How crypto startups are rewriting CVC rules

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The Weekend Pitch

May 1, 2022

Presented by Altvia

(Boris Zhitkov/Getty Images)

Crypto tends to distort and intensify everything it touches.

The value of art is subjective. The value of an NFT defies explanation. Gaming companies make money off of users. Blockchain gamers make money off of each other. Day trading stocks is risky. Day trading cryptocurrencies is like base jumping in one of those flying squirrel suits.

So it should come as no surprise that crypto corporate venture capital arms are upending norms.

CVCs typically try to make money in a way that benefits the parent company's strategy. In that respect, crypto CVCs aren't all that special: They've made money and grown the ecosystem, to the benefit of all involved.

These startups-turned-investors are remarkably active. They back rivals and underwrite bailouts—and some are making a fortune along the way. Which makes them inescapably odd.

Crypto startups may simply be borrowing from the "coopetition" approach that gave the garage entrepreneurs of early Silicon Valley an advantage over tech conglomerates. They're just taking it up a notch, playing the role of both founder and funder.

Welcome back to The Weekend Pitch. I'm James Thorne and you can reach me at james.thorne@pitchbook.com or on Twitter @jamescthorne.

The ride together, die together approach of crypto CVCs fits the sector's collectivist culture. The blockchain experiment is still proving that it is not merely a solution in search of a problem, that decentralized tech will fulfill needs in ways that powerful platforms have failed. Coopetition may be the way to meet that challenge.

Quote/Unquote

"The crisis in Ukraine is devastating, but I believe that the private equity asset class is flexible. At the same time, it is important that we are investing responsibly. During COVID, we saw the acceleration of the digitalization trend, and [we] may yet see other trends speed up, such as the adoption of renewables and reduced dependence on oil and gas."

—Karita Meling, head of PE at Finnish LP Elo Mutual Pension Insurance Co., on how the current macro-economic environment and geopolitical situation in Europe has impacted the firm's investment priorities.

Find out what else Meling had to say in our Q&A.

Deal Flow

Global M&A activity bifurcated for much of Q1 2022. Previously negotiated deals closed on time, while announced activity diminished due to the uncertainty created by Russia's invasion of Ukraine.

The financial services sector also played a pivotal role in Q1 M&A activity on several fronts. PE continues to account for a swelling proportion of deal activity, including a significant percentage of the largest deals. Eight of the 20 largest deals to close in the quarter were bought by financial sponsors.

Read more in our latest Global M&A Report, sponsored by Liberty GTS.

Did you know ...

(fhm/Getty Images)

... That German VC investing has boomed over the last five years? Plentiful capital, low interest rates, an improved regulatory framework and government support for startups and founders are all working to create and sustain a vibrant startup culture.

HV Capital and Earlybird Venture Capital are just two of the most active German VC investors by deal count. Check out our list to see who else made the top 10.

Datapoints

Infertility affects 15% of reproductive-aged couples worldwide, according to the World Health Organization. The problem isn't new, but only in the past couple of years have VCs really turned their attention to startups working to develop fertility-focused tech.

However, despite an increase of 273% in funding over the past five years, some startups in the sector are still feeling overlooked.

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This edition of The Weekend Pitch was written by James Thorne and Ryan Prete. It was edited by Chris Noble, Angela Sams and Sam Steele.

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