With $19B invested just last year in European startups that focus on AI, Blockchain and Quantum Computing, potentially there is a lot of funding out there for new companies.
But how do you get funded?
Well, there are certain funds right now who look to combine capital investment and blockchain technology. The TMT Blockchain Fund is one of them. They are looking to make around 30 $2-3m investments at either a seed or Series A stage, with a further opportunity to invest more later.
Indeed, the fund’s partners are proven early trend spotters. Their previous investments were followed by Google, Microsoft, Bain, Didi, and many more Silicon Valley unicorns.
But how does TMT spot a unicorn ($1bn market value – incidentally the founders have already helped create several) and what advice can they give to startups looking for funding?
Gina Clarke found out more.
About the founders
TMT has four founders, each with their own unique investment experience, and an experienced chairperson John Paton who believes Europe is up-and-coming in the blockchain market:
A bit like the tale of the Tortoise and the Hare, Europe’s steady, thoughtful and patient business culture is about to pass Silicon Valley’s full-speed-ahead-no-matter-the-cost approach.”
Julian Zegelman is a prolific angel investor (with two unicorns, GitLab and Protocol Labs), a Blockchain pioneer, and an early investor in numerous Blockchain startups.
German Kaplun and Artyom Inyutin are founders of the first Eastern European unicorn, RBC (RosBisunessConsulting), which they grew to a $1.5B valuation and brought the company public in the first successful high-tech IPO in Eastern Europe.
Igor Shoifot created several successful startups and chaired two high-tech accelerators in the US, Europe and Asia. He taught at UC Berkeley and other top US universities for over a decade.
Together, the team has already built a highly successful VC fund, TMT Investments, listed on the London Stock Exchange’s AIM. Even though the fund is an early investor, and the average valuation of a TMT portfolio startup at the investment time was less than $8M, it has already generated 11 profitable exits as well as an average annual portfolio growth of 60%.
I asked Zegelman why now was the right time to start a blockchain investment fund.
We believe that we are 3-5 years away from a large Merger and Acquisitions (M&A) consolidation wave, where large tech players will be buying blockchain companies to implement blockchain based products and services into their core businesses. This is what happened with mobile applications, big data, machine learning, data science and other technological trends. We want our portfolio companies to be mature enough and well positioned to take advantage of that future M&A wave. That’s why 2018 was the perfect year to launch a blockchain VC fund.
What sectors are you looking to invest in?
Digital ID verification and KYC/AML using blockchain – combatting identify fraud and complying with EU and global Know Your Client and Anti-Money Laundering regimes is a laborious and ever complex task for many businesses. Blockchain technology with its potential to lower cost of running and accessing databases and its immutable transparent data storage regime can be a great tool to build robust international KYC/AML databases.
Cybersecurity – hacking attacks, loss of data, online fraud, these are all growing problems that wipe out billions of dollars of value every day for consumers and corporations. Blockchain can be used in conjunction with existing products to build better and cheaper tools to combat cyber-crime.
Fintech and digitizing assets – blockchain can be very useful for the financial sector, for example digitizing stocks and bonds and digital trading tokens that represent underlying real-world assets (real estate, commodities, metals).
Digital Collectibles and Games – blockchain can be used to power internal economies in multiplayer online games (where virtual goods are swept for tokens), it can also be used to digitize collectibles such as celebrity trading cards.
Enterprise software – blockchain is being used in industries as diverse as logistics, pharmaceuticals, banking, and education, wherever there is a need to eliminate a central depository of data and allow participants to transact together in a fast and trustworthy manner.
How can startups gain the attention of potential investors?
Zegelman: The best way to get attention is through a trusted connector. For example, the best intros we often get are through existing or former portfolio companies. Nothing works better than an introduction from someone we already invested in. It helps even more if the investment was a profitable one.
Another good channel is professionals in the industry whose opinion carries weight such as industry executives and other VCs, angel investors.
What attracts investors to your portfolio?
Paton: True investors are hungry for change. They are not satisfied with the status quo where most shrug and say ‘But it has always been this way.’ You become an investor because you don’t accept that answer. And because you want to be part of the exciting journey searching for solutions through the companies, you help build by investing.
I was born in Glasgow’s east-end ghetto. When you are born into those circumstances, you understand the need for change. It has been a powerful motivational tool my whole life.”
How can startups maximize the benefit from having investors?
Shoifot: Investors help with more than just wisdom, they help with contacts: to key employees with the right sets of skills, to the press and efficient PR and marketing agencies, to other investors and buys, and to marketing and sales partners and channels.
Startups that learn to leverage this access and knowledge can benefit from all the free advice and connections that good VCs are happy to provide. Startups should seek the funds where ratio or partners and venture partners to startups is less than 10. In TMT Blockchain Fund case, this is planned to be not more than 3-5 startup per partner/venture partner.
What makes a company a good investment for funds such as TMT?
Zegelman: It is a combination of a compelling team (perhaps a great technical founder with a savvy business founder), defensible core blockchain technology (not off-the-shelf, hard to replicate, has internal value to other companies in the space), available MVP (minimum viable product) and some early traction (ideally revenue, also can be customer pilots, recurring users and lined up distribution channels.
In other words, the company has to be beyond a mere idea or prototype stage, and the skeleton of the future business has to be built already.
Finally, what are your top predictions for investment this year and why?
Shoifot: It’s a tough market but if we had to advise we would say:
Dublin-based Wrike – it ties distributed workforce into an intuitive and comprehensive online project management environment and for marketing and many other departments of 100s of Fortune 1000 firms.
Depositphotos in Kiev brings millions of stock photos and videos to the fingertips of bloggers and media publishers.
In London, MEL Science creates a magic-like virtual reality experience for children studying science.
Whereas Tallinn-based Pipedrive makes sales customer relationship easier than anyone had thought it could be before they put everything into the cloud and let salespeople access all data from any browser.