From BlackRock to founding a VC in blockchain industry, chat with Asim Ahmad

Yasi: Hello Asim. Welcome to the Fast track podcast. 

Asim Ahmad: Thanks Yasi. Happy to be here. 

Yasi: Yeah. And you, were working at black rock in the past in the institutional clients business, and now you are partner of a VC. So I wanted to ask, how did you move. From a corporate job, which to many people is a very nice job.

And then to start a VC with your partners, 

Asim Ahmad: it was quite a big risk as is any, setup of any business. what we did was we didn’t look at it as we wanted to set up a business that was never an ambition of mine. it started off as having something which we felt. Had a lot of value in the market, something which was our expertise, our background, our approach to investing, our, our connections within the blockchain space.

we felt like those were all the right ingredients to bring a solution to market. And if that solution was somewhere else that could have potentially been an option, but we felt like what we could do. As a collective group of full partners, was something unique and special and the only way to do what we wanted to do and to bring that type of market to that type of product to the market would be by launching our own product.

And that’s what, what was the, like the ambition, you could say, the, the drive behind starting our own firm. 

Yasi: And to, for the audience who do know about Eterna Capital maybe you can tell us about what is this company about, and you mentioned to bring a certain type of products to the market. What type of products do you to make?

Asim Ahmad: Sure. So it’s had a capital was started in, early 2018. It’s a ventu re capital fund, investing in blockchain technology. the, there are four partners in the firm. one with an entrepreneurial background here, the three of us, used to work at BlackRock. So funnily enough, it wasn’t just me who left BlackRock.

when the firm was started, there was three of us leaving around the same time. And basically we bring a lot of, we bring an institutional approach, plus many, many years of investing in blockchain and digital assets. And. What we’ve done is we’ve launched a venture capital fund, which basically invest in blockchain technology projects over a long-term period.

Yasi: And how did you get involved into blockchain? Have you worked on this kind of projects in black rock in the past? 

Asim Ahmad: Well, it started when I was an investment advisor, pre BlackRock. I was working for a company called Jardine Lloyd Thompson, which has been acquired by Mercer. What I was doing there was, I was investing, or researching investment opportunities for pension funds, institutional clients, local and, and, local government pension schemes and those, some private companies, pension schemes, and.

I was, you know, looking at many things, different asset classes. And I was looking at alternatives and for innovative new solutions. And that’s when I came across blockchain and specifically, yeah. And while looking into it, I realize this is something which, you know, my clients cannot go into this. I’m talking, early 2016 at this point.

And even if Ethereum itself wasn’t that developed, it was before the first. Fundraise took place on Ethereum. So it was definitely not the ecosystem we see today. And, at that point, I, I felt like this was a very big opportunity, but my clients couldn’t get in, spoke to other hedge funds and they were saying because of regulation, they can’t touch it.

So I personally invested at the time. And then slowly, since then I’ve been watching the ecosystem grow. I got more and more involved while working. At BlackRock during the day I was spending my nights working on this attending meetups, growing my network. And that’s where I met like-minded people at BlackRock who were also, interested in blockchain technology because at BlackRock they were also some in, forums and, working groups who were looking at blockchain as a technology. And also exploring digital assets. maybe not from a investment perspective, but just to have knowledge of the fact that other people invest. So it just from an exploration perspective, so I was involved in those groups and that’s where I met, my, the partners in my firm.

And we basically, you know, started investing together while at BlackRock and, just in our spare time. And it just grew from that. 

Yasi: When you say you started to invest together, you mean invest in Ethereum or invest in planning your VC? 

Asim Ahmad: it was a bit of both. So it was, while at BlackRock it was making, personal investments in, you know, new fundraising opportunities on, on, you know, some building Ethereum and building new blockchain solutions.

we were speaking to the teams and getting our own allocations and, Then, yeah, of course. At some point once we felt like, you know, what we’re doing is great and we should be doing it, but, and allow it to allow other people exposure to this, opportunity. Then it’s, it’s slowly turned towards looking for opportunities for, for the fund.

Yasi: Oh, okay. I see. And maybe for the audience there who have not learned a lot or study a lot about venture capitalists, let me ask you, can you explain to us how does a venture capitalist fund work? 

