EP 4: Blockchain or Bust? The Safest Way to Invest in the Riskiest Sector
Shyam Kamadolli | Managing Partner of the Blockchain Fund
Learn how Shyam Kamadolli is making blockchain investing an accessible and easy-to-understand option for venture capital investors who want a stake in this revolutionary technology that is upending businesses like never before. (Listen)
Disclaimer: This is not a solicitation to sell securities, which is only done through appropriate disclosure documents and only to appropriately qualified investors.
Episode Summary: Shyam Kamadolli, Managing Partner of Alumni Venture Group’s (AVG) Blockchain Fund, is in a unique and specialized position. Through a series of career moves, he picked up a background in cryptography before becoming a venture capital investor focused primarily on early stage technology companies. When the value of Bitcoin began to increase, Shyam got interested and leaned on his crypto expertise to look at potential VC opportunities in the blockchain space.
Now at AVG, this merging of skillsets enables him to sift out the best of the blockchain businesses with a focus in a specific area that other investors may not be looking at. With his help, potential blockchain investors do not have to understand the technology all that well to get involved. They just have to trust that the Investment Committee, under Shyam’s direction, knows what they’re doing. In this podcast, he explains a few key terms, plus shares how he is picking the best entrepreneurs doing the most innovative things in order to maximize the value of the Blockchain Fund.
Introducing Shyam Kamadolli and Blockchain
Shyam Kamadolli is the Managing Partner of AVG’s Blockchain Fund, which provides a simple way for people to invest in disruptive blockchain technology. Shyam has been a technology entrepreneur, investor, and deal maker for over 20 years. Though he originally worked on startups, his passion over the last 12+ years has been early stage technology investing. He has been investing on behalf of Fidelity’s venture capital funds across various countries and stages–both early and late investing with a focus on enterprise software and financial technologies.
Highly educated and a self-proclaimed “technology junkie,” Shyam holds a Bachelor’s degree in Computer Engineering from the University of Bombay, a Master’s of Science in Electrical Engineering from Clarkson University, and MBA degrees from both Columbia Business School and London Business School.
Three Takeaways from This Podcast
If you are intrigued by (or a little overwhelmed with) terms like Bitcoin, blockchain, cryptocurrency, Ethereum, and so forth, or you are thinking about investing in blockchain technology but don’t understand how it all works, then give Shyam Kamadolli’s interview a listen. In addition to providing a basic blockchain explanation, he shares how he got involved in this “wild west” and how much money he thinks people should be willing to invest in blockchain ventures.
And don’t worry. This podcast is not a sales pitch. Shyam clearly explains the risks and potential rewards of investing in the Blockchain Fund while being honest about the volatility and unpredictability of the opportunity. Nevertheless, he believes this new economy is here to stay and he has the background needed to quickly sort through potential investments to figure out “how to back the best entrepreneurs doing the best innovative, yet legal things to maximize the value of the fund.”
Below are just a few of the many insights you’ll gain by listening to this interview with an expert in the field of blockchain venture investing.
1. Invest in a balanced blockchain portfolio
Many people invest in stocks. Some pick individual stocks and make their own investments. However, most buy mutual funds so their money is invested in a portfolio of companies and the risk of suffering a loss from any one of them is mitigated. That’s what AVG is doing with the Blockchain Fund. There are many investment opportunities floating around, but by being an informed investor (he “speaks crypto natively”), Shyam is able to screen deals quickly to sort through the various assets the fund will hold—including some currencies, tokens, and traditional equity in software companies that are building for the blockchain space.
2. Find the blockchain sweet spot
In his blog post “A Framework for Blockchain Investing,” Shyam describes blockchain as the underlying scaffold that cryptocurrency and applications sit on. In the first couple of funds, he believes the biggest opportunities in terms of value creation for the fund will come from the protocol and structure layer. In other words, the fund will include some tokens and apps, but it will primarily be investing in the foundational technologies that make the layer above it possible.
3. Think about what you’re willing to risk
Shyam explains that the reason everybody is “hyped” about blockchain is because this new territory is trying to upend business models. Former technologies like the Internet, the mobile wave, and the move to the cloud were evolutionary. Blockchain, however, is revolutionary. The technology eliminates the middleman position that many companies profit from, and the network cannot be shut down. There is no playbook for entrepreneurs, developers, or investors in this space. As a result, it is potentially one of the riskiest ventures funds available. However, Shyam says that the rewards people have experienced thus far have been significantly larger than the risk they took to get in. He believes that trend will continue, but cautions people to only invest the amount of money they are comfortable risking.
Though the blockchain environment is largely unregulated, one of Shyam’s goals and a guiding principle of AVG is to be a shepherd of good capital to make sure the investments the fund makes will direct the ecosystem towards long-term sustainability for a greater good.
More on Blockchain Investing
With Blockchain investing being a new sector and new opportunity for many, Shyam says that investors often are not sure what to ask before deciding whether or not to get involved with the fund. For a recent interview on “What ICO Investors Should Really Look For,” Shyam provided this additional insight:
Q. In What Type of Blockchain Businesses Does the Fund Invest?
A. We are diversified and balanced fund to give retail high net worth investors exposure to several kinds of crypto assets. So we invest in currencies, tokens and in equity of companies that are building next-generation decentralized ledger technologies and applications.
In currencies, we are looking for a basket of them that together helps minimize the unavoidable correlation that exists among them. In tokens we look for quality projects that can deliver either a critical piece of protocol or infrastructure value–which is our thesis for the current vintage of the AVG Blockchain Fund. We have made some application-centric investments as well when we believe the team can deliver the entire stack (protocol, application, and token econometrics). And across similar projects we do take equity positions when there is no reason or intention on the part of the founders to create token economy.
The bottom line is we look for the best founders and projects and seek alignment with them in building great companies that deliver on the promise of blockchain.
Q. How is the Blockchain Fund Different?
A. In general, we bring years of pattern recognition about teams, markets, products and business models that apply equally here as well. So our lens is very much one of a venture capitalist rather than that of a crypto trader or anybody doing sentiment or trend analysis on prices of a liquid token.
Q. What is the Evaluation Process for Blockchain Investing?
A. We follow a rigorous diligence process given the noise in the space and the sheer number of opportunities that come our way. We evaluate deals fairly quickly to indicate our level of interest, with strong weight assigned to opportunities where a significant fund raise is already underway with marquis investors already committed. All our deals have been alongside investors who are considered leaders in this new arena of crypto-savvy venture capital. Once we have identified interest we follow the usual venture capital diligence process of evaluating the team, the market, the product, and the deal (in order). But generally, since we are participating in a round led by others, our diligence process is fairly efficient. For the value that AVG as a platform brings, we add minimal overhead to a deal closing process from an entrepreneur’s perspective.
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