Navigating Investments in the Crypto Age

With an increasing interest in blockchain investment, venture capitalists might be paving the way to the technology’s mainstream adoption.

As blockchain technology continues to rise in popularity, traditional venture capitalist (VC) investments are flooding in at a tremendous rate. Recent reports indicate that blockchain and cryptocurrency-focused startups have raised nearly US$3.9 billion through VC investments in the first three quarters of 2018 alone, which puts the industry up 280% compared to the whole of 2017.

The sudden interest from investors is no accident or coincidence. Initial Coin Offerings (ICOs), the notorious fundraising method once used by nearly 95% of blockchain startups to raise capital, continue to lose their foothold in the industry as the result of scams, security concerns, empty promises and underperforming projects. However, the collapse of ICOs has not hindered adoption or interest in the technology, but rather given way to alternative fundraising vehicles –

most notably in the form of VC participation.

Crypto Mania Commences

Following the astronomical rise of Bitcoin in 2017, the initial consensus surrounding blockchain was that this new, decentralized ledger had the potential to revolutionize every industry and solve systematic issues on a global scale. The ‘blockchain-for-everything’ conversation that ensued resulted in many uneducated investment decisions, the rise of baseless startups, and an industry that lacked guidance, experience, and authority.

As the initial hype surrounding the technology dies down, we have begun to see the global ecosystem mature, with the sentiment from investors now being that blockchain’s true potential is its long-term promise. As blockchain comes of age, a heavier emphasis has been placed on establishing sensible use cases, dedicated research to support technological advancement, and rational regulation to ensure that both projects and investors are protected.

Enter VC Investors

Profitability and liquidity are certainly not new attraction points for investors, but the draw of cryptocurrencies has been particularly strong given their considerable, and at times unmatched, growth rates. Given the increasing belief that blockchain is here to stay, we have seen even some of the most hesitant investors make their forays into the realm of crypto investment, joining the ranks of institutional and individual investors in the hunt for blockchain’s next best thing.

Traditional VC firms have also started to branch off into the ecosystem by developing crypto-centric funds dedicated to advancing the industry. Many of these funds not only invest in innovative startups, but also in initiatives that encourage the growth of the overall industry, particularly in the form of supporting research and initiatives in higher education.

One such example would be the National University of Singapore (NUS), which recently established the CRYSTAL (Cryptocurrency Strategy, Techniques, and Algorithms) Centre, an academic research laboratory and think tank launched with the financial support from NEO Global Capital (NGC) and Chainfund Capital. The centre adds to a growing trend of VCs doing more to support universities in their efforts to prioritize blockchain education, research and development while preparing students across sectors for the shift that may take place in their careers due to this emerging technology.

We have also seen a rise in universities putting their money towards blockchain projects. Yale University, the Ivy League school with a US$30 billion endowment, was recently among investors that helped raise US$400 million in the last several months for Paradigm, a new fund focused on digital assets.

A Decentralized Future

While a wave of institutional capital might help crypto markets recover, bridging the gap from VC investment to crypto is no easy task. As with traditional markets, the promise of great returns does not come without risks.

Despite its strengths, blockchain has not entirely rid itself of bad actors. The most successful investors in today’s market are those that have successfully adopted some of the well-established disciplines of traditional financial markets, including an in-depth due diligence process and taking a considered approach to all investments.

It has become clear that VC investors will play an important role in accelerating the industry towards mainstream adoption: the projects and initiatives they decide to invest in will simply determine how quickly the industry will get there.

About The Writer

Roger Lim is a Founding Partner at NEO Global Capital (NGC), one of the world’s leading blockchain investment firms with over US$400 million in assets.

An experienced angel and blockchain investor, Roger serves as an advisor to many successful ICO projects including Bluzelle, Qlink, CoinFi, Selfkey, Tomocoin, nOS, and Open Platform helping them to raise over US$400 million in funding. A successful entrepreneur, Roger also founded Webvisions, one of Asia’s largest managed hosting company in 1996.

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