Asim Ahmad - Eterna Capital - Ethereum London

hi my name is Andrea I'm also an imperial alumnus as Nasim we actually met here at Imperial we studied in 2013-14 at MSC finance and we started alongside with awesome and material here as well Atena capital which is a blockchain investment fund focused on social impact projects maybe let's move on yeah who we are so as I said my name is endre studied here at Imperial I work in the light and Cape engine I mean advisory then I started a company around great recruiting we worked also quite a lot with Imperial student groups and last year the UK segment was taken over by a competitor we still have the business going on in Asia by a fully owned subsidiary and been quite involved into crypto for a while I was talking with Nas him about that we were doing research sometimes investing together and then the attend was the next logical step hi everyone my name is Nasim so I guess the transition is where you will realize that three guys here used to work at the same company called Blackrock Blackrock for the ones who don't know is the largest asset management in the world I came across Mattia and Assam when were part of kind of informal forum within the company called blocked chat so it was for people who were interested about blockchain cryptocurrencies and we interacted and what we realized actually three of us were sitting on the same floor or working on different divisions with it what we call the institutional client business covering different areas so for myself was insurance other guys were working with consultants pension funds as well as the internal strategy so what we decided is basically to apply what we learned in the asset management world and create a regulated fund to give mark some comfort is we who also went for a kind of appointed representative from the an FCA umbrella so we can kind of run the activity within here the UK and and fun this kind of Luxembourg domiciled just to make it very you know friendly for European investors and I mean I think you know it's about the first two tellers with you know our story and then as well a bit more about our investment thesis how we look at projects here is just you know some say press coverage we got when we launched we were featured on desk investment weeks another good press asking was also featured on Bloomberg when he left and then in terms of how do we normally invest like there are different steps so the first is the deal sourcing were mostly involved and I think also the good visibility we got clearly helps we are trying to basically get the entry points into the most high-profile deals because one problem we went through during 2017 was we were researching and investing as individuals but then it was very difficult for us to get into the right projects very early and that was also one of the reason then why we started fund so for us is a combination of leveraging our network in the blockchain space we get a lot of inbound requests from projects and now that we have already made for investments that you know there are public on our website except of one that we are about to announce soon we basically get referrals from projects that introducing us to other projects and then the second stage is about the research so we build our own due diligence framework where we score different elements and then we have a final score for the project and then we rank all the projects that they passed through this framework and then we make decisions on you know where to invest pretty much and then it goes to the next stage is about asset allocation so we are we are operating as a VC fund meaning that we invest in very early stage projects but we do also have a basket of large market cap coins that then we use to finance these projects so is about you know keep the right balance and ensure that the results enough liquidity on the secondary market for us to come out from position which brings me to the last point which is about basically managing the properly our liquidity because as a NASA mentioned is a traditional fund so investors are locked up for a certain period of time and we need to ensure that whenever they want to redeem we have the liquidity for them to redeem and then here is about you know breaking down our investment research process process so what do we look at there are two main stages so what we look in new projects and one of the main focus as nothing we'll cover more later is around you know identifying the key social impact metrics that then we put the due diligence framework and they have a strong weight then of course we look at the team what are they trying to achieve what are the token matrix you know are they giving massive discounts to early investors something that you know which basically send how it works because sometimes you can dilute the proposition of the parade itself and then once we make a decision on investing we monitor the process the project on an ongoing basis and we look at things like how's it going from the business development effort standpoint how they are basically comparing to the other competitors in terms of valuation and as well you know whether they actually met the rod Natur or they didn't and one other very important element which is also linked to the fact that the legal environment is always evolving is about the macroeconomic element to basically understand how this evolves and all these impacted projects thank so one of the things I thought we'd focus a bit more on today is most of you would probably ask why social impact so I mean the idea came all the way back to when the three of us were at Blackrock and we're seeing a big shift in the finance industry where a lot of institutional clients were