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The cryptocurrencies have had a wild 2018.
Take the bitcoin, for example. Just one year from its nearly $ 20,000 high in 2017, the cryptocurrency stands at $ 3,700, recording double-digit oscillations that continue to make volatility a trait characteristic of virtual currency. Ten years after the release of Satoshi's cryptocurrency, its potential remains just as elusive today.
Alex Marquez was enthusiastic when he first encountered cryptography. From 2013 to 2014, Marquez and his team of USAA colleagues began to study investment opportunities for cryptocurrencies and blockchain companies.
"When we approached for the first time in 2014, IBM's research structure literally stood behind the corner of my home," said Marquez. "I would cross the road and spend half a day with IBM Research talking about the projects they were doing with blockchain at the time."
Marquez invested in Coinbase on behalf of the American financial services company, United Services Automobile Association (USAA), with a valuation of $ 400 million in early 2015. He also put some of his money. Five years have passed and the encrypted have come a long way, but also Marquez's point of view on them. He acknowledged that the hype distracted many of the potentials he saw for the first time in technology.
"The original thesis (for cryptos) was that you did not have to have all these legal currencies all over the world. You have a uniform digital currency and basically exchange it, so it's not logical or common sense to think you should have hundreds and thousands of cryptocurrencies. I think the value has been distracted because all the scrambles and ICOs issued have zero value and intentional purpose, "said Marquez.
According to ICOdata, in 2018 there were 1234 ICOs, or 1.4 times more than in the previous year. Also the amount raised has increased. Approximately $ 7.5 billion was raised in 2018, compared to $ 6.2 billion in the prior year. But where the ICO really moved things is in VC fundraising.
Since 2017, ICOs have delivered at least 3.5 times more capital to blockchain startups than VCs. In a Crunchbase report, the amount collected by the ICOs from 2017 to the first two months of 2018 was 32%, a notable figure considering the recent ICOs as development.
All of this is at the top of the record $ 2 billion worth of dry dust that Southeast Asian venture capital investors are already accumulating today.
What it means is – startups do not just have access to a lot of money. They have the advantage of raising funds from multiple sources, some of which require less governance than the more traditional way of a venture capital company.
"The founders are winning today because they can now choose," said Will Klippgen, managing partner of the Singapore seed investor, Cocoon Capital. "The wonderful thing is that if you are a founder, you can choose to raise ridiculous ratings from anonymous people.
Klippgen added that he tends to send blockchain startups when looking for portfolio companies. The bubbling ratings have nothing to do with this.
"I only see so much irrelevance in some of their developments," Klippgen said. "I have not seen a single blockchain company that makes sense so far – sometimes you see founders who can do amazing things but are attracted to things like blockchain – we think they are losing their time in many cases because they can do many other things."
While global regulators have made progress to encourage the use of blockchain, their efforts are somewhat irregular. Some jurisdictions are more progressive, others less so. But the complexities are further complicated when the use of the blockchain intersects a global global picture like GDPR.
Marquez, who is currently head of Experian Ventures, said the growing control over online identity and the "right to oblivion" are making the future case of the blockchain slightly problematic.
Blockchain promises ironic security by storing data on the chain. But what if GDPR requires to remove an online identity after it has been placed on the blockchain?
"One could argue that it is in direct conflict with the providence of blockchain because technically it is not possible to remove any data that has been stored in the chain," said Marquez. "There were some options to remove that identity information that will make it compatible with GDPR, but then – what's the point of using the blockchain?"
Blockchain is not short of optimists. Money speaks.
According to a Diar report citing Pitchbook data, blockchain companies have raised almost $ 3.9 billion of VC capital worldwide in 2018, with a jump of 280% compared to 2017. The number of businesses and value of median operations is increasing. The trade count doubled, while the size of the median trade increased by over $ 1 million from the last year.
Closer to home, the heavyweights of Asian VC are starting to pay attention to the blockchain too.
South Korea's largest VC, Korea Investment Partners (KIP) has made a secret investment in TEMCO, a blockchain-based supply platform. Supported by Temasek, Vertex Ventures has invested in Binance, a global cryptocurrency exchange.
In November, Quantum Energy Asset Management based in Singapore and Pundi X, a blockchain developer announced a $ 100 million blockchain fund for 2019.
Kenrick Drijkoningen, founding partner of the blockchain-focused fund, LuneX Ventures compares the dismissal of blockchain to the dismissal of the Internet.
"Let's not forget that this technology is only 10 years old and it takes time to build the necessary infrastructure and applications," said Drijkoningen. "The Internet has disrupted traditional content activities, while cryptography and blockchain are bound to destroy much larger and often more regulated sectors."
"Our task is to separate the wheat from the straw," said Drijkoningen. "Every day the technology comes with a good deal of hype, experimentation leads to the discovery of feasible business models".
At the start of this year, LuneX Ventures launched a $ 10 million fund focused on the blockchain. The Golden Gate Ventures fund has two portfolio companies in its portfolio: an exchange of cryptographic options and a crypto-custody solution. According to LuneX, the fund targets services around the broader blockchain ecosystem such as custody, KYC / AML solutions, SaaS, portfolios and analysis startups.
Drijkoningen added that the business flow is strong and plans to add another ten companies to its global portfolio. Evaluations are also reasonable, due to the cynicism of the market around the blockchain.
"This is driven by the distrust and lack of understanding of the industry by traditional VCs, which is something we are trying to fill. There's a good deal of education in the fundraising process, but the most familiar people with the industry clearly recognize the value we carry as a dedicated fund, "said Drijkoningen.
"Someone who says it's all hype clearly did not do their homework".
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