Cryptocurrency remains high on the agenda of businesses and organizations across the globe, as many continue to monitor its impact on the investment community and the opportunities it is creating for both entrepreneurs and investors. During a recent keynote presentation on this very subject at the 2018 World Angel Investment Forum Annual Congress, Brad Bulent Yasar, the Founder and Managing Partner of KrowdMentor and the Blockchain Investors Consortium (BIC), revealed the positive transformation that Blockchains and Cryptocurrencies are having on Angel Investment.
“Cryptocurrencies have opened a new era of Angel Investment. I have been angel investing for nearly 10 years now and it was around two years ago that I narrowed my investments to exclusively crypto investments. As the Cofounder of The Blockchain Investors Consortium, a group of around 125 crypto funds investing within this arena, currently around $5 billion worth of crypto assets, I have seen first hand the positive transformation of angel investing as a result of cryptocurrencies.
Prior to getting into crypto angel investments, I was your traditional angel investor. During this time, I came to associate with a wide range of entrepreneurs and made observations about the best practices in early stage investments. As the cryptocurrency acceleration began to emerge, I noticed that it presented a number of investment opportunities that I could leverage.
As a result of the challenges crypto angel investors face, organizations such as KrowdMentor, which aim to catalyze blockchain projects in different areas and industries, were launched. KrowdMentor advises established businesses, funds, and governments, as well as early stage projects looking to raise funds with best practices in blockchain implementations and fundraising with cryptocurrencies. KrowdMentor’s helps people understand the potential of the technology and what the future could hold for it.
Initial Coin Offerings (ICOs)
Because I saw the opportunity to take the methodologies I had learned in traditional angel investment and apply them to the accelerating crypto landscape, I was able to transition successfully from traditional angel to crypto angel. The idea that ICOs signal the death of angel investment is widespread, but from experience, I do not believe that the outlook is as bleak as this. In fact, I feel ICOs can enhance the world of angel investing in numerous ways.
For example, as the rate of cryptocurrency investments has soared since summer of 2017 due to the ICOs, the projected return on the average angel investment has shrunk from over ten years to under four.
The Attractiveness of ICOs
Personally, I believe that investors are attracted to ICOs for two main reasons…
1. Liquidity of Investment
Firstly, the liquidity of ICO investments has disrupted the angel investment norm for the better. When an angel invests in a project, they normally do so with a timeframe of anywhere between seven to fifteen years within which they expect to see a positive return on their investment. If a return does not materialize, it is simply tough luck and that is the risk any angel investor fully understands when putting their money on the line. However, ICOs and token generation events allow investors to invest in a liquid asset with quicker access to secondary markets through global crypto exchanges.
ICOs allow for a level of accountability and transparency that traditional angel investment does not. In terms of accountability in crypto investment, the value created with the investment is accessible and available to be measured by the token or coin price. Thus, there is no hiding from responsibility when delivering returns on an angel investment as the digital currency is so transparent. Furthermore, cryptocurrency allows for more flexibility and security on the part of the investor. Whether they decide three months or ten years in that they are not getting the return they expect out of their investment, they can act. They are not locked into a single arrangement, and the liquidity enables them to put their coins or tokens onto an exchange and move on to a better suited investment. This single difference alters the angel investment landscape by levelling the playing field, minimising the ‘opportunity cost’ to investors.
2. Democratization of Angel Investment
Secondly, cryptocurrency democratises Angel Investment. Traditionally Angel Investors have always been bound by certain accreditation standards, which dictate that a person must have a certain net worth or annual income to be deemed suitable for investing. Of course, this presented a considerable stumbling block for those trying to break into the angel investment arena. A person could have all the knowledge and expertise in their field, but if their bank balance did not meet standards, then they were not considered appropriate investors.
Moreover, traditional angels have also been required to abide by the applicable regulations of their country or region of operation, making international dealings difficult. The democratising impact of cryptocurrency means that, provided that the recipient of investment is adhering to any regulations enforced in their own jurisdiction, they are free to seek investment from abroad without any further complications.
Not only does crypto investment allow for projects to scout globally for appropriate investors, but it is likely to trigger a reform of traditional accreditation standards, potentially leading to a whole investment market better suited to 21st century business.
In a number of ways, cryptocurrency has opened up opportunities to access the global business investment scene, making investments more accessible to entrepreneurs, less risky for Angel Investors, and paving the way for progressive changes to the entire business investment community.
You can listen to Brad’s full speech on Angels, Blockchains and Cryptocurrency here –