basically moving and we're shuffling the balance sheet to make it what they called ESG friendly meaning environmental social and governance focused what does it mean for us basically it means that the big thing is most of us here we would agree that generally speaking blockchain as a technology can bring a lot of positive things to society you know this intermediation transparency and so on there's so many factors that can make it you know positive now the question is it's a Wild West and we think that it's not because the technology per se can be positive for society that you know investing blindly in the in the ecosystem we would meet that criteria so what we did and what we decided is to create a screening looking at the idea what is the idea of a project is the idea scalable that have any use case then the technology you know what kind of protocol is being used are they using you know proof of work versus proof of stake are they consuming so much energy that someone could argue is negative for the environment then it's also about the team you know how do they behave predominantly on social medias so you know when we invest in a project we kind of follow them on telegram Twitter and so on and we just make sure that you know the way they communicate is aligned to you know the principles we we care about and the biggest element that comes on top of that is the governance element so when a project raises capital if it's through tokens or if it's through you know equity rounds if you're very early-stage you know we look at you know how did they structure that legally speaking did they run proper KYC IML checks are they doing it in a jurisdiction that you know can't make sense for us and all of that basically evolves we keep on top of it you could argue that you know all of that is very difficult to quantify 100 percent agree with that so it's mostly qualitative but you know we try to kind of push it and make sure that you know this industry moves towards the right direction this is kind of ironically what we're trying to do and you know blockchain social impact you can kind of you know it's almost you can apply to all types of industries or sectors you know some of them renewable energies you know Andre myself were invested and Nico I guess some of you would have heard of sculpt our ledger just about you know solar panels how do instead of wasting energy you kind of reduce your beauty to your neighbors you sell it it's all about supplying the man all these kind of things you know can be very positive for society once it's adopted once there is a proper legal framework around it and it's regulated one of the big codes that we care about as well as around personal data so you know 2018 has raised a big question mark around privacy we heard a Facebook can bridge and ethics we heard of GDP are so a lot of people are asking questions how do we make sure that you know when I go on on Google and I and I try to search for something my data is not used in the wrong way and we think that blockchain can can consult that you know you can put your data on private blockchains you can decide to release your data to apply for you know a specific job or for a bank account so all these things are things we look at when we invest in projects and if a project aims to kind of move the world towards that direction it's definitely something we'd consider and we overlay on top of our scoring metrics and then I think what do we have yeah these are think you pretty much I mean already cover it I mean are just like the different elements that we can see that on the social impact standpoint like from the idea technology team and government side so I think he already spoke about that so I mean we are I mean I don't like if you guys have any questions you can keep it quite interactive you know we also see Imperial as for us like good source in terms of you know smart developers that then start building projects that could be you know the next big thing so we are very keen about getting involved as early as possible so we don't all invest in tokens sometimes we also invest into the equity so for us is read about coming in early and then supporting the projects we invest in with our network first of all then about funding synergies with portfolio companies helping them out with the liquid on the secondary market we are in touch with the several big exchanges we systematically introduce the product to invest in - so like even after the event if you guys are like up to something I see that there are a lot of developers here feel free to to reach out to us so I'm just curious as to what helps to influence your decision as to whether to take a equity investment or to invest in the our CEO of a company I think is more about the stage so sometimes when you invest very very early they will do an equity round and not a talk and say just because you know they're yet to figure out how to structure the tokens so yeah I think that's pretty much the reason then you know it also I think is also dependent like on the kind of project we ought to see that in terms of I mean you said a lot about you know regulating icos and that's of course something that we definitely welcome you know as a funding we really want to have the clarity from a regulatory standpoint but you have to see now that this in this uncertain period the very serious project sometimes they don't do I see us so what they do they either do like rounds for just funds or accredited investors so they take out the written investors or they say you know what let's do an equity round because you know you're not here because the blockchain is so hyped then we want to capitalize on that is you know we are serious people so let's