TechCrunch, the leading on-line tech news site focused on startups, interviewed Patricio Jutard, Newtopia VC Founder and General Partner, as one of the main investment pacesetters that bet on cryptoindustry in the venture ecosystem of Latin America.
Patricio highlighted Newtopia’s mission, guided towards helping entrepreneurs and mentioned the main investments in this realm, showing optimism regarding the evolution of crypto currencies as the platform for financial inclusion. Also stated that the cryptographic space is now taking its first steps and has some difficulties.
Additionally, highlighted the work of great companies that are booming and fostering the growth of Latin America by incorporating a great deal of users into the cryptocurrencies world like Belo, Lemon, Bitso, among others.
Other Latin American investors that also participated in the interview and that provided their standpoint were Matias Nisenson, DeFi Wonderland cofounder, Christina Chang, Tribal chief of corporate and business development, Claire Diaz-Ortiz, startups committee chairwoman, VC3 and Andy Areitio, TheVentureCity General Partner. You can see the whole interview here.
– Quick first question for context: can you let us know roughly how many investments you’ve made in this space, and in what capacity?
We invest between 100K to 500K and we are usually the first check for the startup. This is the list of our investments in the crypto space in no particular order:
A platform that supports a series of traditional sports video games developed by them that uses NFT’s characters to play competitively for a chance to win their tokens.
A crypto-fiat digital wallet, where users can exchange and save crypto and FIAT Money seamlessly.
First non-custodial & P2P mobile wallet, with a focus on stablecoins. Users can trade cryptocurrencies from the Bitcoin and Ethereum ecosystem with people nearby using geolocation!
Building an open source, non-custodial protocol on Ethereum, that will bring fixed-income solutions for lenders and borrowers.
An NFT Marketplace platform where artists, collectors and brands meet in the metaverse
with the most unique collection of both digital (NFT) and physical goods.
The first Global Platform for agricultural commodities tokenization. They create the first
stablecoins backed in grains to exchange them for supplies or services, use them as collateral or access other crypto assets.
A marketplace to easily activate nodes on leading blockchains in Latin America.
Is the first NFT platform for opinion leaders. Allows you to collect the opinions that represent your vision of the world, support the leader´s cause (personally or their foundation/party), access the leader to discuss the opinion you share with them and make your own opinions valuable.
The first music NFT marketplace, specialized in unique and unrepeatable covers, multi-tracks,
demos, album art, unreleased live performance recordings, and never-before-seen videos.
A Ticketing marketplace built on the blockchain made for organizers.
– Crypto is sometimes touted as a possible remedy for those left out by traditional banking services. However, the fact that it requires digital inclusion and crypto’s history of fraud and volatility may create a barrier for people with limited income. As an investor, what steps (if any) are you taking to ensure that crypto will alleviate, and not exacerbate, financial access inequalities?
We understand that we are still on the early days of crypto as a platform for financial inclusion. Not only because the immature deFi protocols have still to prove its robustness and security across a longer period of time, but also because the general user experience for crypto apps, specially for ramp up, are still too hard to use and understand.
In Newtopia we are only investing in those startups that are tackling the UX problem for a broader inclusion as their main goal, some are doing this from within the gaming space (with a play-to-earn approach) others from the wallet side and we even invested in Exactly, a novel fixed income protocol that eliminates the uncertainty when it comes to investing in crypto.
– What’s your estimate on the TAM of DeFi in LatAm?
According to latest reports, LATAM represents a total share of 9% and the current total value locked in DeFi is around USD 72 Bn (amid latest volatility). This would represent a total served market is of around USD 6.5 Bn.
We should point out first that the success on growth and development of DeFi will deeply depend on its ability of being integrated by financial entities of all kinds to provide products for institutional and retail clients.
Any financial institution could eventually support its products on DeFi creating their own protocol and managing financial products in transparent and secure way. So, in terms of addressable market, we could consider that the whole financial service market could be addressed by DeFi products and protocols. According to the World Bank, Latin America has a financial service market of USD 1 Tn a year, that could be a reasonable addressable market for the DeFi industry.
DeFi has just started, and with the resources and talent flowing into the space as we are currently evidencing, an exponential growth is almost inevitable. An even higher DeFi penetration could be expected in Latin America with respect of global growth. Especially considering what has been happening with the Fintech industry in general. The number of Fintech platforms reached 2,482 in 2021, which represents a growth of 112% between 2018 and 2021. In addition, almost 25% of the Fintech companies worldwide are Latin American.
Sources: Chainanalysis; Defi Llama; World Bank
– What companies would you name as current or future market leaders in this domain?
The Blockchain RSK, which allows the development of smart contracts and DeFi protocols in the bitcoin ecosystem.
From a blockchain infrastructure standpoint, Senseinode, a nodes as a service focused in address the unattended Latin American nodes industry.
Open Zeppelin provides security products to build, automate, and operate decentralized application.
Decentraland, world leader in metaverse, which although it is a metaverse has decentralized finance content, starting with the metaverse’s own economy.
Ripio: one of the first centralized exchanges in Latin America, with almost 1.5 million users. Currently turning its eyes on DeFi products.
Lemon and Belo are two promising fintechs based on blockchain technologies and offering disruptive financial products, that are growing and positioning quite fine in the region.
Other promising platforms being developed that have managed to attract the best talent in the region, such as Exactly, building an open-source, non-custodial credit protocol on the Ethereum platform to compete with platforms like AAVE or Compound; or Defiant, the non-custodial multi-chain wallet, brings with it a remarkable product that seems perfectly able to compete with Metamask or Trust Wallet, global leaders in the space.
