Summary

During Breakpoint 2023, a panel of venture capitalists, consisting of Ben Sparango from The Solana Foundation, Brandon Potts from Framework Ventures, and Austin Barack from Coin Fund, came together to discuss the changing landscape of venture capital in the crypto space. They provided valuable insights into their investment priorities, the attributes they seek in founders, and how their approaches have adapted in light of recent market conditions. The panel also focused on portfolio support and the subtleties of forming long-term partnerships with companies post-funding. This discussion offers a glimpse into how prevalent crypto investment firms are navigating the current environment and what startups can do to attract their interest and funding.

Key Points:

Investing Trends in VC Crypto Funding

The panelists, both from Framework Ventures and Coin Fund, illuminated recent shifts in their investment strategies. They emphasized a robust interest in DeFi (Decentralized Finance), gaming, and infrastructure projects that support these sectors. Brandon Potts expressed his commitment to supporting existing investments and evaluating new opportunities based on sustainability and practicality in a post-bull market environment. Austin Barack highlighted a focus on innovative primitives that can propel the crypto industry forward, such as improvements in wallet user experience and yield-bearing stablecoins.

What VCs Look for in Founders

When it comes to selecting founders to invest in, both venture capitalists shared similar views on the qualities they deem critical for success. They prioritize high integrity and respect from peers over technical prowess alone. They seek founders who exhibit unique life and professional experiences that provide them with distinct advantages in their markets. Additionally, well-rounded individuals who understand go-to-market strategies, customer engagement, and the importance of differentiation are highly valued. The VCs are less impressed by incremental improvements and more intrigued by those who can provide step-function changes in the market.

Post-funding Partnerships and Portfolio Support

Post-investment, the VC's involvement with portfolio companies transitions into a partnership aimed at addressing key challenges that arise during the growth phases. Framework Ventures focuses on identifying friction points and bottlenecks to streamline execution toward the founders' vision, while Coin Fund provides extensive support ranging from hiring and executive coaching to marketing and strategic planning. Both venture firms emphasize the importance of capitalizing on their extensive networks and experiences, providing founders with invaluable resources to prevent common pitfalls and achieve success.

Facts + Figures

• Framework Ventures remains deeply invested in non-EVM spaces, emerging markets, and looks to lead seed and series A rounds in DeFi and gaming.
• Coin Fund, active since 2015, manages three main investment vehicles, including a series A fund with $6-10 million checks, a seed fund with $1-3 million checks, and a liquid hedge fund.
• The recent market downturn has led to a more focused crop of founders and clearer investment priorities for these VCs.
• VCs are now looking for innovations that can initiate substantial shifts rather than small, incremental improvements.
• Both VCs emphasize the importance of founders being the subject matter experts in their field and exhibit the tenacity to weather crypto market cycles.

Top quotes

• "Jack of all trades, Master of None, that's me." - Brandon Potts, implying a broad-based investment approach.
• "We're looking for teams that are going to create that innovation that brought about the last cycle, which was DeFi and NFTs, and what's that next step forward?" - Austin Barack on driving industry advancements.
• "It's more a function of what is unique about yourself, your co-founders... that lends you an unfair advantage to frankly just tackle the market that you seek to tackle." - Brandon Potts on differentiating founders.
• "Our expectation is that you know way more about what you're building than what we know." - Austin Barack on founder expertise.
• "The main friction point? What's your bottleneck? ... What's keeping you up at night?" - Brandon Potts on seeking candid pain points.
• "It's incumbent on an investor to provide value otherwise... there's no reason to pick an investor that doesn't." - Austin Barack defining investor roles.
• "We want to help you take on and just like take as much off your plate as possible." - Brandon Potts on post-investment support.

Questions Answered

What sectors within crypto are VCs particularly interested in?

VC firms like Framework Ventures and Coin Fund are focusing their investments on DeFi, gaming, and supporting infrastructure. They are drawn to initiatives that present significant leaps in technology or service provision rather than minor enhancements. Their interest lies in startups that can potentially catalyze the next evolution of the crypto industry.

Why do specific qualities of founders matter to VCs?

VCs seek founders with high integrity, respect in the community, and unique experiences that offer them a competitive edge. These qualities indicate a founder's potential to not only develop innovative solutions but also lead a company through growth and market fluctuations. VCs believe that a founder's personal attributes significantly contribute to a startup's eventual success or failure.

How have venture capital strategies adapted due to recent market changes?

Recent shifts from bull to bear markets have caused VCs to be more selective, opting for founders and projects committed to building substantial and sustainable technologies over the long term. They search for genuine innovators who are not merely riding the crypto hype wave but are focused on solving real problems and advancing the industry.

How do VCs support startups after funding?

VCs like Framework Ventures and Coin Fund provide targeted assistance to tackle key challenges such as hiring, product development, strategy planning, and navigating market dynamics. They offer a partnership approach to ensure startups have the resources and guidance to scale effectively and sustain operations through different market cycles.

What are the benefits of VCs providing post-funding support to portfolio companies?

The benefits of post-funding support include tapping into the VC's experience, avoiding common pitfalls, and accelerating growth and product refinement. Continuous support ensures that portfolio companies can access strategic advice, operational expertise, and a network of successful peers, which can be pivotal for early-stage companies facing the intricacies of scaling in a competitive environment.