27. September 2023

A few months after the launch of the Ethereum platform, the first Ethereum startups aroused the interest of investors. But only in some cases did this lead to tangible investments by venture capitalists focusing on digital currencies.

According to interviews with the four leading investors in the blockchain/digital currencies sector, the first due diligence checks are carried out on start-ups in these areas, so these companies are assessed with the intention of investing. Ethereum has made a name for itself in this context thanks to the successful hard fork and the early interest of large financial firms.

According to Travis Sher, investment associate of the Digital Currency Group (DGC), between 20 and 30 Ethereum start-ups have been scrutinised to date. Bart Stephens, managing partner at Blockchain Capital, even revealed that the company had now invested in two start-ups. Blockchain Capital, one of the most active early-stage investors in the technology sector, is bullish about Ethereum, according to Stephens. The reason for this is the positive feedback that Ethereum does not only receive from Techies. The company has appointed a junior associate to focus on this area in its investment portfolio.

This portfolio also includes more well-known Bitcoin trader startups such as Coinbase and Xapo

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The interest so far is a sign of great confidence in a system that only recently came onto the market with a limited number of features. Ethereum plans to expand the list of features further and wants to move from a proof of work to a proof of stake system regarding the verification of transactions. So the interest will rather increase.

With DGC, BoostVC and Pantera Capital, several venture capitalists with a focus on Bitcoin and the Blockchain have expressed their interest in investing in Ethereum startups – even though they have not yet given financial support to the entrepreneurs behind them.

DGC, for example, would like to invest in a digital currency company in the second or third quarter of 2016 and that “probably” Ethereum sSartups will be included in their portfolio by the end of the year.

This sounds sobering, but you have to remember that the first investment in a Bitcoin company was delayed until 2012 – three years after the Genesis Block mines. this investment, donated by Draper Associates, went to the former CoinLab incubator.

Investment challenges for crypto trader

Most VC firms stated that they found the time for a solid investment too early, they did not yet know whether Ethereum would remain on the crypto trader market in the long term.

Such statements coincide with statements about the developer scene behind Bitcoin, which is perceived as very healthy, stable and attractive.

“It is still difficult to evaluate Ethereum start-ups. The community is still quite small and the experience of young entrepreneurs in the cryptoscene can often not be assessed. This all leads to the fact that it is difficult to penetrate this startup scene”.

says Melten Demirors, Director of Community at DCG.

Demirors continued that the old Bitcoin community was more networked and technically savvy than the Ethereum ecosystem is now.

“We wanted to be the first to find talented people who wanted to solve a problem they believed Ethereum was the solution to or provided tools to find the solution to. That’s why we want to avoid those who want to speak up to the Ethereum hype and look for a problem that fits.”

Paul Veradittakit is a venture investor at Pantera Capital. Pantera Capital is often seen as a pure Bitcoin investor, but has recently adopted a multi-blockchain approach. According to Paul Veradittakit, Ethereum would fit in here, but there are still some concerns about Ethereum’s ability to meet future challenges.

“The issues of security and scalability need to be thought through. Clear use cases must also be identified.”

According to Veradittakit, Pantera does not yet plan to set up an Ethereum Fund in the style of the Bitcoin Fund, founded in 2014.