Our Venture Partner Peter Augustin and our Investment Director David Teufel lately had an interview with New Business Magazine about the first Austrian crypto fund “Tigris Web3”.
Supporting the digital future with an investment and earning money in the process – that sounds like a good idea. The first Austrian crypto fund “Tigris Web3” has set itself exactly that goal.
Last year, we launched “Tigris Web3”, the first Austrian crypto fund that invests exclusively in digital assets. Peter Augustin, a pioneer of the early days of the Internet – the so-called Web1 – is involved as initiator of the fund and venture partner. Augustin, who founded the Internet provider Inode in 1996, returned to the technology sector after an entrepreneurial break. NEW BUSINESS talked to him and to our investment diector at Venionaire, David Teufel, about the background.
We briefly summarize for laymen what a crypto fund exactly is
DAVID TEUFEL: The crypto fund “Tigris Web3” falls under the category of alternative investment funds. It is registered with the FMA in Austria in accordance with the AIFM-G (the Alternative Investment Fund Manager Act, note). Alternative funds are regularly offered only to professional or so-called qualified investors. These investors are sufficiently experienced, risk-conscious and wealthy.
The minimum subscription of the fund is EUR 100,000 via a security registered with the Austrian Kontrollbank, directly with the fund manager (AIFM) of Venionaire Investment GmbH. Tradable among registered professional investors, this security will be available in 2024 at the earliest. Crypto funds can have different orientations. For example, they can be purely speculative or focused on a specific theme in terms of content. Our fund “Tigris Web3” invests in the future of the Internet, the so-called Internet of Blockchains or Web3.
The fund holds only so-called tokens, which are purely digital assets. It holds no company shares, shares or bonds in tokenized form. These tokens nevertheless allow investors in the fund to participate in the growth of blockchain-based projects, since they increase in intrinsic and market value as their popularity rises, in line with their tokenomics (token economy, note).
What is the Web3
Peter Augustin: The Web3 aims to redistribute value creation and ownership with increased security and control for the network or its users on the Internet. Transparent, decentralized networks and correspondingly unchanging information chains will make it possible to replace the trust service provider or the platform operator, such as Facebook, Amazon, Google or Spotify today, which will release enormous economic potential. Web3 is gaining ground because of a win-win situation. In Web3, users once again become the owners of their data, and creators – content creators – are paid more fairly for their services.
Web3: The next generation of the Internet
In the beginning, with the introduction of the Internet, there was Web1. After that, user-oriented applications from big tech companies such as Google, Amazon, Microsoft or Facebook, all originated in Silicon Valley and centrally manage enormous amounts of data, dominated Web2. Control over the data ultimately also means restriction of access. With Web3, the next generation of the Internet is now just around the corner. A decentralized, democratic system is emerging in which many players jointly control data and thus also realize a completely new level of data security. The “Tigris Web3 Fund” supports this development by enabling investments in digital assets (so-called tokens). Only tokens that meet strict specifications in terms of security, technology and concrete applicability are selected.
Headlines and Risks
David Teufel: The risk cannot be dismissed out of hand, which is why we also regularly advise private investors against investments in this area. For our fund management, managing the risks is an enormously important task. However, as a professional market participant, we do have options and teams of experts at our disposal that enable us to manage risk appropriately.
Fundamentally, the following must be said about Web3 or crypto: Web3 or blockchain as a technology is still in its infancy. The drastic cycles and developments around individual market participants, such as FTX most recently, are of course making headlines. All of this is very reminiscent of the early days of the Internet. What complicates matters is that the crypto market cannot escape the general market action. This asset class also reflects the economic crisis and reinforces its negative effects.
We are making a virtue out of necessity. Our fund builds up its allocation very slowly. We invest de facto countercyclically and benefit from low entry prices. As a result, we are also convinced that we will deliver pleasing returns in the coming years.
Dotcom Bubble vs. Crypto
From the very beginning, Peter Augustin has not only observed all developments in digital business, but has also been “involved” in them. He explains whether current market events can be compared with the bursting of the dotcom bubble or whether the comparison is inappropriate.
Peter Augustin: The comparison is more than apt. Fundamental developments take time, whereas liquid financial markets are incredibly short-winded. In the dot-com era, investors recognized the potential of the Internet, but few had the stamina to see it materialize. Therefore, the investment focus at “Tigris Web3” is a buy-and-hold strategy, although we do not exclude investing a small part in so-called market-making. We continuously subject the projects that end up in our investment universe to intensive and in-depth analyses. For this purpose, we have developed our own investment framework with over 30 different criteria together with internal and external experts. The Investment Commitee only considers projects that pass this framework.