Asim Ahmad: Okay. Well, they, the intricate details can get very complicated because it goes into regulation and, legal, lots of legal terms as well.

because it’s what you are essentially doing is you’re investing in illiquid long-term opportunities with other people’s money. And then basically once those opportunities, you know, you, you need to point them in an exit. You know, the proceeds from the exit are then distributed back to the investors.

So there’s a lots of lots and lots of rules. Of course, you know, we can’t hold investors’ assets. We need a third party custodian and administrator and auditor. and there’s lots of rules to, to, you know, abide by as well as regulations, such as the regulations of the FCA. And also the, our fund is domiciled in Ireland.

Again, that’s another thing you have to look over to domicile your fund based on your investor base, under regulations in that area and the type of fund structure you want. But at the end of it, from an investors perspective, what they see is it’s a vehicle that has capital calls. Whenever we find investments, we basically call the assets of the investor and then we invest it into the deals.

As the deals are exited over, you know, you could say a five-year holding period an eight year holding period, as exits are made the, the proceeds from the exit are then given back to investors to make them hold on the amount they put into the fund. And then as the exits return profit, then the profit is split between the general partner as in Eterna Capital and the limited partner, the investor.

Yasi: And when you mentioned illiquid opportunities, do you mean most of the time are startups or companies? 

Asim Ahmad: Yeah. Yes, exactly. So, you know, if you invest in a stock in the stock markets, you know, a stock market, you can invest in disinvest within a minute. If you’d like, things move quickly, there’s always buyers and sellers.

but when you invest in startups, there are, there are no bias, except for the round that you invested in. so you have to hold that position and obviously there’s a illiquidity risk involved as well. but then you are, therefore, if you’re taking venture risk, you want that venture return as well.

So they are high return, opportunities in, in venture as well. 

Yasi: And for startup founders, let’s say in the blockchain space, since your VC invest only in blockchain startups. Right. 

And what, what are you guys looking at? How do you make decisions, which company to invest in or which not. 

Asim Ahmad: Okay. So different venture capital firms will look at things differently than an investor looking based on their view of the world or where they see the world going.

So of course we have a, a particular view. Of how blockchain fits in the world and the types of disruption it can have on, on various markets. And we look for opportunities that meet our view of where things are going to go. And also, you know, we look very long term. I know in venture capital, that’s normally a given, but in a.

In blockchain, not so much because sometimes liquidity can come, soon as sooner than, you know, particularly are the areas of venture capital. And then we apply a very high conviction approach to investing. So we’re very picky. We don’t make a lot of investments. and we have our due diligence framework, which looks at various aspects of a business.

Now, when it comes to startups, you can’t apply a due diligence framework the way you would with a listed. company because, you know, data availability, the, you know, the stage of the startup and, you know, the number of employees and some of the, financial data or, you know, data to do with the coding.

certain things are not there yet. Sometimes these won’t, you don’t have the product at that point. But the general pillars, you could say, which we focus on the key areas the team is a major one. We look for experienced teams, it’s great. If the, founder has experienced in exiting previous companies, but that’s not always needed, but you know, those types of qualities are things that you look at and say, okay, this person’s been through the cycle before. It’s that type of experience you want, someone who’s experienced in the industry is also vital. go to market strategies also extremely important. you have to have the right product and you also have to have the right timing. Timing can sometimes be go wrong. and that’s where, you know, we make that decision. We can say no to a great product. If we don’t think it’s the right timing in the market, it could be too early for it for its time. And in blockchain, we’ve seen a lot of, examples of those types of products.

So while we, we look at timing on our part, the, the company needs to make sure from this, that part, the go to market strategy is in place. They have the right connections, the right partners, perhaps the right employees who have the right connections to basically ensure that they become a revenue generating business.

Yasi: Since the data about startups are very limited in the blockchain startup space, how did you gather all this information to like meet people in person? Do you connect with, you know, with the key people in the companies, through internets, in some of the projects you invested abroad.

Asim Ahmad: Yeah. So we, we’ve made some very good investments in the first fund, which are available for people to see on our website. And a lot of them are infrastructure. Projects. And now, we feel like we’re in the next phase of, of the technology, as we, as people start building applications now.

