Dubai-based blockchain investor Cypher Capital has launched its first seed fund specifically targeting companies in the United Arab Emirates.
The $100 million vehicle will invest in seed to Series A start-ups within the UAE and the Middle East, though could expand its reach in the future. The vehicle is fully self-funded but may open up to institutions for larger fundraising.
Bijan Alizadeh, founder and general partner at Cypher Capital, told Venture Capital Journal that the VC grew out of a desire to mentor start-ups in the blockchain space.
“There are a lot of people who want to invest in blockchain projects, but the challenge is that many of the companies don’t have the experience to run a $100 million or $500 million company,” Alizadeh said. “There is a certain discipline and experience you need to pass certain stages, and that’s where we come in as a strategic coach.”
Global blockchain funding reached $25.2 billion in 2021, an increase of 713 percent year over year, according to CB Insights. Funding for blockchain accounted for 4 percent of global venture dollars as more investors are attracted to the sector.
Alizadeh said the fund has already invested in seven companies. Cypher aims to invest in at least 20 companies per year. Most of its investments are in the metaverse and games finance sector of blockchain, though Alizadeh expressed hope that his firm will work with companies in the decentralized finance area, too.
Cypher span out of an earlier venture firm from Alizadeh called Phoenix Venture Capital, part of Phoenix Technology, which began mining bitcoin in 2015. Alizadeh said that, after Cypher was launched, the earlier venture iteration was shuttered.
Alizadeh has been investing in blockchain for years and invested in companies such as the open-source platform Near, Web3 company Skale, and blockchain platform Flow. Cypher itself invested $1.5 million in Crypto Oasis Sentio, a blockchain ecosystem in the Emirates.
Support services that Cypher provides include marketing and publicizing products and services of portfolio companies. It is also building a 10,000-square-foot crypto and blockchain hub in Dubai that it expects to open by August 2022.
Alizadeh said the UAE has been friendly to crypto companies with regulations that encourage the establishment of companies and relaxed taxation.
Even though the pace of investment in blockchain is very fast, Alizadeh believes they will take their time before expanding beyond the Middle East for now.
“Some people start expanding very fast, but we believe we’re rolling out at the right place at the right time,” he said. “We need to focus on our market first, and then we expand to Singapore and Miami.”