FTX Bankruptcy: An Opportunity to Clean Up the Sector

Asked by AFP, Matthias Ruh, the head of a Swiss venture capital firm, believes that the fall of the American giant will disrupt the crypto ecosystem.

The collapse of the FTX platform will provide an opportunity to “clean up” crypto assets, according to Matthias Ruh, co-founder and head of CV VC, a Swiss venture capital firm that invests in blockchain companies, distributed ledgers.

The 46-year-old investor, who funds startups in the Swiss canton of Zug, nicknamed Cryptovalley, began his career during the dot-com bubble of the 2000s and sees a lot in common in the current crypto asset push. His company does not disclose the amount of its assets under management, but has invested in blockchain-focused companies to offer solutions for both recording music rights and tracking related objects in a vehicle.

What do you think will be the impact of the FTX bankruptcy?

Matthias Ruch: I think we are in for a purge (of the sector). We haven’t seen many bankruptcies yet. But looking at the size of FTX’s business, it can take a long time to figure everything out. I don’t think we’ve seen everything yet. I expect bankruptcy. But will there be more of them than usual or not? Well, we don’t know that yet.

You are comparing the current cryptocurrency shock to the bursting of the dot-com bubble. How does that sound like you?

I think it’s a very similar stage. History repeats itself. People have been greedy, neglected due diligence (Editor’s note: “due diligence” for company valuation), and it’s the small investors who are the last to come in who are paying the price. CV VC opened in Zug in 2018 but we started our business in 2016. When the (crypto asset) explosion began in Switzerland in 2016, we checked almost a thousand companies in six months. Projects came from all over the world. And since we were the only (venture) company in Zug, people literally knocked on our door, wanting to start their own business that day. In the beginning there were many projects from Asia. The excitement was such that some came with their ambassador. At that time, we refrained from investing because 99% of the projects did not cost a lot of money. But then there were those sobering 1% to 2%.

How do you choose the companies you finance?

So far we have invested in 51 companies. We deliberately avoid the speculative part. We invest in startups based on blockchain technology. For early stage projects, each startup receives $135,000 for a 7.5% stake. For startups at a more advanced stage, the amounts invested range from $250,000 to $500,000. Nowadays everything is quieter, less noisy. But there is still much to be done. Ratings will drop. The possibilities are huge. I think this is the best opportunity in my professional career as an entrepreneur in Switzerland.

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