Arcane has an asset management arm operating a crypto fund for accredited investors and recently entered into a share-purchase agreement for the purchase of a local regulated crypto broker in Norway.

Teana asked how both companies are looking at the decentralized financed (DeFi) space and whether they are participating in looking at DeFi technology protocols that are looking to disrupt the payments  space.

(8:30) “We’ve definitely been taking an interest in DeFi. I think everybody has. And it is a very exciting area of development. But we haven’t specifically invested in DeFi projects as of now. We’ve been looking more at second layer solutions on Lighting networks,” said Arcane Crypto’s Eva.

She pointed to one portfolio company that announced a clearing platform to enable participants to have direct ownership and access to their funds via the Lightning Network. So she thinks that there are some synergies for the DeFi space there as it’s looking to solve some of the same problems that DeFi is trying to address, with areas such as transparency and greater self-custody in focus.

Eva added that this portfolio company is acting as an escrow partner, not a custodian, and they are the party enabling the peer-to-peer transactions to occur.

(9:54) “That’s probably the nearest we have in our portfolio for now. But obviously we’re always looking and exploring new projects and it’s definitely an area of interest,” said Eva.

For his part, Laurenz described how Blockwall has not yet invested in the most prominent DeFi projects, though he says that conceptually it is “absolutely interesting.” As a fund with a certain duration, however, they need to look at investments that are creating “plannable value” over the fund’s remaining duration.

(10:35) “DeFi seems still to be a bit like a speedboat that’s being built while it’s operating at 300KM an hour. And the holy grail to proper defi protocol solution adoption is to have mainstream non-crypto natives using it. And if you look around, how difficult it still is for regular retail buyers to get their hands on bitcoin, the stretch for DeFi solutions is still a bit wider,” said Laurenz.He goes on to say that some of their investments are data marketplaces, and if you put the definition wide enough, it’s DeFi because you’re monetizing data that hasn’t been monetized before.Teana asked about other verticals that the companies might be looking at today that they might not have looked at earlier, in response to which Laurenz explained what has been the most surprising to him. He said that this is in particular to their second fund, which again is focused on early-stage equity startups. The rate and magnitude at which solutions are being built using blockchain is extraordinary, he said, adding:

(10:47) “So what we’re seeing is the rate of adoption that began almost 18 months ago has looked incredible. And the area that we see with respect to that is almost exclusively on a B2B level. So we’re seeing B2B processes being reengienered, being made more efficient, and that’s something that I could have only imagined when we raised the first fund that was supposed to invest in tokens that facilitate a certain use case. And now we’re seeing these use cases being established. So the rate of adoption again is what has surprised me on a positive note the most.

Eva explained how Arcane started out with trading and exchange infrastructure and then moved over into payments, looking for complimentary companies that work well together and that shared many synergies.

(13:27) “I think that we’ve seen more interest or more focus around payments in the last year or so then we had at the start. But I think also our focus has shifted geographically rather than just on the particular projects. So obviously we started out as you would expect with a Nordics focus as we were a Nordics investment company. But that has shifted now, and we now have investments in the UK, in Sweden, in France. And we’re currently looking at potential partnerships or investments in the US, Southeast Asia and the rest of Europe.  So I think that it kind of shows that the exciting projects these days are not limited to one particular area, that it really is global in terms of companies building, working on interesting projects,” said Eva.

Teana asked about the sentiment around what’s been shaping venture capital over the last 12-18 months and how the profile of LPs has changed.

Arcane Crypto’s Eva said that one of the biggest changes was going from a family office to almost being listed. In general, they’ve seen more interest from the more traditional investors, such as asset managers and insurance companies, who are starting to ask how they can get involved and gain more exposure.  Previously it was something that they had an interest in but it was more “from the benches,” she explained, saying that they were on the sidelines because while they found this area interesting, it was just not possible then.

Blockwall’s Laurenz explained how they’ve observed a “huge difference” between the first and second funds. For the first fund, investors were exclusively single-family offices and high net worth individuals who wanted to participate but “didn’t really get their hands around it to be into it themselves.” With that backdrop, he said they raised quite a significant amount of money.

They also had to learn that a lot of what would be classified as proper institutional investors didn’t have a mandate to hold anything directly or indirectly that relates to tokens. So that’s also what they see with respect to their second fund, the equity fund. He said there’s a lot of interest compared to the first fund and people wanting to have access to this still niche-area, blockchain, when it comes to venture capital.

(19:50) “This is what COVID-19 has tremendously helped with. They want to be invested in one of those exponential technologies that they’ve researched about and they want to have an allocation in. They don’t see deal flow for that. They have a mandate to invest in venture funds so that helps. So this is definitely what has changed,” said Laurenz.

He added that even though they’re an equity fund, the rising token prices do support that to some extent because it’s an underlying confirmation of the overall technology, though it’s not a major driver. When it comes to volatility, the fact that Blockwall has a closed-fund structure is something that LPs finally understand because “I wouldn’t have survived this roller coaster ever since,” said Laurenz.

Teana also asked about the next big play the market has its eye on, in response to which Laurenz said in addition to the price predictions for BTC and ETH, it’s the overall adoption of the technology, which he says is the more important aspect of the industry. They’re seeing how corporates have an active interest in this technology and are looking for solutions to adopt them. Meanwhile, startups are building those technologies. He pointed to IOT sensors, an area that has grown tremendously and that is looking for certain solutions that the blockchain can facilitate. He is also hoping for some exits, which helps the overall venture part around blockchain mature even more.

Eva says that something Arcane crypto is focusing on unlike everybody else is lightning transforming payments for areas such as trading and gaming, for instance. They are also focused on Bitcoin for cross-border payments, which she says is “completely disrupting the global payments market.” And they are watching for banks coming into crypto, saying that it’s not just institutional but tier-one banks that are coming, which is something completely different. They will require infrastructure to fit the way they operate.

She adds that the way a tier-1 bank operates vs. a hedge fund or asset manager is very different, saying that the banks are very specific around what they need and want to be able to trade crypto. So service providers can deliver everything around trading, AML and data specifically for big banks and their very specific requirements. (31:26) “I think that’s also going to be very big,” said Eva.10