The Venture Capital landscape has changed significantly over the past decade.
It’s a function of:
- How often can you get a run-on-base (In our case a follow-on investment or exit.)
- How low is the cost of that run-on-base. (How early of a round can you get in.)
Because of this, we’re seeing new tools to source early stage investment pop-up, like AngelList, and we’re seeing the round size of seed and angel stage investments explode. In fact, the average seed round valuation, for a company with early product-market fit is now at $7M.
While the amount of money flowing into early stage investments is at an all time high, we’re also seeing a lower risk tolerance among these early stage investments, especially in emerging markets.
Young startups at the concept or early prototype stage, that are in emerging markets, have some of the highest potential to create significant market shifts.
But, they also need the highest levels of support and expertise, and have unique risks that require industry specialization to overcome.
At this stage, which I’ve referred to as the “hackathon stage” we see great startup concepts, by ambitious founders, that patter out because they can’t tap into the funding, ecosystem and advisory support of angel investing or venture capital, as investors don’t feel they can confidently pick winners at this early stage.
All this means, is if you aren’t ready for the incubation stage or considered to risky for 500Startup or YC, there is no real path forward for you. You have to either bootstrap or hope your product can thrive in crowdfunding.
The Case Study:
Enter MetaCartel, a distributed community of engineers, entrepreneurs and ethereum enthusiasts focused on exploring new technologies in the decentralization and blockchain space. At over 600 worldwide members, the group taps into broad experience and expertise in the space.
Early on MetaCartel created DAO (a decentralized voting contract to manage shared funds) to provide grants to hackers and builders creating new products in Ethereum’s decentralized ecosystem.
Over the past year it has been able to provide early funding to some of the most popular new startups in the space:
In theory, the success rate of funding hackathon concepts, would be like playing the lottery, and yet, MetaCartel found a high-success rate in concepts going from ideas, to prototypes, to broadly adopted products. Even at this “hackathon funding stage” MetaCartel’s batting average would seem to be out even the best venture scouts.
Simple. The secret is in the MetaCartel community itself. Hundreds of experts with experience in designing, building and deploying DApps, DAOs and other decentralized products — a community focused on mutual success.
Founders entering into the MetaCartel ecosystem find themselves not only surrounded by experts who can help them to refine the first version of their product, (and deploy great memes), but, they also find their first few hundred alpha testers and advocates.
When we shift to earlier stages of investing, it is no longer about trying to find sourcing signals of what makes a successful startup, instead it is about building an incubator community that helps to make great ideas successful.
Enter MetaCartel Ventures (A.K.A @Venture_DAO) a for-profit investment DAO (with classic RPG theme, and an awesome website right out of the 90s.)
MetaCartel Ventures is, on paper, a US Limited Liability Company consisting (so far) of 33 accredited investors and builders in which member is a voting partner. In practical terms, it is a Decentralized Organizations using a version of a MolochDAO to manage group funds, allocate shares and managing voting among the approved members of the organization. (You can read more in the whitepaper here)
Building on the success of the MetaCartel grants program, MetaCartel Ventures leverages a community-oriented membership structure to help incubate, refine and grow the startups it invests in.
The fund will focus on hackathon stage and pre-seed stage investments in Decentralized Applications (DApps), with a strong focus on those that are using crypto-native assets — and companies within our portfolio will have access to the community of experts providing insights ranging from contract security, legal advice, and business and UX considerations.
Our goal with MetaCartel Ventures is to let business leaders work together and build the first decentralized investment fund, entirely with part-time experts, and leverage that community and expertise both to support Ethereum’s decentralized ecosystem, and to show that we can invest earlier and more accurately than traditional venture capital.
I’m excited to see where the future takes us.