1/ thinking about VCs and their role in the emerging token economy. in order to understand how VCs are playing the crypto game, you have to understand the business of venture capital. VCs aren’t philanthropists. they invest money in companies for a financial return.
2/ part of being a VC is finding great companies that are likely to create a lot of value. a lot of being a VC is about controlling your entry price (as low as possible) and maximizing your exit price (as high as possible) to juice your return multiple.
4/ VCs are in the business of selling ideas. they need to actively participate in the curation of demand for the ideas they are invested in by blogging, speaking, writing, and evangelizing to the next tier of investors who will buy in at a higher price.
5/ now, VCs get “credit” for value not just in terms of hard dollars, but also for “paper value” or mark-ups. the game is creating the illusion - on paper - of making money. the game for really good investors is doing whatever it takes to turn that into CASH.
6/ so let’s now turn to tokens. if you’re a VC, tokens are a wet dream. you can buy at a very low price, in a market where collectively knowledge is low and transparency is non-existent, and you can dump your position quickly and quietly at any time.
7/ if you’re an investor who buys tokens to generate a return for your investors, your incentives are to:
- talk up your token investments
- position tokens as the future of x
- press companies to acquire tokens as cheaply as possible
- establish your firm as a “thought leader”
- talk up your token investments
- position tokens as the future of x
- press companies to acquire tokens as cheaply as possible
- establish your firm as a “thought leader”
8/ most importantly, it’s to evangelize tokens to other investors who are less informed and have less access so you have a pipeline to sell to. in the case of tokens, this includes the great unwashed masses aka retail.
9/ this isn’t any commentary intended to blast VC. early stage capital formation is critical for innovation economies. just remember every investor is playing the same game - some are just better at the game. altruism doesn’t exist in investing.
10/ tokens are a new medium for selling ideas. 99.9% of tokens won’t hold any value long term. their initial investors and evangelists will have long exited by the time they turn to zero. this is a game to find the buyer of last resort. make sure it’s not you.
