This Crypto Founder Might Have Hit on the Psychological Trigger to Get Investors to Give You Cash — ‘Get Their Greed to Overcome Their Fear’
“You really only need one investor to say yes,” she says. “It’s the same as dating, in some ways. You don’t need every boy or girl you date to say yes. You’re going to marry one person.”
Although her Mountain View-based crypto tech startup eventually earned a “yes” from a number of investors, Yin has a refreshing approach to fundraising. As its singular founder, she approached fundraising solo. “The hard part is managing your own psyche,” she says.
Here are the gritty (cough) details on DIRT’s tech and Yin’s advice on identifying, approaching, and appealing to investors.
Get to the root of the problem
With the lack of a Bloomberg or PitchBook-style authority to provide objectivity, the crypto scene can seem sketchy. When Yin started trading coin, she thought, “Whoa, there’s a lot of misinformation. It’s hard to make an informed trading decision if accurate data isn’t even available.”
Her brainchild, DIRT, is a protocol to create Community Moderated Datasets (CMDs). Like wikis, any user can propose to add, edit or remove information. In fact, her elevator pitch for the company is that “it’s like Wikipedia for structured data.” But CMDs use token staking to make it “economically irrational” for misinformation to exist on the network. “It’s a way for people to curate trust in information,” says Yin.
For now, its target customers are cryptocurrency/blockchain companies. If sunshine is the best disinfectant, DIRT’s appeal is shining light on an often unpredictable, inscrutable market. And in the midst of its on-again off-again growth spurts, it’s time.
“Cryptocurrencies had been on an insane tear the past year,” says Yin, a serial entrepreneur who got into crypto after stints at Microsoft and Y Combinator, where she launched her first company.
Lay the groundwork
Because of the nature of DIRT, Yin’s journey through a $3 million seed round was a bit unconventional. Of about 10 investors, “we didn’t have a lead, and that was intentional,” she says.
Because the network uses tokens for voting and moderating, she doesn’t want to create the perception that any one investor has a disproportionate stake or can game the system by voting in a certain way.
“We’ve intentionally chosen investors who share our mission of creating open data sets that are trusted, accurate, and free to use.”
Throwing dirt on being ‘too early’
As a veteran of Demo Day, Yin sees a clear difference between Y Combinator hype and post-incubator hustle. YC startups automatically attract a lot of attention, she says. “Investors know you’re talking to other investors. They just come up to you. You’re the pretty girl in the room.”
With DIRT, she didn’t have the benefit of the YC spotlight, so drumming up interest was sometimes difficult.
“The response I disliked the most was, ‘you’re a little too early,’” Yin laughs. “As an investor, your job is betting on companies that are too early. That phrase just gets to me as an entrepreneur.”
Till your soil and stack your pitches
As a Stanford alum and Valley vet, Yin’s first DIRT fundraising conversations focused on her own network.
The early investors you talk to should be the friendliest ones, perhaps people you already know. “They’re more forgiving,” she says. “But there’s really no substitute to pounding the pavement.” She took at least one, if not two or three, meetings a day on the path to her $3 million seed round. It took about a month and a half to get there.
“That’s fairly quick,” she admits. Her advice is to secure funding — fast. “Let it drag out too long and people wonder why you haven’t gotten enough funding.”
The process was initially difficult but it got easier, she says. “This startup is your baby … If someone tells you no, you think, how could they not see how brilliant this idea is?”
How did she convince them? “I talked to them about how big the potential market size is. For a lot of these investors, especially in the Valley, they missed out on the first rally for crypto. I think if you were trying to raise funding for blockchain or crypto company two years ago, you would’ve gotten no from nearly every tier one investor. Now, they recognize it was a mistake, and the lever to pull is to say, ‘you don’t want to miss out on the next wave.’”
“You have to get their greed to overcome their fear,” she says.
As you stretch beyond one-degree separation, she advises seeking a warm intro. Tap into your network and ask for help. “My pitch was pretty raw at the beginning. You get better the more times you do it,” says Yin.
Her advice: do not approach dream investors until your pitch is nailed down. “Take the feedback you get from your first meetings and figure out how to improve upon it.”
Yin says she wrote down a list of all the common questions investors asked. She had a succinct answer for each one by the next meeting.
Plant the seeds for success
Prominent investors inspired others to join. “The first two ‘yeses’ really got us going,” she says. They included Fred Ersam, co-founder of Coinbase, and Linda Xie, now at Scalar Capital, who was an early Coinbase hire. “That was a strong signal to other investors,” Yin says.
Eventually, DIRT reached a tipping point. “We ended up getting three times oversubscribed, turning away investors by the end.”
Yin didn’t just approach cryptocurrency investors. She sought those with “a really strong reputation, who had the founder’s back,” she says. As a result, her partners are exceptional.
“Greylock is one of the largest investors in Coinbase. General Catalyst is one of the largest investors in Circle, which acquired Peloniax. Elad Gil is a prolific angel investor, but he’s been a good friend, back from Stanford. And SV Angel has a reputation second to none.”
When we spoke, Yin didn’t have any immediate plans for another raise. “The goal of fundraising is that you get funding to build the product. The flip side is that we could be profitable and not need to do a subsequent round,” she says. “That would be ideal. The easiest way to fundraise is when you don’t need to fundraise.’
Her advice to her younger self and aspiring entrepreneurs is to persevere in spite of rejection: “It’s not an indication of whether your company is going to be successful.”
Nathan Beckord is the CEO of Foundersuite.com, a software platform that has helped entrepreneurs raise over $1 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders have raised capital.