Venture Capital vs Bootstrapping: James Wo Of DFG On How To Determine If Fundraising Or Bootstrapping Is The Right Choice For Your Startup
If you take too long or wait for something to happen it will probably be too late by the time you wish to invest.
Founders are often faced with the nagging question of whether Fundraising or Bootstrapping is the best choice for them. What is better, having access to capital or maintaining full control over your vision and profits? What is preferred, to have the seasoned oversight of an experienced investor, or to plow forward with a disruptive and pioneering ‘can do’ attitude? Of course, every situation is different, but what standards can be used to help a founder decide?
As a part of this series called “Venture Capital vs. Bootstrapping: How To Determine If Fundraising Or Bootstrapping Is The Right Choice For Your Startup”, I had the pleasure of interviewing James Wo.
James is an experienced entrepreneur and investor in the digital assets space who founded DFG in 2015, where he oversees over $1 billion assets under management. He is an early investor in companies like LedgerX, Coinlist, Circle, 3iQ. James is also an early investor and supporter of Polkadot and Kusama Network.
Thank you so much for doing this with us! Before we dive in, our readers would love to learn a bit more about you. Can you tell us a story about what brought you to this specific career path?
It’s a pleasure, thank you for having me. Well, while I was in the final years of my bachelor’s degree in Fudan University Shanghai, I came across several students and friends that told me about Bitcoin and how it was a revolutionary idea as a currency and how it could be the next financial revolution. At the beginning it was just out of curiosity that I researched it, but I ended up going down the rabbit hole and gathered my savings to allocate a substantial part of them into acquiring BTC. This gave me great returns, and I was hooked. After some years trading and putting in practice my knowledge in finance, I decided to start DFG, a private investment firm that started with a single investment fund focused on BTC and ETH and since then I haven’t looked back.
Can you share a story with us about the most humorous mistake you made when you were first starting? What lesson or takeaway did you learn from that?
Well, at the moment it wasn’t that humorous, but in hindsight I think it was a common mistake all crypto investors have at some point and the only solution is to laugh about it later on. No one can really time the market when it comes to trading, so during the early days it was all about looking for the big drop so I could sell or trying to catch the bottom to get back in and reap immense rewards.
After several bad trades, I understood that even though there are great day traders, my objective as an investor was not playing the market directly but looking for companies where long term allocation had a higher return and a more impactful result for me and the rest of the market. I understood that when you invest in a company that you are convinced will have great effects in such a young market, the rewards on those, including myself, would be greater in a quantitative and qualitative aspect.
You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?
Thank you. Personally, I believe there are key traits that apply to different scenarios so you have to have more of a toolbox and know when to use the proverbial screwdriver or the hammer. In general terms I think, patience, curiosity and grit in this industry pay dearly due to the very high highs and very low lows, so not getting caught up in narratives but sticking to your guns and research is key. When I entered the market, we were actually in a bear cycle, so for a little over a year everything I invested was usually losing value. I’ll be honest, it tested my drive and patience, but never my curiosity and this gave me great perspective on what it was like to enter in a downtrend moment and how if you are patient and really believe in what you are doing rather than only thinking about making money, odds are, you’ll eventually succeed.
Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Are there takeaways or lessons that others can learn from that?
Definitely, there was a point when I realized that investing in products or solutions that would benefit millions rather than looking for quick profit making deals, that was the moment when DFG turned a corner and our investment strategy was boosted. I believe that this is the real investment strategy, something similar to what Warren Buffet has done for decades, he invests in what he understands and what will bring value to people in their daily lives.
None of us are able to achieve success without some help along the way. Is there a particular person or mentor to whom you are grateful who helped get you to where you are? Can you share a story about that?
Yes of course, even though I have many great men and women that have helped me, and keep helping me, Barry Silbert (Digital Currency Group founder and CEO) was a particularly special person when I was getting started in this industry. He helped me substantially in the early days and allowed me to have great networking sessions by inviting me to the events hosted by DCG.
I have to say that I will always be grateful to him for helping a fellow investor at an early stage when making the right connections was such an important part of my growth process as an investor and to DFG as an upcoming company.
You have been blessed with great success in a career path that many have attempted, but eventually gave up on. Do you have any words of advice for others who may want to embark on this career path but are afraid of the prospect of failure?
I am a firm believer that failure is my biggest motivation in everything I do as an investor, I try to avoid it at all cost, so it is always there in the back of my mind, reminding me that you have to put a lot of hours and energy into achieving what you want so that failure doesn’t come knocking on your door.
My recommendation for all those that haven’t entered this industry because of the fear of failure, I would tell them, don’t run from it, run at it! Worst case scenario, each unsuccessful endeavor you make will be a stepping stone that will push you closer to your goals and objectives.
