“Something Big is Coming Our Way, Carrying Immense Potential to Reshape the World”

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Interview with Mathias Ruch, Founder and CEO of the Zug-based startup investor CV VC, discussing the revolutionary potential of blockchain and providing insights on the best ways for investors to engage with this technology and its applications.

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Interview with Mathias Ruch, Founder and CEO of CV VC AG

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Mr. Ruch, you are considered one of the key figures in the Crypto Valley. You founded the Zug-based startup investor CV VC and initiated the Swiss Blockchain Federation. Is there a "blockchain moment" that has changed your life?

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Ruch: I have been active as an entrepreneur and investor in the startup scene for over 20 years, successfully founding and leading companies. I am fascinated by technology, innovation, and people who venture beyond conventional norms to create something new. Before the turn of the millennium, I was electrified by the Internet, initially Web 1.0 and Web 2.0. 

A similar experience occurred when I initially encountered blockchain in 2013 and subsequently immersed myself in it. I thought, wow, something very big is coming our way, with tremendous potential to change the world.

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How do you explain to your mother what blockchain is? 

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Ruch: Firstly, I tell her that our current internet has many vulnerabilities, and that the next generation will be much more secure thanks to blockchain. I explain to her: Imagine that each person in our family has a special book. Every time someone spends or receives money, that person writes it in their book and shows it to everyone else, who also records it. All entries are identical, and no one can manipulate or delete entries individually because everyone can cross-reference to ensure accuracy. All expenses and income are traceable and accessible. This is basically how a blockchain works: A collectively maintained book overseeing transactions, guaranteeing integrity, and preventing any form of manipulation. This mechanism can be applied to almost all processes involving transactions, information, and thus the exchange of data. In a digital world, this means: to almost all industries and business models.

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And can this special book really change the world? 

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Ruch: Absolutely! With blockchain technology, data can be stored and transferred in a decentralized, cryptographically encrypted, and transparent manner. This opens infinite new possibilities and business ideas, some of which we may not even be aware of today. It reminds me of the very first websites. No one knew exactly what could be done with them. Suddenly, search engines, online shops, marketplaces, social media, and streaming platforms, as well as news and knowledge portals, emerged, fundamentally changing society and the economy. We can't imagine a world without the internet anymore. In a few years, the same will be true for blockchain technology.

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Why are you so convinced of the future potential? 

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Ruch: Blockchain will replace infrastructure in various industries and simultaneously usher in a societal structural change. The blockchain infrastructure can be compared to today's common operating systems: Windows, Linux, or iOS on our smartphones. A corporation like Apple provides a digital platform, essentially an infrastructure, on which thousands of apps are developed and can be downloaded by customers at any time. The operating systems can be likened to protocols in the blockchain world, and the apps to blockchain projects and startups emerging worldwide. Through infrastructure replacement and the decentralized approach, completely new possibilities are opened for essentially all interested parties, without an intermediary like Apple taking hefty commissions. You can imagine the fascination these options exert on many people. 

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The blockchain technology is a huge market. According to Fortune Business Insights, the global size of the blockchain technology market is expected to reach nearly $500 billion by 2030, with an average annual growth rate of 60%. These are impressive figures. Moreover, adoption is in full swing in the financial industry, with examples such as Zug Cantonal Bank, Julius Baer, Postfinance, Maerki Baumann Private Bank, Swissquote in Switzerland, and JPMorgan, Fidelity, or Blackrock in the Anglo-Saxon region.

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Can you specify this enormous market a bit? Where are there concrete examples of applications? 

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Ruch: The most well-known example is certainly Bitcoin. Here, the underlying blockchain enables the secure transfer and storage of digital currencies like Bitcoin without the need for a central authority, a central bank. We see the importance and significance of cryptocurrencies, especially in less developed markets like Africa, where we are active as investors. Millions of people do not have a bank account but own a mobile phone, providing them with internet access and the ability to conduct transactions. The most prominent example from the traditional world is cross-border money transfers like Western Union, which are either very expensive or legally prevented. Thanks to blockchain, costs for users are reduced from up to 20% to less than 1%. It's no wonder the financial industry is interested in blockchain to massively improve costs and efficiency.

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A second example is supply chain tracking. With blockchain technology, companies can trace the entire journey of a product from manufacturing to sale. This can help verify the authenticity of products and make the supply chain more transparent. Just think of the horsemeat scandal in Switzerland in 2014. At that time, it took several years to convict those responsible.

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A third example is digital identity management. Blockchain can contribute to creating a secure and trusted digital identity that allows users to verify their identity securely without disclosing sensitive personal data. This is essential, especially in managing sensitive health data or copyrights, such as in the music industry.

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How did you come up with the idea for CV VC?

