How to Invest in Digital Assets and Blockchain Startups with Maggie Wu | Hacker Noon

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Ishan Pandey Hacker Noon profile picture

@Ishan PandeyIshan Pandey

Crypto Veteran. Tokenization, DeFi and Security Tokens – Blockchain.

Ishan Pandey: Hi Maggie Wu, welcome to our “Behind the Startup” series. Tell us about yourself and the story behind Krypital?

Maggie Wu: I was born in China and came to the U.S. 15 years ago. I’ve been an entrepreneur for more than 15 years. Before entering the crypto space, I was in the investment field. Since 2017, I have started to pay attention to and invest in the blockchain and cryptocurrency industry.

We founded Krypital Group in 2017. As a leading global venture capital firm and incubator, we only focus on the investment and incubation related to the blockchain and cryptocurrency industry. Aside from investment, we also have arms in the trading, mining and crypto exchange, etc. Through the years, we have invested in projects from all over the world. So far this year, we have invested in well over a hundred projects, and more than a few dozens of projects have yielded 100x+ returns. Our core team is based in North America; we also have teams in Asia and Latin America.

Particularly, we have a high interest in the Latin American market. Last year, we launched our own exchange Mexo.io, the development has been very rapid. In less than a year, Mexico has become one of the largest exchanges in Latin America. Our plan is to complete a comprehensive crypto ecosystem in the Latin American market as we progress forward.

Ishan Pandey: What qualities do you see in a team and a startup while investing? What important parameters do you follow while doing due diligence on projects?

Maggie Wu: When we invest, we certainly hope to invest in teams and projects with fresh ideas, lots of experience, and perseverance. Specifically, we always perform detailed analysis from the track, prospects, market pain points, products, teams, competitors, valuation, token economy, go-to-market strategies, etc.

We generally will evaluate the following perspectives before we invest in a project:

  1. Solving what kind of problem?
  2. Business Model
  3. Team background
  4. Competitor Analysis
  5. Is it decentralized enough? Does it really need to use blockchain technology?

6) What is special as a Crypto Fund is that we also pay much attention to the project’s Token Economy, knowing the utility and use case of the token. How can a token accumulate value in the long term?

7) Community engagement

We spend much time discussing with project teams and do research before we invest. Also, based on the research we conducted, we will write articles to help others understand the project after we invested.

Ishan Pandey: Please enlighten us about the blockchain investing scene in Asia and how it is different from investing in blockchain startups in North America?

Maggie Wu: Since we have international teams, the projects we invest from all over the world. As far as North American and Asian projects are concerned, I believe there are similarities and differences. From a technical point of view, I do not think there is a big difference. There are excellent developers in every country and region. In particular, the speed of technological iteration in our industry is breakneck, and the top developers’ learning and development speed are also very fast.

In North America, DeFi and other crypto topics are quite popular and acceptable, there are many great DeFi & NFT projects based in the US, and there are also many excellent teams working on innovative products and technology. We invested in many projects based in this region. Also, the North America crypto community is amazing. We do think North America is the most critical region for crypto funds to find and invest in projects.

In Asia, such as China, the market condition is a bit different. Projects in this region are not that deeply technology-oriented but have more operational innovation. Whether it is North American projects or other overseas projects, the Chinese market is really important for them since many people trade and hold crypto in this market. Many top centralized exchanges such as Binance, Huobi, Okex, and Gate are coming out of China. In the Chinese market, you need to have good relationships with different resources to invest in good projects or help projects expand in this market. Also, the relationship and resources are significant when you conduct due diligence for the projects and the team.

From the perspective of financial innovation, I think North American projects have a deeper understanding of the design of financial derivatives, while the Asian team is better at the innovation of token economic models.

From a policy perspective, the North American market is more open and has more opportunities for project development. The Asian market, especially the Chinese market, is focused more stringent on blockchain and the cryptocurrency industry, so there are more restrictions on the development of the projects.

From the investment perspective, we use the same evaluation standards for all the projects that come to us, that is, investing in early rounds of solid projects with the most potential.

Ishan Pandey: What is your investment strategy when investing in blockchain projects?

Maggie Wu: In general, we are a research-oriented, long-term, and visionary investment company. We focus on discovering the builders or creators of the blockchain industry. In addition to providing funds, we will also use our global resources to help the project and maximize its potential, including support for product design, token model, marketing, community building, exchange listing, secondary strategy, etc.

In terms of specific investment strategies, there are conventional strategies and special strategies for different cycles. First, we will invest primarily in tokens and secondary in equity.

Second, we invest in relatively early projects, seed rounds, and private equity rounds with a reasonable valuation.

Third, we will adjust the investment direction per the development of the industry. For example, two or three years ago, we mainly invested in infrastructure projects, such as layer 1 or layer 2 solutions. Last year we started to invest more in DeFi projects. This year we focused more on the NFT and GameFi-related projects. Recently, we are focusing more on metaverse. In the future, we will continue to focus on Web3, DeFi-related projects.

