- A region in the heart of Switzerland is dubbed “Crypto Valley” due to its popularity among crypto firms.
- The area is home to 960 crypto firms and 11 unicorns, including solana and polkadot.
- CV VC, a leading VC firm in the crypto hub, share their investing thesis and start-ups to watch.
Over the years, the Swiss canton of Zug has earned itself the nickname “Crypto Valley” as digital asset companies flocked to the location because of its crypto-friendly regulation.
In February, the Swiss authorities said individuals and companies in Zug would be able to pay up to 100,000 Swiss francs ($110,489) of their taxes in either bitcoin or ether.
As crypto adoption surged from the middle of 2020, so did the growth of Crypto Valley. Insider visited the region back in 2018.
There are now 960 firms operating in the region and 5,184 people employed by blockchain firms, an increase of 8.5% compared to the first half of 2020, according to a recent report that looked at the top 50 companies in the valley.
Crypto Valley has also become home to 11 crypto unicorns – companies with a valuation of over $1 billion. This includes blockchains and protocols, such as ethereum, polkadot, aave and solana.
It’s no wonder that companies and VCs are flocking to the hub.
Total funding for the top 50 companies in the valley amounts to $3.7 billion, according to the report.
Crypto valley blockchain investing strategy
“I think you can say we are the founders of the Crypto Valley ecosystem,” Mathias Ruch, founder and CEO of CV VC, said.
CV VC is a consortium partner of Blockchain Nation Switzerland, who have been crucial in helping the authorities come up with the current crypto legal framework, Ruch said.
Unlike the majority of crypto venture firms, CV VC is focusing on the “picks and shovels” companies operating in the crypto world, rather than the protocols and digital currencies themselves, such as ethereum and bitcoin.
“We invest in the startups that build on top of the technology,” Ruch said.
The startups are creating the tools at an application level, which will help the ecosystem expand exponentially in coming years, Ruch said.
The jury is still out on which blockchains will be the dominant ones, there could be one or two, or there could be 10, Olaf Hannemann, co-founder and chief investment officer of CV VC, said.
“You can have a very smart protocol, but you need applications to run on those and people to use the applications,” Hannemann said. “That’s where we’re very focused on the investment side, which then will lead to better views in the medium term on which protocols are the endgame winner.”
“[For our incubation startups there’s] already a founding team, there’s an idea of, there’s an MVP and a product, sometimes there’s even first revenues,” Hannemann said. ” … we take the ideas and work with the startups early on, and try and get them ready for the next phase of bringing the product to market, accelerating potentially revenue, and making them ready for the next round of professional investors.”
At the end of the program, CV VC might invest in the startup following a demo day investing up to 125,000 Swiss francs ($138,150) in return for 10% of equity or tokens, Hannemann said.
Other investments outside the program are also early-stage investments, either pre-seed or series A.
“We are long in crypto, long in blockchain,” Ruch said. “We don’t really bother that much when it comes to the volatility of the space. We invest long in the second level of the space and the development. And the future looks bright.”
The firm just recently raised a 13 million Swiss francs ($14 million) financing round to invest in more early-stage companies.
Hannemann and Ruch highlighted 3 under-the-radar companies in their existing portfolio that investors should watch.
Startups to watch
AdHash is a digital advertising processing ecosystem that aims to create a smoother experience through blockchain technology.
“Normally, you have up to 70 intermediaries in this supply chain of online advertising and what [AdHash] do is eliminate most of these intermediaries and they guarantee a flat rate basically, when it comes to your ad being published,” Ruch said.
“If you’ve ever done online advertising, you know how much of a pain it is,” Ruch said. ” I think this really solves a big issue in today’s digital and online business.”
Asvin is a provider that helps internet-of-things businesses help securely and safely update their devices “over-the-air”.
“This startup is combining two exponential technologies, one is blockchain and the other one is IoT,” Ruch said. “And this is where for us the thesis becomes really interesting if these leading technologies are being combined.”
The firm helps companies make sure the latest software and firmware is on the device before use, which becomes essential in the cases, such as autonomous cars, where an out-of-date update could have serious consequences.
3) Proof of Impact
Proof of Impact aims to make impact investing more transparent and verifiable by leveraging blockchain technology.
“Our co-investors in the very first round were Franklin Templeton, out of the US, and they don’t typically do that early stage VC,” Hannemann said. “If you count one and one together, why they’re doing this is for strategic reasons, i.e. they need for their business to demonstrate impact on certain funds.”