In our last post, we mentioned all the interesting deals our friends at Konvoy are seeing in gaming and esports. Their work also touches on another theme that we have been seeing in the market lately. As we have noted (and here and here) the traditional venture funding market has slowed down markedly over the past 18 months. This may not be clear from reading the tech blogs, but ask any start-up CEO and you will hear about long delays in funding, prolonged due diligence, tighter valuations and deal terms and a pronounced slowdown in decision making. This is true across all of tech venture except for one area – crypto.
Crypto fund raising is down from last year, but last year was an anomaly. Today, companies or projects looking to use the blockchain will find a ready audience among investors. These firms are aggressive, smart and hungry. This does not mean they will fund anything (that was last year), but they will move quickly. And they can become important advocates in a turbulent market.
This raises an important question – is the future of venture capital going to be tied to crypto assets? We do not think that traditional VC investing will go away, but it is also becoming clear that the market is shifting. Investors now need to consider whether to invest in company equity or tokens. The equity side is well understood, while the coin side is still highly dynamic, but it does offer some important advantages. Chief among these is improved liquidity. Venture investments in equity can be locked up for years, and this can become a major source of tension. By contrast, token investments are liquid (notwithstanding early lock-up periods associated with security regulations). While this does create some pressure on start-ups, well-designed tokens will better align investors and the underlying business. No more need for entrepreneurs to perform unnatural acts to pretty up businesses for sale or IPO.
This pattern holds not only for start-ups but for venture funds themselves. A shift in how investments are made is going to shift the firms that make those investments.
Which brings us back to Konvoy. Konvoy has built an investment platform targeting video games and esports. They have over 140 investors on their platform and seen hundreds of deals, and have already had 3 exits. And they have barely begun.
This alone makes them interesting, but Konvoy is also building a fund for the future. They are currently raising a fund structured on top of their own cryptocoin. Proceeds from their token sale will be used to invest in and grow their portfolio. They will invest in equity or other company’s tokens, but crucially, their fund will be denominated in tokens which means their own investors (i.e. LPs) will be able to take advantage of the benefits of tokens we discussed above.
Take a look at their site. If you are interested in gaming or esports, or if you are looking for a better venture model, it is worth your time to get to know Konvoy. Contact us and we can connect you.
NOTE: We are NOT being compensated by Konvoy.