Greetings, Leo Schwartz here today. Try as I might, I can’t stop stumbling into strange stories in the world of crypto venture capital. By all accounts, the sector is thriving, especially compared to the rest of VC. Liquid tokens mean that investors are actually seeing returns, firms are raising new capital, and startups are attracting funding. But this is crypto, after all. Something always goes wrong.
David Gan had a winning hand. As a young hotshot at Huobi, one of the largest crypto exchanges, he earned a spot on the Forbes 30 under 30 Asia list in 2019, soon leaving to raise his own venture fund, originally called OP Crypto. This was the halcyon days of 2021, when everyone was throwing checks around, and Gan signed on heavy hitters like Bill Ackman, Garry Tan, and Alan Howard as limited partners to his new $50 million fund.
OP Crypto, which rebranded this year to Inception Capital, has fared well, including closing a $30 million fund of funds in early 2024 and growing its assets under management to nearly $100 million, according to the firm’s most recent SEC filings. But in May, Gan sent out a mysterious email to his LPs. His father, a retired high-ranking Chinese government official from Hubei, where Wuhan is located, was under investigation. Gan would be traveling to China to help out. That was the last investors heard from him for over a month.
I began to hear rumblings during Gan’s apparent disappearance from confused LPs, who voted in his absence to do a controlled wind-down of the firm. In the middle of the tally, Gan returned, agreeing to relinquish key responsibilities in the firm. And now, Inception is at a crossroads, with the firm continuing to steer its holdings but agreeing not to call the remaining 25% that has yet to be invested.
Inception told me that they plan to formally introduce a plan in October that would allow its LPs to invest the remaining capital, though it may not be the most appealing option for a firm that has had a tumultuous few months. Inception also let half its staff go after pausing its investments, though it has since hired new deal analysts.
There is no indication that the investigation into Gan’s father had anything to do with crypto—you can view the public notice here—but the often fraught connections between China and the U.S. seem to impact every aspect of the blockchain industry, from mining to pig butchering. And Gan’s pitch to his investors was all about bridging the Western crypto world with Asia. As Inception’s LPs decide on the next steps for the firm, the gamble may no longer be worth the risk.
You can read my full story here.
Leo Schwartz
Twitter: @leomschwartz
Email: leo.schwartz@fortune.com
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Nina Ajemian curated the deals section of today’s newsletter.
VENTURE DEALS
- AtoB, a San Francisco, Calif.-based payment solutions provider for the transportation industry, raised $30 million in Series C funding. General Catalyst and Bloomberg Beta led the round and were joined by Mastercard and others.
- Ephos, a Milan, Italy-based glass-based photonic chips developer, raised $8.5 million in seed funding. Starlight Ventures led the round and was joined by Collaborative Fund, Exor Ventures, 2100 Ventures, Unruly Capital, angel investors, and others.
- Scribenote, a Kitchener-Waterloo, Canada-based AI-powered medical scribe for veterinarians, raised $8.2 million in seed funding. Andreessen Horowitz led the round and was joined by Inovia Capital, the Velocity Fund, and angel investors.
- Kestra, a Paris, France-based workflow orchestration platform, raised $8 million in seed funding. Alven led the round and was joined by existing investors ISAI, Axeleo, and others.
- mbue, an Austin, Texas-based automated architectural review app, raised $1.8 million in pre-seed funding from Techstars, Geek Ventures, 2045 Ventures, and others.
PRIVATE EQUITY
- KEV Group, backed by Serent, acquired Gray Step Software, a El Dorado Hills, Calif.-based web-based accounting services provider for student body organizations. Financial terms were not disclosed.
- Stellex Capital Management acquired Fox Brothers Holdings Group, a Lancashire, England-based services and materials provider to the construction and infrastructure industries. Financial terms were not disclosed.
EXITS
- Oyo agreed to acquire Motel 6, a Carrollton, Texas-based hotel chain, from Blackstone for $525 million in cash.
- EQT agreed to acquire Indostar Home Finance, a Mumbai, India-based housing loan provider, from IndoStar Capital, for $209 million.
- Kingswood Capital Management acquired Kichler Lighting, a Solon, Ohio-based lighting fixtures developer, from Masco Corporation. Financial terms were not disclosed.
PEOPLE
- Coller Capital, a London, England-based private market secondaries manager, hired Phil Gaechter as a director. Previously, he was at Nuveen.
- Norwest, a Menlo Park Calif.-based venture capital firm, hired Will McCallum as principal and promoted Sameer Kapur to vice president. Previously, McCallum was at Gryphon Investors.
