Advice for Blockchain Founders: What VCs want to See from Your Project, an Interview with Avishay Ovadia
Avishay Ovadia is an accomplished entrepreneur and principal at the new Collider Ventures, a venture capital fund focused on the blockchain and crypto industries based in Tel Aviv. Along with his long-time business partner Amitay Molko, Ovadia he is the co-founder of BlockchainJLM, a community organization specifically aimed at helping Jerusalem’s crypto scene flourish. Here, Avishay gives us perspective on what venture capitalists, who are taking on renewed importance for blockchain companies after the lull in ICOs, are looking for in the short, mid, and long terms to earn their investments.
Investors Wants to See Clear Priorities from Blockchain Startups
The metrics for a worthy investment don’t match the ways blockchain projects are evaluated in the ICO world, methods that have been the norm for public-facing blockchain companies until recently. In other words, winning a popularity contest isn’t going to necessarily get a VC’s attention.
“Having 100,000 participants in your Telegram group isn’t something that’ll impress me,” Avishay said. “Eventually, you notice that a lot of those participants joined in order to only invest in the ICO or advertise their own stuff.”
“I would prefer working with 100 developers actually interested in your project and participating.”
From Ovadia’s perspective,entrepreneurs are beginning to get the picture. It was easy to move a project before mid-2017. Now, it has got to go beyond just a concept pitch and projects that grow will have to earn it.
“I think we’re about to see the switch from the quantity to the quality. You care about the developer, not necessarily the buyer,” says Avishay. Moreover, he thinks the industry is maturing enough that seasoned venture capitalists are going to overtake ICOs as the main sources of funding for crypto startups.
“Investors now understand that the ICO craze is over. The 100x returns from a shitcoin are not going to happen again. So we will see more and more traditional methods of investment in the crypto field.”
With that in mind, Collider is focusing on new blockchains, infrastructures, and protocols, but not dapps. There might be some interesting concepts out there, but the underpinning framework isn’t set in stone — yet.
“I think for venture capital to invest in dapps, it’s very hard because there are no users right now. When the transition started from desktop to mobile, you could see the numbers [in the apps]. But right now, you don’t have those kinds of numbers. You want to invest in a Facebook, not a Friendster. The thing is, we’re not even at Friendster right now.”
Collider is just one VC and other investment strategies might see it differently. Regardless, there are three factors Avishay would advise anyone and any project in the industry to consider about non-VC funding — dApps, cryptocurrencies, or otherwise — if they are still skeptical of venture funding.
“The public pressure of raising [non-VC] money from thousands of unprofessional investors; the benefit of value-add coming with a VC to the company; and finally, unclear regulation imposes risks” that a VC can help navigate. “Until products have full utility, companies wishing to avoid the risk of having a public offering [can do so] by raising funds from accredited investors only.”
Investors Need to See that dApps Care about Users
One issue with the market, which will probably get more and more mention in the next few months, is inferior UI and UX. There hasn’t been a true break-out app, partially on account of design. I also asked him if he thought there was confusion in the markets about dapps, in that only part of the dapp needs to run on blockchain, which is a new form of database.
“It is only the DLT (distributed ledger technology) that is on the blockchain that has to be on the blockchain. But everything else will be on servers, and probably AWS servers at that!”
What the blockchain is capable of is still an open question, especially for investors, but ultimately it is just one form of technology reflecting a more fundamental revolution: Decentralization.
“The main thing is a decentralized world. Blockchain is just one technology. Hashgraph is another distributed technology. Blockchain won by accident to be the technology behind Bitcoin. I don’t care about which technology you use as much as I care about the concept of decentralization.
“Are they part of the decentralized revolution, yes or no?”
Like other investors, Ovadia is patient. Just because something doesn’t interest his team now doesn’t mean it won’t interest him later. The heyday of blockchain — and decentralization — is likely years away.
“What people forget is that even the internet didn’t start in the 90s, when it got big. It started in the 70s. Only twenty years later did we see the first real companies. The same thing can happen with blockchain.”
Between Jerusalem and Tel Aviv
Ranked separately from Tel Aviv, the city was considered one of the top 30 innovative cities in the world by Startup Genome in 2017. There are a handful of blockchain and crypto projects in Jerusalem right now, including a hedge fund called Lionchains, an OTC provider Bitmarket, and a micropayments startup called Invio.
“Building a community is like having a baby, launching an organism and then letting it go run itself. I think right now BlockchainJLM needs to work on university relations, that in the next two years will take researchers, give them grants, and search for university-based projects, protocols, and solutions.”
They have held eight meetups so far with hundreds participants and built a 5-meeting course that taught both smart contracts and Ethereum’s coding language Solidity to over 20 participating developers. They’ve also helped the city get its first bitcoin ATM — now Jerusalem has four.
While Ovadia is still focused on Jerusalem, he just moved to Tel Aviv to be closer to his new day job: Principal at Collider Ventures with co-founders Adam Benayoun of 500 Startups and Ofer Rotem.. Collider is an early-stage venture capital focused exclusively on blockchain and crypto projects.
“Without funding, you can only help them up to a certain point,” Avishay explains. “It felt very natural to move from building a community and making connections to then to fund the startups.”
Collider will be running an event December 17, Blockchain & Academia, on the sidelines of Hebrew University’s special Winter School in Computer Science and Engineering on Blockchains and Cryptocurrencies, seeing it as the perfect chance to “organize an event for the students that will bring the national blockchain community to Jerusalem.”
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