Business

Profile: A family office steeped in diamonds looks to the future with crypto and blockchain

Diamonds are forever, and Lior Messika feels the same way about his family’s businesses.

His father André Messika has been a serious player in the diamond trade for decades.

Sister Valérie has built a global jewellery business endorsed by celebrities such as Beyoncé, Kate Moss, Anne Hathaway, and Charlize Theron.

The investor must have two basic and opposing instincts: the first is the ‘persecuted animal instinct’…the second is the ‘predatory beast instinct’…

Lior has started a venture capital business investing in crypto and blockchain, backed by family office Messika Holdings Fund, which he sees as a bridge to the future of finance.

“We’ve got about seven companies,” says Lior Messika. “ We’re all operating them. My mother started a clothing business at 50.”

Tunisia-born André Messika became one of France’s youngest diamond traders at the age of 21. He developed a diamond merchant business, winning awards for services to Israeli exports. Tel Aviv-based André Messika Diamonds has been operating for 45 years.

But the diamond trade has become more challenging. AndréMessika has lately spent time supplying diamonds and trading expertise to his daughter’s Messika Jewelry operation, acting as her business partner.

Valérie Messika has blossomed as designer and marketer of diamond jewellery, enhanced by a cool and contemporary brand.

Lior Messika stayed in the background until recently: “I’ve been concentrating on everything that’s passive for the family: investment strategies, private equity and real estate. I sit on our operating company boards and take care of everything that is risk mitigation from our perspective.”

Of late, Lior Messika has stepped up his interest in direct investing, drawing on Israel’s success in venture capital as well as European venture capital: “which is getting tremendous.” His brother Ben has taken on a business development role at Messika Holding Fund, the family office.

Lior Messika declined to confirm its size but said: “We’re in the hundreds of millions in yearly revenues through our operating companies.

“We started Eden Block as a way to get exposure in blockchain, because we couldn’t find any managers to fill that requirement.

“What we found in the sector was idealism, but very little pragmatism. We’ve come up with some interesting views on what the technology could apply to the real world. Three years on we’ve made 28 investments.”

Eden Block specialises in Web3, which facilitates online transactions between participants and their business models.

The companies use blockchain electronic ledgers, the process which allows digital assets to trade on platforms on a decentralised basis.

Breakthroughs could seriously disrupt the financial sector, eroding the position of traders who employ market intelligence or speed to profit from spreads at the expense of less fortunate market participants.

The banks are starting to wake up to the challenge. JP Morgan has just set up a division called Onyx to develop blockchain initiatives.

Lior Messika

Many of them are hoping that regulators will try to preserve the status quo, which is not yet clear. Many bright ideas are highly ambitious and insufficiently tested. But they confirm that disruption is now reality for the capital markets.

Right now, Eden Block is upbeat, cutting across academic, scientific and commercial disciplines to scope and shape portfolio companies: “We try to help our companies build scale, prove ideas and become the best they could ever be.”

Lior Messika provides the enthusiasm and family funding, which pushes Eden forward. He believes it can win support from other family offices which are often, though not always, keen to profit from disruptive VC.

Eden’s top advisory team is led by Dermot O’Riordan, a lawyer and director of the tech-driven International Conclave of Entrepreneurs.

Rami Beracha is former managing partner at VC firm Pitango and chairman of Israeli global enterprise network Sosa.

Ben Livshits, chief scientist at Brave Software, who previously worked at London’s Imperial College and University College London, provides a crucial link with academia.

The team likes to be decisive. According to Rami Beracha:  “The investor must have two basic and opposing instincts: the first is the ‘persecuted animal instinct’ whose aim is to escape the wrong investments The second is the ‘predatory beast instinct’, which aims to identify, while constantly escaping, a rare investment opportunity and devour it.”

Early on, Eden Block backed a blockchain software company, born out of UCL research, called Chainspace. It was acquired in 2019 with members of its design team by Facebook and put to use in its Libra digital currency project.

Dave Hrychyszyn, Chainspace co-founder, soon quit Facebook to get involved in Nym Technologies, a company popular with human rights campaigners.

The company is out to use years of research by the European Commission to offer privacy to online users who dislike companies and governments harvesting their metadata.

Nym uses a technology known as mixnet to stop the harvesting by masking it with other transmissions. Messika says it can already protect the privacy of high-definition videos while being streamed.  Much more is in the pipeline and Nym aims to generate revenues by selling subscribers to its service.

Another investment, Vega Protocol, is out to deploy blockchain to trade and settle derivatives through a decentralised platform.

According to Lior Massika: “Across markets, we have a situation where the ownership of information is unequal and Vega has been solving this by taking an intensely academic approach. It gives you a chance to provide liquidity to markets on a fair basis.”

The Vega team has accessed research from a range of European universities, including Edinburgh. Eden participated in a $5 million fundraising led by Pantera Capital in 2019.

Vega believes it can automate the functions of middlemen while employing digital assets as collateral. Ambitious maybe, but Vega believes it can trigger a revolution and open up new markets.

GrainChain has a suite of blockchain products which programme and trace global supplies of grain. Overstock’s VC arm Medici Ventures led a $8.2 million fundraising which closed in March 2000 in which Eden participated.

In a big move, Mastercard signed a partnership with GrainChain on October 29, saying the system offered transparency to consumers and farmers.

Lior Messika says: “GrainChain is solving so many issues. It can give the smallest of farmers the chance to sell their grain, rather than being forced to rely on monopolies which have been controlling prices for years.”

More recently, Eden Block has backed Atpar, working with Christoph Jentzsch, who previously developed Ethereum-based digital solutions.

The company’s current project involves turning loans to small and medium-sized enterprises into digital securities. A decentralised depository would act as record keeper separate to traditional markets. This would hopefully bring order, and liquidity, to a fragmented market, where borrowers find it hard to access loans.

Lior Messika is first to admit the crypto world isn’t perfect, pointing out it needs to develop a stable decentralised currency which does not suffer the weakness of fiat currencies and volatility of bitcoin.

“If we want to build decentralised financial systems for crypto-networks on the back of blockchain, we’re going to have to utilise a structure that’s a lot more stable.”

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