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Ruch: There was really this moment when I thought, Silicon Valley has moved, and now it's called Crypto Valley. Zug has become the first major global hotspot for blockchain startups since 2013. Hundreds, even thousands, of projects from around the world came to Switzerland from 2016 onwards. Due to the establishment of Ethereum, the revolutionary second-generation blockchain, and unique conditions, young entrepreneurs and developers were working on entirely new business ideas right on our doorstep. I was immediately inspired by this entrepreneurial spirit.

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For me, it was clear from the beginning that something unique was happening here, similar to 1989 when Tim Berners-Lee invented the World Wide Web at CERN in Geneva. However, the commercialization of the internet unfortunately did not take place in Switzerland or Europe but in the USA, on the East and West Coasts, where the billion-dollar tech giants emerged. This should not be repeated with the blockchain revolution.

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And how do you achieve that? 

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Ruch: Firstly, at CV VC, we invest in the blockchain ecosystem. As it involves a new technology with novel possibilities, there's a need for mutual learning among entrepreneurs, programmers, legal experts, regulators, researchers, scientists, communicators, and politicians. We connect them through events and summits, publish reports, and provide co-working spaces, now not only in Zug but also in Vaduz, Berlin, Lisbon, and Cape Town. These activities are unified under CV Labs and offer the best entry point to familiarize oneself with blockchain technology and the relevant stakeholders. Secondly, as a venture capital firm, we directly invest in early-stage blockchain startups.

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What is the difference between investing in blockchain and cryptocurrencies? 

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Ruch: Simply put, blockchain is the technology that forms the basis for cryptocurrencies and many other applications. I mentioned infrastructure earlier. Blockchain allows for secure and transparent data storage, while cryptocurrencies are specific digital assets built on this technology and used for financial transactions. At CV VC, our primary interest lies in blockchain applications beyond cryptocurrencies, and we invest in startups that we believe could become the future Googles and Amazons of the new tech world.

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How can an individual invest in blockchain? 

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Ruch: There are various approaches to this. An experienced investor familiar with venture capital could directly invest in promising startups. However, the effort involved is immense, and the risk without broad portfolio diversification, as we apply it, is very high. Investments in these early-stage startups in our industry typically occur as private placements through equity (stocks), convertible bonds, or tokens. The latter are distinguished from tokens traded on exchanges and are relatively easier to acquire. This means you need access to these private placements. We regularly exchange ideas with around 50 specialized VCs and now have a similar deal flow as major Silicon Valley VCs. Private investors often face challenges with entry amounts being too large, or access being very exclusive or even impossible, particularly when relying on professionals like us for the selection process. However, this is not the case with us. As a dedicated blockchain venture capital investor, we are a highly specialized technology investor, a rarity globally. Investors can invest in our funds, such as the global or Africa fund.

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How do you proceed concretely? 

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Ruch: Thanks to our CV Labs ecosystem approach and our international network, we evaluate around 200 startups per month. We focus on so-called Layer-2 projects, a jargon term for applications built on the underlying technology. These projects have the advantage that they can later switch the rail network, i.e., the protocol. So, we invest in individual train cars, not the rail network itself. Our approach is comparable to other technology VCs: the right team with the right product at the right time. About two-thirds of all startups we invest in go through our in-house CV Labs Accelerator, a kind of MBA for startups tailored for blockchain founders. Over a hundred experts and mentors support us and accompany startups on their growth path. We invest directly in the remaining, somewhat more advanced companies. An Investment Committee, which meets regularly, makes investment decisions. Our portfolio currently includes 59 investments in 21 countries.

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How can and should someone invest in cryptocurrencies?

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Ruch: One can buy cryptocurrencies directly, for example, through an exchange like Kraken, and store them in their own wallet. There is also the option to acquire them through a broker or a bank such as Swissborg, Bitcoin Suisse, Zuger Kantonalbank, or Julius Baer. Additionally, there are financial products familiar from the traditional finance world, such as index funds or hedge funds, including CV VC's Alpha Fund, or ETPs, ETFs, trackers, specialized certificates, derivatives, or bonds.

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What is your most important investment recommendation?

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Ruch: Many investors start with cryptocurrencies, wanting to understand more and discover a new world. They are excited about the technology, recognize its future potential, and want to invest in corresponding projects or companies. They catch fire, much like I did at the beginning of my Crypto Valley journey. A customer advisor's initial response might be, "invest in a fund." This is certainly not a wrong answer. Directly investing in startups is a risky strategy in my opinion. The technology evolves so rapidly, presenting new possibilities, currently with AI and soon with quantum computing, that keeping up without global networks is challenging. This task of careful analysis and selection is ideally left to experts like professional venture capitalists, such as CV VC. Or, as we like to say, "Innovation has never been as fast as today. But will never be as slow again ever."