Liquidity, Emerging Markets, Venture Capital and Blockchain

by HACK Fund Managing Partner Jonathan Nelson

I’m in Dubai at #gitech and amazed at the quality of the startups. At the same time, I again hear repeatedly how difficult it is for these startups to raise capital.

Why is there so little Venture Capital or angel investing in emerging markets? No liquidity.

At present, investors only profit via startup investing when the startup gets acquired or has an IPO. Aside from those ‘liquidity’ events the investors money is frozen inside the startup.

No liquidity is why investors don’t invest in emerging markets. 85pct of the world’s tech acquisitions happen in Silicon Valley, which is why 60pct of the world’s venture capital gets invested in Silicon Valley.

No acquisitions means no liquidity. No liquidity means investors can’t profitably invest. No investment means no great startups.

Many countries are trying to grow venture capital industries to grow their economies. What they should be doing is encouraging mergers and acquisitions in their countries.

Also, venture capital must evolve to succeed in emerging markets. Venture capital funds must be liquid, not just the startups they invest in.

Blockchain funds are liquid and can make that happen.