Over the past 18 months, investments in blockchain startups tackling a variety of problems have climbed. SparkChain Capital, a new $100 million early-stage fund launched by SparkLabs Group, wants to contribute by backing blockchain and cryptocurrency-related companies that are solving real-world issues.
Led by managing partner Joyce Kim, the founder and former executive director of open-source payment network Stellar, SparkChain Capital will back companies developing products and services related to blockchain and cryptocurrency instead of trading actual cryptocurrencies. The fund, which is planning to hold its own initial coin offering later this year, will mostly fund companies raising their Series A rounds, with a typical investment in each startup of about $1 million to $3 million.
A non-profit organization, Stellar was created to make money transfers more accessible for people in underserved communities by connecting financial systems around the world and recently partnered with IBM on a cross-border payment system for banks. After cofounding Stellar, Kim served as an investor at Freestyle Capital before switching to her current role as an advisor there. SparkLabs Group, a network of funds and accelerators, is known for its focus on Asia (it launched its first startup program in Seoul before expanding to cities including Beijing, Taipei and Hong Kong).
Kim will look for entrepreneurs around the world, but notes that SparkLabs’ network overlaps with the most active blockchain and cryptocurrency markets outside of the U.S.: China, Japan and South Korea. SparkLabs Group has already taken advantage of this with several investments: enterprise blockchain startup Blocko and bitcoin remittance company Sentbe in South Korea through its accelerator program and Stockholm-based blockchain-compatible financial exchange Cryex through its global seed fund.
“I think they have an extremely good track record and they are one of the few people in the VC space or crypto space that have a pre-existing footprint where crypto has been growing the most strongly,” says Kim. She describes Blocko as “one of the shining stars of the Korean startup scene. One of the things I really like about them is that unlike other bitcoin startups that are building for a future value that is still undetermined, Blocko’s implementations have already saved customers millions of dollars.”
When Kim first became involved in the space, she says blockchain and cryptocurrency-related technology was seen as David to the Goliath of traditional financial systems. But many companies are now finding ways for the two to work together.
“You’ll see more products were blockchain tech is used to expand the reach of the existing financial infrastructure to where it can’t go because the tech is too old or it wasn’t designed to do that, because blockchain is more flexible and adaptable to the needs of discrete problem sets,” she says.
While remittance is one obvious example, blockchain technology can also make it easier to handle business contracts and transactions or for data storage and security, to name a few potential applications.
“I try not to identify problems, then find an entrepreneur. Now that I’m on the other side of the table, I try my best to let entrepreneurs come up with solutions, but I’ve worked in Silicon Valley, Asia and Africa and I’ve seen that there are just so many challenges that individuals face when dealing with financial transactions that the opportunities are really endless,” Kim says.
“The question is, when will we, the VC space, start investing beyond Silicon Valley and maybe China, because those markets are more heavily funded by VCs already and the reality is that money moves globally, so solutions need to be around the world.”