Crypto Development Fund

The Crypto Development Fund enables investments in startups that are operating in developing countries using the blockchain technology.

Why is it relevant?

Exclusion

2.5 billion people worldwide are excluded from financial services. Specifically, in developing countries financial exclusion is one of the major development obstacles where up to 80% of the population does not have access to financial services.

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Funding Obstacles

Due to the broken financial system, it is extremely difficult for start-ups to raise money from investors and for investors to find suitable investments.

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Challenges Investors and Startups face

LEGAL FRAMEWORK

Without a developed legal system, start-ups often have to accept the investors conditions without understanding it and without the opportunity to seek legal council. This may result, in unequal agreement which favour the investors.

DEPENDENCE ON INVESTOR

In the absence of multiple funding opportunities, investors can leverage their position over local start-ups resulting in abnormal equity shares or collateral collection. Furthermore, start-ups depend on additional capital injections from the investors which can result in the abuse of power from investors.

FUNDRAISING

Due to an underdeveloped financial system, local entrepreneurs fail to receive funding for their start-ups. Even if they find first investors, they are often not able to subsequently attract additional capital.

COSTS & INEFFICIENCIES

In order to avoid fraud, current investment vehicles apply traditional measures e.g. collateral collection and engage in complex verification processes which are obsolete in this age. As a result, the investment/funding process consumes much time and high resources which increase the cost of investments.

EXIT OPPORTUNITIES

One of the biggest problems why venture capital firms do not invest in developing countries is the absence of exit opportunities. Without a stock exchange or big competitor, there is no market to sell the company after successful growth. Therefore, we provide a platform at which investors can resell their company share to the next investor.

INFORMATION ASYMMETRIES

When investing in developing countries, it is often difficult for investors to observe or control the actions of the entrepreneur. As a result, they often rely on the entrepreneur or on expensive third parties to achieve transparency.

Our investment vehicle

Based on the blockchain, we are providing a platform for investors from developed countries to come together with start-ups from developing countries:

Startup Platform

Smart Contracts

Proof of Intention

Escrow Mechanism

Tokenization

Payments

How it works

Funding criteria

CDF provides a way to financing start-ups which utilize the blockchain technology in the areas of finance, payments, governmental services, property registries, energy, IoT and sharing economy. These applications offer strong growth potential in developing countries and will boom in the next years.

Read more about blockchain in developing countries

Blockchain

Blockchain-based

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Clear Milestones

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Impact on developing countries

Job Creation

So called “high-growth” entrepreneurship contributes around 50% of newly created jobs in developing countries. Our concept is to support these transformational entrepreneurs to fund their businesses and as a result make a positive economic impact on their region.

Coping Capacity

We focus on companies which build their business on the blockchain technology to fill the gap of weak regimes. Most of countries fail to realize their potential because they do not have a functioning infrastructure and legal system to encourage entrepreneurship and growth. We specifically target those companies which aim to fill that gap and provide alternative infrastructure on which other companies can build. Due to this, we will create a self-reinforcing process which foster development and entrepreneurship.

Knowledge Transfer

Due to the creation of milestones and the interaction with investors and other start-ups, entrepreneurs can widen their horizon and discuss business focus with a wide range of people.

Team

Kai Schmidt, Co-Founder

Kai Schmidt

Co-Founder

Kai graduated from the Frankfurt School of Finance and Management in Business Administration. He wrote his final thesis in cooperation with the Frankfurt School Blockchain Center about the potential of Blockchain-based applications in developing countries. Kai worked in a Rocket Internet-funded start-up in Bangladesh where he experienced the challenges of developing countries and learned how to build start-ups in unstable environments.

Philipp Lesche, Co-Founder

Philipp Lesche

Co-Founder

Philipp graduated from TU Munich School of Management studying Management and Technology. He is currently working on different topics around the Blockchain technology and its various applications. In addition, he is supporting promising projects as ICO advisor. During his exchange semester in Milan he got interested in Social Entrepreneurship and Social Innovation and joined Kai with the idea of a crypto fund for developing countries.

Simon Scholz as CTO

Simon Scholz

Co-Founder

Simon graduated from TU Munich with a masters degree in Automotive Engineering and started working as a simulation expert at Audi. With his affinity for user-centered design as well as software development, combined with a mindset of learning, he acquired the skill set to launch his first company on a part-time basis. He has a strong interest in Blockchain-based applications and the benefits they can provide, especially in Social Impact.