Ultimately, projects that come into question for us must bring added value for the user, for which the user is also prepared to pay. But market penetration still takes time – users have to familiarize themselves with the new possibilities of Web3. The solutions must also become more user-friendly, more suitable for the masses. In a few years, Web3 will be completely normal.
How the idea for Austria’s first Crypto Fund came about
David Teufel: Peter Augustin and the Venionaire team had already been in contact for a few years through joint investments in the start-up and venture capital sector. This has resulted in mutual trust and a friendship. We talked regularly and intensively about innovation and technology trends. Web3 then became an increasingly frequent topic two years ago. We were equally fascinated and experimented with it in private. Peter Augustin had discovered the topic much earlier than others and also got involved very intensively right away. He was invested early on and friends and acquaintances often asked how they could do the same. This is how the idea for a professionally set up fund came about.
Goal of Tigris Web3
David Teufel: We want to find the best teams and the strongest technologies of Web3 and accompany them in their growth already in early days. To do this, we want to build a 20 million euro fund. The number seems small in a bull run, but all the bigger in a crypto winter like we are currently experiencing.
A large part of the founders and developers in Web3 are currently still on a partly ideologically driven journey. They want to break the de facto monopoly of Internet giants, the so-called FANG, and create an independent, fair, censorship-resistant and open Internet of Ownership.
This is a vision we share. We also see an opportunity for Europe to regain the digital connection with the USA or China. There are very good European projects. At the end of the day, investors entrust us with their capital and expect us to work for a “better Internet” by investing in this new asset class.
What advantages do investors have when they invest in “Tigris Web3”?
David Teufel: In addition to a broad spread and risk diversification, the intensive selection process, risk management and active portfolio management of “Tigris Web3” are definitely a great advantage for investors. We are in regular exchange with developers, foundations and experts on various projects. This allows us to react very quickly to news and market changes and to keep track of a fairly large number of projects in the portfolio – thanks to a team of several people. Individual investors can’t possibly be so active in the various networks and at the same time maintain an exchange with other investors, funds, developers and other industry experts. As a professional team, we certainly have a big advantage here.
Possible disadvantages
David Teufel: That depends on how you look at it. In the case of funds – including “Tigris Web3” – annual management fees and, in the event of success, i.e. in the case of large price increases, a performance fee are incurred. You can save these costs if you invest sufficiently large sums yourself, e.g. > EUR 10 million, and can finance the corresponding personnel and technical resources, such as a 3Folio account, internally.
What is invested in
Peter Augustin: The “Tigris Web3” invests in tokens and other digital assets based on blockchain technology. The focus is on Web3 applications or underlying layers. Currently, we are invested in 16 different projects. Specifically, among others, in infrastructure projects, so-called Layer 1, such as Cosmos. But the main focus is on applications, especially own chains and decentralized apps. For example: decentralized cloud computing, decentralized VPN providers or projects that enable secure communication between different blockchains and also the outside world. But we also have decentralized finance applications or gaming applications in our portfolio or in our sights.
Target volume EUR 20 million
David Teufel: Unfortunately, this goal has not yet been achieved. The market turmoil on the capital markets, the events surrounding LUNA and most recently FTX have caused a lot of uncertainty shortly after the fund was launched. This has significantly slowed down the fundraising, which was initially very strong. However, we are noticing that interest is currently rising again. We expect to reach our internal target by the end of the year. The fund can and will accept new investors until the end of 2023.
Impact of the crypto winter on Tigris Web3
David Teufel: Despite our strict risk policy, we have also recorded losses. But the fund has lost significantly less than its benchmark Bitcoin. We see the current developments as a short-term correction rather than a long-term negative. For example, the number of active blockchain developers continues to rise, regardless of the price trend. What should be learned from what has happened is that more decentralization is needed – and arguably a higher level of regulation. The EU is a pioneer here with the MiCA and DAC8 directives.
Peter Augustin: Regulation and blockchain are not contradictory. Regulation allows a greater number of individuals, financial institutions, and companies on the web3 to operate within a clear set of rules. That in turn should promote innovation and the spread of technology overall. (RNF)
Here you can find the original New Business Article in German: https://newbusiness.at/unternehmen/in-zukunft-investieren