From theblock by Yogita Khatri

Avant, a crypto yield protocol developer similar to Ethena  ENA +16.48%

Labs, said it has raised $6.5 million in a seed funding round.

The round saw participation from Superlayer, Avalaunch, GoGoPool, Daybreak Digital and Linda Kreitzman. While these names are not widely recognized, Avant founder Rhett Shipp told The Block that the startup focused on its existing network of contacts and angel investors rather than targeting high-profile crypto venture capitalists.

"Our team has been operating in DeFi for many years, and we prioritized speed and diversification of investments over high-profiles," said Shipp, who is also the founder of DeFi protocol Gravita.

Avant, founded in June of this year, started informal conversations with investors in May but officially began fundraising in October, Shipp said. The round closed earlier this month, structured as a simple agreement for future equity (SAFE), bringing Avant's post-money valuation to $25 million, according to Shipp.

What is Avant?

Avant issues a "stable-value" token called avUSD, which can be staked to receive savUSD, a yield-bearing version of avUSD.

To mint avUSD, users deposit stablecoins such as Circle's USDC -0.14%  or Tether's USDT +0.067%  into Avant Protocol, which operates on the Avalancheblockchain. While avUSD itself does not generate yield, it is designed for use in various DeFi activities, such as borrowing and lending.

Yield is earned by staking avUSD to receive savUSD. Currently, savUSD offers an annual percentage yield (APY) of 34%, according to Avant's website.

Avant has partnered with on-chain asset manager 0xPartners, which uses delta-neutral trading strategies to generate returns for savUSD holders. Delta hedging involves reducing the price risk of a spot position by taking an opposing futures position.

For comparison, Ethena's yield-bearing token sUSDe also employs delta hedging strategies and currently offers an APY of 25%, according to its website. Ethena currently boasts a total value locked (TVL) of over $4 billion across around 313,000 users.

Avant Protocol is still in its early stages, operating in an "early access" mode that allows minting and staking of avUSD only for a select group of whitelisted addresses. "That whitelist will expand over the next few weeks," said Shipp, adding that a full public launch of avUSD and savUSD is planned for December.

Currently, Avant's TVL stands at just over $5 million, with fewer than ten depositors, Shipp said. He expects both figures to grow as early access broadens.

Avant vs. Ethena

When asked how Avant differentiates itself from Ethena, Shipp highlighted Avant's broader approach to yield generation.

"Ethena's USDe generates yield via the 'carry trade.' The carry trade is very high yielding in some market conditions and less so in others," he said. "Avant engages in the carry trade too but engages in other market neutral trades when the carry trade is less profitable. So far, this has resulted in notably higher yields than Ethena produces. Furthermore, even when the carry trade is profitable, we believe we can perform it more productively than our peers."

Shipp also emphasized Avant's commitment to decentralization. "Avant is 100% on-chain. We believe that DeFi is the future and is finally at a stage where we can scale yield generating market neutral tokens like this without relying on centralized exchanges," he said.

Avant takes a performance fee on the yield generated, starting at 10%, according to Shipp. The protocol also plans to launch a native governance token called AVANT in the first quarter of 2025, which will include a "vote escrow" mechanism, Shipp said. Token holders will have governance rights, including control over future token emissions, he added.

Currently, Avant's team comprises eight people, and Shipp said there are no immediate hiring plans.