The blockchain and cryptocurrency space has shattered so many of its previous records, as VC funding is currently scaling to new highs. According to CB Insights, 2021 Q3 has topped $15 billion in blockchain and crypto financing investments, up over 380% compared to 2020. There have also been 15 mega-rounds of over $100 million or more, a category that’s increased 1,400% since last year.
Q3 2021 hedge fund letters, conferences and more
In this outlook –rife with blockchain developments– VCs must find a strategy to identify the early-stage, next-generation blockchain projects that are bound to change the industry. According to Feras Al Sadek, Managing Partner at investment fund Ghaf Capital Partners from the United Arab Emirates, analyzing and evaluating potential investment opportunities is becoming an issue.
Besides pinpointing the hottest blockchain projects to invest in, Ghaf Capital bets on later-stage and established companies with a strong footprint and desire to revolutionize the blockchain industry. The firm has invested in over 25 companies and projects including Polygon, 1inch, Geojam, as well as startups such as Space, DTravel, and Epik.
We spoke with Mr. Al Sadek about the most essential strategies and insights for selecting startups to invest in, and the trends that are going to shape the industry next year.
In your experience, what are the three most important characteristics of an investable project?
The most important aspect is the founders and their team. The founders of the project must be honest, committed, vision-oriented, goal-focused, persistent, and not afraid to ask for help when they need it. What’s also important is the ability to listen to constructive feedback.
We always ask them the most fundamental questions: Who they are, what they want to do, why they’re working on their project, where their experience comes from, how they’re planning to achieve the company goals. The answers to those questions give me the comfort to take the discussion further.
Secondly, the company needs to have a strategy and a plan, follow them step by step, and make sure they achieve their targets and goals.
Finally, it’s key to have more than “just an idea.” The idea must be a game-changer in its field, backed up by research and data. We’d also need to see a proof of concept and at least a beta version to consider a project investable.
Blockchain might already be well advanced for some. What would you say to a newcomer who thinks it’s too late to get started?
I really believe that the blockchain space has not even taken off yet, so there is lots of room for growth. Also, there’s a quite logical sequence of steps to follow in establishing whether or not a project has a future.
Firstly, make sure that you tick off all the necessary rules and regulations of the country that you are in to establish your fundamental freedom to operate your business –blockchain and crypto can be heavily regulated in some jurisdictions.
Secondly, newcomers must work on a lot of research, gain data insights, technical analysis, and try to study early on how to reach their target audience. This will allow them to be competitive and have an opportunity to create value. After that, you can proceed with onboarding developers or a development company to support your idea and turn it into reality.
For me, it’s important to see that the entrepreneur or developer has some skin in the game by this point –usually, that involves sweat, tears, or personal financial investment. Most often, it’s a combination of the three.
Once the above is in place, the next step is onboarding the right team and advisors with the appropriate experience and knowledge to establish the foundational organizational structure of the company.
Finally, my advice would be to always and only have smart money involved, which means money from investors that add value and will support your project growth. Don’t take funds that will add no further value to the growth of the company.
What is Ghaf Capital’s value proposition as a VC partner?
Ghaf Capital Partners is one of the first home-grown VC funds out of Dubai, UAE, that invests only in the blockchain space and that is formed and managed locally. The main focus is to establish a partnership with the companies in which we invest and support anything related to the blockchain side of the business.
That may include introductions to the best exchanges, launchpads, market makers, marketing agencies, key opinion leaders, analysis, reporting, tokenomic design, and much more.
We want to be part of the family and growth of our portfolio of companies, and we will always make sure that we have the capabilities to support each one of our projects in whichever areas are needed.
What do you think will be the biggest trends shaping blockchain and crypto in 2022?
My personal favorite, and the same for many investors right now, is the metaverse. There’s plenty of activity happening in gaming and NFTs that relates to this initiative, but projects featuring innovations in any or all of these disciplines are currently doing very well.
The UAE is also becoming a world hub for blockchain, thanks to ongoing investment and support from the government –many projects are either starting up here or moving to the country. In my view, the biggest segments in the region are in the area of NFTs and exchanges.
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