Swiss start-up investor Daniel Gutenberg, who has earned a reputation for collecting tTechnological companies are right, believes that the emerging blockchain industry is several years away from attracting traditional risk capital.
In an interview with swissinfo.ch, Gutenberg said the blockchain needed time to realize its undeniable potential to produce the next generation of technology giants – known as "unicorns". At the moment, many start-ups are funded through mass investment programs known as initial coin offerings (ICOs).
The Swiss venture capitalist should know this, having made a fortune thanks to the first investments in technology giants such as Facebook and Mobileye. He is also one of the founders of the Crypto Financial ConferenceExternal Link which brings investors and start-ups together with St Moritz, California and Tokyo.
swissinfo.ch: How excited are you of start-up blockchain as an investor?
Daniel Gutenberg: They are a risk capital of traditional start-ups, seed-stage investor. In 2013 I started to invest in bitcoins and I became interested in space. Now I'm a little deeper in space, but I have not made a lot of investments because I do not think it's ready for traditional investors like me.
It needs more time. People tend to forget that the credit card took 35 years until it became widely used and useful. The entire ICO industry is only one or two years old. Until the ICOs are unable to write White Paper [technical prospectuses] which are at least as short as the nine-page Bitcoin White Paper [that emerged in 2008]I think it will be very difficult for traditional investors to understand what they do. Based on this, it would also be very difficult to raise money from them.
Daniel GutenbergExternal Link has earned a reputation as a successful investor in Switzerland and other countries. In 2011 he was appointed Business Angel of the Year by the Swiss Private Equity & Corporate Finance AssociationExternal Link (SECA).
In the early 1990s, he founded Gutenberg Communication Systems AG, an IT distributor, which he sold to TelinDus in 2000. His most successful investments include companies like Facebook, Mobileye, Netscape and Skrill.
Gutenberg joined the Swiss venture capital group VI Partners in 2003 and is now General Partner. He is also president of the Swiss Technion SocietyExternal Link, which supports Technicon Technology Institute in Israel, and is a member of the Investors Circle of BrainsToVenturesExternal Link (btov), a European venture capital company.
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swissinfo.ch: What investments have you made in blockchain so far?
D.G.: I am a small investor in Streamr [an open source platform that tokenises data] and Telegram [a cloud-based instant messenger service].
swissinfo.ch: Do you see many parallels with blockchain and was it a dotcom?
D.G.: The blockchain start-up scene shows exactly the same mechanics as Dotcom's era. The Internet began in 1993/1994 with Netscape and Mosaic as Internet browsers that set a standard. We are seeing the same thing here with [cryptocurrencies] bitcoin and ethereum.
There was total madness up to the year 2000. Then other players entered and the market evolved, with the whole cycle taking ten years. Some of the old players survived, but most died. I expect to see the same cycle with blockchain. We are now in the hype noise. Some of the companies will survive but most will die. Those who survive will go very well.
swissinfo.ch: But do you believe in technology?
D.G.: I think the whole idea of blockchain is fantastic and is definitely here to stay. There is no doubt that the whole idea of cryptocurrencies, of securities dealers on the blockchain, will be a success. It is only very difficult to assess which companies are reaping success. I'm getting interested and I'm working on it because I see a promising future.
swissinfo.ch: How do you judge which start-ups to invest in?
D.G.: The same three principles apply as before: team, team and team. If you have a good team, then they can make it work, even if there are problems along the way.
swissinfo.ch: What do you think of the ICOs that allow amateur investors to put their money into blockchain start-ups?
D.G.: At present there are mainly risks associated with ICOs and very few chances of success. But the idea makes a lot of sense: you do not need banks, exchanges, regulatory documents and minimum levels of investment to make an investment. In the future this will be done through blockchain and token. But it will probably take another 10 years before it works properly.
swissinfo.ch: Will Switzerland continue to earn the nickname "Crypto Nation"?
D.G.: If we play our cards the right way, we can have the same global reputation as a crypto we now have for the banking sector. At the moment we have 500-600 blockchain start-ups and a lot of talented people on the way. Our main problem was to attract the right CEOs. But they're coming to Switzerland now, so there's no reason why we should not have some interesting blockchain unicorns in the near future.
swissinfo.ch.: It is often argued that Switzerland does not have enough risk-taking spirit.
D.G.: This is the biggest obstacle. Unfortunately, in the Swiss universities, the mantra is not about earning money. This goal of the universities is focused on research. There is a big gap between research and making money in Switzerland that I do not see in Silicon Valley, in Israel or in other places.