Ha Duong is a Principal at Cambrial Capital, a fund of funds specializing in the digital asset space. Previously, he was an Investment Manager at the Berlin-based venture capital firm Project A. Ha is a mentor at Techstars and connected across the European tech ecosystem.
Crypto is a nascent industry for which the base layer of software infrastructure is still being developed and refined. As it matures, it will potentially be integrated into existing digital value chains and enable completely novel applications. This process will take a decade or more.
Venture capitalists, who look beyond the swings of the price of bitcoin and other cryptocurrencies, appreciate this and are positioning themselves to make investments in the space that will deliver outsized returns for themselves and their limited partners (‘LPs’).
This technology is enabled by cryptoassets: digital tokens that have their own native attributes and market dynamics. Hence, VC investors need to take a different approach from traditional, equity-based, VC investing.
Deriving a VC strategy in crypto is hard. It requires VC fund managers to rethink from first principles the economics of venture capital. This piece touches upon a few key parameters for venture strategies and offers our perspective as professional investors in crypto funds.
The case for venture capital in crypto 📈
Before diving into the topic, it’s worth asking: Why Venture?
Venture capital is about making long-term, fundamentals-based investments in early-stage businesses, where the chance of failure is high but the rewards of success can be outsized. Venture as an investment style does not mandate what instrument should be used to access such opportunities. Historically, venture capitalists have used equity (and, to some extent, convertibles).
But cryptonetworks are different,