At the same time, in different industry cycles, such as the bear market or bull market, our investment strategies will also have some differences. For example, we will be more interested in more aggressive and fast-developing projects in a bull market. If the bull market cycle can be grasped well, then the development of the project will be relatively easy. When investing in a bear market, we will be more cautious, and the evaluation criteria will be stricter.

In the bull market, sometimes we will pick projects with fast growth because you have to be more aggressive in the bull market. Thus, if the project has a good strategy, they will have good go-to-market strategies and exchange listing plans. These are the types of projects that will be more attractive in a bull market. In a bear market, it will require totally different strategies because, in the bear market, it is really hard for projects to be listed on crypto exchanges. So we will have to stay with the investment for a much longer time. Like traditional investment, you will do a lot of due diligence that includes the team background, product positioning, marketing strategies, corporations, competitions, and valuations. There are a lot of things to look at during the bear market.

Generally speaking, we are a long-term and far-sighted research-driven investment firm. We focus on builders or creators and invest in early-stage, seed, or private round projects. In addition to capital, we will also leverage our global resources to help projects and maximize their potential. Support will be provided to creators who need assistance utilizing crypto user interfaces, token models, funding and marketing, etc.

Ishan Pandey: What are your views on DeFi and the susceptibility of decentralized applications to hacks?

Maggie Wu: Yeah, nowadays, more and more projects get hacked. If you are new to DeFi applications, you really need to be aware of these risks.

Since DeFi is still in its early days and has lots of money involved, hackers will try every method to find the weak points and profit. We follow the market and hack technics evolution every day. We also have an internal tech team researching this part. We often alert our portfolio projects to prevent hacking from happening to them and advise them to work with more than one audit firm to make sure their smart contracts are solid.

I think with the growth of the whole ecosystem, DeFi applications will become more secure in the future.

Ishan Pandey: What advice would you give to fund managers or investors who want to start their own investment fund?

Maggie Wu: For a fund, it’s really not just about money. Fund managers and investors should find out what kind of value you and your fund can give to the projects you want to invest in. I think investors need to have enough enthusiasm and knowledge about this industry. The second is to have a clear positioning, investment strategy, risk control awareness, and reasonable resource allocation. Of course, you also need to prepare sufficient funds. Finally, investors need to have a vision for this industry, long-term patience to accompany and do their best to help the project development.

Since we started investing in this space in 2017, we have accumulated many resources and experience in this industry to help projects grow. For example, here are a few things we can help for our portfolio companies:

  1. Advisory on project positioning, token economy, white paper, etc.
  2. Funding: Connection with other Crypto Funds
  3. Marketing, Branding, PR, Connect with KOLs
  4. Exchange listing and market making strategy
  5. Global Community building
  6. Co-organizing Hackathon and help with hiring

Since this space still has much room to grow, we do think there will be more fund floods in the blockchain space. Finding your exceptional edge and value-added points could give you a better chance to be a great investor.

Ishan Pandey: According to you, what worthwhile trends are we going to see next in the blockchain industry?

Maggie Wu: We can see that more and more funds are entering the blockchain industry, especially traditional funds and family funds, etc. The price of mainstream cryptocurrencies such as BTC and ETH will gradually rise in the future. And then, fierce competition will occur between the various main chain ecology, and cross-chain related components will become inevitable. In various ecosystems, especially at the dApp level, there will be more complex combinations of financial derivatives and financial instruments. At the same time, GameFi, NFT, social, and DAO related projects will be continually popular among the communities, and it is foreseeable that there will be good incremental users. Recently, metaverse-related projects have become more popular, including Facebook also announced they want to build a metaverse.

At the same time, the financial supervision of various countries will be more transparent. We look forward to introducing financial policies related to blockchain in various countries, which will further promote the development of the industry.

Our industry is still in its early stages. Especially in developing countries, there is still huge potential, such as the Latin American market. We have been focusing on the Latin American market since 2019 and have entered the Latin American market in 2020 on Large-scale user-focused applications, such as payment, transfer, wallet, exchange and social networking, etc. We believe that all these can help the industry to develop into the mainstream truly.

We think the number of people who join trade or hold crypto will be doubled or tripled by the end of 2021. TVL will rise up again and even surpass the beginning of 2021. Bitcoin & Ethereum prices will reach ATH.

From the trend-wise, we pay most of our attention mainly to DeFi, Web 3.0, NFT, Crypto Infrastructure such as crypto payment areas.

We see other newly emerging trends like Metaverse, which could become the next social platform & DAOs, which could become the future of companies or corporations. These areas are also quite exciting and also have a lot of growth potential.

Disclaimer: The purpose of this article is to remove informational asymmetry existing today in our digital markets by performing due diligence by asking the right questions and equipping readers with better opinions to make informed decisions. The material does not constitute any investment, financial, or legal advice. Please do your research before investing in any digital assets or tokens, etc. The writer does not have any vested interest in the company. Ishan Pandey.

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