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Toronto fund says mix of digital assets, crypto VC has fuelled strong early returns.
Despite a tumultuous two years for the cryptocurrency market, Round13 Capital claims its Digital Asset Fund (DAF) has still posted gains of more than 40 percent since its inception.
The Toronto crypto venture capital (VC) fund was announced back in April 2022 to back blockchain and Web3 infrastructure startups during the early days of what later became known as the crypto winter—a prolonged sector-wide bear market that saw numerous firms collapse, digital asset prices nosedive, and trillions in value erased.
“We know how to manage risk in an extremely difficult time.”
To date, Round13 DAF has raised about $80 million USD in total—$10 million more than it launched with and less than its initial target of $100 million. The fund has deployed approximately 85 percent of that amount into an undisclosed mix of digital assets and 20 early-stage startups, including Wombo, Improbable, Confirm, and ChainSafe.
As Round13 DAF managing partner Satraj Bambra highlighted, a lot has happened in the broader crypto market over the past two years. “Everyone has been decimated [and] it’s been very hard to invest in crypto,” he told BetaKit in an interview, noting that in this context, he is happy with how things have played out for the fund so far, and ready to tout its performance as things are beginning to look up for crypto once more.
“It was challenging, but the whole idea is that if everyone can do it, then we’re not special, and at this point, we have the notes to prove that we’re good at what we do and we’re in the right place to be capital allocators,” said Bambra, who manages the fund alongside Khaled Verjee.
Bambra believes that Round13 DAF offers “a very good balance” between early-stage crypto VC—generally equity in startups plus token warrants—and crypto capital markets (direct investments into Bitcoin, Ether, and other highly liquid digital assets). The majority of the open-ended fund has been dedicated to early-stage crypto startups, with the remaining 20 to 30 percent going towards digital assets.
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According to Bambra, this two-pronged approach has helped the fund navigate a crypto bear market and the “domino effect” created by the collapse of FTX and other large, unregulated crypto companies. Round13 DAF claims it has consistently outperformed Bitcoin and Ethereum by 30 and 60 percent, respectively.
While Round13 DAF’s VC portfolio has seen some markups and no writedowns or exits to date, Bambra said the fund’s digital asset holdings have largely been responsible for the gains it has generated so far.
“Buying negative actors’ liquidations is generally a very profitable crypto strategy if you believe in crypto, which is something we do,” said Bambra, who noted that the Round13 DAF bought low on Bitcoin, Ether, and other digital assets during the recent bear market. “We front-ran the opportunity in a sense because we got excited at those prices.”
Round 13 DAF’s lead investor is an unnamed major Canadian pension fund, and its other backers include undisclosed institutions, high-net-worth individuals, family offices, and members of Round13. The open-ended fund accepts new money from investors quarterly and permits them to redeem their capital in two years. Bambra claimed Round13 DAF has seen strong interest from investors lately, and expects the fund to “blow past” $80 million soon.
The crypto market has come a long way since 2022. Canadian crypto company stocks rose and the value of digital assets like Bitcoin and Ether posted strong returns in 2023, recovering some of the value they lost during the so-called crypto winter.
“What we’re seeing now is—from a really dark grave—crypto is rising again, as it has in the past,” said Bambra, who believes that the industry is maturing. As companies learn from the mistakes made by other players across the sector, he expects FTX-like “blow-ups” to become less common, especially now that more severe regulatory consequences exist.
“What we’re seeing now is—from a really dark grave—crypto is rising again.”
Satraj Bambra, Round13 DAF
Despite a rocky couple of years, Bambra remains bullish on the sector. He expects the broader crypto market to continue to grow over the next two years, not just Bitcoin and Ethereum. He singled out recent Bitcoin ETF approvals south of the border as positive moves that will help fuel greater institutional adoption. These trends, plus the evolution of smart contract platforms, lay a strong foundation for crypto to grow, argued Bambra.
Still, Bambra noted the current Bitcoin run has largely been driven by institutional investors. “I haven’t seen, personally, any retail euphoria at all,” he said, acknowledging it will likely still take some more time to win back the retail investors burned by the events of 2022.
But while the crypto bear market has brought plenty of pain, it also created clarity, Bambra argued. “We know who knows how to perform in this asset class and who doesn’t … We want to tell the world that we know how to manage risk in an extremely difficult time.”
Feature image courtesy Round13 Capital.
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