Even in a sector as new and greenfield as blockchain, recent history provides investors with many sound principles through which to view opportunities, NEO Global Capital founding partner Roger Lim said.
NEO Global Capital brings a unique perspective to investing because their founders bring diverse backgrounds to the task, Mr. Lim said. Some have managed funds while others have founded successful companies.
Mr. Lim is one of those successful entrepreneurs. In 1996 he co-founded Webvisions, a Singapore-based hosting company that helps its clients with domain acquisition, expanded internet presence and email hosting services. He is also a partner at PreAngel Fund, a boutique venture firm investing in early-stage mobile and internet investments in China.
As he became more involved in angel and VC investing five years ago, Mr. Lim quickly saw success with some early stakes in ICOs. In mid-2017 a friend with whom he had invested in past projects asked him to teach him more about the space.
Then China cracked down on cryptocurrencies and exchanges. Seeing too much uncertainty but plenty of potential, they decided to institutionalize the process by creating NEO Global Capital, a platform investing in blockchain-based projects that applies best practices gleaned from the partners’ past success in traditional environments.
In the ensuing 14 months NEO Global Capital has struck early and often by investing in more than 40 companies such as Zilliqa, Bluzelle, and Oasis Labs. Even in a bear market, the returns have been encouraging, Mr. Lim added.
One key aspect of Neo Global Capital’s philosophy is to invest in the infrastructure that is needed in order for the blockchain to realize its potential, Mr. Lim said. Just like the original Bitcoin blockchain was usurped by Ethereum and Cardano, so will the infrastructure created by various pioneers be improved upon by those coming after.
“Given anything that is version 1.o, don’t expect them to scale or be fast enough for applications,” Mr. Lim said. “So you keep investing. Invest until you get the right infrastructure access points.”
Establishing the base technology was crucial, and Mr. Lim gave blockchain’s pioneers their due. Just a few years later, hundreds of incredibly bright minds are taking the ball and running with it, with examples being Zilliqa’s use of sharding and Oasis Labs’ work with privacy.
But those founders must have specific skills before NEO Global Capital will partner with them, Mr. Lim said. They look for founders with a deep understanding of and a passion for the underlying technology. Too many ICOs were led by fast talkers who looked for the money first and worried about what they were going to do with it down the road, if ever.
The leaders then need to communicate their passion to a wider audience in a way that allows them to understand the technology while getting them as excited as the founders are.
“Teams must have that hustle mentality and sell what they have,” Mr. Lim said. “Vitalik (Buterin) is a cult-like figure.
“You need people that can tell the story, wow the audience and get them to fall in love with something that is technical and dry.”
Investors can look to recent technological eras for lessons to guide them through this current period dominated by the blockchain, Mr. Lim said, adding he did quite well in the dotcom era.
“If you think of the dotcom crash of 2000, out of those ashes you’ll find the survivors who returned 100x or 1000x. They innovated and disrupted. You can’t stay there, you have to keep improving.”
Apple and Samsung took over from Motorola and Samsung. Solid-state drives were an improvement on hard drives. Amazon Web Services is changing the hosting industry. When comparing blockchain in 2019 to the dotcom era, we are still in the Netscape days, Mr. Lim advised.
In case you haven’t heard, blockchain is in a bit of a bearish spot. While not good for the hundreds of entrepreneurs with valid ideas who are chasing a shrinking pool of venture capital, it’s literally a gift from above for those who have raised, Mr. Lim said. Those companies have to focus on treasury management and capitalizing on the breathing room to make mistakes. Work hard, take measured chances and improve their product.
“From that angle it’s great for blockchain itself,” Mr. Lim said.
A self-described optimist, Mr. Lim said past and expected future steps from regulators in different parts of the world are a strong net positive. While China is publicly discouraging cryptocurrencies, they are actively pursuing blockchain technology.
Those with Libertarian leanings and entrepreneurs with suspect business plans may dread regulation, but with rules come clarity and guidelines as to what is acceptable and what is not, Mr. Lim said. That will move the market forward and encourage more players to enter the fray, a development that should lower the volatility we have seen to date.
And the innovation is just beginning, Mr. Lim believes. Most of the efforts we have seen so far are low hanging fruit.
“There are many other sectors which blockchain can benefit – healthcare and insurance for example. There has not been a massive effort in those areas.
“It is still the early stages. People are waiting for more stability before we see more money and proofs of concept.”
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