– Ethereum creator Vitalik Buterin noted that Argentina has one of the biggest crypto communities in the world. But as a consumer market for crypto, is Latin America currently being served more by homegrown, or by foreign companies? Do you expect this to change any time soon?
In Latin America we have great consumer oriented crypto companies like Belo, Defiant, Lemon, Bitso, among others that are onboarding a lot of people to crypto. I believe that in crypto as in the FinTech landscape, local players tend to serve better since they know local financial systems better and therefore customer needs, as well as local regulations specific for financial products. Furthermore, we are seeing the emergence of large new projects, as well as the well positioning of companies in the region that have already proven to be world class.
– Even before crypto, Venezuelans had been known to use gaming to earn a living. Play-to-earn As Axie Infinity continues to crumble, do you still see play-to-earn crypto gaming as a way to subsist?
Axie Infinity is an example of a complex UX with high barriers of entry for the common player. We believe that a new generation of games that are super easy to pick up and that allows for a casual gameplay will be a good income stream for a lot of people, that’s the type of crypto game we are investing in (see MokensLeague as an example)
If players can make a living out of these games is still to be seen, we want this to be a reality but it depends on a lot of factors. What we are sure of is that they will definitely contribute to a family economy.
What’s for sure is that if the play-to-earn space will succeed it mostly depends on game developers, we need better crypto games, more entertainment and gameplay focused than what we’ve seen until now.
– Did you notice any surprising developments or interesting trends regarding crypto adoption in Latin America?
Latam day to day commerce is still run mostly on cash. We believe cash/paper money is on its way to extinction globally, no doubt about it. The problem is that in Latam there’s no trust on traditional financial institutions and there’s almost no access to credit so we believe that crypto has a big opportunity to digitize cash, this is the startups in this space manage to create easy, accessible, robust, trustworthy and beautiful solutions for the unbanked population.
Another interesting trend that strengthens and enlarges the crypto space is that several companies that are tackling real world problems of traditional industries through web3 are becoming the entrance to crypto adoption. A good example of this is Agrotoken that is tokenizing commodities and onboarding new users to DeFi. Another example is TravelX, who is tokenizing air tickets and will help onboard travelers into the crypto space.
– Argentina and Bolivia have restrictions on currency exchange. Does this increase the appeal of stablecoins compared to cryptocurrencies in general?
In Latam in general, the volatility of exchange rates and the inflationary local currencies are pushing people from fiat towards stable coins, but at the same time, the lack of formal credit sources and investment opportunities are making latin americans to invest in all type of crypto assets.
There’s a super interesting case of stable coins minted by Agrotoken where the parity is not with the US dollar like in DAI or USDC, but with natural resources such as soy, oil, gas, etc.
– Ethereum is switching to proof-of-stake soon, which should significantly reduce energy consumption. In a region where miners in some countries were taking advantage of subsidized energy, is this going to affect Latin America’s relevance for mining?
Probably yes, miners won’t have a great incentive after the merge to PoS, but our opinion is that PoS will contribute to lowering the transaction fees and to increase the price of ETH, resulting in an overall win for the whole Ethereum ecosystem, fostering even more innovation in the space.
– In January, El Salvador rejected a recommendation by the International Monetary Fund to drop Bitcoin as legal tender. What is there to learn from this country’s controversial but ongoing bet on Bitcoin?
We believe most countries should learn from Salvador and its bet on the future. In order to tackle our planet’s most challenging problems it is extremely important that governments and countries the importance of innovating through technology adoption. The pace of region transformation will depend on our leaders willingness to embrace change.
– What kind of regulation would help strengthen the DeFi market and encourage more investment? Is any Latin American government taking steps in that direction?
Regulation is great! We believe that by regulating the space, governments are validating the crypto space. In general our view is one of polarization in the space, solutions will be fully decentralized or fully centralized and regulated, in the future there will be no space for gray areas.
– Many are hoping that the crypto market will eventually recover from its current struggles. How are you positioning yourself for a rebound?
We are not betting on crypto currencies as an investment, so price is not relevant to us, we believe that the crypto ecosystem and blockchain based solutions are here to stay, some may fail and others will succeed as long as they solve real problems of the society. So our view is long term and focused on finding and investing in the best teams innovating in this highly dynamic space with a goal to fix a big problem and doing this for the long run, not for the easy money.
– What type of crypto innovation coming out of LatAm would you like to see more of?
Exactly, Agrotoken, TravelX and Polemix are four great examples.
– Are you open to cold pitches? How can founders reach you? (Please share an email address if you’d like.)
Definitely! Newtopia has only invested in 50 startups so far and our $50M fund will invest in over 100, so there’s room for more early stage startups that are willing to innovate from Latam, just submit your application in https://newtopia.VC
Patricio Jutard clearly explained the direction of Newtopia’s investments, setting the target on startups that address the UX issue, with the main goal of achieving a greater inclusion.
Moreover, he looked optimistic regarding the inevitable and imminent exponential growth of DeFi, even though he highlighted that it will depend mostly on its capacity to be integrated by financial institutions and offering products to its institutional customers and retailers.
Lastly, reflected around the issues of Latin America in terms of a lack of trust on the traditional financial institutions, with limited access to credit and the daily use of cash money. Regarding this matter, he highlighted an aspect in favor of cryptocurrencies, given that they have a great opportunity to digitize traditional money. Clarifying that this will be possible, so long as the companies in this space accomplish to create solutions that are easy, accessible, sound, and trustworthy for the unbanked population.
If you would like to get in touch, just send a request at https://newtopia.VC.