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Chinese Blockchain VCs Are Getting Back Into the Market

Since the 2018 crypto crash in China, up to almost 90 percent of Blockchain VCs left the market. As China’s central government pushes for blockchain adoption some are returning to the market while taking another look at blockchain.

In the first six months of 2019, Chinese blockchain startups raised $368 million via 71 funding deals as reported by the Chinese financial data tracker 01Caijing.

VC Firms Are Now Finding It Easier To Raise Money

Venture Capital firms are now finding it easier to raise money. Hong Kong-based Kenetic started in 2016 with a few partners trading their own capital is almost on a deal to close an eight-figure fund next month.

NEO Global Capital has also been raising a second fund of about $50 million since June. 

At the same time, VCs firms are diversifying away from equity plays in startups towards areas such as secondary trading and bitcoin mining. 

Sora Ventures is one such example, it’s an early-stage blockchain investment firm that entered the secondary market trading earlier this year. The trading activities include swap, futures of mainstream cryptocurrencies, taking about 20 percent of its asset-under-management as said by the founder and managing partner Jason Fang.

Expectations For Returns Are Becoming More Realistic

Investors say that Chinese blockchain firms are maturing and evolving to find a more sustainable path. Currently, valuations are becoming more reasonable while speculative players have left the market.

Funds are becoming more professional, said Jason Fang, managing partner at Sora Ventures. When his fund started in late 2017, it was among the first institutionalized funds in China with a recognized fund administrator and auditor. Now that practice is more standard.

“Before the market crash, investors didn’t evaluate projects carefully because token prices kept going up,” said Xin Jiang, an investment manager at Fenbushi Capital, one of the earliest and biggest venture funds in China established in 2015. “Now investors need to truly find value through more vigorous research and due diligence.”

Expectations for returns are becoming more realistic. “Analysts are spending much more time researching and checking with each other about startups,” said Frank Li, who worked at Node Capital previously and recently joined Parallel Ventures.

Kenetic’s Chu is more optimistic. “Equity in blockchain startups will never be cheaper than it is right now,” he said. “We are excited about the companies in China, especially in crypto trading platforms, infrastructure, and defi [decentralized finance] space.”


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