Rui Zhang, CoFounder/Managing Partner gumi Cryptos Capital

Pemo Welcome Rui. Great to speak to you again, albeit it’s not live but, still wonderful to speak to you. So, tell me firstly, how are things going in Japan, with the crisis? Obviously, the whole world’s been affected by it, so we can’t help but not talk about it.

Rui Yeah, I arrived in Tokyo last Friday I’m in quarantine right now. I need to stay in the hotel for 10 days before I meet anyone. But the situation is getting much better. I think, after that it will become normal.

Pemo So great. You don’t have the delta variant in Japan, hopefully. 

Rui I don’t, but I think Japan have, they have, yes.

Pemo No, yeah, okay, it seems to be having a second round of disaster with that. Anyway, moving on, tell me how your VC firm is going, I know you invest in Crypto games correct? Do you want to tell me a bit about what you’ve been doing since we spoke last?

Rui Sure, yeah, I remember that probably the last time we talked was either late 2018 or early 2019. So, the fund I’m running is called gumi Cryptos Capital, to refresh you. So, it’s an early-stage Venture Capital fund investing in Blockchain and Crypto, in the whole ecosystem. We’re not just investing in gaming, we invest in the whole Blockchain ecosystem.

Pemo Oh okay, thank you for the heads up on that. Okay, sorry.

Rui No worries, no worries at all, and so we invest from the fundamental layer, layer one, smart contract layer, layer 2, up to application layer and different verticals from financial services to gaming. We cover basically all of them, as long as those companies or projects have a meaningful way of utilizing this Blockchain new technology, and then they are basically our investment target, right. And the first fund was founded in early 2018. We closed the fundraising in May 2018, since then, right now, we invested in total, I think 34 projects/companies and a lot are doing super good. I think the famous ones you probably heard about are OpenSea, YGG the Yield Guild Games, Qredo, Vega, 1Inch. So yeah, they are doing super good. And we are in the process of having the first close of our second fund right now. So, very excited about that too.

Pemo Okay, and do you invest in, obviously you’ve been in Silicon Valley that’s where we know you, is it just in the US that you invest or is it globally that you’re investing?

Rui Globally, although I would say the majority were in the US. But we do have portfolio companies in Europe and Asia. I expect we will have more portfolio companies outside of the US from now on.

Pemo Okay, okay and from your perspective as an investor. How do you see the future for the Blockchain domain?

Rui Yeah, obviously, we are a Blockchain thesis driven fund. So, we believe that Blockchain will be utilized in many industries, many sectors, from now on. Right now, we already see the financial services side already starting to boom right? There are so many players from the enterprises, from the institutions to the individuals all coming into this area; and NFT gaming is the second one starting to become super hot since the beginning of this year. So, I think, it starts from these 2 sectors have been the reason that crypto or digital assets have the ASSAT nature. So, when you have assets, you want it to be tradable, you need the marketplace to enable trading; and you want to find a place to utilize the assets. The financial services is exactly the start of where you can utilize your assets, and digital/virtual assets is the perfect assets inside of games. So, I think that’s where it started. Then, I will say in the future, I would expect that at least that the Blockchain technology will be utilized in other genres too, I think there’s a project doing IoT related things, supply chain, I think any industries that have a multi-party collaboration mechanism, and the trust cost is super high, the synchronization of the data, or amount different in the players, those sectors will have a perfect utilization of Blockchain technology.

Pemo Fantastic and recently or earlier in the year I was asked to be on a panel for Tokyo invest and, you know with a FinTech obviously based panel, for a couple of days with other global people and I didn’t actually hear very much about Blockchain and Crypto. So, I’m just wondering how is that in Japan is there a big uptake in Japan are people open to this new technology and a different type of financial asset?

Rui Yes, first the whole Japan market they definitely pay attention to Blockchain & Cryptocurrencies. If you remember in 2017, early 2018, I think the majority of the Bitcoin was actually held by Japanese investors.

Pemo Wow Wow! You guys are smart.

Rui But, however since then obviously, the market dynamic changed after the market crash, the regulations became restricted. If you want to be doing Blockchain related, Crypto related business you need to file for a license and here in Japan the Crypto issuance is still very restricted and limited and so we see a lot of startups actually going out of Japan, registered in Singapore and other offshore countries to build up their Crypto businesses and doing the token issuance. So, I think that’s the current status, but I think as the other countries have more clarity on regulations, Japan, definitely, they don’t want to be late compared with other countries or other markets so they will catch up soon.

Pemo Yes, yeah. They don’t want to miss out. So basically, what you’re saying is that at the moment it’s it is highly regulated and difficult to do startups with the Blockchain and Cryptocurrency and that Singapore at the moment is a better spot for them to start off with?

