Brian D. Evans discusses the challenges of investing in crypto startups during a bull run and points out narratives his firm is keeping an eye out for.
Over $731 million was invested in crypto startups in March, as venture capital (VC) money started flowing back to crypto startups driven by positive news and the recent price leaps. Brian D. Evans, CEO and founder of VC fund BDE Ventures, believes that the ‘manias’ of bull runs cause some VCs to “throw money around without doing much due diligence.”
Evans explains that this same movement happened in the last bull run, which occurred between 2020 and 2021, and the one before it. However, during bear markets, the VC’s playbook is the polar opposite.
“VCs, that is, don’t feel much FOMO [fear of missing out] and in turn are far more discerning when it comes to scrutinizing potential investments. I think it’s best to be discerning and cautious during both bear and bull markets, but willing enough to take the risks that boost terrific projects and in turn help get them to market,” explains Evans.
Moreover, although every bull run in crypto sees a fresh inflow of VC money, this time might be different. The approval of the first spot Bitcoin exchange-traded funds in the US is closing the gap between traditional finance and crypto, and this might affect VC’s investment pattern.
“I think we will eventually see a further melding of the crypto and traditional finance worlds, leading to a situation where new, more crypto-native players are launching funds and such, and also vice versa. In the latter case, we’re already seeing BlackRock looking to tokenize assets on Ethereum, for example. But this will take time to place, and it will likely require solid legislation at the federal level in the United States that provides a clear and helpful framework for the industry. But I can see a world in the not-too-distant future where ETFs are tokenized and traded almost entirely on-chain.”
‘Hyped’ sectors On top of fresh VC money, bull runs are also marked by the chase of trending narratives, or the most ‘hyped’ sectors of the crypto industry. BDE is closely keeping an eye out for projects related to artificial intelligence, distributed computing, real-world asset tokenization, decentralized physical infrastructure, and gaming.
“As we see blockchains become more performant over time, I expect there will be novel use cases that emerge in the coming months and years. What’s exciting about crypto is that it’s such a new technology and design space that all sorts of new ideas and projects are emerging that aim to solve a vast array of problems in radically novel ways,” concludes Evans.
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