The digital platform Harbor has evolved from aiding companies who issue security tokens to supporting them in tokenizing existing securities.
On Monday, the startup revealed creating tokens on the Ethereum blockchain that depict four real estate funds’ shares with an overall worth of $100 million.
With this change in direction, Harbor wants to make private securities easier to trade for the 1,100 investors holding them, and the 17 broker-dealers and placement agents that work with iCap Equity, the manager of the funds.
As Chris Christensen, CEO of Washington-based iCap – Bellevue, commented:
“For years, we’ve been looking for ways to create the best investment experience we can and for us that means providing liquidity for them.”
Josh Stein, CEO of San Francisco-based Harbor also noted the strategic shift, stating that their company “evolved from crowdfunding and tokens to being the Salesforce.com.”
Stein shared the initial idea of the company to build tokens that are backed by real-world assets but made it clear how the real-life situation convinced them to leave this idea:
“The overlap between investors demanding tokens and investors interested in security tokens was zero. People were buying tokens but they weren’t buying it to invest, they were buying it to speculate.”
In general, Harbor’s platform is aimed at investors, advisors and broker-dealers, and encompasses a private marketplace where every user can buy and sell securities. As per Christensen, the funds are “high-yield, [which] usually requires a lockup” and during this lockup investors cannot sell shares for a period of 3-5 years adding that:
“We just knew if we can provide measured liquidity for them and allow us to continue our business model [but] allow them to … exit as needed, that would be cutting-edge.”
Usually, when iCap investors buy securities they are just okay with the one-year lockup. With the old system investors who want their money back before the period ends, had to find people that are willing to buy their securities and commit to the remaining period. However, this process was rather costly and very slow. This is where Harbor’s platform comes to help according to Christensen:
“What Harbor does is they automate this entire process,” he added. “Those who want to come in come in, those who want to exit can do that.”
Is bypassing the rules possible?
The simple answer is no, as iCap works under Rule 144 of the Securities Act of 1933 requiring a mandatory one-year lockup for all sold securities. As Christensen explained:
“Once you’ve held a security for one year, it can be freely tradeable.”
What Stein found interesting is that after this one-year period is over, even non-accredited investors can buy these securities, commenting that:
“I don’t think it’s a goal but what it says to these broker-dealers and RIAs [is] that they have this investment… they can get their non-accredited clients into it.”
As Stein elaborated this step is part of Harbor’s overall strategy vision, summarizing that:
“What we’re hoping to do is increase access… in real estate and other [areas], which was kind of the promise of security tokens to begin with. We’re just going about it a different way.”