A consortium of Swiss investors has launched a private equity vehicle that aims to collect up to $100 million with the long-term goal of getting 1,000 blockchain companies off the ground internationally within five years*.
The Swiss company Crypto Valley Venture Capitalexternal link (CV VC) launched its initial “Genesis Hub” incubator in Zug, home to Switzerland’s Crypto Valley, on Thursday. Starting with 20 blockchain start-ups, it aims to fund and mentor 60 new companies per year. The consortium has ambitious plans to replicate this incubator in different parts of the world, developing a global network in the coming years.
Start-ups that are chosen to go through CV VC’s three-month kickstart programme will each receive $125,000 in seed funding. Later stage financing for the most promising projects will be decided on a case-by-case basis. In return, the young companies will give CV VC a stake in their business of up to 8% in the shape of shares or digital tokens.
Working out of the established CV Labs co-working space in Zug, the start-ups will receive support and mentoring from a team of experienced business and technology consultants.
While CV VC will be based in Switzerland, it plans to operate on a global scale and is currently seeking new investors from around the world to help it set up future incubators in other countries. “Blockchain technology is a global phenomenon so we could expand anywhere in the world,” said CV VC co-founder Mathias Ruch on Thursday.
ICOs 'running out of steam'
Many blockchain start-ups have ridden the wave of the initial coin offering (ICO) crowd investing boom over the last 18 months. This source of funding has generated billions of dollars in previously untapped capital. But ICOs have also been criticized for spiraling out of control, with a spate of failed start-ups destroying a large chunk of the capital raised from the public.
Ruch, who founded the Lakeside Partners consulting group (that will be merged into CV VC), is convinced that the worlds of ICOs and traditional initial public offering (IPO) funding will merge into a new model of start-up financing with better checks and balances to protect both companies and investors.
This thought was echoed by Vasiliy Suvorov, CV VC advisor and vice-president of the Crypto Valley Association. “ICOs will continue to be a useful mechanism but they will no longer be core to the blockchain economy,” he said. “We have had all the hype about ICOs, and now we need a model that takes all these great technology ideas and brings them into the real economy.”
Crypto Valley has already seen some 600 blockchain companies establish in region, both home-grown and foreign imports. These include Xapo, Bitcoin Suisse and Shapeshift.
* Correction: the original version of this text wrongly stated that the goal was to produce 1,000 companies every year.