Recently, CoinGeek had a chance to catch up with two Bitcoin venture capital firms to learn more about what they look for in a Bitcoin business before they invest. Jackson Laskey, the principal at Unbounded Capital, and Alex Fauvel, a general partner at Two Hop Ventures, gave us their perspective on investing in the Bitcoin ecosystem. This is what we learned.
What do you look for in a Bitcoin project?
Laskey: We are very open-minded and curious about what successful businesses can look like in a world built on Bitcoin. To us, it is still an open question. Getting to know entrepreneurs in the space has helped to expand what we think is possible. Bitcoin is one of those things that only becomes more amazing as you learn more.
If there is one thing we really look for, it’s the ability to succeed at scale. There are a lot of potential applications of Bitcoin that would face no competition today, but that will face fierce competition if Bitcoin goes mainstream as we anticipate it will. This poses a challenge to entrepreneurs. Entrepreneurs and businesses which have strong views on how they can navigate this challenge are of greatest interest to us.
Fauvel: What we look for varies business to business depending on the stage and scope of the vision, primarily we look for teams that have the capability to execute on what they envisage. Part of this is focusing on a specific real-world problem. If the goal is realistic and solves a problem in a way that is technically sound and achievable while respecting regulatory frameworks we then turn our attention to potential revenue streams and eventual profitability.
What metrics do you analyze or what do you absolutely need to know about a company before you invest?
Laskey: Even though Bitcoin SV (BSV) is rapidly surpassing the embarrassingly low expectations for Bitcoin and blockchain, we don’t think the current state remotely resembles the future. For this reason, relying on metrics would be foolish. We care far more about an entrepreneur’s vision, ability to create a great product, and understanding of their customers and market, both present and future.
Fauvel: As our investment thesis is focused on seed and early growth stages metrics are hard to come by, it is especially difficult since the industry is also still in its infancy and no business in the Bitcoin SV space has really entered the growth stage although some are getting close.
What are a few red flags or characteristics of a company that prevent you from investing?
Laskey: We try to be very straightforward with entrepreneurs. If there is an aspect of a presentation that places the business in a bad light, we will make that known. Strategically speaking, we would rather see the red flags than warn against them.
Fauvel: A pitch deck only, a team that is trying to take on too much too soon, or a valuation that is miss-aligned with the current status of the business. The vision can be big, but it needs a well thought out strategy and considers why the business must take on certain responsibilities.
Are there any common elements that you see in successful projects/projects that you decide to invest in?
Laskey: All of the businesses we’ve invested in have great proof-of-work and a drive to scale. The entrepreneurs are also great people with whom we share values, worldviews, and ambitions.
Fauvel: Having an MVP goes a long way to winning over investors, it demonstrates the team’s ability to produce something.
Are there any common elements that you see in unsuccessful companies/companies you decide not to invest in?
Laskey: We have our own perspective which, prior to pivoting to our exclusive focus on the BSV ecosystem, routinely led us to conclude that the projects we were seeing lacked fundamental product-market fit. Since pivoting to BSV we have been encouraged by the pragmatic vision of many entrepreneurs.
Fauvel: The most common theme in pitches that are unsuccessful in raising funds is an inability to explain why customers would use their service over a non-bitcoin business, what their product is, or who will use it. A clear target audience is vital to keep focused, Bitcoin can do anything and everything, your team cannot so don’t try.
Do you have any advice for a Bitcoin project that is looking to pitch to investors in the future?
Laskey: Be yourself. Finding an investor is establishing a long term relationship with an average length twice as long as the average American marriage. If that relationship is going to be successful, it needs to be grounded in honesty and integrity. If you approach a pitch with these qualities, you are much more likely to avoid conflict or strife in the future.
Fauvel: Simplify processes and simplify the message. If investors feel things are being overstated it will make them uneasy and you will either be called out on it or not called back. Bitcoin businesses are more nuanced than startups in other industries so the team must show that they have the knowledge and expertise to bring their vision into being by explaining why it is necessary. [If] a pitch [is] attractive to customers it will likely be attractive to investors.
To learn more what goes on behind the scenes during pitch day presentations, watch BSV Stories – Back My Business Dream:
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