The fund will leverage DCG’s seven-year experience of backing web3, DeFi and crypto startups as it looks to expand its investment activity to reach more early-stage businesses at pre-seed and seed.
Also, scaling this investment effort will require a ‘localized’ approach, particularly in a highly competitive venture environment. Luno Expeditions believes it can tap into Luno’s market expertise to support founders across the five continents in which it operates.
Luno Expeditions, which has no dedicated size, intends to fund between 200-300 startups each year and diversify beyond crypto into the broader fintech space.
CEO Jocelyn Cheng will spearhead this new project as she leads an all-female team of five. Cheng has invested in global startup founders over the last six years as the managing director at Global Innovation Fund, an impact investment VC.
Cheng’s previous role required her to work closely with startups spanning sub-Saharan Africa, India and Southeast Asia, expertise she’ll bring into Luno Expeditions as the firm sets its sights on founders globally. She has also held investing roles at CPP Investments, Bain Capital and Goldman Sachs.
Barry Silbert, founder and CEO of DCG and Marcus Swanepoel, co-founder and CEO of Luno, will be part of Luno Expeditions’ Investment Committee.
DCG remains operational despite Luno Expeditions’ spinoff. Cheng said the venture capital company, which focuses on the digital currency market, would continue to invest in digital assets and later-stage companies from Series A up. “Luno Expeditions will focus on the group’s early-stage investing in equity and convertible rounds,” she added.
Retail customers’ appetite for crypto continues to reach new heights, likewise investors and LPs for crypto, web3 and decentralized projects. This past year has seen firms such as Paradigm and Andreessen Horowitz launch gigantic funds -- Paradigm at $2.2 billion and a16z at $3 billion -- to solely back startups providing solutions in the budding space. And there are more funds from Hack VC, Electric Capital, Crypto.com and Inflection, all launched within the last three months.
With these funds focusing solely on crypto and its surrounding ecosystem and investing more in these startups than traditional fintechs at the moment, why is Luno Expeditions choosing a dual focus on crypto and fintech instead of going head-on with crypto?
“There are very few truly global and very early-stage fintech funds in the world; we see an exciting opportunity here to build one. The reason why it’s not just pure crypto is that over the past few years, as operators scaling some of the largest crypto businesses in the world, we have noticed that there is such a strong intersection between some of the traditional fintechs and crypto,” said Cheng.
She cited how fintech companies are enablers for crypto; for instance, payment gateways for offramps, fraud and compliance companies and challenger banks that heavily promote crypto adoption.
So while the long-term hypothesis is that crypto will revolutionize the global financial system, many founders and companies are working directly and indirectly toward that same goal, whether as pure crypto companies or fintechs, she said.
“There is still a lot of work to be done in building the infrastructure that crypto will rely on. So our aim is to be supportive of this broader ecosystem. So what this practically means is we will invest in fintech companies that we feel match that long-term thesis, not just any fintech company.”
Meanwhile, Luno Expeditions chose not to dedicate an exact amount of capital for its portfolio companies because it provides flexibility on matching deployment to what it sees in the market.
The fund will invest between $50,000 to $250,000. Multiplied by the number of startups it plans to back each year, we should expect Luno Expeditions to fork out between $15 million to $75 million yearly. Looking at typical investment periods of funds of around three-four years, that translates into commitments that go into the $50 million to $300 million range.
“We are likely to invest at the upper end of that range. Also, we have some flexibility, including writing larger cheques as we scale,” the CEO said.
“The reason we didn’t go with a fund structure is that we don’t need any external funding to be able to build this business, both from a capital and management fee perspective. It also allows us to finance investments with evergreen capital, which we believe is more valuable to founders building companies in the fintech space and aligns all of our long term interests better.”
Luno Expeditions is just emerging out of stealth mode. Over the past few months, it has invested in 20 crypto and fintech companies such as Nala, a Tanzanian remittance solution; Oraan, a digital bank for Pakistani women; Sealance, a crypto compliance solution in Israel. Others include African crypto exchange platform Busha and fintechs Stitch and Root.