How to Become a Web3 Venture Capitalist
We all want to make stunning gains on our investments, and it feels especially important in times of economic uncertainty. I have been a successful “TradFi” (traditional finance) investor for three decades. Whatever is happening in the world, I believe you can always find great investment opportunities using a disciplined research-based approach. The cryptocurrency ecosystem seems complex at first, even for a seasoned investor like me, but once I understood the sheer power of this new technology, I got excited about its potential.
Where do I see attractive returns right now? The short answer for me is in carefully selected early-stage Web3 projects. It’s hard to dismiss the incredible multi-year returns achieved by early investors in this space, with many investors yielding >100x returns. What’s more, with the massive growth in adoption, innovation, and utility continuing at breakneck speed in Web3, there is every prospect that these superior returns will continue into the future.
For me, part of analysing projects in the blockchain space is assessing their risk profile. What has struck me is the similarity between the risk:reward payoffs in cryptocurrency and those in stock market investing: large “blue chip” projects like Bitcoin and Ethereum are amongst the ‘safest’ places to invest in the blockchain ecosystem. (By safest, I mean most likely to continue in existence over the long term and offering relatively lower price volatility). But the ‘price’ of this safety — as in traditional markets — is comparatively lower returns.
What if you want to allocate a part of your money to the higher-risk:higher-reward end of the crypto spectrum? In both traditional and crypto markets, you have comparatively safe blue chips at one extreme and VC (venture capital) investing at the other. Venture capitalists invest at an early stage in a promising project’s lifecycle and enjoy spectacular returns if it succeeds (many obviously don’t). Sadly, the ordinary investor typically only gains access at a much later (high valuation) stage and so can’t match these early investing VC returns.
The diehard blockchain enthusiasts will tell you that this new technology can allow the man in the street to finally access these high returns that have for so long been denied to them in the centralised world. But the reality so far doesn’t live up to these lofty ideals: new crypto projects simply find it easier to get funding from larger investors who therefore continue to have the upper hand in terms of achieving high returns even in this brave new world!
The solution for smaller investors may be to join a solid syndicate specifically designed to offer access to the top early-stage projects. What’s important is that these private deals are only offered to syndicate members after they have been thoroughly vetted and researched by the syndicate’s own experienced team. This way you can actually gain exposure to the explosive potential returns on a series of early private deals without having to have millions in the bank and without having to do hours of research. I am a member of the Fellowship Syndicate. Join us to learn more!
PTLIB is Co-Founder of Dragonfly Asset Management
DISCLAIMER: This content is for EDUCATIONAL AND ENTERTAINMENT PURPOSES ONLY and nothing contained in this blog should be construed as investment advice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit.