Mohammed Al-Salafi is our representative in Nigeria

Mohammed Al-Salafi

Head of Nigeria

Mohammed holds a masters degree from Frankfurt School of Finance & Management in International Business with a focus on African Business Development. He wrote his master thesis on the role decentralized systems can play in fostering development in fragile countries with Yemen as a case study. Momentarily, he serves as a business analyst and country manager based in Nigeria for a German-based consulting firm supporting international companies with their entry strategy to sub-Saharan Africa.

McIntosh Kuhlengisa Blockchain Research Accelerator

McIntosh Kuhlengisa

Business Development

Mc obtained his MBA from the Gordon Institute of Business Science, South Africa, where he wrote his thesis on funding social enterprises in emerging economies. He is currently pursuing doctoral studies on the effect of blockchain based platforms on financial inclusion on SMEs. He has worked for central banks in southern Africa with a focus on regulation and supervision frameworks for financial services providers, and has provided capital raising advisory services to SME’s in Southern Africa across agriculture, energy and fintech.

Farhan is a Blockchain Developer

Farhan Shahid Nawaz

Blockchain Developer

Farhan is completing his masters degree in Informatics from TU Munich. He has been involved in programming various blockchain based solutions including one for simplifying the rental process. He also maintains a deep understanding of the technical underpinnings of the crypto space. Hailing from a developing country himself, Farhan is excited to be involved in helping realize the Social Impact potential of blockchains.

Advisors

Prof. Dr. Philipp Sandner, Frankfurt School Blockchain Center

Prof. Dr. Philipp Sandner

Prof. Dr. Philipp Sandner is Head of the Frankfurt School Blockchain Center at the Frankfurt School of Finance & Management. The center was launched in February 2017 and analyses implications of blockchain technology on companies and business models. It provides a platform for decision makers, startups, technology experts and industry professionals to exchange their knowledge and share their visions. Prof. Sandner is member of the FinTechRat of the Federal Ministry of Finance.

Benedikt Pollmeier, Luvent Consulting

Benedikt Pollmeier

Benedikt is Managing Director and co-founder of Luvent Consulting GmbH. He has extensive experience managing, implementing and evaluating international development projects. He worked for numerous donors including ADB, AfDB, EBRD, EIB, EuropeAid, GIZ, KFW, and the World Bank. He obtained global experience advising private and public sector clients as Senior Economist with a focus on private sector development and digitalisation.

Partner

Frankfurt School Blockchain Center

In particular, weak institutions and corruption hinder the evolution of a stable financial sector and favour power disparities among the population. The blockchain technology is one of the key technologies to fill the gap of failed states in developing countries. The blockchain empowers people to set up their own rules and to collaborate on the blockchain without a central controlling authority. In the following decades, the blockchain technology will be the key technology for developing countries to revolutionize their financial and legal sector and to jump out of poverty.

It is almost impossible for investors from developed countries to find good investments in developing countries. The biggest obstacles for investing in developing countries have been trust and information asymmetries. In order to protect from fraud, investors have to set up complicated measures including identity proof, collateral collection and legal documentation. Not only are those measures expensive and time-consuming and thus, make an investment less attractive, many entrepreneurs in developing countries are not able to provide it. In addition, the absence of a legal framework often prevents investor and start-up to achieve an agreement. Even if they are successful, the agreement will often reflect the investors interests leaving the start-up in a state of dependence.

As a result, investments are less likely. Current investment vehicles aim to solve these problems but often result in high costs and inefficiencies.

On our platform, we offer an overview of pre-screened blockchain start-ups and the opportunity to invest in them. If needed, investors can contact the start-ups directly before making an investment decision.

Due to our smart contracts, we maintain a legal framework in which the investor and start-up can operate in. Thus, we ensure that both parties stick to it thereby decreasing the risk of costly legal disputes.

Before a start-up can receive funding, it has to achieve pre-defined milestones in order to proof their intention. In addition, we will verify the entrepreneurs identity. We continuously monitor the start-ups progress using our CDF-Scoringboard.

With our escrow mechanisms, we secure that new payments will automatically be freed if the start-up achieves new milestones, protecting it from funding uncertainties. In this way, we eliminate the need to manually manage the investments.

In order to provide a legal investment vehicle for the investor and start-up, we tokenize the company and distribute the shares accordingly. As a result, we do not rely on corrupted legal systems in developing countries.

Due to cryptocurrencies, we are able to send money at low rates in all countries of the world. This results in cheaper and faster payments, reduces currency risks and allows more adaptability towards changes.