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…