Tezos News

How The Tezos Foundation Is Quietly Growing A Fintech VC Empire

The Tezos foundation is already known to be a financial powerhouse in the blockchain/cryptocurrency space, but now the foundation is beginning to make strategic partnership moves that could end up turning it into a fintech VC powerhouse.

Here is a list of just some of the strategic equity partnerships the Tezos Foundation has invested in:

CompanySeries/Seed Stage/RoundSeed Raise ($ Millions)Other Raise ParticipantsDate
Chorus Mobility Corporate Round (3rd Round – Early Stage Venture)Not KnownN/AMay, 2019
Blockfolio Series A – Early Stage Venture2.6ImToken, Pathfinder, Pantera Capital, NKB Ventures, Hashkey CapitalAug, 2019
SecuritizeSeries A14Santander Innoventures, Nomura, MUFG Bank,
Mitsui Fudosan, Fenbushi Capital & Others.
Sep, 2019
GlobacapSeries A – Early Stage Venture5CoinsharesOct, 2019
Fundament GroupCorporate RoundNot KnownBauwens GroupOct, 2019
ZaboSeed Round2.5Digital Currency Group, Castle Island Ventures, Moonshots Capital, CoinsharesMar, 2020
Taurus Group SASeries A10Arab BankApr, 2020
A List Of Some Of The Strategic Investments The Tezos Foundation Has Made

We don’t know the exact figure the Tezos Foundation has invested into these strategic alliance companies, as many other participants were involved in the individual raises. It is clear the strategy has picked up a significant pace since the foundation participated in the Chorus Mobility early-stage venture round in May 2019.

What is obvious though is that the partnerships have a heavy security token/tokenized asset bias and the majority of these companies are involved in the security token/STO space.

It is also clear that some of the raise participants alongside the Tezos Foundation also have a clear interest in this space and are adopting a similar strategy to carve out a strong position. For example, the German real estate giant Bauwens Group, who invested in the Fundament Group like the Tezos Foundation, also had a strategic interest. Alexander Jacobi the Managing Director of the Bauwens Group stated:

We are delighted to announce this partnership with Fundament Group which recently achieved a decisive breakthrough in Germany by securing the first regulated tokenized real estate bond. The Fundament Real Estate Token is an extremely interesting option for selling our real estate and we are proud to support them with our real estate and digitization expertise. By partnering with Fundament Group, Bauwens is positioning itself sustainably in the emerging real estate tokenization market.

Interestingly, it appears that the Bauwens Group invested at a similar (if not the same time) to the Tezos Foundation around October 2019 in a Fundament Group corporate round.

If the security token market lives up to its potential and becomes a multi-trillion dollar market, then some of these strategic partnerships could prove savvy investments in the long term, with big security token players such as Securitize making great strides to provide security token adoption.

It is clear that the Tezos Foundation has both a clear strategy and the resources to be focused on making big partnerships and strategic acquisitions in the security token space. Judging by the recent uptick in activity when it comes to strategic partnerships and acquisitions by the Tezos Foundation, it is expected more will be announced in the near future.

As the Tezos Foundation has to overcome various network effects of Ethereum in terms of development tooling and community building, the strategic partnership/acquisition route makes a lot of sense.

One such company that made a success of strategic acquisitions in a bid to maintain a competitive advantage in traditional markets was IBM, who recently completed the acquisition of open-source software company RedHat for $34 billion.

The Tezos Foundation seems to be going a slightly different route with strategic partnerships/investments. Rather than acquisition, the Tezos Foundation can look to build bridges connecting the eco-system they are trying to create. The foundation also looks to make early-stage investments in promising blockchain and security token companies.

One thing that has been noted is the diversity in the strategic partnerships, with some companies falling into the custody, platform/on-boarding, wallet, cap-table, and even app spaces.

In addition to making strategic equity investments the Tezos Foundation has also been investing in core development and dapp development on its own platform. In the latest Tezos Foundation annual report from March 2020 the Tezos foundation had $635,009,406 in assets (taken from January 31st, 2020).

In addition $11.2 million was spent on core development and functions.

Tezos Foundation Grantees List 1 – core development & functions – $11.2 m

$13.2 million was spent on dapps and other eco-system developments.

Tezos Foundation Grantees List 2 – Dapps and eco-system developments – $13.2 m

Another $13.2 million was spent on building communities and projects around the world.

Tezos Foundation Grantees List 3 – Community Building/Global Adoption Grants – $13.2 m
The Tezos VC Empire Continues To Grow

Further analysis of the bi-annual report shows that on the 31st January 2020 the Tezos foundation had around $298,454,420 worth of Bitcoin around the 19th March 2020 (47% of total assets). As Bitcoin was around $9300 per Bitcoin, it is plausible they had around 32,000 Bitcoin around this date. If that same amount of Bitcoin was held to date it would be worth around $282,272,000, however some of the Bitcoin may have been sold/acquired since then. If Bitcoin was to reach its all-time high price of around $20,000 this amount of Bitcoin would be worth $640,000,000.

According to the bi-annual report on the 31st January 2020 the Tezos Foundation held around $146,052,163 worth of XTZ. As the Tezos price around this date was around $1.70, the Tezos Foundation had around 97,368,108. If that same amount of Tezos was held to this date it would be worth around $261,920,210. If Tezos was to reach its all-time high of $3.96, then the XTZ would be worth $385,577,707. Again, it is not known if any Tezos was sold in between the time of the bi-annual report and today however, the Tezos foundation did mention in the report that there were no plans to liquidate any XTZ.

It is likely that the Tezos Foundation has lost in Bitcoin, but gained in XTZ (had they not sold any Tezos in the interim) and that’s not taking into account the extra XTZ they may have gained through staking.

Interestingly, on the latest bi-annual report, 6% (or $38,100,564) of the total assets were made up of other assets that are “predominantly strategic equity or debt investments or cryptocurrencies such as Ethereum”. It’s hard to tell how much strategic equity the Tezos Foundation held at that point in March 2020, but it is likely that some of the strategic investments mentioned in this article fell into this bracket. With this recent activity it is expected that this segment will increase further on the next bi-annual report.

After reviewing the analysis it is clear to see that whilst other blockchain and cryptocurrency efforts focus on marketing, the Tezos Foundation is building some very strong partnerships in some very promising market sectors, which align with their own interests. This is a medium/long-term strategy, as opposed to the short-term marketing efforts of their competitors.

The one problem with investing in mainly marketing is that marketing runways eventually run out, however strategic alliances made at an early stage reap benefits long-term. By the time the runways of other blockchains have ran out the Tezos Foundation could have created a connected eco-system they can tap into to prolong the blockchain for many years to come.

The foundation is also positioning itself to have a strategic part in the many rails that form the overall tokenized assets industry. This will give them the flexibility and composability to pursue their ambitions without being held back by a lack of third parties to support it. This should give a competitive advantage against blockchains who lack the individual elements that connect a fully-fledged tokenized asset system

Imagine a cryptocurrency that can adopt the innovations of other blockchains and a venture capital arm that can acquire/bridge/align strategic spaces to fit the blockchain’s purpose. This could prove to be a powerful combination in the months and years to come.

While other blockchains are trying to be all things to all people, a focus to bridge cryptocurrencies to real-world assets could be the missing link to mainstream adoption (even if the mainstream might not even know it when it happens).

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