From the beginning of 2017, in the United States there has been a new trend in which a number of Asian funds have been actively involved in early-stage encryption investments. Many people in traditional technology have never heard of it before, but these funds will become increasingly important as cryptocurrency and blockchain will consolidate their position in the American technology industry.
Asian money funds, mainly from China, have been in Silicon Valley for a long time. However, in the past, they were rarely heard or seen in the press, mainly because their managed assets (AUM) and the size of the investment checks were smaller and with a lower frequency than the average American counterparts. These funds were often invested only in subsequent shifts, since they were not able to compete with the best venture funds in the early rounds for very coveted startups, as many entrepreneurs were not familiar with them.
has changed in recent years and statistics on recent investments are telling a different trend. In 2017, Asian investors headed 40% of the $ 154 billion record in global venture capital financing, against their US counterparts at 44%, according to a Wall Street Journal analysis. In particular, operations conducted by venture capital and technology-based investment companies based in the United States, such as Sequoia Capital or Andreessen Horowitz, constituted 67 billion dollars of venture financing, just over the $ 61 billion of Asian investors, including Tencent and SoftBank. The share of Asia has increased from less than 5% only ten years ago.
Not only are there more money from Asia, but US funds are also realizing the growing and massively underestimated technological opportunity in China and the rest of Asia. In a joint study issued by the Chinese branch of the Ministry of Science and Technology and a consulting company based in Beijing, the China Unicorn Enterprise Development Report 2017 showed that in the same year China had 164 unicorns, for a total value of $ 628.4 billion, while the most recent US figures have suggested 132 unicorns. Companies such as Meituan Dianping (the equivalent of Yelp of China) and Didi (the Uber equivalent of China) are examples of large companies of disruptive technologies from China that have garnered huge valuations.
Subsequently, more funds based in the United States are expanding geographically. In the past, some funds could have an understanding of China's great market opportunities and had a partner, team, or partnership relationship focused on China in Asia. But now, from these funds, the focus on Asia is increasing, not only driven by potential investment opportunities, but also by untapped market opportunities for their portfolio companies.
Several funds have anticipated the game. For example, Y Combinator recently made a major entrance in China with the announcement of a new office in China led by Qi Lu, the former COO of Baidu. In addition, Connie Chan, who was responsible for running Andreessen Horowitz's Chinese network, was promoted to a general partner at the start of this year, the first to be promoted to the interior of the company. company.
Cryptocurrency and blockchain accelerate the investment ties between West and East
Now, cryptocurrency and blockchain have accelerated this cross-border activity. The global nature, or rather, the resistance to the censorship of cryptocurrency and blockchain have led Asia – and especially China – to the fore. In the blockchain space, Chinese companies represent more than 80% of the share in mining power, while Asia in aggregate represents a significant market share in cryptocurrency trading. The major cryptocurrency exchanges, including Binance, OKex and Huobi, are also managed by Chinese teams.
The cryptocurrency phenomenon started in Asia and the United States in the same period, but Asia had an advantage thanks to a favorable set of regulations compared to the United States Although it is certainly not laissez faire, the Blockchain technology has been hailed by regulators from countries like China, Japan and Korea. From the start of this year, the blockchain has been highlighted as one of the most promising technologies by Chinese President Xi Jingping, calling it "a revolutionary technology". Japan has also placed a spotlight on technology in an effort for the country to reinvigorate itself and its economy. And last but not least, Korean regulators have begun to discuss the idea of using blockchain technology as part of the democratic process, with proponents asking for the introduction of blockchain-powered voting systems.
As a result, cryptocurrency and Chinese and Korean blockchain funds for the first time have an advantage, with access to proprietary information and relationships, along with a huge market that cryptocurrency companies in the United States can no longer ignore.
Eric Ly, former CTO and co-founder of LinkedIn, recently started a blockchain-based company called Hub. And in our conversation, he recognized the importance of Asia as a market: "it is a region that should not be liquidated, especially in the cryptic world in terms of interest and activity that is happening there". With more funds coming from China and Asia and many encryption projects from Asia, there will be more cross-border activities for both investment and business development.
Given the global nature of cryptocurrencies and blockchain, it is increasingly important for entrepreneurs to raise funds from investors who are not only local to their team, but also globally useful for their success as a cryptocurrency and blockchain company. Not only can foreign investors bring a very different point of view from the table, but they can also provide access and market opportunities in the other half of the hemisphere that otherwise would have been difficult.
Strong examples of this fundraising scheme emerge. Take for example Messari, a company based in New York with the mission of creating an authoritative data resource for cryptographic resources. CEO Ryan Selkis mentioned how he made a conscious effort to raise Asian funds and other global funds when he initially raised the company's seed round.
Typically, regional investors will have better information and relationships with local businesses and regulators, which should prove useful as the company climbs and grows overseas. Moreover, local investors will probably be more in touch with policies and regulators, which is crucial when it comes to trampling the gray areas in cryptocurrency and blockchain. Having someone who recognizes and can provide regulatory inflection points would be extremely valuable to the company as they trace their overall strategy.