Rui Yes, especially if it is going to be a token issuance

Pemo Okay, good ole Singapore. So tell me, what do you think is coming like obviously this crisis has really affected everyone globally both investors and startups has that been a good thing for you as an investor? Have positive things come out of that do you think?

Rui Yeah, yeah, so obviously in the past two years if you pay attention to this industry, the investments that VC’s made is actually much much bigger than what it made in the 2018, 2019. So, it doesn’t prevent anything, and you know Blockchain and Crypto its born to be global so because of the pandemic we see more and more distributed teams getting together building projects. We see people naturally collaborate through community helping each other you know, build a global network. So, it’s definitely, or at least, I would say for Blockchain Crypto this Pandemic has no impact at all.

Pemo Except, it almost made people take more notice of it or take it more seriously. Do you think? That’s what I’ve noticed just as being a media person and watching the media. So, do you think that people have taken more notice during the crisis of that domain?

Rui Yeah, I think yes, especially when the market is getting hot. You know, you cannot ignore it.

Pemo You can’t ignore it. Yeah, when it’s money. No one can ignore it right?

Rui Exactly, exactly.

Pemo Do you have any promising startups that you’ve invested in that you feel are going to change the world? Obviously, all of them ultimately change the world but anything really big that has stroke that you’ve invested in?

Rui Pemo, sorry I just lost you for several seconds. Could you repeat your question?

Pemo As an investor is there anything that you see is really outstanding. That’s coming that you’ve invested in or that you want to invest in in this domain?

Rui Yeah, I lost you for several second but I think your question is what the sectors that I am interested, excited in?

Pemo Yeah, things that like are coming in the future that we’re not really using right now but you can see coming in the future.

Rui Yeah, so I will say at least in the short run, in the next 1 to 3 years, I still think financial services and the NFT metaverse will be kind of the core in this industry. If you look at the current financial service build on Blockchain, it is still very very simple. You know, build an AMM, a pool, and all of designs are how to make the pool more efficient, earning a higher yield and making users more convenient to join this sector. But, if you look at the traditional financial services there’s more complicated, sophisticated financial products, the structuralized financial products. Those are not available on Blockchain at all and in order for you to actually make this whole industry, facing the whole mass market, enable all the financial services build on top of blockchain, you will need more innovations. So, I think from now on we will see more and more innovations on the infrastructure side, architecture, how to make the sophisticated financial products available on Blockchain as easy as the traditional financial services, that’s something that we will see. I think that the industry like insurance people are paying attention to it, but I think now It’s not ready at all. I think that the derivatives is a very important function for financial industry, it’s a pricing discovery, its balancing the stock market. But right now, on Blockchain its mainly just the perpetual swap. It’s the simplest derivative product we can think of. There’s no efficient pricing model for the Crypto assets on Blockchain. So how you create a framework that make that happen that’s a very important thing. On the NFT Metaverse side, I think now is mainly just that an NFT issuance  everybody wants to issue NFTs so that it can raise money very fast and get enough.

Pemo It’s sort of like the ICO craze years back in Silicon valley I remember our events. We just packed out when, I mean it became an STO but it was an ICO to start with and everyone went really mental about it.

Rui Yes, exactly, exactly. So now I think the phenomenon is you’ll have more and more NFT assets following on the market. However, where you can use it? What’s it for? Most of the Player/user who buy it, of course, I would admit there will be, there are collectors, they really want those assets. I have no doubt. However, that’s only a small, tiny group of people majority of the NFT buyers they are still basically speculators. They expect, they buy it now, someone will buy it later at a higher price. That’s how the market is working now. So, I would expect to see more and more usable NFT’s, right. I say in game playable assets. You have a very specific utility of that NFT and using that, giving you the experience, not just the financial returns. You want to have this to enjoy yourself, and entertain yourself, accept specific services, those things I think will be necessary in order for this whole NFT industry to sustain and I would expect more and more real world assets being connected to the Crypto NFT, because think about the real world, every assets is a unique asset, so it should be…so it’s a perfect match with NFT scheme. So how to make that, you can call it tokenization, or make that connectivity possible, that’s also some area that I’m looking into.

Pemo Yeah, that’s very interesting. It does seem like the NFT craze has really gone a bit crazy. But you’ve helped explain the future perspective of it and so I really appreciate that. Might wind it up now, but totally fascinating and interesting. Always great to talk to you, Rui, and wish you all the best in Japan and then when you’re back in Silicon valley be great.

Rui Yeah, that’ll be great. Look forward to talking to you soon.

Pemo Thank you