Benjamin Franklin said that “Diligence is the mother of good luck,” and this can easily be applied to the statistics our DAA manager Frank Hutley mentions in these insights when discussing the role of VC in the blockchain world.

Coming from the VC world, you must look at blockchain startups through VC glasses. Are there any interesting differences you have discovered in this new industry compared to other industries?

The explosion of ICOs as a new funding mechanism is the most immediately relevant new trend from a VC perspective. It’s unlikely that ICOs will continue to exist in their present, unrestricted form, but it is interesting to see a reversal in opportunity from professional investors to individuals; in traditional startup fundraising, it’s typically a handful of VCs who have access to the 5% of projects that go on to be successful in a given timeframe. The stats seem to suggest that it is therefore best for individual investors to steer clear of investing in startups, as chances are they will be looking at the other 95% of them. It remains to be seen whether or not token purchases are in any way comparable to purchasing equity in a company, but if they are, then ICOs have for the first time enabled individuals to effectively seed the Googles and Amazons of the future!

Another interesting development is that many of the biggest blockchain projects are set up as open source, non-profit organizations (Ethereum, Steemit, IOTA, etc.). Where is the role of the VC here?

You set your DAA structure using different layers, from a core layer to a layer of exciting projects with different weightings. Can you share some insights on how you developed this weighting logic?

All of the projects in the FCE portfolio are long-term “hodls” for us; however, the present weightings reflect a 3–6 month horizon. The sizeable core holdings reduce risk and factor in the potential for ETH or BTC to go on a significant bull run this year and outperform the market.

Bitcoin has held strong this year to date when many expected its dominance to give way to alts. We are forecasting that this trend will intensify with the arrival of institutional money because BTC/ETH are the first ports of call for anyone new to the space (from an understanding as well as purchasing perspective) and will likely make up a big portion of institutions’ resulting portfolios.

In terms of alts, in what is still a very immature market defined by speculation, low liquidity, and unpredictable forces, our focus is on projects that show clear traction and are well-marketed. We are seeing great things from OmiseGO here in Asia, and “platforms” continue to be one of the fastest-growing areas of the space. Decentralized exchange protocols are also a big bet for us going into 2018, hence the 0x and Kyber Network inclusions.

Looking ahead, we have an exciting weighting model under construction that we will be ready to deploy as the market matures and more liquidity arrives. Now is a good time to buy FCE!

Lately, we have been seeing the rapid development of new platforms like Waves, Qtum, Lisk, Wings, etc. Do you think any of these platforms will be able to outperform Ethereum development? And if so, when?

With the biggest issue today being scalability, many other projects have learned from the limitations of Ethereum and put out better solutions. Ethereum has the best and biggest team, the brand, the leadership, and the first-mover advantage, but it doesn’t feel like a winner-take-all situation, at least for the near term. Different platforms are targeting different markets and different verticals, and there are some quality teams focusing on blockchain interoperability. As such, it is still too early to call winners, hence our inclusion of multiple platforms in FCE.

How do you see the latest developments in the crypto market, from regulation (SEC influence) to the market correction?

The market correction is healthy. I sleep better now with market cap around $400B than I did a few months ago when we were up at the $800B mark.

Regarding regulation, it will take a while for regulators to make sense of this new asset class and the different types of tokens that are developing within it. It’s fair to say that there are plenty of worthless tokens out there, and this is going to become more and more apparent as regulators begin to make distinctions between them. Overall, while it will continue to be the source of much of the volatility in the market, regulation is crucial for the long-term credibility of crypto and for the arrival of institutional money. The tone from the SEC so far has been sensible and open-minded. Let’s hope J. Christopher Giancarlo is finding plenty of time to hang with his kids!

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