The Crypto Explorer podcast: VCs in bear season
Welcome our latest episode for The Crypto Explorer, a podcast by Sygnum, which takes you into the exciting world of crypto assets and Future Finance with conversations with leading figures in blockchain and finance.
In this episode, our host Aliya Das Gupta and guests David Toh, Partner at Mirana Ventures, and Luca Burlando, SVP Asset Management at Sygnum, discuss how venture capital firms (VCs) deploy capital, and what changes in a bear market.
Listen to the full podcast episode here.
Aliya Das Gupta: What do you look for when you're considering an investment in the crypto sphere?
David Toh: I usually look for four key factors, varying degrees of importance. The first one is the founding team. Above and beyond the technical and industrial understanding it’s teams that are genuine, and that you can vibe well with in this company-building process as we are not just an investor, but also kind of a brother in arms.
As you know, the crypto markets can be quite daunting at times when it comes to major price swings in public markets and things like that. So, at the very least, you want someone that you can work well together with for 3 to 5 years.
The second factor is market readiness or market need, in terms of what they are trying to build. I think fundamentally it’s an external space where your imagination is pretty much whatever you can build.
There are some businesses that are going to be there for a lot longer, because they're grounded in fundamentals, like a decent revenue model, a decent product and a captive audience who are willing to pay as customers. So, finding companies with products like that is ideal.
The third point is their technology differentiation. So for example, if they are working on a roll-up, which is predominately tech-driven, or something similar, the underlying innovation has to be a differentiator in terms of how they are competing with the other alternative technology solutions out there.
The fourth point is the longevity of that project because with the crypto hype cycles, you have companies coming in the space that could be around for a year or two, and they start something else because the market goes from a bull market to a bear market. But fundamentally, I believe that if the project, product or founding team is the right one, this particular project or company will actually stay through different cycles of bear and bull markets and they should be able to last through each cycle and become a very, very dominant player.
Aliya Das Gupta: Amazing. Luca, would you like to add to that?
Luca Burlando: I think we have a good overlap with David. I would say that from our side there are three areas. One is the founder, as David mentioned. Without the founder or the team in general, you don't have a company.
It’s not just about the founder: you need to execute. So, without the team around the company, you don't have anything to invest in. So, those need to be people that you feel comfortable working with. It's a relationship you are building with the people. So that's really where you're going with this.
The second part is the traction, and it doesn't have to necessarily be revenue. As David said, there are so many different models out there that don't always build revenue first, but they gain a lot of traction and monetise later on. The traction helps us qualify the market response. Is it something that people like or that people use? This is because, in general, web3 and crypto investments are very network heavy. You need to depend on other participants and other people, not the users, to really promote the product. And that's very important.
The third part is something that may not have been taken into account much in crypto: it’s distribution. How do you bring the product to the right people? Right now, we're seeing a lot of companies saying “we have very low customer acquisition costs.” That’s because there may be very few users at that moment and they are very, very engaged and you're oftentimes paying them in tokens to come to you. So, it's not something that the crypto space has had to deal with so far. But as we grow and as the sector becomes more mainstream, it's certainly something that's going to be more relevant.
Listen to the full episode here to learn more from David Toh and Luca Burlando.