Even during the hard times that the crypto market has been going through in the past months, there is no shortage of funds that maintain certainty about this industry’s promise. They continue to invest in a wide range of startups under the crypto umbrella, including the Web3 sphere, which has been progressively gaining popularity.
We sat down for a conversation with Dr. Holger Sprengel, co-founder of Grupo HS3, a fund that focuses on investing in fintech projects with great potential for innovation across different industries. Dr. Sprengel is an entrepreneur and investor, building and developing new ventures since 1999. He successfully started, co-founded, managed & invested in a number of startups (and sold some of them).
Recently, HS3 has been paying more attention to the crypto industry, so we asked for their take on the state of projects in this market and their potential.
Here are the excerpts from our discussion:
SC: Tell us briefly about HS3. How do you choose your projects? What does your portfolio consist of?
Dr. Sprengel: We are a combined company builder and investment vehicle investing in companies in pre-seed and seed-phase. HS3 was founded in 2006, which means that today we have over 15 years of experience in the fields of business development and investing/co-creating innovative companies. We select projects with the potential to be a successful business creating sustainable value across markets.
Over the years, we have invested in a wide variety of businesses across multiple industries. These include software solutions, payment infrastructures, healthcare, gaming, sports, and more. These days the majority of our investments are focused around projects that operate in the Web3 space.
SC: What do you pay attention to first of all when making a choice to invest in a project? What strategies do you use?
Dr. Sprengel: There are several main criteria that we look at when determining whether a project is suitable for us to invest into. The first, and most important, aspect is the project’s team – how experienced its members are, what background they come from. Many companies that establish themselves in the Web3.0 field (and beyond) do so while claiming ambitious goals. We seek to determine whether their teams actually have the capacity to bring these plans into reality.
Aside from that, there is also market & upside potential to consider, as well as competition, innovation potential, and ability to perform, but also to pivot if necessary. In other words, we check if a project’s chosen field of application has development potential, and where the project itself stands in terms of advantages over other players in the same area.
SC: You recently invested into Choise.com, a MetaFi ecosystem. Why did you choose them? What were the main factors that influenced your decision?
Dr. Sprengel: We chose Choise.com because it has a highly experienced team with the capability to implement long-reaching plans, and because they had a promising idea. A one-stop-shop for all things DeFi/CeFi with an already existing user base sounded very intriguing. To have a single entry platform to all yield products, from farming, to multi-currency deposits, to even NFT integration, for retail & institutional customers alike. This is something that would certainly be of interest to many. The overall market potential is fantastic and we are only at the beginning of its development with around $300B at the moment.
Choise.com’ fundamentals like capitalisation, number of issued tokens, etc., have also been a fit with what HS3 would consider as optimal investment conditions. As such, when we were deciding whether to invest in the project, there was no factor on the table that would make us say “no”.
SC: How promising do you think investments in crypto projects are? What are the three features of a crypto project that are key for you to make an investment decision?
Dr. Sprengel: Crypto projects can have high multiples depending on the stage of investment. There is also a risk of total loss, as is the case in all startup investments. Crypto projects can have higher upsides but the timing for investment is more decisive than in other industries.
As far as main features are concerned, team and experience are a major factor, as we already discussed earlier. Additionally, the project’s tokenomics need to be developed fairly, and the market itself needs to be in need of the product/technology that the project is offering. If these core aspects are not given proper consideration, then it is unlikely that the project in question would reach success.
SC: Does the news agenda influence your investment decisions?
Dr. Sprengel: Only to a certain degree. Investment decisions need to be long-term, and not affected by daily news. For example, reports on the global macroeconomic situation would be important to consider. Day-to-day news, on the other hand, not so much.
In terms of the crypto market specifically, we are of the opinion that the ongoing winter makes a perfect time to invest. And we also think that MetaFi and DAO are going to be attractive avenues for investment in the near future. So we are keeping an eye on the news about any new projects in these areas with potential.
SC: How do you see the future of classical traditional funds – will they invest more in crypto projects?
Dr. Sprengel: Yes, there are a lot of classical funds which started either to include crypto and Web3.0 companies in their portfolio or establish dedicated new funds concentrating on this with a special focus. We believe that this is a trend that will see further growth in the upcoming years.
