Why have you decided to organize a crypto fund?
I have been involved in blockchain since 2014. My investment activities progressed from buying bitcoin to participating in token sales and investing in equity of blockchain startups. My partners and I decided to organize TMT CryptoFund in late 2017 when we felt that the blockchain market was maturing and more sustainable companies were being created.
Do you think it will become more profitable than the venture one?
We use a hybrid investment model where we invest both in equity and tokens of portfolio companies. Equity allows us to participate in the ultimate exit events such as IPO or M&A, created for portfolio companies. Tokens give us a potentially higher return rate because of the higher crypto markets volatility and earlier liquidity than with equity tokens. This is a more profitable and novel investment model than the traditional equity based venture model.
What kind of projects do you prefer to invest in?
We prefer to invest in deep blockchain technologies such as new protocols, infrastructure, large scale decentralized applications (dApps) and mining hardware. We also invest in tokenization of existing successful Business 2 Consumer (B2C) companies such as consumer subscription models, marketplaces, etc.
Which of your investments turned out to be the most successful?
Personally, I was an early investor in ShapeShift, Protocol Labs (Filecoin), and Bitso (the largest crypto exchange in Latin America). All of these companies are growing nicely and serving millions of customers. I was also an equity and token investor in Cindicator, which achieved current crypto market cap of $80M and provided me with over 60% ROI.
Which principles do you consider the most important when analyzing white papers of a potentially interesting project?
What consequences does your business face as a result of the US cryptocurrency restrictions policy (SEC investigations of ICOs), China ban and lack of law regulations in Eastern Europe?
We are certainly relying on legal counsel more when doing due diligence of potential projects. On average, now the token sale process takes longer, because it is more complex if you look at it from a legal standpoint.
How does the cryptocurrency and ICO ban in China affect partnership with Asian investors?
From our experience there is more of a crypto investment market in South Korea and Japan now. Mainland China, where the ban is implied, is not as active as it used to be.
From your point of view, are there any projects that can be successful in one country and fail in another? If so, how to make a good project location choice?
Absolutely! Each market has its own unique needs and challenges. For example, Netflix is extremely successful in the US, where there is strong enforcement of IP rights and users chose to buy licensed content. Similar companies have been launched in Eastern Europe, but failed to achieve similar success, as the IP rights are much less enforceable there. This is just one example of a business model that works great under one jurisdiction but does not take off under another.
Which projects would you recommend considering for investments this year?
This year we will see more tokenization from existing later stage businesses. I am also excited to see more projects on decentralized insurance, healthcare, and energy generation / storage.