Smart Blockchain Investors — How to Maximize returns
In 2018, the value of cryptocurrency saw a dramatic crash since its previous all-time high just a few months ago in December 2017. Nevertheless, the innovation of blockchain technology continues to march forward, as companies both large and small begin to experiment with the technology.
In this market, there are dozens of exciting opportunities unfolding, many of which may end up shaping the blockchain landscape of the future. However, it is becoming increasingly difficult to determine which projects are genuinely innovative, versus those that are fraudulent or scams.
Here at the DOGI Shanghai meetup, we got to catch up with a number of prominent players in the blockchain investment space. Shirley Lin, Co-founder of DOGI sat down with Calvin Ng (Plutus), Jack Chen (SQ Capital), Paul Flanagan (Creative Mobile), Sumit Gupta (Boom TV) and Chloe from Fenbushi Capital to discuss blockchain investments and the future of the blockchain gaming industry.
Calvin Ng: Hello everyone, my name is Calvin and I’m from Plutus, a $200M investment fund based in Hong Kong. We invest around 70–80% of our portfolio in blockchain projects, with currently around $73M invested in a variety of projects such as Telegram, OKex and EOS, as well as a portfolio of the top ten cryptocurrencies.
Jack Chen: I’m a player myself, I have played a lot of video games, come from a finance background and have also worked with Downjoy. I believe that combining fintech with gaming holds a lot of promise for the future.
Paul Flanagan: I work with a game developer called creative mobile, with a background in VC and finance having worked with CitiBank, JP Morgan, Accenture, Flemings, moving over to the development side several years ago. We recently raised money for a game we launched several months ago and we now have a full-size dev team producing a much more sophisticated game.
Chloe: I’m Chloe from Fenbushi Capital, one of the earliest investors in Ethereum, the first VC in China that focuses only on blockchain and one of the top blockchain VCs in the world. We focus on 4 areas of blockchain — fintech, infrastructure, IoT and games. We believe that blockchain for gaming has a promising future, because of this we have invested in several blockchain projects and are looking to invest in more in the future.
Sumit Gupta: My background is in the gaming industry, I’ve had a few exits, sold a few gaming companies, and have been investing in the gaming space for a while, investing in a lot of eSports startups and esports teams and finally in blockchain games. In 2016/2017, I invested in middle layer solutions such as platforms, as these are needed for the application layer to grow and scale.
Shirley Lin: That’s interesting Chloe, so do Fenbushi focus on the Chinese market only? How do you find these projects, and can you tell us a little more about your fund size?
Chloe: We invest in global blockchain projects, with around 50% outside of China at the moment. We have team members spread around the world, with an office in San Francisco and partnerships in Singapore, Japan and Europe, so we are able to reach out to great projects internationally. All our funds are internal, we don’t see any external funding, we find that this gives us the power to focus only on the long-term projects, helping the blockchain produce vale in the long-run.
Shirley Lin: Calvin, you mentioned that Plutus focuses 70–80% of its investments on blockchain gaming, could you tell us more about that?
Calvin: Sure, we invest 70–80% of our portfolio on the tokens. We invest in their pre-sale and product sale, get the tokens at a low price, and then slowly exit part by part. We also have a few deals that are equity + tokens, though the majority are tokens only.
Shirley Lin: Jack, could you tell us more about how you find potential projects to invest in? And how you decide which ones are worth investing in?
Jack: We think the current state of blockchain is quite basic, we also think it will take a long time to improve this at a fundamental level. We tend to focus our selection on infrastructure projects and applications for this very reason. To find these projects, we rely on information from our investor circle and face-to-face meetings with the team where we can discuss the project at hand.
Shirley Lin: What do you think about that Calvin? How do you find potential projects to invest in?
Calvin: I think that investing in blockchain can be explained quite easily with token investments. You want to get in at the lowest price and make sure you know when they will be listed on an exchange and which exchange that will be, their tokenomics is also very important. We use third party reviews in our checks and A.I. reviews that help us perform our due diligence, such as ensuring the team is real. For games, we look at the strength of the team, to see if they can actually build and market the game. We are not interested in teams that simply slap blockchain and tokens onto their game.
Shirley Lin: How about you Paul? Does your group invest in tokens? How do you assist the projects you invest in?
Paul: Around 12 months ago, we thought that blockchain was too complicated and that we’d never catch up. However, we ended up getting into a co-development deal with some investors, leading to a 50:50 equity with their investment. We don’t invest in tokens, just the games themselves, no token sale, no ICO etc. There are a lot of platforms, marketplaces and tools popping up, and blockchain enabled game is being developed, we think that for these platforms to succeed, you will also need a lot of successful games to be developed too.
