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Investing in Web3 is a ‘hedge against disruption’ — VC investment exec

The crypto space has been facing waves of uncertainty in recent months between impending regulations from regulators across the world and a lingering market downturn. 

Despite the state of the industry investors are still backing new ventures in the space. Data shows that in 2022 alone, European DeFi startups experienced an increase in venture capital (VC) funding by up to 120%.

Cointelegraph spoke with Martin El-Khouri, a senior director at Bertelsmann Investments, during the Proof of Talk blockchain conference about why major investment firms still see Web3 as a way forward.

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Proof of Talk 2023 blockchain conference in Paris. Source: Cointelegraph

Bertelsmann Investments is one of the world’s major VC investment firms with around 1.7 billion euro invested in over 400 companies worldwide.

El-Khouri told Cointelegraph that the firm made its first investment into the Web3 space back in 2016 and the current state of the market actually helps investors distinguish between “noise and sound.”

“Now that the hype is gone, investors can see where the actual value is being accrued, which projects are just artificially inflated and which ones are built and based on a solid foundational framework.”

He said he considers investments in Web3 a “hedge against disruption,” though says it’s still sometimes “difficult to convince” executive leadership in large global corporate entities to dedicate attention to Web3 due to the industry’s fluctuating reputation.  

However, he highlighted that regulations help the industry in terms of investments because it gives investors more clarity about what is being built. 

“When you invest in a project, you want to understand whether there is a big regulatory risk that could prevent this business and business model or idea from flying.”

“The more regulatory clarity we get,” he said, “the easier it becomes to evaluate different types of businesses.”

Related: Metaverse investments: Opportunities and risks of the trillion-dollar VR market

He also pointed out the shift of interest towards generative AI and AI startups. According to data from Marketsandmarkets, the AI market is projected to hit $407 billion by 2027, compared to its $86.9 billion revenue in 2022. 

El-Khouri said that although investors are pivoting towards AI, “blockchain and crypto are going to be more important than ever before.”

“The interesting thing is that the main value propositions of Web3 are basically magnified 10,000x via what we’re seeing right now with generative AI.”

He concluded that especially when it comes to AI content creation, blockchain will help solve the “double spending problem without the need for an intermediary, and it gives provenance to digital assets.” 

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