Ask your VC anything
On the other side of the fence: Fractal interviews innogy Innovation Hub
Let’s be frank, it’s usually the VCs who ask the hard questions to entrepreneurs. This time we exchanged roles. Nele Wollert, CMO of Fractal met Kerstin Eichmann, Head of „Machine Economy“ and leading the Innovation Hub Team in Berlin.
Kerstin, as VCs, you have unique visibility into how technologies and markets evolve. Blockchain has been hailed as the tech revolutionising financial markets — or as a pipe dream of people out of touch with reality.
1. What do you believe, and what signals are informing your opinion about blockchain?
KE: Blockchain is a paradigm shift in how the internet works. From the internet of information using HTTPS or TCP to the information of value via a new trustless protocol allowing you to send value from A to B without any intermediary and track the change of ownership. That’s a fundamental change that intrigues me every time anew. For this simple reason, we believe Blockchain is a cutting edge technology that we as a VC take seriously.
Blockchain can be a key technology for the energy transition and the Internet of Things. The energy sector, that is our “home,” leverages the Blockchain as abstraction layer facilitating interoperability and authenticity — a new standard protocol combined with the smart meter gateway data, tracking how many assets are available, how much energy has been produced and consumed, at which voltage level, where, when and for which price and where we do have free capacity, etc…Picture the Google for energy. We may also see a European decentralised registry for all green generation units and hybrid (smart home) devices (washing machines, electric vehicles, home batteries) making it easier to fetch local capacity, create virtual power plants to provide control to the grid and get more cost efficient tamper-proof “local” proof of origins.
I assume that at some point in time, flexibility –and energy trading– will be highly automated via smart contracts. Machine-Economy? Yes!
Furthermore, the role of the customer will change. While in the past KYC (know your customer) was the only requirement, KYM (know your machine) is starting to become relevant. He/she/it will be in a position to not only produce its own energy, but also to sell excess energy or flexibility to its neighbour –or neighbour device–, or to the municipality. Knowing whom exactly you are selling to or buying from will become more significant as the energy system of the future involves multiple stakeholders.
2. What do you think is needed for the space to grow into its full potential?
KE: Within the blockchain paradigm it’s very important that we focus on privacy, scalability, connectivity and a great user experience. If these four pillars are addressed, mass adoption will be possible and permissioned chains will lose their attractiveness. We’ll see a natural shift from intranets to internet of blockchains.
In a nutshell:
- Public blockchains need to scale/interoperability, e.g. Ethereum 2.0 / Polkadot
- Public blockchains need to have embedded privacy features, e.g. Mimblewimble, zkStark
- Blockchain aside, we also need a very robust communication layer in particular with regards to the Internet of Everything
- Bullshit in Bullshit out — we need to ensure that the sensor data from each device has not been tampered before the transaction gets propagated to the blockchain network.
- We need more DApps and we need more services that enable a great UX/ on-boarding, e.g. Fractal.
3. How are these needs reflected in your investment strategy? What are you looking for?
KE: With our Machine Economy Investment Strategy we basically invest in the roads, highways and airports of Web 3 to enable interoperability.
Our investment in Fractal fits into this strategy perfectly — it addresses the need of a seamless customer onboarding process. In both traditional banking and crypto, a great user experience is key. The customer doesn’t want to be bothered with a cumbersome process. KYC and AML is not a product per se. It serves a need. It’s not sexy. Therefore every second counts to increase the conversion rate. We believe that identification in finance is ripe for disruption and that Fractal has huge potential to enter this space.
4. Apple just announced they are moving into the identity space, Facebook has access to billions of verified identities — where do you see competitive niches in the space?
KE: On the plus side, as an externality of Libra, Facebook will educate two billion customers about cryptocurrencies. On the minus side, Facebook is not perceived as a trusted company. The nature of the Libra coin is borderline: it’s not decentralized and it’s backed by a group of very powerful corporations.
Let’s assume only 2% of the FB audience that got educated about cryptocurrencies, prefers to buy Bitcoin, Ether, etc.., it would be a great marketing campaign for crypto-exchanges and wallets which would increase the addressable market.
About Fractal: Fractal is an identity (KYC/AML) aggregator that comes pre-packaged with best-in-class identification technology, a global vendor network and a user-centric onboarding journey. Fractal IDs are reusable for use in highest-regulated industries, and suited particularly to applications in the large and fast growing global Blockchain FinTech industry. Visit http://trustfractal.com to find out more!
Special Thanks go to Nele Wollert and Julian Leitloff — You guys rock!
