Tips for securing Bitcoin venture financing
On September 30, in cooperation with Seoul CoinGeek Conference, there will be a “Pitch Day.” Blockchain entrepreneurs will pitch venture capitalists for investments in their businesses.
The blockchain space has no shortage of intelligent idea people who have the next great idea written down on a cocktail napkin. They know that with some investment capital, they can change the world.
That may well be true, but to find the investment money their ideas need, blockchain innovators will need to package and prepare their concept.
They’ll need to prepare to present their next blockchain application ideas in the most transparent possible light. This preparation will allow venture capitalists and equity funds to understand the idea, understand the importance of the concept, and see that there will be a return on their investment.
I spoke to a few of the key people taking part in Pitch Day. Paul Rajchgod is the Managing director for Private Equity at the AyreGroup. Dave Mullen-Muhr and Jack Laskey are both Principals at Unbounded Capital and Zach Resnick, Unbounded Capital’s Managing Director. The trio shared their considerations when it comes to investing in new businesses.
“A goal without a plan is just a wish.” – Antoine de Saint-Exupéry
The first thing expressed was that before approaching venture capital or equity funds, entrepreneurs must have a Business Plan. For clarity, it’s not just a Powerpoint presentation but a well thought out plan for your business.
Paul Rajchgod talks about the importance of preparation and legwork done by the people looking for investment, “In addition to having different investment mandates, every venture capital and private equity fund has its approach to seeking and assessing opportunities, managing risk, weighing pros and cons, undertaking due diligence, and ultimately deciding whether or not to proceed with an investment.”
He continues, “Some investors prefer later-stage investments whose business plans have been somewhat ‘de-risked,’ and some are more comfortable with start-ups and their higher risk profile.
In general, it’s very beneficial for companies seeking funding to have already done a lot of their legwork. Start building your product, start testing your market interest, start seeking out partners to join your team. It’s ‘your opportunity,’ so you’ve got to do the hard work of starting the business.”
“Show me the money!” – Rodney “Rod” Tidwell
Investors want to know that the money they invest in your business will come back to them someday, it’s essential that you’ve considered how your idea will make money. Companies seeking investment will need to have a Financial Model to show investors as they’ll want to know that you’ve seriously thought about how your idea will make money.
In this regard, Rajchgod said, “Also, you need to be able to explain to potential investors in a succinct and cohesive manner.
What is your business is trying to achieve?
What is the problem you’re addressing? How are you addressing it?
This needs to be explained in a business plan and with a sensible forecast – after all, you probably aren’t building your business for free.
What is the revenue model, and when does it kick-in?
It’s ok that your forecast for ‘x years from now’ won’t turn out to be accurate, no company’s forecast ever is, but it’s still important for investors to see how you’re thinking about revenue, where it’s generated, what homework you’ve done to validate your views that customers will pay xx (whether in Bitcoin or fiat) for your product or service.
“Who are you? Who, who, who, who? Who are you?” – Pete Townshend
Blockchain investors will want to know who they are getting into business with; it’s vital that you are open and honest about your personal history and how long you’ve been working on this business.
Zach Resnick sums it up well: “Trust is of the utmost importance for every relationship in life. Having a foundation of shared trust from previous business ventures or friendship is one of the most desirable unfair advantages an early-stage team can have.”
“Brevity is the sister of talent.” – Anton Chekhov
To complement your business plan, financial model and personal history, they’ll need a One Pager. Like the cover letter to a resume or a book synopsis, the One Pager gives the highlights of your plan; it will entice investors to commit to reading the rest of the dense documents you’ve submitted as part of your pitch.
Rajchgod has questions he’d want to see answered, “Does the company solve a problem or maybe two with bitcoin as core to the solution?
Is the technology scalable?
Is the business already being built?
Are customers using it (even in beta)?
Is there a management team with depth in place?
Does management have a track record of creating or helping to build growth companies before this one?”
Jack Laskey adds, “Businesses can be complicated subjects. It may take a short book to explain how your business works and its possible applications fully. So while a one-pager may leave out important details, it provides an excellent opportunity to develop a language for describing your business in a succinct but exciting way. A great one-pager will help you have a better initial conversation with potential investors and partners. It also makes your business much more sharable, both internally within VC firms and externally among investors. If your product is highly technical, having multiple one-pagers addressing different audiences may be useful.”
“Sorry to be a wet blanket. Writing a description for this thing for general audiences is bloody hard. There’s nothing to relate it to.” – Craig S. Wright
Blockchain and Bitcoin start-ups are on the radar of many equity funds and VCs looking to invest in the technology, without risking investing in a coin. It’s important to explain “Why Bitcoin?”
Zach Resnick explains the allure, “By and large, entrepreneurs and investors love the hype that comes from new fundamental technology like blockchain. As a result, despite massive value being created, there are exponentially more projects that don’t have a firm grasp on what blockchain is than do.
Of those that do, few that can succinctly explain why, for example, building on Bitcoin gives them a competitive advantage or opens up a new market not possible before.”
Dave Mullen-Muhr continues, “Investing in Bitcoin businesses allows for a variety of potential business models. Some look similar to what has proven successful with existing tech companies, while others are novel concepts, with the ability for unusually low overhead, or entirely new monetization paradigms such as micropayments.
What’s so exciting is that the businesses exploring these uncharted waters can set new precedents on how the internet will generate revenue.”
If you have the next great bitcoin idea and you need investment to take it to the next level, consider reaching out to the gentleman at UnboundedCapital.com or sending your pitches to the Ayre Group by using our Ventures Capital form.
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