue startup world–can become worthless.
Unicoin’s portfolio is available on its website. The coin itself is considered a securities token by the Securities and Exchange Commission.
“I think right now that venture capital and speculative money feels like it just got a lot harder to find,” says John Sarson, founder of Sarson Funds, a crypto currency investment company based in Indiana. “I wouldn’t think that now is a great time to launch a new project because investors are consolidating into the largest and safest projects right now. But the dust settles pretty fast in crypto,” he says. “I think the animal spirits will return and it should only take a year or so for risk appetite to come back.”
This is Konanykhin’s first foray into cryptocurrency. Unicoin purports to be the cryptocurrency that Konanykhin and a team of investors will use to invest in startups that present themselves on a show he created – the one-year-old Unicorn Hunters. You can see the show here.
Unicorn Hunters is like a Shark Tank, but open to millions of investors. Its hosts include Steve Wozniak, one of the founders of Apple.
On the show, company founders have 20 minutes in a roundtable called the Circle of Money to pitch their company and answer the related questions. These are not crypto companies. One of the Unicoin funds investments is in a healthcare company called Mymee in New York.
This show is the center of the Unicoin universe, for sure.
Show participants are put in front of Wozniak, and others including Rosie Rios, a former Treasurer of the United States under President Obama; Moe Vela, another Obama White House staffer and ex-Vice President Biden Senior Advisor; and Lance Bass, a 90s popstar back in the days when he sang with NSYNC.
Unicoin will invest unicoins in some of the companies that appear on Unicorn Hunters. But investors do not own any positions in those companies. Only Unicoin itself does. The value of Unicoin rises, in theory, with the value of the companies the fund has chosen to invest in.
The show does not appear on any major network television station, but has its own YouTube channel with 125,000 subscribers. Some episodes only have a few hundred views, while others garnered millions of views. The show can be accessed through YouTube and other live streaming channels, as well as on UnicornHunters.com.
Wozniak told Fortune magazine in March that Unicoin “really opening up the world of startup investment to the masses.” It’s really only open to the masses, as in retail investors, outside of the U.S.
Wozniak contrasted Unicoin with other cryptocurrencies, telling Fortune’s Jonathan Vanian that it isn’t “just based on words and talks” but is instead “really based on the outcome of investments.”
Konanykhin’s crypto depends in part on the success of this show and Wozniak, of course, is a headliner. “I approached Wozniak because I wanted on the show the co-founder of one of the most innovative companies in the world which later became the only company that had reached $3 trillion valuation and he agreed,” he says. “Like he has stated on the show, a show like Unicorn Hunters would have been ideal for Apple when he and Steve Jobs were looking for ways to finance their company.”
I likened the Unicoin idea to venture capital, crypto-style, but Konanykhin said that investors were holders of the coin and did not have any stakes in the companies. The companies the Unicoin fund invests in are what brings the coin value, and pays dividends.
Unicoin right now is invested in five startups (like Mymee) that appeared on Unicorn Hunters, and also 5 million shares of the show itself.
So far Unicorn Hunters raised $55 million, and used these funds to launch the show and Unicoin.
Konanykhin, a Russian immigrant who defected during the blowup of the Soviet Union and has been living in the U.S. ever since, runs a six-year-old software services company called Transparent Business with a partner named Silvina Moschini. Transparent Business serves as the Unicoin fund manager. It calls itself a holding company.
Argentinian entrepreneur Moschini is best known down for creating a company called SheWorks, a platform targeting women looking for remote work.
“We raised money from 3,000 investors from around 45 different countries for Transparent Business in 2018 just by creating videos explaining what we do and we grew traffic through social media,” says Konanykhin. “We raised money that way. Once we saw that, we decided – okay, now we know how to do it through social media platforms – let’s produce a TV show, and we hired a production company to film it in Beverly Hills at CBS Television City.” Konanykhin is the Executive Producer of Unicorn Hunter.
They claim to have sold $25 million unicoins and are spending a lot of that capital on advertising. They have advertisements in New York City airports, Miami International, San Francisco, Los Angeles and Denver airports.
“The business model of our Unicorn Hunters show consists of taking 5-10% of the company to give it visibility on the show and they think it is worth it because they can be watched by millions of people around the world,” Konanykhin says, even though most shows will not have that sized audience. “That gives us a chance to create this crypto coin, with backing by assets we invest in, which are stakes in these companies owned by the Unicoin fund managed by Transparent Business. You can see the founders make their presentations, you can see what the panelists say about these companies, you can visit their websites and do your own due diligence. We are flooded with applications from scale-up companies. I expect the portfolio value to grow by investing in more of these companies in the next year.”
Stakeholders are not just a few institutional investors like in traditional VC funds, but are coin holders. Like many private funds, this one has a lock-up period of six months.
“We are simply trying to capture a large share of the demand for cryptocurrrency investing by offering the first equity-backed, dividend-paying cryptocurrency,” he says.
Unicoin is trying to raise $50 million from global investors in this ongoing first round, expected to close by September. Then they hope to up the ante in a second round and raise $100 million and then double it to $200 million in a third round by 2023. Unicoin is currently worth around 10 cents. It is not traded on any exchanges.
“The first fund is a beta test for us. It is invested in the show itself and the five portfolio companies,” Konanykhin says. “Those companies generate dividends for shareholders of Transparent Business. We are now building a new portfolio for new investors.”
If this works, Unicorn Hunters and the attached Unicoin will eventually be invested in different sectors. “We’re thinking a Unicoin fund would focus on companies in metaverse, SaaS, FinTEch and pharmaceuticals,” he says. “We will create individual Unicoin funds for each major category.”
Should crypto die out in the months ahead and look less interesting to newcomers, the worst case is that Konanykhin can always make the switch to old-school venture capital. It’s just that retail investors won’t be able to invest in these Unicorn Hunter projects, even if they are doing so only indirectly.