In the rapidly evolving landscape of blockchain and Web3, venture capital firms pioneer trends and stand as vanguards of innovation. Armed with vision and capital, they explore ways to harness the transformative potential of digital assets. Navigating this intricate frontier, they reshape finance, technology, and governance while grappling with the impact of regulatory turmoil. Most VC firms innovate strategies, moving beyond backing projects to create new paradigms.
TheNewsCrypto sat down with Augustus (Augie) Ilag, Investment Partner and Head of Asia at CMT Digital, discussing how the venture capital firm seamlessly integrates traditional finance (TradFi) practices with blockchain innovation.
Augie also sheds light on the firm’s vision for Southeast Asia’s blockchain market, strategies for staying ahead in the ever-evolving landscape, and their profound interest in Web3 gaming projects and DAOs.
How do you perceive the strategic intersections and collaborative avenues that serve as common threads between traditional finance (TradFi) and the blockchain space?
Augustus (Augie) Ilag: CMT Digital, as a firm, aims to blend the best of both worlds while proudly embracing its crypto nativeness. Folks on the team, including myself, have been actively participating in the space for years. Also, we incorporate some of the best practices from TradFi. In my opinion, many lessons from traditional ventures can indeed be applied to blockchain.
Previously, people used to argue that Web3 is entirely different from Web2, with nothing to be gained or shared, whether in terms of building or investing. However, this narrative is beginning to shift. There’s a growing belief that, as builders, we can learn valuable product design principles from Web2. On the investor side, there are best practices, heuristics, and due diligence methods that can be adopted. These are criteria we consider at each stage, and they’ve been honed over decades of investing. So, this is the approach we take at CMT. We’re deeply committed to crypto, but at the same time, we also embrace a highly institutional approach with the best practices.
As the Investment Partner and Head of Asia at CMT Digital, what strategies do you envision for bolstering the firm’s presence in Southeast Asia and its position within the blockchain sector?
Augie: CMT Digital has been present in Asia for a long time. It is a subsidiary of CMT Group, a 26-year-old global electronic trading and asset management firm. My recent joining of the team extends our decade-long commitment to the region and its founders.
We see a lot of potential in the Asia Pacific (APAC) region. Builders here are innovating applications and infrastructure, addressing what we see as an underserved market gap. It’s often challenging for founders in this region to raise capital and access necessary resources, compounded by the geographic distance factor. Additionally, there are some misconceptions about Asia, including the quality of talent and other related factors.
To bridge this gap, CMT employs several strategies. Firstly, we maintain a global team with an on-the-ground presence in these markets. I have personally been involved in investing in Southeast Asia for nearly a decade. We adopt a similar focus in Europe and other markets. Secondly, we foster cross-border collaboration, leveraging portfolio expertise in trading and facilitating connections between our extensive US and European portfolio and newer investments in Asia. To highlight, CMT Digital includes Consensys, the parent company of the popular crypto wallet service provider MetaMask, as a portfolio company. These efforts facilitate mutual learning and the formation of valuable commercial partnerships, among other benefits.
How do you stay ahead in the ever-evolving blockchain landscape and what excites you most about the Web3 space?
Augie: In addressing the first part of your question, our team comprises various roles, including investment-focused members, a head of research, a head of technology, and a sizable trading team. This diverse mix allows us to leverage research and technical expertise in our decision-making process.
From a strategic perspective, we aim to bridge the gap between thesis-driven and reactionary investors. We maintain a thesis-driven approach, which means our team constantly forms views on market directions and investment opportunities. We consistently challenge these views among ourselves to formulate robust theses.
However, we recognize the inherent uncertainty in predicting the future. To adapt to this uncertainty, we maintain flexibility and openness to new narratives and opportunities as they emerge. This mindset keeps us proactive and research-driven while adapting to changing market dynamics. In an evolving landscape, we want to be agile and ready to engage with emerging ideas and opportunities.
What challenges does the venture capital ecosystem encounter when navigating evolving regulations and markets within the blockchain sector?
Augie: Beyond the complexities of regulatory changes, the venture capital ecosystem confronts substantial challenges. If we set aside the regulatory aspect for a moment, it is evident that traditional venture capital, as an asset class, is navigating a shifting landscape, especially in the current highly inflationary environment. Many portfolio allocators are reevaluating how venture capital fits into their overall investment strategies. Concepts like the power law are under renewed scrutiny. There is a growing debate about whether VC needs to evolve and take on a different form than it did in the past.
This transformational period impacts blockchain-focused funds, including our own. I believe it is crucial to apply the same advice we provide to startups to our fund’s strategy. We must thoughtfully assess our unique value proposition and refrain from assuming that securing the next round of funding will be straightforward. It is a challenging market environment, not just for businesses but also for funds. Consequently, we have been diligently dedicating thought to this matter, reflecting on what sets us apart and how we can stand out among other funds.
What aspects of investing in Web3 gaming projects and DAOs pique your interest?
Augie: Certainly, at CMT, we have been at the forefront of investing in consumer apps and gaming for quite a long time. Particularly, my partner Charlie, who is based in the US, has been a driving force behind these endeavors. We have fostered partnerships with companies like Horizon Blockchain Games, Midnight Society, and Axie Infinity, cementing our position as early partners. So, our bullish enthusiasm for this category runs deep.
What excites us about gaming and consumer use cases, in general, is their potential to unlock mass adoption of blockchain technology. Take gaming, for instance. Enabling true ownership of in-game assets just makes perfect sense. This aspect has captured our attention. Furthermore, when it comes to the infrastructure side of things, blockchain data holds immense potential. It can revolutionize user acquisition by providing wallet-level insights that inform predictive spending models. This, in turn, becomes a more accurate gauge of future purchasing behavior. This direction aligns with the ambitions of major players like AppsFlyer.
Hence, we see exciting intersections between blockchain and gaming, not only on the creative studio side but also in the infrastructure landscape. Our commitment to these domains remains steadfast, as we continue to channel our investments into these promising areas.
With the Web3 landscape heating up, what brought you to CoinFest Asia 2023 in Bali? Were there any intriguing projects that caught your attention?
Augie: When it comes to my expertise, I’ve developed a deep understanding of the Southeast Asian market within the broader APAC region. This market is truly remarkable, with Indonesia and the wider Southeast Asian region showing incredible enthusiasm for the blockchain industry. When you dive into popular user statistics, like MetaMask wallet users or others, we will see that the top 10 countries all hail from Southeast Asia. This provides an exhilarating landscape for projects looking to tap into this trend. Joining Coinfest Asia 2023, which places a strong focus on Southeast Asia, has been an exciting experience for me.
Being here at this event, participating, speaking on panels, and contributing to the vibrant ecosystem has been a pleasure. The energy was infectious, and I was genuinely excited. As for the emerging projects, a diverse range, from centralized exchanges to groundbreaking gaming ventures, innovative NFT marketplaces, and promising startups have captured my attention during this visit. What truly ignites my enthusiasm is witnessing new builders enter the crypto space, even in this fast-evolving market, and addressing distinct challenges.
Disclaimer: The information provided in this interview article is for informational purposes only. It is not intended to be, nor should it be construed as, investment advice, financial guidance, or a recommendation to make any specific decisions. Readers are encouraged to conduct their own research and consult with appropriate professionals before making any investment or financial decisions.