get the money let's get what we need and you know I move on awesome great presentation guys and a interesting question here is that due diligence comes down to probably when it comes to investing in business is one of the most key pivotal part I'd say so what are some no compromises when it comes to due diligence you have to name three things which a business that you invest in has to have what would those things be I mean we can both code I mean from from my side like first of all like on the due diligence we look at you know the team the team should be legit you know we look at the credentials they have at when you invest early stage you pretty much invest in the team itself so that's first of all the first element then the second element is on the legal standpoint so we want to ensure that these people actually thought through about what to do you know because sometimes you can get some super amazing projects very smart teams but then they up completely on the legal side and you know they that's it like it's game over right and we met people their life you know where to be shot in the US and we are accepting investor from anywhere I would like you know he's I don't know like at some point he's gonna create a problem you don't discover it right now yeah and I guess the the I guess the third element I would add to that is you know a lot of people are doing icos some of them you can question utility of the token some of them I could be you know why do you have a token is it just because you're taking advantage of a heiped no ecosystem or is it because you really believe in a tokens and quite interestingly when we you know when we before investing in projects you know to be honest with you we receive hundreds of emails and we run through them like through the through the screen and when we have discussion with them on the phone you know one of the big questions is you know why do you need to open for your platform and you can also add on top of that is the competitive landscape you know some of them tell you I can do a million transactions per second and then you you start questioning them I mean how do you do that if you team is struggling to do it how do you guys the team of three or four can claim to be able to do it so then you stress test them around all of that so I mean I guess all these elements kind of constitute massive you know milestones in our decisions framework in particular like we do a lot of investments in the protocol and infrastructure level because we think that there is the main bottleneck and then after that you know you can have the phase of these centralized apps built on top of scalable platform some protocols and one thing that we look at and we invest in these blockchain infrastructure is about what nothing much like transactions per second which is a very hyped metric for blockchain platforms you know claiming that millions of transactions per seconds but then you know the question should be how like because number there is a trade-off between being so fast and security right so you know you basically need to be very very careful you know so due diligence is about you know the tech side try to understand if they can indeed do what they claim to do and what do they compromise how to achieve it yeah thank you for the talk obviously this technology is quite complex as in like a lot of the elements that considers technology are very deep deeply technical so in order to invest into this space how important do you think it is that you have a technical background or how deep of an understanding of the technology underneath you need to have to make good investments in the area yeah I mean I think is quite important I think you know we let's say we invested in the space for a while so even if you're we are not developers ourself we like learned quite a lot and we are at a good understanding of the technology but then we also have people have very close to a team that are helping us out with that side like sunlight quite well-known developers on the in the blockchain space that are supporting us on that what's needed but I think that's something of course very important but you know one thing is like sometimes you cannot really like you don't have much like you can look at the white paper right but there is not much code available I can't get up because they're very early right and they haven't released anything yet so that's sort of something that you have to consider thank you and if I may ask what are your assets under management and who are your investors so who are the investors we cannot basically signal disclose that in terms of uh what type okay so the main areas are large crypto holders so people that they are like very rich nathie do more bitcoins and they want to diversify because we are more early-stage investments then like standard high net-worth that they don't know anything around crypto and they just want to get an exposure into the space and as well some like family offices funds of funds that you know restarting getting conversations with then in terms of assets under Madrid the way we do it is as follows so the target for the fund is 20 million euros as another management then what we do is we call up the capital when we needed to deploy in the projects so what we don't want to do is been a situation where you have 19 million in cash and you dilute the returns for your investors so our aim is to create a small very high quality fund with a very very strong track record that doesn't you know compromise in terms of quality of the project we set the bar very high like I can tell you like probably you you can have a look at the way our website but you know you can see that the products we invested in that are