- Pluto Digital Assets is a UK crypto VC firm that launched in January 2021.
- The founder breaks down how he got into VC and the firm’s investment strategy.
- He also shares his outlook for DeFi and what’s the best way for investors to start understanding it.
- See more stories on Insider’s business page.
In the space of five years, Atif Yaqub has moved from bitcoin and ethereum mining to crypto investing and product development to venture capital.
Last year, Yaqub founded a new crypto product called YOP, which makes accessing and interacting with DeFi services more user-friendly. But when he tried to secure funding for YOP, he noticed a disconnect between fundraising in the traditional markets versus within the crypto space.
So alongside three other co-founders, Yaqub launched Pluto Digital Assets, a UK based crypto venture capital fund, to bridge that gap.
“The crypto space moves very, very fast and what we learned from that is that there’s appetite from the traditional markets to invest in crypto, DeFi, digital assets, NFT’s, in emerging projects and technology,” Yaqub said. “But they, 1) have a challenge to understand the technology, and 2) have a challenge with the speed to move and execute.”
Since launching in January, Pluto has accumulated over $50 million in assets under management through three fundraising rounds. The first round was the founding team’s own capital.
The strategy is to deploy this capital toward existing tokens as well as new token issuances, Yaqub said. The fund will take strategic positions with existing projects and look to take equity positions in early-stage companies.
The portfolio includes companies such as DexTools, Polkalokr, and YOP, Yaqub’s own creation.
“The capital is the least interesting aspect for any project at the moment, they want to value add, they want your network, they want your experience,” Yaqub said.
The three things Yaqub said he is looking for in an early-stage seed investment are:
- Is the founder trying to solve a problem that exists today or is improving an existing product?
- Does the founder have an edge ? And is the founder thinking long-term about the product, outwith the current crypto bull cycle?
- What is the project type ? Yaqub said the team at Pluto is looking for investments in the areas of decentralized finance (DeFi), NFTs, synthetic assets and even new protocols.
The traditional venture expertise within the Pluto team means they are looking for investments for the long-term.
“A lot of [ crypto VCs] want to recycle their capital very, very fast and they want to make as much money as possible in the kind of hype cycle, but then they kind of let off the gas thereafter,” Yaqub said. “There’s not much follow through, but what we want to do is we want to start focusing on projects that can make the most of the cycle, and enjoy that, but at the same time, have a vision beyond that as well.”
Decentralized finance (DeFi)
One of the big focus areas for Pluto is decentralized finance, which seeks to replace a variety of centralized and regulated banking institutions with decentralized systems and products.
DeFi products aim to remove the middleman and use blockchain technology to enable complex financial use cases directly between parties.
“I think DeFi has so much capability we are just at the very fine tip of it,” Yaqub said.
One way of assessing decentralized finance adoption is through “value locked”. This represents the quantity of ether, the native Ethereum cryptocurrency, and other coins posted with the smart contracts that make up a particular DeFi service.
Bank of America highlighted the surge in “value locked’ in a recent research note.
Despite the growth, Yaqub sees one of the biggest hurdles for decentralized finance is securing more liquidity in the market and making it more accessible.
“The missing link at the moment is probably bridging DeFi to some of the traditional financial markets to allow that capital to flow in faster, benefit from decentralized finance and then make its way back again into traditional markets right into centralized holdings,” Yaqub said. “That flow at the moment has a lot of friction and once that’s kind of lifted and it becomes easier then we can see hundreds and hundreds of billions of dollars traded and locked into DeFi.”
For investors who are interested in DeFi and don’t know where to start, Yaqub recommends investors check DeFi Pulse to get a pulse on the market.
Investors should then try to navigate through a Dex, which is a decentralized exchange. One place to start is Uniswap, Yaqub said, which is one of the most popular exchanges.
“Some of it can be challenging again, it’s not so easy to use and interact with but just taking one step in and starting to use self custody, exchanges and interacting with different tokens and moving from one platform to the other, I think, is just a good start for somebody to really feel the speed and the power and the opportunity available to hand compared to what they would do in the traditional market,” Yaqub said.
Yaqub recommends investors buy a few tokens to try DeFi out, then move them around and stake them, which means enabling coins to be locked up so they can be randomly selected by the protocol at specific intervals to create a block as part of the proof of stake process.
“When you [are] fully in control of your assets and they’re generating you yield that is that’s very powerful,” Yaqub said.
However, Yaqub notes that this space is still very high risk and experimental. He said some things still break and do go wrong, and investors need to bear that in mind when purchasing tokens and trying to understand the space.
“You have the likes of Visa settling in USDC now,” Yaqub said. “All of these things are coming together I think sooner or later people just won’t need to go back to the traditional system and they will have to adapt to communicate with the new system, which is permissionless and decentralised.”
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