Wealthcoin and the Rise of Bitcoin Investing

Flatiron Investors Associate Kevin Sullivan sat down with Wealthcoin founder Simon Burns to speak about bitcoin, private blockchains, lessons learned in fundraising for a bitcoin company, regulation of bitcoin, and other topics. Before starting Wealthcoin, Burns worked at Robinhood, the commission free stock brokerage. As one of its first employees, he lead growth efforts for the much-hyped, mobile-first company. He has has also worked with Openfolio and Sliced Investing on their user acquisition strategies.

Wealthcoin, Burns’ latest startup, is positioning itself to become the Blackrock of the bitcoin world. The company built a mobile first app to allow users to invest in a diversified portfolio of stocks, bonds, and other assets with bitcoin. The app recommends a portfolio to the user based on desired risk preference, similar to Wealthfront or Betterment. The user deposits bitcoin to invest in the portfolio. To make this a seamless process, Wealthcoin is integrated with leading bitcoin wallet providers. Users then track their investments on the home screen of the Wealthcoin app. There is no lock-up period. Investors can withdraw their bitcoin anytime.

This product seeks to create a simple, intuitive, and user friendly way to get returns on bitcoin. There are other ways for users to invest their bitcoin in stocks and bonds, but those tend to be very convoluted and time intensive. Wealthcoin works with a number of brokerage partners to make investments in traditional stock markets in a way that stays bitcoin denominated. This means all gains and losses in a Wealthcoin portfolio are represented in bitcoin.

The real promise of Wealthcoin is in democratizing the investment process for users around the world. To date, companies like Wealthfront and Betterment have been able to provide intuitive products with low fees, but these services are limited to investors in the United States.

While the regulatory framework is still being worked out, if the company succeeds it will have a huge cost advantage. The cost basis of Wealthcoin is orders of magnitude lower than competitors. All bitcoin transactions are digitally recorded on public networks without any involvement from banks or clearing agencies. Hence, there are usually no transaction costs involved in bitcoin, even for global transfers.

To launch, Wealthcoin will have three portfolios in the beta that span the gradient of risk preferences from Conservative to Aggressive. The Aggressive portfolio has a larger exposure to stocks, the Conservative is primarily bonds. They are working on a way to allow for individual stock purchases.

Fundraising for a Bitcoin Company

Simon Burns has been fundraising in both New York and San Francisco for Wealthcoin. He recently shared his experience as a bitcoin company founder trying to raise venture capital with Coindesk. The following are a few of his pointers for entrepreneurs raising money for bitcoin startups.

• Look for venture capitalists who have previously invested in bitcoin companies.
• Don’t believe people who say that the time to invest in bitcoin has already passed.
• East Coast and West Coast investors are very different, especially when it comes to bitcoin investments.

“On the West Coast, it’s very consumer centric. Everyone is thinking the killer app is yet to come and they want to find it. We have a couple of investors on board who sort of think we are that app. On the East Coast, everyone is thinking about the banks and how you serve the banks with bitcoin. You have to explain ‘why bitcoin’?”

• Be public early and never stop pitching.
• Seek mentors.

“The biggest lesson I’ve learned, and this transcends bitcoin, is to talk to the founders who have raised money in your space and gone through the trials and tribulations of fundraising, because there is no one that understands that struggle more than a fellow founder.”

• Be sure to communicate the larger vision of what you are doing. He gave a great analogy that he picked up from Matt Schlicht, the CEO of Zapchain.

“Sell the New World and not the boats. To get to the New World, the boats were an innovation on their own. But it’s not about the product or consumer platform. In very few cases do investors actually look at our app. It’s the Blackrock for the emerging world built off of bitcoin.” (7:50)

Listen to the full podcast:

Contents:

Private Blockchains Versus Bitcoin (8:30)

Is Bitcoin Overhyped? (11:30)

Regulation In Bitcoin (13:30)

How Wealthcoin Works (19:30)

The Future Of The Digital Monetary System (26:30)