During a panel in Hong Kong as part of the Decentralizing the World tour, top cryptocurrency venture capitalists laid out the new opportunities—and some challenges—created by investing in decentralized networks or the companies building them.
The VC panel featured:
- Nick Grossman – GM for Special Projects, Union Square Ventures
- Bonnie Cheung – Venture Partner, 500 Startups
- Kenneth Ballenegger, General Partner, Oyster Ventures
- Carman Chan – Founder and Managing Director, Click Ventures
- Moderator: Jason Choi – Associate, Spartan Capital
Overall the panelists agreed that while the introduction of decentralized networks and their accompanying tokens introduces many new dynamics to the investing business, many of the things a good investor has to look out for remain the same. In other words, their work is still driven by finding good ideas with teams that can credibly execute on them. Collectively, they acknowledge that the hype surrounding cryptocurrencies can sometimes make it difficult to parse who can deliver on what.
Adding tokens to the mix requires an investor to consider some novel factors. For example, an investor could be buying actual network tokens with their investment, or equity in a company that will receive a token allocation, or maybe they are receiving a token that represents equity in a company. These are all different things with different capabilities that must be understood.
Another unique factor is the inherent global nature of decentralized networks. Traditional investment interest tends to remain focused in tech hubs. With decentralized projects, there is pressure from day one to build a global community of people who are excited about participating the network being built. Managing a global community takes considerable resources, even to just bridge language barriers, let alone make introductions etc. That is a role where VCs with global footprints can step in to support their portfolios.
Panelists agreed that a major difference between traditional and cryptocurrency venture investing is time horizon. As Union Square Venture’s Nick Grossman said, in traditional investing “we decide when to buy, but not when to sell.” Until now it was difficult, if not impossible, to exit an investment until several years down the line—even if you begin to lose faith in a team. But if an investment comes in the form of freely tradable tokens, investors may be able to enter and exit more fluidly. That comes with its own challenges, as it is a role that venture investors have not had to play before.
Watch the video for a deeper dive into these topics and if you’re interested in a training ground for proving out your app before potentially taking venture or traditional investment, try out App Mining.