So, these ecosystems, which we’ve invested in now that, you know, good things are being built on them, we find out by our connection to our investment. then we are also very well connected with other venture funds as well. And we are also, very well connected with corporates.

So we have quite a broad network and through this network is how we find deals. And I think that’s also a key point that how a company reaches our desk is also important as well. If it comes via a referral, it’s a, it’s going to be a lot more meaningful to us. Another Avenue for us, which maybe you’ve seen before is we’re quite involved with universities as well.

We’ve lectured at universities. We’ve, partnered with them on, on research. and we’ve attended meet-ups at universities as well to do with blockchain technology and. Through this people at universities here hear about us people who are doing masters, PhDs, people who are looking to be entrepreneurs.

And so that’s also been a great Avenue as well for deal flow. 

Yasi: Yeah, that’s right. And it’s a very, very good point that for startup founders who are looking for VC money, they should reach out and they should build a wider networks. It’s more effective. 

Asim Ahmad: Definitely. Yeah, I think, the network is important, because you know, you can have the right ingredients as a startup, but there’s so many risks and your business can go in many different directions as you grow.

and the more you network, the more likely you are to find partners along the way to basically get you to where you need to. So you need to have a big network. That network will become your support in the long term. And you know, it’s not just a suppor during the fundraising process, we’re looking for VCs, but even during your growth, it’s part of your brand, your reputation.

If people know who you are. So the networking aspect of, you know, of growing a business is very important 

Yasi: and this is what a business should do or what a startup should do to grow network. On the other hand, what do you think are the common mistakes that startups made in terms of looking for investments?

Asim Ahmad: I think, what, while I’ve noticed quite a lot is that, people don’t as a start up, don’t always know how to sell the best qualities. Sometimes we have to go looking for it or, and then sometimes it’s the other side of things where some people, and this has happened quite a lot in blockchain technologies, that people, oversell some of the things that they’ve done or, and, you know, we we’ll, we’ll get to the bottom of it. And if, you know, if you lose a bit of credibility on one aspect, it becomes very hard to regain that trust. So it’s best to be clear and transparent. And on the point of transparency, One thing we’d like to know from the beginning is the financials and, the market opportunity, which you’re trying to grasp.

And sometimes we have to go searching for that data ourselves. and that can be quite painful. And, it also links to a wider point where often, you know, when you’re investing in technology companies and the founders are very technical people. Sometimes they miss the business aspects which is extremely important.

And it goes hand in hand with the product. it’s basically that merging of the go to market strategy and execution on the go-to market strategy and also finding the right product. For the, for the markets. So, that business aspect is something which we really, really want to see.

Of course, that’s something that can be fixed when VCs comment. then of course, sometimes with the funding, they make the right hires. but it’s always great to see when a company has the right ingredients. And that includes a mixture of technical and business. 

Yasi: And is technology more important or is go to market strategy more important?

Asim Ahmad: I think, sometimes it can be, it’s normally I’d say they’re both, this is important. And then when we apply such a high conviction approach to investing, we would only invest in something with satisfies as on both sides. but you could, you could claim in certain industries or certain opportunities in markets sometimes it’s good to have an amazing go-to market strategy and be very opportunistic. And even if the product isn’t great, he could end up making a lot of money very quickly. So, it can be argued both ways. But, but generally speaking , having both is what you want. And there’s so much going on in the startup space, we normally are in a position where we can be picky until we find exactly what we’re looking for.

And if we don’t it’s okay. We just look for some, we look for something else and we’ll find something else, which is great. Even if it’s not exactly what we think should be there. at the same time, you invest in a company that can grow and change and improve as you would expect.

So, so sometimes, you know, something that’s, it doesn’t need to be the final product to reach us, but we need to be able to see that potential. And we need to see that the plan is there and the right people are involved to execute that plan. 

Yasi: And you mentioned several times people team, what are the

right qualities as a VC that you are looking for? 

Asim Ahmad: It depends like if you, if you consider a product that the, that the farmers are building, we need to ensure that the founders know exactly, the industry they involved in they need to have industry experience. I personally like, a mixture of entrepreneur and corporate backgrounds, similar to how we are to Turner.

