What Crypto Exchanges Invest In: Interview with KuCoin Ventures Chief

Криптовалютные биржи earn not only from trading commissions, token listings and financial products. Large players are creating venture arms to invest in early-stage startups.

ForkLog spoke with the head of KuCoin Ventures, Justin Chow. He explained how the fund selects projects for its portfolio, why billionaires rescue troubled companies, and when the bear market will transition into a bull market.

ForkLog: Hello! Tell us a little about yourself. How did you enter the cryptocurrency industry?

Justin: I earned an MBA at the London and China-Europe International Business Schools, and then worked as an executive in large public companies. They were closely tied to fintech: because of this I became acquainted with cryptocurrency and began to take an interest in it.

During my research into the crypto industry I learned about KuCoin — an exchange with high potential and stable growth metrics. In November 2021 it launched KuCoin Ventures, and I joined there as Director of Investments.

ForkLog: Do you invest yourself? Which tokens are in your portfolio?

Justin: Investing is my passion. Given the current market, I hold Bitcoin, Ethereum and a few other native tokens.

ForkLog: What role do cryptocurrencies play in your life? Do you discuss trends and investments with friends?

Justin: Not always. Most of my friends from Singapore, India and the United States often talk about cryptocurrencies, while friends from Australia are not interested in blockchain.

I am interested in combinations of goods and NFTs, especially premium-brand items. I also like fiat-on-ramp projects — apps for fast and convenient purchases of cryptocurrencies.

They connect the blockchain industry with everyday life. I believe that thanks to such solutions, in the near future the mass adoption of cryptocurrencies will arrive.

ForkLog: You previously worked in traditional venture funds. Is there a difference between investing in ordinary companies and crypto projects?

Justin: Financial cycles of the crypto market develop faster. New information has a strong impact on prices, so KuCoin Ventures closely follows the mood of other traders and investors.

The key to successful investments in any market is researching projects. I believe that value creation lies at the heart of all investment processes.

ForkLog: Why did KuCoin decide to create a dedicated investment fund?

Justin: The exchange’s management wanted to create a dedicated unit that would constantly monitor the market for new projects, so as not to miss early-stage investment opportunities.

In addition, KuCoin Ventures is responsible for KuCoin Group’s strategic investments. For such a task, a dedicated team is best suited.

ForkLog: Why do exchanges prefer venture investments over ICO?

Justin: In venture investing we conduct legal due diligence on the entire startup team, we can better understand technologies and business models. This information allows us to earn more than from token sales.

ForkLog: Does KuCoin Ventures compete with other funds?

Justin: No, we are more partners than rivals. We even regularly share deal flows.

ForkLog: And how does the project selection work?

Justin: KuCoin Ventures has developed scoring matrices for rapid startup scoring. We also keep reserves for investments in projects that offer new technologies and use cases for blockchain.

We also evaluate the personal qualities of team members. The best projects are built by cohesive teams and execution-focused entrepreneurs.

ForkLog: From a technical point of view, which projects are the most promising?

Justin: We highly value appchains — blockchain protocols designed for a single specific application or ecosystem. KuCoin Ventures also invests in infrastructure, GameFi, NFT and other Web3 projects.

From a technical standpoint, the most promising projects are ZK-Rollups, layer-2 and layer-3 solutions.

Web3 attracts new users to the world of cryptocurrencies; decentralized projects have room to grow. Web2 businesses, on the other hand, continually face monopolies.

ForkLog: What projects are currently in KuCoin Ventures’ portfolio?

Justin: We have more than 60 positions: a dozen games such as Dogami and Heroes Chained, SocialFi apps with tokenized content, several blockchain protocols, DeFi projects with strong teams. The list can be seen on the KuCoin Ventures page.

ForkLog: Are you continuing to invest in a bear market?

Justin: Yes, but we have become more strict in evaluating projects we plan to invest in. Appchains and infrastructural solutions deserve greater support in a bear market.

It should be noted that KuCoin Ventures highly values innovative projects. We are ready to invest in them in any market cycle, although there aren’t many such products at the moment.

ForkLog: Many companies had to cut staff. Has KuCoin been affected as well?

Justin: We did not lay anyone off, as good specialists are more important than ever. In the first half of 2022 we hired 300 people in development, marketing and business development departments.

ForkLog: Some crypto billionaires announced they would help distressed companies. What do you think about that?

Justin: They are expanding their influence in the market, and this is much more valuable than money. The current market is what it is. We do not plan to rescue anyone, but if we see undervalued assets, we may invest in them.

ForkLog: Analysts sometimes compare the current bear market to the 1907 bank panic. Do you agree with this comparison?

Justin: We believe markets move in cycles, from crisis to upturn and back to crisis. It happened in 1907 and in 2008 as well. Technological innovations will help the market re-enter a bull phase, if not this year, then next.

ForkLog: What would you advise to beginning investors?

Justin: Do your research on projects, verify teams, update your list of potential investments and think carefully before you press the button.

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