As cryptocurrency goes mainstream, attracting individual and institutional investors, digitally-savvy employers realize tokens are an increasingly attractive form of compensation, especially for their millennial staff.
But paying employees in digital assets can create all sorts of administrative hurdles. Human resources managers manually record who has been paid what on a giant Excel sheet but can easily lose track of where the tokens are going, as transactions are largely decentralized. And because token holders are also supposed to be shareholders in an organization, changes of ownership can tip the control and power within the company.
Started three years ago, Sprout is trying to make the ownership of digital assets more traceable and transparent for organizations. The Hong Kong-based startup was founded by Andy Lee and Tony Sun, who used to work together at Mapbox, as a cap table software provider. It was helping mid-size startups keep track of equity as they grew, but last summer, as the price of Bitcoin shot to a historic high, the company began getting requests from its clients to help manage employee tokens.
Sprout created Folium in light of this customer demand to help companies trace digital coins and non-fungible tokens across various blockchain platforms. Folium begins by collecting individuals’ blockchain addresses, reading ledger changes and labeling them according to ownership, like whether it belongs to an employee, investor or founder, and the type of transactions; that is, whether it’s a payroll or investment.
Once all the wallets are tagged, Sprout will have a token cap table ready just as it has done for equity ownership. Tracking tokens gives more transparency to founders, investors and ultimately regulators, reckoned Lee.
“We think there’s a tremendous opportunity to help traditional and crypto companies manage tokens,” said Lee, who previously worked on Uber’s business development across Asia, including China. “Crypto is next-generation compensation.”
Sprout has hit a sweet spot managing both traditional equity and the flourishing space of digital tokens via its SaaS platform. With this two-thronged strategy in place, the startup managed to raise $3 million from a seed funding round that recently closed.
Investors from the round included U.S.-based venture funds Sovereign’s Capital and Firsthand Ventures, as well as Hong Kong’s NDN2 and the special administrative region’s government-backed funds. Prominent angel investor Ruby Lu, who is known for her early bet on Kuaishou, TikTok’s nemesis in China, also participated.
Sprout is first going after companies in Hong Kong and Singapore, which have emerged as major nexus for crypto companies. “There are, anecdotally, a lot of employees and people in the Asia Pacific who understand tokens more than equity,” Lee observed. “So it’s actually attractive for a company [in the region] to think about, especially if they’re moving into web3, having tokens.”
With its new proceeds, Sprout plans to add more product and engineering staff to its current team of 30 and expand in Singapore. The company declined to mention how many customers it’s servicing but said Hong Kong-based microinsurance firm YAS Digital and crypto gaming company Animoca Brands are among its early users.
Update: Sequoia Capital India, an investor in the funding round, requested to be removed from the article for compliance reasons.