Ok, thank you for that. Let’s now jump to the main part of our discussion. Can you share a story with us about your most successful Angel or VC investment? Or an investment that you are most proud of? What was its lesson?
I have to say that my most successful VC investment has been investing in Polkadot as a protocol and becoming one of the largest ecosystem investors within it. I am extremely proud of how we were able to observe, since 2017, the simple realities of scalability that Ethereum was facing and would face when the adoption rate increased.
Furthermore, we didn’t stop at scalability, we understood that interoperability was the future of blockchain and at the moment a sort of revolution that would take over this space. We saw great development in both Cosmos and Polkadot, but felt inclined to go all in on Polkadot due to the team that is working to develop this Layer 0 and also the teams working on products and solutions that would enable a seamless cross-chain environment for all blockchain.
An additional lesson I learned from this investment strategy was the power of holding your assets for long periods of time. As I said before, we started investing in DOT (Polkadot-native token) in 2017, and we continue to do so. This has given us incredible returns and investment opportunities. From this I gather that being resilient and not chasing trends is a very important way to move within this industry. If you are forward looking and believe, fundamentally, in a project, product, or solution, you should be willing to endure any type of circumstances.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
Just as Polkadot was an incredible investment and gave us great benefits due to our forward looking strategy focused on scalability, I would say that not fully understanding other sectors of the industry and investing, without deep knowledge about them, was an overall failure.
There are cases of products or solutions that were directly related to specific chains or protocols in 2017/18, that we invested in, that turned out not to be at the level of solutions being built on new chains that at the moment were not being used as much or didn’t have the media coverage that they have today. Again, in this industry, it’s important to know what you want to work with, learn as much as you possibly can, and invest heavily in it.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?
I’d say that more than a specific company being rejected, the centralized exchange sector was something I didn’t really look into fast enough to participate in names such as Kraken, Bitstamp or Binance. We were in contact with them but didn’t act fast enough and while we were managing different avenues of investment in different sectors, the pace at which these exchanges would fill their funding rounds was very quick.
This has also shown me that you have to be harsh and quick when making an investment decision in this industry. If you take too long or wait for something to happen it will probably be too late by the time you wish to invest.
Super. Here is the main question of this interview. Let’s imagine that a young founder comes to you and asks your advice about whether Venture Capital or Bootstrapping is best for them? What would you advise them? Can you kindly share “5 things a founder should look at to determine if fundraising or bootstrapping is the right choice”? If you can, please share a story or example for each.
This is a great question that all founders and entrepreneurs have to face when looking to launch their product or solution to the market. I believe it’s not black or white, there are important factors that have to come into this decision making process and having a clear mission will give you important clarity in this matter.
There are obviously clear advantages and disadvantages for each one, but the ones that come first to me are the intricacies of the product or solution you are building or offering. In the blockchain industry, it is very common to see founders go for the VC fundraising at an early stage due to the cost of creating that highly valued proof of concept that will evolve to the final product you are offering.
On the other side, you also see specific sectors within the industry such as GameFi or NFTs that usually begin by bootstrapping their business and entering the market with a high risk tolerance. This will eventually create an environment where they will have enough growth and revenue to approach a VC and achieve a bigger funding round with a higher valuation. This is not a crazy idea, but if the market fit of the product is not on point the founder could be in for some painful months or even years.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
To be honest, I consider myself a person with average influence, I share my opinions and try to convey as much information as I can so any person that can read what I decide to share will know what I’m thinking or looking at in terms of investment. I obviously have certain biases and hold strong beliefs towards certain products and people have to take that into consideration, so I have to say, everyone should do their own research.
That said, I’m a staunch investor and defender of DeFi, not only because it is an incredible technological advancement, but because it is set to benefit millions of unbanked individuals in the world who don’t have access to the banking sector but could access all the benefits, with better returns (in some cases with higher risk) through their mobile phone.
We are very blessed that a lot of amazing founders and social impact organizations read this column. Is there a person in the world with whom you’d like to have a private breakfast or lunch, and why? He or she might just see this. :-)
How can our readers further follow your work online?
I’m really active on Twitter, my handle is @realjameswo, and as a company we are usually sharing insightful articles on our partner companies through the DFG Medium account. I would recommend that if you want to be updated with my thoughts, follow me through these accounts and you’ll have a small window into my mind.
Thank you so much for this. This was very inspirational, and we wish you only continued success and good health!
Thank you for having me and allowing me to share my opinion on these matters with your audience, I hope it will shed some light on many future world changing entrepreneurs.