like very very high profile and you had the funds like understand Horowitz polishing capital investing at the same around where we came in so yeah that's how you operate thanks again and the speakers very good the the question I have is that you talked about early stage and and then the three that you have listed on your site origin Hydra hash craft and and that one in particular causes some odd question marks in this industry because it's far from decentralized it's actually it's actually owned right and centrally governed by the hata craft team so can you just explain because that seems a little bit odd in comparison to your you know your social piece I think that you know you should have a pragmatic approach and in the sense that you know you'll definitely have use case for public blockchains and also use cases for more private blockchains so the fact i mean i don't think that we are gonna be in a situation where you will just have one single decentralized blockchain to rule them all you will have different use cases and on either hash graph if you look at you know the technology our building is very you know in now it goes also beyond let's say blockchain itself so from that standpoint it really bring many benefits to society yeah and I guess so interestingly a couple of weeks ago actually Hadera Ashcraft came to london they did a quick Meetup and one of the companies that was presenting there actually had a very interesting product which I would definitely qualify as you know social impact so it was kind of fizzy juices basically it's a cane mostly I think was pineapple and lime and the other one was raspberry and I forgot the other ingredient but basically you could open the cap and at the back of it you had the bar code and one of the guys what he showed us actually he used the demo is he scan the code and by scanning the code you could see each ingredients where they were coming from all over the world how this cane the cane was put together where you know the aluminum comes from these kind of elements kind of you know are positive from our perspective in terms of social impact so it's to give you an example that there are some applications that potentially can develop on a large graph and per se you know qualify as as what we consider being social impact hi I'm David here as co-founder of a social impact project I was just wondering whether you have any specifications as to where the social impact needs to be for example we've had many discussions with private investors who are very cautious about investing on anything that has to do with Africa which is our case not at all as the answer we can have a chat later on we don't you know Africa Asia Latin America we've been talking to projects that all over the world so it's definitely not kind of I would say red flag for us just a quick one what's the percentage percentage of people that want to give you cash and what's the percentage of people that want to give you crypto when they want to invest do you know that yeah so I mean as as Angela mentioned we have different types of investors so obviously the crypto holders ideally would want to you know come in with with Kryptos the the issue you have with cryptos as well is you know when you when you get them into a phone and you need to run paprika why caml due diligence and you need to prove that you know they've paid tax on the instrument they're using to come in so it's definitely not you know something you know we we promote there are ways around it you know an example would be if someone used to work for the term foundation as an example and he was paid in ETA or you know he managed to buy some ether the specific price and we have a copy of you know this employment it was signed by vitaliy who whoever from the foundation that would help us on the KYC AML but yeah predominantly it would definitely be euros because actually it's a Luxembourg fund high as an investment fund how do you deal with the markets when they've been like they have this year are you taking out short positions or no strategy no we are long gone Lee so you know it's a VC strategy so I would say 90 if not 95% of the fund is invested in early-stage projects so you know luckily we've been you know immune to the bear market we still have a small you know basket of you know what we consider as being large gap meaning positions that if we need if needed we can liquidate you know in 24 hours that is exposed to the market simply because you know we want to have exposure to the market we believe in a market but it's not the strategy of the fund so you know I would say the bear market hasn't been something that directly impacts us like one thing to add from my side that actually we think that you know is the best phase for us to launch like to like ever fund and then be able to invest because we are long-term orders right we want to support the project long term we are not some of that it's gonna come in and then flip the token as soon as it gets on an exchange also because when we come in we also have you know lockup period sometimes and we we cannot not do it but it's not our intention to do it so is it's just you know you are in for the long term so you need to accept the volatility on the upside and on the downside and you just need I mean you you are here you launched a fund because you think that in the next five years years this is gonna grow as an asset class and as an industry so it should be like you should not be concerned about the short-term volatility one of the things he said in the talk which I thought was very interesting is he said that when you're at Blackrock you noticed that a lot of institutional investors were leaning towards socially positive investments