Shirley Lin: That’s interesting because that’s exactly what DOGI is doing also. We know that this is just the beginning of the blockchain sector/industry, and we need everybody to help it grow.
Shirley Lin: Pick one or two of your investments, what made these investments options stand out to you?
Chloe: Our groups aims to invest in around 100 promising projects over 1–2 years. We don’t just provide money, but also assets and international resources to help teams succeed and grow the project. Because of this, we only invest in projects with a great team that shares our values, looking to bring innovation to the blockchain world.
Because I’m not a gamer girl, I personally invest in several fintech projects because they really bring out the innovation with blockchain. When it comes to blockchain games, we believe that blockchain isn’t magic, it’s a tool that can help a game become more popular, but fundamentally the game must be interesting enough to attract users alone.
Shirley Lin: I feel that in the early days' blockchain games will be very casual and easy to play, as you want them to get into the game very quickly similar to early mobile gaming. There are infrastructure issues that need to be resolved but the whole world is turning its attention to blockchain, whether this is positive or negative, there are a lot of smart people jumping in to solve the technical problems, such as transaction speed, gas fee etc.
DOGI looks to help blockchain gaming extend beyond existing cryptocurrency holders into the huge casual gamer market consisting of over half the population!
Paul: From an investor point of view, blockchain games have a huge opportunity for users to monetize much more than in conventional games. I think the general number is from playing to paying is around 1.9% for mobile games, people have figured out that things are fungible, and they can be taken away. We think this number could be as high as 40–50% for blockchain games, and so no other app on the app store will be able to compete.
Shirley: That’s right, this kind of ownership by players has never been seen before by any other type of game. The players put the money in, but they have never had really any invested interest in these assets, whereas this will be different for blockchain games, as they share the success of the industry.
Jack: There are three pillars of blockchain games currently. These are completely blockchain-based games such as Cryptokitties with everything on chain. Others are high quality, mass market games that can work with blockchain, allowing the assets to be owned and transacted by the players themselves. And the last type is something in between, neither fully blockchain based or attractive to the players, games we don’t tend to look for in this market.
Right now, we invest in two types of projects, one is a public blockchain for games that provide the environment and tools for developers to produce blockchain games, and we also invest in heavily produced games such as the latest Civilization. I think blockchain games can help bring more people into the industry and can see them being very successful in future.
Calvin: We invested in an IPFS project, because we know that they will be able to raise huge amounts of money, we knew that the founders were very well connected with the Zhuhai network. We went in at the seed round, and they raised $27M in 48 hours in their private sale, just from one big 6,000 people event.
The most important thing here is that they knew how to market in China, this is something that many crypto companies say they can do, but actually don’t know how. The ecosystem in China is very different from Europe, and we invest in companies that know how to leverage that.
Audience: My question is, how do you secure your investment? What do you recommend or advise for token investors?
Sumit: Other than the legal routes, it’s mostly about knowing the game. I don’t think that anybody should invest in tokens for any old random website, pick your choices carefully.
Calvin: We use third party rating companies that do some preliminary checks.
Chloe: We also have the same philosophy that checking the team behind the project is most important. There are so many scams in the blockchain industry, if you just check the team background and see a lot of inconsistencies regarding their PR. Then there will be a large question mark on their project.
Jack: Besides the project itself, another important point is the valuation. The blockchain industry is very different from the traditional VCP investment philosophy where the valuation begins with very small and grows to become large. The blockchain industry starts off very large. So make sure you understand the realistic valuation of the project when investing.
Audience: Since you are all investors, what do you think is the current biggest opportunity in blockchain gaming? How can we turn this into a real industry?
Paul: At the moment it’s just so difficult for the consumers to transact due to its complexity. I think an ideal endpoint is something something like Clash of Clans with (non)fungible assets. So if a company like Supercell make assets useable across a suite of games then they would be even more successful in my opinion.
Jack: I think in the traditional game industry there are millions of games currently, and a few very large games with a large population. However, in the blockchain industry, there are few magnificent games currently. I think if somebody can produce very good games based on blockchain, then it will attract a lot of players to the industry. I think this is a very good opportunity.
Calvin: I think that investing in chains is probably not the way forwards now with so many available. I think the next big thing is probably dApps, everybody is waiting for the one killer dApp! I strictly believe that games are one type of dApp that will eventually be massively successful. It will take some time, but it will come.
DOGI is a platform that hosts the next generation of blockchain games, helping them establish the pre-sales of their collectible digital assets and reach a global audience. DOGI gives promising blockchain game developers access to its promotional and advertising power, and the potential to participate in the DOGI accelerator program — all free of charge!
For investors, DOGI provides highly-qualified deals sourced by the DOGI team, allowing investors to benefit from a shared success model through the purchase of collectible digital assets during a project’s initial asset offering (IAO).