Blockwall set up the first BaFin-registered crypto fund in Germany back in 2017. The focus was on various crypto currencies, from Bitcoin to Dash to Solana. Now, almost four years later, Blockwall is entering the race with a second crypto fund. This time, however, it is not about blockchain protocols, but about crypto start-ups that are supposed to benefit from the venture capital fund. To find out more about Blockwall’s investment strategy, we conducted an interview with the two Blockwall founders and partners, Dominic Briggs and Laurenz Apiarius.
This article first appeared in the August issue of our magazine Kryptokompass.
BTC-ECHO: How do you assess the current market situation for crypto currencies?
Laurence Apiarius: When making investments, we always keep the long-term horizon in mind, as our funds are designed for this. If I answer the question honestly, I have to say: there is no volatility in the market. The price rose to $ 60,000 with a lot of volatility, then it crashed again to $ 30,000. Now he moves in a so-called range; that means there is no clear trend up or down. But that is only the short-term consideration.
But basically – from our perspective – we are still in a market environment that is extremely positive for cryptocurrencies but also for equity-based developments.
BTC-ECHO: That means the correction doesn’t really affect you or you even buy more because you say we’ll take the courses again?
Dominic Briggs: Exactly. We basically have a lot of stamina in terms of price volatility because we invest over a certain horizon. At the same time, rising prices are an opportunity for us to take positions and buy more when prices fall.
BTC-ECHO: How actively do you trade your funds? Are you doing rebalancing?
Laurence Apiarius: We are not a passive crypto fund, but conduct fundamental analyzes in the sense that we ask which solutions are needed and what the time horizon is in which these could become marketable. We made a relatively large number of seed investments in our first fund, which shows that we are approaching the matter with a long horizon. Nothing happens at first, nothing is balanced. At some point, however, these tokens will become liquid. Then the question is: where is the market headed and what is the term of our fund? Based on these factors, we try to take profits when prices rise and increase them when prices fall. Rebalancing is more likely for liquid tokens. After all, we have more facts on which to base our investment decisions.
BTC-ECHO: What are the most important aspects that you consider in your investment decisions?
Laurence Apiarius: Especially when you invest early, the team is very important. Does the team bring credibility from previous projects? Can you implement your visions? Is the ecosystem strong enough to do that? Of course, once the tokens are listed, other market dynamics will matter.
BTC-ECHO: Hand on heart: Aren’t there far too many insubstantial blockchain protocols, especially in the DeFi area, that are causing real inflation of tokens?
Dominic Briggs: Of course, the meaningfulness of the project is crucial for us. Is there a demand on the market and is the value of the token also given? The fundamental question of whether a token investment makes sense is still at the beginning of every decision. As a form of financing, tokens come into question when it comes to decentralized infrastructure solutions – less so when they are placed on the application side. It’s the same in the DeFi area. In the case of many tokens in the ICO area, there was no intrinsic value in the token, as they did not refer to the protocol level or were anchored in an ecosystem, but were often used for pure fundraising purposes.
Laurence Apiarius: I would even go a step further: The very fact that so many teams deal with the DeFi topic is actually a very good indication that this is something that makes sense in some way. It is also much better for us as an investor to be able to decide from a large number of projects what to invest in. At DeFi, we no longer have to answer the fundamental question of whether that makes sense.
BTC-ECHO: And which of these projects stands out in your fund?
Dominic Briggs: Solana is a good driver for the ecosystem. After all, they addressed exactly the problem that many protocols had, namely scalability, high transaction costs, low transaction speed: these are all points that Solana solves. Therefore this is an ideal protocol for the DeFi Space.
That was exactly the comparison: If there are such projects that have such a concrete technology approach and solve a problem in the market, then these are just sensible investments, where the token also plays an essential role. However, we have already had many projects that came up to us in 2017, but where we saw no point at all in token economics. But those were also the projects that came up to us three years later because the token had become worthless and then wanted to collect equity.
BTC-ECHO: Your first fund was geared towards token investments, while your second fund is now a venture capital fund and focuses on start-ups. What is the motivation for this new focus? With which fund do you expect the higher return?
Dominic Briggs: So basically it is an extension of our investment strategy. We have seen that the basic requirements have been laid. Now there is a toolbox that offers blockchain technology and this is now used by the start-ups that are of interest to us. That is divided into two theses. One is: As the crypto market is becoming more and more institutional, we need more institutional services: tax services, KYC / AML solutions, on- and offramps, custody. All of these issues exist in the crypto ecosystem and grow with it.
But these are exactly the cases in which token investments make no sense. These are classic equity start-ups. The other thesis is that we see an enormous trend towards B2B software-as-a-service in the context of general digitization. For start-ups in this area, blockchain also offers a very exciting toolbox for building a competitive advantage here. This is also at a level where classic equity investments are concerned, because token investments or your own token make little sense here.
BTC-ECHO: Which branch of crypto start-ups (payment, infrastructure, NFT, DeFi etc.) is particularly interesting for you? Where do you see the greatest potential in the short to medium term?
Laurence Apiarius: DeFi is one of the most tangible areas we see. The area of NFT that we had been observing for a couple of years has also seen something of a rebirth. This is one of the clearer use cases for blockchain at the end of the day: namely, to make a digital certificate.
The exciting question is: Which use cases can even be implemented at the end of the day? I would like to point out that digital art will certainly be relevant. I also saw a project that uses NFT for classic video games. With NTF you create a resilience for values that are not yet tangible today.
Dominic Briggs: If you go on the equity side now, there is a very clear trend to make life easier for those who now come into contact with token investments. In other words, if I, as a payment processor, have to check the source of funds or create risk profiles for market participants, for example, then crypto compliance tools are a huge topic. Chainalysis should be mentioned here. They had a huge success and were able to successfully carry out a large number of funding rounds.
In general, it is always about simplifying usability. In other words, how can I make it easier for my tax report to work and not have to enter everything manually? On the B2B side, we see many blockchain solutions with a future, especially on the supply chain side. We see unbelievable demand for the topics of circular economy and mobility. The new supply chain law in particular means that more and more solutions are entering the market.
Identity is also a big topic – but that is more likely to be driven by consortia. And of course we deal with IoT and data sharing.
Many of the applications pass through as cross-industry applications. Of course, the financial market is the most active market, the automotive market and pharmaceuticals then come in second and third place.
BTC-ECHO: How do you rate Germany as a location for the crypto industry? Shouldn’t you go to Switzerland or even Singapore if you want to start a crypto company?
Laurence Apiarius: Germany is a great location for traditional equity start-ups. There is clarity and legal certainty. Of course, there is still room for improvement in how to set up employee participation programs, which has always existed in the USA as the dominant venture location. We can still make improvements in Germany, but otherwise Germany is very exciting as an equity location.
It looks a little different with token projects. When it comes to tokens, the main goal is decentralized solutions. In other words, you need a kind of launch pad with which to start development. But then it depends very much on where do I have my ecosystem, where can I promote this decentralization as globally as possible? And of course there is some room for improvement in Germany. Germany is now not the ideal location to start a token project – especially from a tax point of view. Switzerland, for example, offers a better basis for this. For example, we see a lot that development teams are based in Berlin, but the company itself is registered in Switzerland.
BTC-ECHO: And finally, where do you see the Bitcoin price at the end of the year?
Dominic Briggs: What we can see with a long-term look at the Bitcoin price is: Fundamentally, there is a positive trend. For us, however, looking at the end of the year is not relevant, as we have invested on a horizon that spans several years. Accordingly, we are not dependent on year-end prices.