I think it adds value to have people from both aspects, the experiences and skillset and approach can be very, very different. And they need to have the right network. and what we’ve seen in, in, in the industry while we’ve been involved. Some major, key figures in other traditional markets have moved into blockchain technology and you know, some of these people have extremely impressive backgrounds.

And when you see people like that, You know what one thing it does is it shows you how important this space is and how the direction it’s going. But from an investment perspective, you are buying into the team, you’re buying into the people. And when you see people like that, you, you, you would want to buy into what they are doing because you know, they have the right network, they have the right experience and skillset to execute.

Yasi: this reminds me of one of the projects you invested in the Algorand

Asim Ahmad: Algorand, yes, exactly. That that was, I would say that’s a very good example of a amazing technology, unique approach and a great go-to market and execution strategy. it’s a great combination of entrepreneurs, people from technical background and corporate backgrounds.

Yasi: now we look at the other side is for the investors and as a VC, how do you serve your investors? why they invest their money with you? 

Asim Ahmad: I think, people know there’s an opportunity within blockchain and digital assets. You know, if you think about where we are now in December, 2020, Just the amount of information on the space, which you’ve been hearing over the last couple of months is extraordinary.

There’s been some major moves and, people know that there’s something that in this market, they see the potential, but they just don’t know how to get exposure to it. And that was the driving factor behind our fund. and that’s something that when people want that type of exposure and they want people with the expertise to, to basically deliver on that, then, then basically what we’ve done is we’ve, we’ve launched a company which basically satisfies that need, because what you’ll find is that, you know, there’s a lot of deal flow in, in the space and, but getting access to the great quality deals, finding them early enough to, to invest in then getting an exposure, being able to execute an investment is something which, you can’t take for granted. And it’s something that pays off over the long term and, you know, trying to do it yourself is not always the, the right approach.

In fact, the way that the market’s moved since we launched the Eterna capital. It’s that it becomes a lot more institutionalized. It’s become more and more, focused on VC investing rather than the individual, being able to get access to it. It used to back in 2017, 2018, and that’s a trend which we saw, and that was another driving factor behind, launching, an institutional fund.

Yasi: Right. 

And also those investors, they couldn’t invest with the banks. Right?

Asim Ahmad: I don’t think so. The way investing in startup companies is basically you have to, you have to speak directly to the entrepreneurs and, and then basically if, if they like you, you sign a shareholder agreement and you end up on the cap table.

so it’s, it’s not something which you can invest via a bank now, you know, people can get exposure to the largest digital assets by, setting up, exchange accounts and making personal investments, but, getting exposure to the equity. In startup companies is not something which you can do by, you know, are opportunities through crowdfunding, but a lot of the major deals, the quality deals won’t go down a crowdfunding route, unless it’s for publicity rather than for the money aspect of the count from there.

Yasi: Why? I don’t understand this point, why they do not do crowdfunding? 

Asim Ahmad: I think crowdfunding is, you know, some people would do it for the, for the fundraising, but a lot of the very popular brands that have come from crowdfunding have come. A lot of them have come because, they were on there for the publicity.

You build up your markets, if you’re launching a new product, Which people can buy, you get a bunch of , say three or 5,000 investors by crowdfunding those guys, you know, they own a share of the company. Now, even if it’s very small, there’ll be, Like ambassadors of your, of your brand is a great way to gain users very quickly and, and, and spread your users across different people from various backgrounds and geographical locations.

Yasi: And for, for the blockchain startups, is it easier for them to raise funds through VCs than crowdfunding? 

Asim Ahmad: I think crowdfunding is not been something that’s been used a lot in, in, in blockchain. I’m talking about the, the equity crowd funding platforms. I’m not talking about ICO as a crowdfunding, mechanism right now.

it’s not been something that’s been used a lot. I think when people see the word blockchain on crowdfunding platforms, it does gain some traction and it does gain some visibility and maybe make it a bit more attractive. but it’s not been the Avenue that most blockchain projects have gone down.

