Crypto could solve venture capital's due diligence problem — VC exec

Venture capitalists battling with the difficulties of due crypto steadfast owed diligence should beryllium looking astatine getting backmost to the basics — to "trust the chain," a crypto-focused task money enforcement argues. 

Speaking to Cointelegraph, John Lo, caput of integer assets astatine Recharge Capital — a $6 cardinal money with crypto and decentralized concern (DeFi) projects connected its portfolio — said that FTX shook the "confidence successful this industry."

"There volition beryllium a batch of soul-searching," helium said. According to Lo, owed diligence has ever been a occupation successful the task space, adjacent extracurricular of crypto.

He said the enactment program taken by crypto task capitalists successful effect to the FTX illness volition beryllium a important deciding origin for either an effectual betterment oregon a deepening of the manufacture crisis.

However, Lo argues that the crypto manufacture provides the satellite with a measurement toward a solution, a nationalist and immutable ledger, arguing:

"Crypto VCs specifically request to spell backmost to crypto principles - spot the chain. We're going to spot a batch much businesses run on-chain, and VCs trust connected on-chain information to execute much thorough diligence."

"We're going to spot amended tools to distill and way on-chain data, successful fact, we whitethorn adjacent spot full on-chain businesses wrapped into NFTs and sold, optimizing arduous M&A processes," helium added. 

The full backing raised successful the crypto task superior past twelvemonth exceeded 2021, with $30.3 cardinal secured by crypto projects, Cointelegraph Research’s VC Database shows.

The past 4th of 2022 saw the lowest superior inflow to the manufacture successful 2 years with lone $2.8 cardinal allocated crossed 371 deals according to a Jan. 1 tweet from Alex Thorn, caput of probe astatine Galaxy Digital.

— Alex Thorn (@intangiblecoins) December 31, 2022

FTX's meltdown caused a antagonistic sentiment crossed the industry, but the backing diminution besides reflects the macroeconomic scenario, said Lo.

"A high-interest situation does not bode good for risk-on industries. Venture usually lags, and we're apt to spot markdowns," noted Lo. He believed arsenic 2023 goes guardant and the macroeconomic scenery stabilizes, the manufacture volition regain stableness arsenic well.

"It is astir apt a bully happening atrocious actors and atrocious practices are shaken retired earlier alternatively than later."

As the twelvemonth progresses, Lo predicted the manufacture volition spot much superior deployments than inflows with an accent connected on-chain products and services alternatively than tokens.

A fig of challenges that surfaced during the bull marketplace volition apt beryllium successful the spotlight too, including idiosyncratic experience, wallets, idiosyncratic onboarding and compliance.

"Key narratives are forming regarding blockchain scalability, liquid staking, real-world assets, decentralized exchanges and platforms," Lo stated.

"These optimizations aft a frenzied play of experimentation volition beryllium cardinal to growth, and arsenic always, determination are teams moving successful stealth connected groundbreaking products yet to beryllium seen," helium said, adding:

"Crypto is live and well."