Conversations about blockchain

12 February 2018

Blockchain or Bust? The Safest Way to Invest in the Riskiest Sector

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Episode Summary: Shyam Kamadolli, Managing Partner of Alumni Venture Group’s (AVG) Blockchain Fund, is in a unique and specialized position. Through a series of career moves, he picked up a background in cryptography before becoming a venture capital investor focused primarily on early stage technology companies. When the value of Bitcoin began to increase, Shyam got interested and leaned on his crypto expertise to look at potential VC opportunities in the blockchain space.

Now at AVG, this merging of skillsets enables him to sift out the best of the blockchain businesses with a focus in a specific area that other investors may not be looking at. With his help, potential blockchain investors do not have to understand the technology all that well to get involved. They just have to trust that the Investment Committee, under Shyam’s direction, knows what they’re doing. In this podcast, he explains a few key terms, plus shares how he is picking the best entrepreneurs doing the most innovative things in order to maximize the value of the Blockchain Fund.

Three Takeaways from This Podcast

If you are intrigued by (or a little overwhelmed with) terms like Bitcoin, blockchain, cryptocurrency, Ethereum, and so forth, or you are thinking about investing in blockchain technology but don’t understand how it all works, then give Shyam Kamadolli’s interview a listen. In addition to providing a basic blockchain explanation, he shares how he got involved in this “wild west” and how much money he thinks people should be willing to invest in blockchain ventures.

And don’t worry. This podcast is not a sales pitch. Shyam clearly explains the risks and potential rewards of investing in the Blockchain Fund while being honest about the volatility and unpredictability of the opportunity. Nevertheless, he believes this new economy is here to stay and he has the background needed to quickly sort through potential investments to figure out “how to back the best entrepreneurs doing the best innovative, yet legal things to maximize the value of the fund.”

Below are just a few of the many insights you’ll gain by listening to this interview with an expert in the field of blockchain venture investing.

1. Invest in a balanced blockchain portfolio

Many people invest in stocks. Some pick individual stocks and make their own investments. However, most buy mutual funds so their money is invested in a portfolio of companies and the risk of suffering a loss from any one of them is mitigated. That’s what AVG is doing with the Blockchain Fund. There are many investment opportunities floating around, but by being an informed investor (he “speaks crypto natively”), Shyam is able to screen deals quickly to sort through the various assets the fund will hold—including some currencies, tokens, and traditional equity in software companies that are building for the blockchain space.

2. Find the blockchain sweet spot

In his blog post “A Framework for Blockchain Investing,” Shyam describes blockchain as the underlying scaffold that cryptocurrency and applications sit on. In the first couple of funds, he believes the biggest opportunities in terms of value creation for the fund will come from the protocol and structure layer. In other words, the fund will include some tokens and apps, but it will primarily be investing in the foundational technologies that make the layer above it possible.

3. Think about what you’re willing to risk

Shyam explains that the reason everybody is “hyped” about blockchain is because this new territory is trying to upend business models. Former technologies like the Internet, the mobile wave, and the move to the cloud were evolutionary. Blockchain, however, is revolutionary. The technology eliminates the middleman position that many companies profit from, and the network cannot be shut down. There is no playbook for entrepreneurs, developers, or investors in this space. As a result, it is potentially one of the riskiest ventures funds available. However, Shyam says that the rewards people have experienced thus far have been significantly larger than the risk they took to get in. He believes that trend will continue, but cautions people to only invest the amount of money they are comfortable risking.

Though the blockchain environment is largely unregulated, one of Shyam’s goals and a guiding principle of AVC Blockchain Fund is to be a shepherd of good capital to make sure the investments the fund makes will direct the ecosystem towards long-term sustainability for a greater good.

 

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