The Inquisitive VC – Kenrick Drijkoningen, the Founder of LuneX Ventures

After finishing his MBA from The Hong Kong University of Science and Technology, Kenrick Drijkoningen started working for startups in Singapore. One of these was Nonstop Games, a gaming startup where Drijkoningen was the Director of User Acquisition. The developer behind hit mobile game Candy Crush, King, acquired the company in August 2014 for up to US$100 million. Following the acquisition, Drijkoningen joined Golden Gate Ventures as the Head of Growth.

In an interview with Brave New Coin, Drijkoningen stated that he’s always done his own personal investing in public markets, and has done some angel investing, “It’s really a personal passion that eventually drove me into the venture sector.”

In 2017 Drijkoningen started looking into the Bitcoin and Blockchain space, when one of the Golden Gate portfolio companies, Omise (OMG), started preparing for their token sale. This is when he came to the conclusion that the technology will change the world in a significant manner, one that hasn’t been seen in a long time.

Drijkoningen subsequently pitched a dedicated fund for crypto and blockchain opportunities to his team at Golden Gate. This eventually gave rise to Lunex Ventures, a USD$10M fund focussed on crypto and blockchain that was launched in partnership with Golden Gate Ventures.

LuneX looks for early-stage deals, while Golden Gate specializes in late-stage deals. When the team at Golden Gate is conducting due diligence they look for traction, revenue, and user numbers. The LuneX team, on the other hand, is much more focused on the founders and the size of any potential market opportunity rather than metrics.

Since the launch of LuneX, Drijkoningen has analyzed and invested in many crypto investment opportunities. He states that the primary crypto application is financial, and that we are building a new parallel financial system. This will not be the only application, he adds, but it will be the one that has the biggest opportunity.

Drijkoningen has also identified several red flags, including strange token or equity combinations combined with sky-high valuations. He has identified one in particular, when projects that have previously conducted token raises and are now raising money through an equity raise. This situation leads to a misalignment of incentives for stakeholders.

Stakeholders from public token sales are quite different from private investors investing for equity. These public token sale investors are mostly retail investors, the majority of which do not have a sophisticated and understanding of investing in technology companies.

Public token sales hit their peak in 2017-18 when there was a bull market and nearly every crypto project was selling tokens through initial coin offerings, or ICOs. These sales were targeted at retail investors. This quickly died out and in 2019, but was replaced by another method of token-based fundraising through retail investors, known as initial exchange offerings or IEOs. This trend only lasted for a year, and is also no longer prevalent.

When asked if he believes there will be a recurrence of token-based funding, Drijkoningen stated, “In a different form. I think it will go into a more regulated structure. I think the whole fundraising landscape will change, but it will take another five years and then maybe you will be able to raise an equity offering through a securities exchange. I don’t think those unregulated ICOs will come back.”

An interesting aspect of public token-based funding was that retail investors, most of which had not made any prior early-stage investments, were unable to conduct sufficient due diligence in companies. They typically only had a whitepaper to go on, and possibly the LinkedIn profiles of the team they would likely be investing in.

Venture capitalists like Drijkoningen conduct deep dives into companies they are looking to invest in. When they are early-stage companies the founding team is crucial. In Drijkoningens experience, a common characteristic he has noticed in CEOs and Founders is that they are all very curious, driven, and fairly non-conformist.

LuneX was an investor in Blue Wallet, a mobile iOS and Android Bitcoin-only wallet. Drijkoningen says, “we invested because these guys are a hundred percent focused on building the best Bitcoin-only wallet. So they always have the latest features, straight out of the box. Their lightning solution is particularly nice, it is custodial which is not great but UI is super easy for onboarding and to use Lightning. I was a user myself for a long time and really like the wallet. They are pushing new feature every few weeks.”

In the current environment COVID-19 has significantly impacted the global economy and as a result, has made it much more difficult for startups to raise venture capital. This is because funds are more focussed on doubling down on current portfolio companies.

Drijkoningen thinks it will be extremely difficult to raise capital from funds that you don’t have a previous connection with post the pandemic, as it’s difficult meeting new companies in the current environment. He stated that if the COVID situation spills over into a larger financial crisis, “valuations will drop and it will be more difficult to for VC funds to raise capital, which will then make it difficult for startups to raise capital, valuations go down and will be not a great period for everyone involved.” In Drijkoningens opinion, certain industries and verticals will do quite well as a result of the current situation and that includes industries like crypto, gaming and e-commerce.

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