How Does China's Leading Blockchain VC View ICOs?
Fenbushi Capital is China's major venture capital fund focused on investing in blockchain-enabled companies. In an insightful interview with China blockchain community ChainB this month, its partner Shen Bo shared his thoughts on the current ICO (initial crypto-token offering) trend and the blockchain economy. Below are some key extracts.
Q: Can you give us an overview of the current global ICO market?
Shen Bo: This year cryptocurrencies have been very popular, with total market cap exceeding $100 billion. This is multiples of the valuation at the beginning of this year.
According to market data, the total valuation of this year's ICOs is 2.4 times that of traditional VC investments. Specifically, there are over 50 ICOs in 2017. 4 of them are in China, and 47 overseas. Superstars like Cosmos, Qtum, iEx, Gnosis, Aragon and BAT have gained widespread attention.
Q: What are the key spirits of the blockchain economy?
Shen Bo: I think there are three dimensions to this, namely an open source mentality, altruistic spirit and global vision. Only by being open source can the public participate. Only by being altruistic will you stimulate the wisdom of the public. Only by having a global vision can you be innovative.
Q: What is the meaning of ICOs to the blockchain economy?
Shen Bo: We need to start from the social implications of blockchain. I think that blockchain has changed the productive relationship, not productivity. After the advent of the Internet, big data, cloud computing, and artificial intelligence, society's productivity has improved significantly. However, our social relations of production is still inherited from the industrial era. What the arrival of blockchain means is that the productive relationship will be updated for the Internet age.
The way ICOs raises funds is to unite the wisdom of the public, building an independent third party which supports society-wide collaboration. Therefore, the nature of ICOs is not only a crowdsourcing economy. Its participants are not merely users, but the owners of the network who can share the dividends of development.
Q: How will ICOs transform the traditional VC investment model?
Shen Bo: The emergence and development of ICOs will have a big impact on traditional VCs, especially in the blockchain field. This can stimulate the future evolution of venture capital investing.
Ever since its inception, the VC industry has been plagued by long investment cycles, and information asymmetry, leading to some entrepreneurs being unable to raise funds. Some VCs also miss good opportunities due to investment preferences and other reasons. ICOs can break the status quo, reducing the barriers for entrepreneurs to raise funds on the one hand, and providing much more options for VCs on the other. This will provide investment liquidity.
Q: What are some of the famous VCs investing in ICOs?
Shen Bo: This March, Blockchain Capital, a VC that has invested in 42 blockchain companies, raised its 3rd round of $50 million fund, $10 million of which was raised through issuing a token called "BCAP".
In addition, some VCs are raising funds to specifically invest in ICOs. For example, San Francisco's Polychain Capital has raised $10 million from Andreessen Horowitz, Boost VC and Union Square Ventures focusing on ICOs and tokens.
For institutional investors, the exit cycle for blockchain companies is very long. By contrast, ICOs provide participants with strong investment liquidity. This is a strong motivation for them.
Q: What's the future trends of ICOs, and what is Fenbushi Capital doing?
Shen Bo: We believe that future ICO projects, from issuance to governance, will go through a process of standardization. In this evolution, platforms linking investors and entrepreneurs will play an important role. We have therefore invested in an ICO serving platform called ICOAGE, which helps surface high-quality ICOs for investors, and provide professional services to ICO teams.