New York venture capital firm Union Square Ventures has revealed plans to expand into the crypto market space and adopt a long-term position without opening a dedicated crypto fund.
“Keeping it Under the Same Roof”
Despite a growing trend of VC firms and partners launching dedicated crypto investment funds in an attempt to stake a claim in the potentially huge future of cryptocurrencies and digital assets, Union Square Ventures has stated that its crypto investment strategy will not involve opening a separate fund. The strategy will instead be to find ways to incorporate crypto investments into the existing markets and spaces that it already operates in.
Managing Partner Albert Wagner states it:
“We are not planning to do it. We see a lot of upside to keeping it under the same roof.”
Despite the ongoing rush to open crypto funds by VC firms such as Andreessen Horowitz, Union Square Ventures insists that the best way for it to profit from the projected $1 trillion value of the crypto industry is to fund what it calls “foundational plumbing” services and products. This means that instead of putting money into trading the actual digital assets or their use cases, the strategy is to invest in the applications that support their functioning.
This is an iteration of the famed ‘49-er’ method of investment which is favored by a number of savvy crypto investors in the ongoing crypto gold rush. Using its ‘picks and shovels’ strategy, Union Square Ventures hopes to create a long-term crypto investment profile that will outlast the current bear market and create sustainable value.
He does, however, concede that investors pouring money into crypto and blockchain projects may stand to reap outsized rewards as the “winning blockchain” could in his opinion end up being worth more than $1 trillion.
Optimism Amid Market Bloodbath
There has been extensive coverage of current crypto market conditions because of their immense bearishness. Bitcoin, whose price is generally used as a proxy for the health of the entire crypto space dipped below $6,000 for the second time in a few weeks recently, amidst a perfect storm of excess supply and dampened demand from disaffected investors. In Wenger’s opinion, this does not in any way affect the attractiveness of crypto as an investment, provided the strategy is not merely to hold an asset and wait for its price to appreciate.
He further described bitcoin and other crypto assets as a “high-risk space” that should not be the sole focus of anyone’s investment strategy.
Giving his view on investment in cryptos, he opined that it is a mistake to base crypto investment decisions on ICO results, as the funding market for crypto projects does not accurately reflect their respective potential values. Buttressing this point, he pointed out the increased incidence of ICO scams which have attracted regulatory attention to the industry.
“You’ve had a series of ICOs where investors have purchased at steep discounts — the second it starts trading those investors cash out, they make a handsome return, and someone else is left to hold the bag. The amount you’ve raised in an ICO or in a traditional way in this space is not going to turn out to be a great predictor of success. Exciting projects are also being pulled off on a lot, lot, lot less money. The stuff that works will float to the top. It might take a while, but time will tell.”