Our initial thesis: Building Bridges to Crypto for the Masses
We believe we are in the early stages of Web3, a new paradigm of the internet powered by blockchain and crypto technology. Web 1.0 was a read-only internet that gave users access to information like never before; Web 2.0 was a read-write internet that allowed users to consume and create content; Web3 will be a read-write-own internet built on crypto rails where users are also the owners of the platforms. This will allow users to have more direct access to the decision making and financial benefits of these platforms that was previously available only to management and shareholders.
A complete transition to this new crypto world will take time, as customer behavior isn’t easy to change, and the many different innovations need time to mature. But, as consumers begin adopting new Web3 crypto-powered experiences, financial institutions and businesses will all need to start adapting to remain competitive—and they will need a lot of help getting there.
At Point72 Ventures, we are interested in investment opportunities in the new set of infrastructure companies that are bridging the crypto and non-crypto worlds for financial services, enterprises, and consumers—ultimately helping to bring crypto to millions of businesses and billions of people around the world.
We believe that crypto is the largest disruptive force to the financial services industry since fintech, which has taken market share from incumbent financial institutions over the past decade. Financial institution participation in crypto began reluctantly because crypto was still nascent, misunderstood, and very risky, but there has recently been a seismic shift in receptivity as the industry has watched crypto scale to become a $2 trillion asset class, opening an entirely new frontier of blockchain-based financial services.
Financial institutions are also seeing a meaningful increase in client demand for crypto exposure. Fidelity’s most recent Institutional Investor Digital Assets Survey found that 52% of surveyed asset managers had purchased digital assets (up from 36% the prior year) and 70% of all investors surveyed have a neutral-to-positive outlook on digital assets (up from 60%).
Widespread adoption of crypto as a new asset class by traditional financial services firms will require new infrastructure that makes crypto look and feel like other tradable asset classes (i.e., equities, FX, or derivatives markets). But, building crypto products will likely present challenges for incumbent financial institutions as it requires domain expertise, regulatory licensing, and new technology.
Because of this, we believe that most incumbent financial firms will look to crypto-native infrastructure companies to help them launch new crypto products for their customers. We are already seeing the emergence of a new crypto-focused vendors ecosystem within custody, trading technology, embeddable infrastructure, and research and market data providers, and we only expect that to grow.
Our early investments in the crypto space have been in companies that help traditional financial institutions adopt crypto, such as:
- Messari, a crypto data, news and research aggregator that provides a trusted source around crypto tokens for both retail and institutional investors
- Zero Hash, which enables fintechs, neobanks, and financial institutions to quickly and easily launch their own crypto trading, rewards, and yield products
- 24Exchange, which has pioneered the crypto non-deliverable forward contract, which will enable the world’s largest financial institutions to trade crypto without taking custody of tokens
Consumers are another key market for crypto products. Up to this point, early adopters of crypto, especially users who wanted to participate in decentralized finance (DeFi) or NFTs, have needed to be technically savvy. But in order for crypto to reach a broader consumer marketplace, an abstraction layer is needed to make it more user friendly and to allow non-technical people to buy, sell, or hold crypto in this new and complex token-based world.
This will require bridges to be built to enable digital assets to be incorporated into payments systems, e-commerce, entertainment, gaming platforms, and much more while also delivering a smooth user experience. In many cases, consumers may not even realize that the platform they are using is powered by a crypto product or blockchain, but the benefits of this new generation of technology will be obvious.
One such company in our portfolio is Massive, which has created a new way for consumers to pay for apps and digital services by leveraging the idle processing power and bandwidth of their devices, and a new way for developers to monetize their applications, without having to rely on paywalls or advertising.
We believe that some new crypto-native companies (ones that don’t have existing business models or non-crypto products) will emerge and scale, but we believe the best avenue for mass consumer adoption will be through established, trusted brands that partner with crypto infrastructure companies. A survey by crypto custodian NYDIG finds that 80% of Americans would rather hold tokens with a bank or fintech and 85% would rather purchase them through their bank or fintech. Zero Hash is one such example of an infrastructure company that is helping existing fintechs, neobanks, brokers and financial institutions to offer crypto to their existing customers.
Similarly, enterprises have a multitude of use cases in which they might want to incorporate crypto into internal systems for treasury, supply chain management, invoicing and billing, payroll, and more. Leveraging crypto provides some advantages over legacy solutions because everything is tracked by the blockchain, which allows for a higher level of transparency and traceability. This means companies can monitor their supply chain at both a global scale and at the most granular levels, or pay contractors in 10 different countries without the complexity and reliance on several local banks or currencies. The ability to move assets between accounts, businesses, and countries almost instantaneously and at extremely low costs unlocks a new level of efficiency within these organizations. In some cases, businesses will be forced to handle crypto and digital assets simply because that is what their customers and the market demands. We expect that enterprises will also partner with specialized crypto infrastructure providers as they make the jump to a digital world.
What’s next: Investing directly into Web3
While we initially focused our investment thesis on investing in the crypto infrastructure that’s building the bridges to Web3 (mainly equity investments), we are also exploring opportunities to invest in Web3 companies directly (token investments). Given our fintech expertise, we expect to be mainly focused on the emerging world of DeFi. However, we are also excited about blockchain infrastructure (L1s, L2s, developer tools, DAO tooling) and Web3/crypto-based consumer application infrastructure supporting industries such as NFTs, gaming, social, commerce, and media.
Why work with Point72 Ventures?
Point72 Ventures is a global venture capital strategy led by a diverse set of domain experts with the capital and mandate to lead rounds through all stages of a company’s growth, from idea to IPO. The team invests in founders with bold ideas who use the latest technologies to drive transformational change across industries. Point72 Ventures offers entrepreneurs access to expertise and insights, executive and technical talent, and hands-on support. With offices in the U.S. and Europe, Point72 Ventures is an affiliate of Point72, the global asset manager founded by Steven A. Cohen.
The Point72 Ventures fintech and crypto investment team has deep expertise in financial services and technology, with over 100 years of combined experience across our team and an active portfolio of nearly 50 fintech companies. We work with our portfolio companies on everything from go-to-market strategy to fundraising to business development to helping build the right product. We are applying our deep expertise, network, and resources to a growing portfolio of crypto investments.
Please reach out…
- If you are building bridges to the crypto world for financial institutions, enterprises, or consumers, or are building Web3 itself and launching a decentralized project. We are focused on investing in crypto companies from first money in up to seed and Series A.
- If you are a financial institution, fintech, enterprise or brand looking to enter the crypto/Web3 world. We would be happy to share our thematic work and help drive strategic partnerships.
- If you are looking to make the career leap into crypto. Our portfolio companies Messari, Zero Hash, 24XExchange and Massive are all hiring for various roles. You can find open positions here.
Crypto @ Point72 Ventures