A Blockchain is a digital ledger of transactions or records. These ‘blocks’ of data are managed across an endless number of public computers (known as peers) that are connected to the network and store up to date versions of the Blockchain.
A block is the ‘current’ part of a Blockchain, which records some, or all, of the recent transactions. Once completed, a block goes into the Blockchain as a permanent database. Each time a new record is completed, a new block is generated. There is a countless number of such blocks in the Blockchain. The blocks are not randomly placed, but are linked to each other, like a chain, in proper linear, chronological order with every block containing a record of the previous block.
The database is ever growing; expanding in tandem with the amount of transactions made on the network. The decentralized nature of Blockchain technology ensures that transactions are immutable and thus immune to change, offering full transparency for each and every transaction. Add to that the traits of increased security, higher efficiency, resistance to error and reduced transaction costs, it leaves no doubt as to why many are excited about Blockchain’s possible future uses. The utility of Blockchain technology is endless, with an ever-growing list of companies, industries and governments looking to further explore its potential.
Venture capital is a form of financing that is provided by individuals, firms or institutions to small, early-stage, emerging companies that are deemed to have high growth potential but don’t have access to equity markets. Such investments are generally classified as risky as they are illiquid but are capable of providing impressive returns if invested in the right venture.
There are different stages of venture capital investment:
The first external investment that helps get a company off the ground
Investment that helps take a company that has successfully proven its concept, and help them to accelerate their sales and marketing efforts
Further rounds to provide additional financial support to grow the venture to its next stage of development usually through an enhanced sales and marketing strategy
Within the venture capital space, the two most typically used structures are equity and convertible debt. Equity is issuing common stock or preferred stock. Once invested, equity is owned outright until some type of sale or liquidity event of the company occurs. Unlike debt, equity does not require repayment but is invested in return for a percentage stake in the company.
Convertible debt is a loan mechanism that technically implements a repayment date and may require repayment at some point in the future. However, it is common practice for sophisticated debt investors in venture capital to treat their investment akin to an equity stake, and are prepared to convert their debt position into an equity stake in the company at some point in the future.