and I'm wondering do you think that this is going to be difficult for Bitcoin specifically because of its energy expenditure I know this doesn't directly relate to you because you're not missing a Bitcoin but I'm just thinking about institutional investors and Bitcoin do you think it's gonna be a problem it's a good question I mean when I said that a lot of institutions are looking into you know social impact it's not to say that there will be you know reshuffling their entire balance sheet and move it into things that you know would qualify obviously if you do that unfortunately the universe you know shrinks quite a lot if you look at the index it's definitely a good question and since that assuming it's something we hope happens we have a Bitcoin ETF you could argue who would come who will invest in a Bitcoin ETF I think you know at this stage the crypto market is definitely gonna be a very very very small portion of you know big institutions balance sheet but that's not the problem right even if it's just 1% or 2% of their entire balance sheet that would definitely take the market to a different level in terms of adoption in terms of you know how serious it's they can and so on so I don't think the fact that Bitcoin is using you know proof of work is definitely is necessary a problem on the other side you could also argue that you know there could be some solutions on Bitcoin like you know litecoin who knows so might might might solve the problem there we go sorry and going back to your sort of view on liquidity as you mentioned before I mean you said that you usually invest in long term with several locker periods now given that we're sort of in a bear market how do you ensure that you know later on and we're not in a bear market when those lot appeared expire and there you have liquidate and pay your bestest and yeah I mean I think is good if the projects can ensure that first of all like you know what we see that now they're very very careful in terms of listing in fact if you see the average time that is now passing before like from the ico to the time actually the tokens get listed is way longer than before so yeah I think the products they should like consider that and they should most of all like design the talk and sell in such a way where they do have those lock ups because you know if most of the people are anyway locked up even if you release it on an exchange you reduce the impact of the project on speculation right if you did something where you give massive discounts at the beginning with no lock ups people are gonna dump into an exchange the first date goes live and this goes back to the point I was mentioning around how do we value projects we look at the token matrix so we want to ensure that on top of being a very good team social impact whatever but you know they also thought about that properly and I think the other thing I would add on that and I guess is the nature of a venture capital fund ideally such a fun would have I would say is looking at the industry between 1525 kind of projects in which you're investing and you know there is some element of diversification by doing so so obviously on the 2025 projects if you expect that all of them you know do a 10x then you completely go wrong some of them would just go bust and some of them might might be able to do it do even more than a 10x so I think that's the nature of the business and and we make sure that there is a diversification element that we take into consideration to avoid putting all our eggs in the same basket quick one and maybe it's the last one hole almost are you looking at us I see oohs yeah I mean we don't discriminate against blacks in plasma that's why else we are social in fact no I'm kidding like but yeah I mean if there is good product on ears why not like we have no problems with that as I mentioned initially we are in a phase where we invest more at the protocol level and at the platform level so we don't invest much in decentralized apps just because we think that you know this is probably gonna be the next wave once you have several very scalable and secure blockchain platforms competing with each other thanks very much I was really good I think over the last sort of 12 months private equity and funds like this and family offices are now the biggest contributors from an investment point of view to I co stand it relates slightly to actually possibly your question earlier do you think as time goes on more regulation comes in it matters if actually all that we do is recreate what we have already on the blockchain from an investment point of view and it becomes harder for individual investors to get in at an early stage I mean is a double-edged sword that's the reality right because on the one hand you want to protect the retail investors right against people that are just running scams and there is no regulation and they can get the money from someone that is uneducated and run with it right on the other hand you don't want to limit access to people that actually their own research they know what they're doing and but they cannot invest because just you close the doors I think you know this the like the task of good regulation like it should be inclusive with people that they actually know what they're doing even regardless of the net worth even if they don't have money but they can actually prove that they know the risk they're taking you go ahead right but if they're not and then projects they can just say whatever they want they're not accountable yeah that's definitely something that should change and I think until these changes you're not gonna see serious money coming into the space amazing thank you very much guys big hand [Applause]