Strategy Session: Borderless Capital Targets Algorand, NFTs With New Fund

Strategy Session is a feature for Crunchbase News where we ask venture capital firms five questions about their investment strategies.

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By now, you’ve probably heard more than you want to about NFTs (non-fungible tokens). However, the NFT world is still nascent and folks are seeing the potential.

This week, Atlanta venture capital firm Borderless Capital raised its $10 million aNFT.Fund to invest in businesses across the emerging Algorand NFT ecosystem, including marketplaces, tooling, NFTs finance applications, and community projects.

Firm founders David García and Arul Murugan started Borderless in 2018, both coming from an entrepreneurial background, with García also previously investing in the blockchain. They closed their first fund in 2019 with $200 million and have since made 40 startup investments. They are also running two blockchain/Algorand accelerator programs, one in Asia and one in Europe — both started up in 2020.

CEO and managing partner García spoke to me about the new fund, how Algorand is positioned as the foundation for NFTs, and his thoughts on the latest cryptocurrency news. The following was edited for clarity and length.

Can you explain what Algorand is?

García: Algorand is part of the new generation of “layer one” blockchains. It was created in 2017 and came to life through the Mainnet in June 2019. It was founded by Silvio Micali, who is the creator of several primitive blockchain technologies. He and a group of scientifics and engineers joined together to start a novel approach to blockchain that would solve three properties: decentralized, scale and security. Typically, if you want to change one property, you have to sacrifice a bit from the other two. Instead, they were creating theirs in a way so you could expand one property without needing to sacrifice anything from the other two.

We are bullish on Algorand and NFTs because they are technologies designed to be immune to “forks,” which is essentially a network update running in parallel to the original version of the network. The most well-known forks are Bitcoin and Bitcoin Cash, and Ethereum and Ethereum Classic. Algorand is immune to that: When you issue an NFT on the blockchain, there is a risk that if it is forked, original creations will be replicated. With Algorand, that is protected, and creators will always have their creations in the same chain without replication.

From your perspective, why are NFTs popular right now?

García: There is a combination of economy, social and artistic movements here. We are seeing artists looking to expand their creations into the digital world, and the context of COVID-19 created the right landscape for people to interact with each other. The digital crypto movement is also connecting people who want to protest the system. NFTs are the right technology for this movement.

How will your new fund be used?

García: NFTs on Ethereum has a growing community, and Algorand is a newer technology, so our focus is to kick off the cycle and invest in infrastructure products to make it easier for artists to use Algorand. We can make existing NFTs, create value for them and make them compatible with Algorand. We are going to invest in the NFT itself, and we even have our own art collection and invest in business use cases that will leverage infrastructure, especially on the secondary market transactions, that are using assets to create tools like lending and borrowing.

Cryptocurrency and blockchain are regularly in the news these days. What do you think about companies in the space receiving large investments recently, such as Dapper Labs, or that Visa and PayPal will enable crypto use at checkouts?

García: It’s a reflection that cryptocurrency and blockchain are becoming mainstream. It was only a matter of time before people saw the tons of value to be created. The technology is coming into areas where it was not possible before. If you asked me back in 2013, when I was working in crypto, if Paypal or Visa were getting in, I would say no. But now we are seeing the acceleration in adoption from various fronts, including enterprise, VC, entrepreneurs and nonprofits, this will only continue to grow.

Finally, what do you think about the U.S. Department of the Treasury’s proposed plans to monitor crypto wallets?

García: Privacy is a value, but everything should be approached with balance. Privacy is a native right that citizens should have, but the government and regulators should have the right tools so that criminals and bad actors are caught. I feel they will find the right balance, and I am “pro” for finding a way for everyone to be a part of the ecosystem.

Illustration: Dom Guzman