I think there’s plenty of VCs out there and VCs can add a lot of value. You know, we pride ourselves on the value we add. for the companies which we invest in and those, those value adds are very important. and those are things that these projects are looking for, because we were like an extension of the team by the end of it, to help them grow.

we talked earlier about the importance of network. if you have a VC investing in you, then your network grows quite significantly. So if you get multiple VCs, it’s, it can be a lot more beneficial than a crowdfunding. Yeah. But sometimes some people combine the two with the crowdfunding, just being a publicity aspect rather than something which they required, for the financial side of it.

Yasi: Right. Yeah. So through VCs or different VCs, blockchain startup, they can bring a lot of people on board and then the networks will help the company to grow in the coming years. Yes. And my last question is what do you think about the blockchain startup space in the coming years? How would it be? 

Asim Ahmad: I think, we are going through the adoption curve and I think I, I genuinely believe this is one of the, if not the biggest opportunity of this decade, to invest in blockchain technology.

And I think we are getting further along the adoption curve into, into, a phase way. The growth is going to be even more like exponential and what we’ve seen in the, in the previous years, because we’re getting to the point where. The infrastructure has been built or there’s enough, alternatives out there.

Of course, we welcome more, but now we’re seeing actual applications. but also seeing, lots of, things happening to do with tokenization of real assets. From real estate and, various other, commodities as well. when you look at the central bank, digital currencies, which is now becoming a very big topic, this is all about the digitization of the economy and of assets. And when this happens, then you basically need to overhaul the existing infrastructure. And that’s where blockchain will become a key component. we don’t think it’s going to be applied everywhere. But there are certain areas within most industries where blockchain can have some kind of efficiency, it can help either operationally or, in terms of reducing operating costs and also the inefficiencies in terms of time laps and and that would result in better products for customers as well.

So we think it’s going to be, It’s probably still, five more years or until we get to a point where, we, we’re going to see a lot of, blockchain use cases and even central bank, digital currencies, it’s not going to happen overnight. but the movement towards that is very, very clear.

and when, you know the world is heading in that direction, Then we’re basically, it’s like being early to the internet. We were seeing that type of opportunity. We see new types of business models, and this will also impact the way people socialize with each other. the way we think about technology, the way we think about money and, we’re very excited about all the ways that this technology is going to improve, businesses and, and the way we do things.

Yasi: Yeah. And just for, for the audience information that when I ask you this questions, maybe you sound very calm, but you have a big smile on your face. I really see how positive you are. 

Asim Ahmad: Yeah, no, I think, when you ask, how did I get into blockchain technology? It wasn’t something which I saw and said, okay, let’s just do it.

It was. Years of looking into this space and the enthusiasm for the space. And that’s what drove me to make the decision to basically, Be part of Eterna capital. so this is definitely something which we’re very passionate about. We’re passionate about investing and we’re passionate about the sector, which we invest in.

 it’s a great space it’s an exciting space, met some amazing people while working in this industry. Some amazing founders. I think the amount of creativity in this space right now, is amazing. even with COVID, you know, there was a, quite a crash in the, in the blockchain market in 2017, 10, 2017, 2018.

the focus on, on building and on actual true innovation rather than the trying to do something opportunistic and short-term, it’s just the focus from the high quality companies. It’s amazing. So we genuinely feel like we’re part of something very, very big. And that’s what we wanted to be at Eterna capital, we were funding, innovation, we’re funding, startups, who we believe will be the next big unicorns in the future. And, and we want to be part of the growth of this blockchain ecosystem and to help this technology to take off. So we’re not just investing in just trying to do something that we, as part of a bigger goal of ensuring that this technology reaches its potential.

We know it will do it without us, but if it does it quicker with us involved in that, then we’re very happy to contribute. 

Yasi: Yup. Fantastic. And for the audience who are interested in knowing more about Eterna capital, or who wants to get in touch with you guys, how would they reach out to you? 

Asim Ahmad: Oh, we have our websites and, you know, you can subscribe to our newsletter on the website and there’s also a contact email address on the website. So if anyone has any questions, feel free to send us an email, active ones on some short social medias as well. So I can, you can find us on LinkedIn. 

Yasi: Okay, then I will leave the link in the show notes. Thank you very much for coming here today. I’m really grateful for all the insider information you provided to our audience. I think some of them might be startup founders. It could be really useful. 

Asim Ahmad: It’s a pleasure to be here. Yasi, thank you for having me.