The Sofia-founded international crypto borrowing and exchange platform, Nexo, announced the establishment of its in-house $150M investment and acquisition fund Nexo Ventures. The investment arm of the company will focus on investing and acquiring early-stage retail and institutional Web 3.0, DeFi, Metaverse, and NFTs projects that are complementary to Nexo’s core business. Nexo Ventures will prioritize investments in Bulgarian startup projects.
Tatiana Metodieva, CFA, Nexo Head of Corporate Finance and Investments, highlights that above all, Nexo is a Bulgarian company, and for them, the development of the local startup ecosystem is a priority. With this in mind, Nexo will aim to develop Bulgaria not only as a fintech hub but also as a Web 3.0 hub. By focusing their fund on these target areas, the company will stimulate the continued adoption of digital assets and the expansion of the Web3 and metaverse ecosystem.
The assets of Nexo Ventures will be managed by Tatiana Metodieva. The other two members of the investment team are Kalin Metodiev, Co-founder and Managing Partner of Nexo, and Stefan Atanasov, M&A and Senior Investments Associate. Being the internal venture capital division of Nexo, Nexo Ventures is primarily financed with internal capital. In addition to that, the new investment arm is partnering with some international blockchain and digital assets investment firms such as Maven 11, Cadenza, Spartan, Architect Partners, and others.
What is the investment strategy of Nexo Ventures
In essence, Nexo operates as a crypto bank as it gives loans against cryptocurrency collateral. It holds deposits which in turn pay interest and allows users to convert their crypto assets into fiat and stablecoin currencies. Therefore, the company earns money by loaning at higher rates than the interest they pay on their savings accounts.
When asked about the investment strategy of the new fund, representatives from Nexo did not give a clear indication what will be the criteria for applying Web 3.0 and Metaverse projects and what will be the ticket sizes. They shared that their investment vision differs from most traditional investment funds, as they are part of the Web 3.0 ecosystem.
“Created by the digital asset economy, Nexo Ventures provides liquidity and strategic risk financing for partner business initiatives and creates integrations with Nexo’s ecosystem of core products and services. We are exploring the opportunity and feasibility of letting Nexo’s users invest in the fund,” Tatiana Metodieva shares.
Nexo Ventures will give their portfolio companies access to in-house fintech expertise and development resources, enabling them to integrate with Nexo’s core products and services, and providing them with liquidity opportunities. In exchange, when it comes to the acquisition of equity, Nexo would take a “Web 3.0 economy approach” and take both digital assets and ownership.
Nexo in the Web 3.0 space
Prior to the official launch of the fund, the investment team Nexo Ventures has made investments in 40 digital asset projects mostly coming from the US, Europe, and the Middle East. The Romanian blockchain API platform BWRLabs is also part of the portfolio on Nexo.
In December 2021, through a partnership with Three Arrows Capital, Nexo became one of the first crypto lenders to allow customers to borrow stablecoins, Ether (ETH), and other cryptocurrencies by using NFTs as collateral.
Fast growth and regulatory pressure
Founded in 2017 by Antoni Trenchev and Kosta Kanchev, Nexo currently manages assets amounting to around $12B. Due to this fast growth, Nexo has faced some challenges including a US lawsuit. In October last year, Nexo and another cryptocurrency lending platform Celsius were ordered to cease operations in New York state for security and licensing breaches. In this regard, Nexo comments that the company has always used IP-based geoblocking which prevents users from regions where the service is not authorized to use the platform.
Nexo manages digital assets and under the European Anti Money Laundry Directive 5 (AMLD5), it needs to have a crypto wallet license. In Europe, Nexo has only licenses in Lithuania, but they are for registration as a virtual currency exchange operator and depository virtual currency wallet operator, not for giving credits or taking deposits.
Almost all of the 450+ employees of Nexo work from Sofia, Bulgaria, but the company is not offering its crypto product within the territory of the country. Some of the offerings of the crypto borrowing bank, such as Nexo Earn Interest Product, are not available for citizens of certain jurisdictions due to legal restrictions, including in Bulgaria, Estonia, and the USA.