gumi Cryptos COVID-19 Update

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COVID-19 Changes Some Things…

Our venture fund, gumi Cryptos Capital continues to deploy our significant dry-powder cash reserve into blockchain and cryptographic asset startups. We continue to deploy capital during this unprecedented COVID-19 pandemic

The Fund Thesis Remains Unchanged.

The vast majority of our thesis remains intact, namely that blockchain represents a generational opportunity and that we continue to invest in an “L-shaped” pattern, investing in deep horizontal technologies including novel consensus (for example Spacemesh) and generally avoid most vertical applications sectors other than Financial Services (whether centralized or decentralized) and Gaming.

Provable Value Today

Given our desire to continue to deploy capital on behalf of our partnership, we also need to be responsibly aware of the generational impact of the COVID-19 phenomenon and its impact to the broader economy. Because of this we increasingly separate blockchain projects into those providing provable value today and ones that remain distant speculation. 

Practical Blockchain Use Cases Have Emerged Already

Just within our portfolio, we have a privacy-preserving KEYLESS who helps secure the remote workforce using biometric identity and a unique zero-knowledge privacy protocol that enables enterprises to comply with privacy regulations such as GDPR. KEYLESS has recently secured their first Enterprise sale and are accelerating their business during COVID-19.

Financial Services

Blockchains can solve problems of trust, audit, privacy, value storage, value transfer and contractual or programmable value transformation or transport. Our portfolio companies like Agoric help enterprises develop secure smart contracts using JavaScript, one of the most popular programming languages in the world. Our portfolio company Tassat provides Signature Bank with the payment rails that powers Signet, their intra-bank payment rails system that provides fully compliant faster and cheaper bank transfer and payment. Our portfolio company VEGA protocol provides a DeFi mechanism for creating derivative financial products. Also from our portfolio, The ABE exchange addresses issues of capital market access and capital formation.

In addition to these real-world use cases we see more “pure play” use cases that directly address needs of early adopters in the cryptographic asset space. Evercoin provides the most secure mobile wallet and exchange for crypto asset users. This by no means is an exhaustive list but just a subset of solid use cases from our portfolio.

Our Fund Cash Position Continues to be Strong

Our firm, gumi Cryptos Capital continues to deploy our significant capital during this downturn. As we stated before being bold when others are fearful continues to be how we plan to provide venture-class returns to our partnership. As before we continue to focus on equity and equity-like investment opportunities.

Our Continued Focus

Many things remain unchanged for our fund, among them being a continued focus on:

  • Blockchain and cryptographic asset startups
  • Excellent management teams and execution
  • Equity and equity-like convertible instruments, not token-only
  • Venture-class growth opportunities

What has changed?

What has changed? We are closely tracking the evolution of the blockchain startup space. We are aware of the separation between projects like the few mentioned above who continue to gain traction and product/market fit even in this economic downturn. We continue unchanged in the conviction that the space broadly represents a generational opportunity.

gumi’s Evaluation Criteria

But this downturn is sorting the emerging blockchain economy into increasingly clear categories. We feel that companies able to deliver real economic value, real product-market fit, generate real recurring revenues and increase growth and traction will be the survivors and ultimately the winners in this time. Because of this conviction we are strongly evaluating companies on the basis of revenue traction and product-market fit. Growth matters significantly as does an eventual path to profitability. Attainable profitability means “infinite runway” and whether companies attain this through a combination of lean operations and growing revenue, we want to back companies with these characteristics.

We are aware that there may be large opportunities in projects that are years away from traction, but such projects need very unusual characteristics such as open source engineering teams or DAOs which create an effectively zero-cost engineering construct (such as Bitcoin). But these kinds of projects rarely produce venture-class investment opportunities.

Therefore please have a look at these guidelines when submitting proposals for gumi Cryptos Capital.

Sharpened Focus on Traction

Therefore our focus has sharpened on:

  • Traction, revenue and product-market fit

We are increasingly focused on practical entrepreneurs with great management, proven execution and solid traction.

Conclusion

This market continues to challenge even the best entrepreneurs. As we build the future together, we need the vision, drive and passion of new ideas and great execution. We continue to be passionately committed to the entrepreneurs who through their bold action are creating this future through delivering real-world value.

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Durable Conviction: How do I Convince a VC to Invest in my Startup?

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What is the currency of Venture Capital?

If you were to say USD you would be partially correct. The deeper view is that Venture Capital is an exchange between relatively stable fiat currencies into monetary instruments that can return significant multiples on invested capital, most often equity in startups.

What is the basis for that exchange? Simply put it’s a transfer of durable conviction from the entrepreneur to the investor.

What are things the investor needs to be convinced of?

  • This team and leader can lead this organization through significant growth including fundraising subsequent rounds, sales and channel growth, operational scaling, recruiting and investor exit. All of those processes involve the entrepreneur being a person of high conviction themselves.
  • The leader will maintain loyalty and integrity in how they deal with any ambiguities that may arise in the future.
  • The product has or will have significant traction in a significant and fast-growing market. That this traction is based on a competitively differentiated product with significant entry barriers.
  • Early stage deals may not have traction or product/market fit. In such cases we need conviction in the team’s ability to deliver product market fit. This may require significant domain expertise, a 10x better product and/or sufficient runway. Many companies are lost in the chasm between early stage financing and product/market fit. Thanks to Paul Walsh who pointed this out.
  • There is a network or data effect at scale
  • The team will be able to deliver product on schedule.

I refer to what I am looking for as durable conviction because I find as a technology and human optimist, I get excited when I meet entrepreneurs who describe constructive solutions for real problems in society and industry. But what I mean by “durable conviction” is that it’s not enough to get me excited. Excitement gets weaker when confronted with the day to day challenges of execution.

I don’t only want the entrepreneur to have durable conviction for their own project–I want to see the ability of that entrepreneur to transfer that conviction durably to me and my fund management team. Paul Walsh also pointed out that the ability to “tell the story” is the ability to transfer conviction. I tend to agree.

In fact, the ability to be accountable to numbers and to explain numbers and tell stories about those numbers is the heart of building trust, so as such it is the key to being a good CEO.

The sure hallmark of durable conviction is not how excited I am during the meeting, it’s how convinced I am the next day after sleeping on it.

If you want financing from gumi Cryptos, you should consider both how durable your own conviction is, and how best to communicate and transfer that conviction to others.

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The Mind of a VC: Reading List

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Here are the books I would recommend that would help you understand how we think.

Required Reading about Early Stage Investment

This book explains the power law distribution of venture returns which is powerfully instructive about how VCs behave and why, and what job they do on behalf of their partnerships. It describes phenomena like contrarianism, “secrets” and the last mover advantage. A distinct and innovative set of thought processes from an original person.

Another classic, Jason Calcanis is instructive about the math associated with early stage investment and the kinds of questions you will face when raising money from this class of investor. Very seminal treatise on how to navigate this complex asset class, early stage venture startup equity and convertibles.

Another all time classic, this book is essential for understanding the mechanics of technology adoption and provides a foundational set of metaphors that technology entrepreneurs must understand in order to navigate most efficiently across this divide.

Required Reading about Blockchain

This is on the required reading list if you want to do business with gumi Cryptos. For anyone interested in the emergence of a new fundamental internet protocol and the mindset of its creator in his or her own words. As an industry, the so-called “blockchain industry” has been bad at reasoning based on fundamentals, and this book will take you through a tour-de-force whirlwind tour through the considerations that went into one of the greatest inventions of this century.

Required Reading about Entrepreneurship

Another all-time classic, Guy Kawasaki lays it all out there. In a prescient way he lays out the groundwork for the lean startup manifesto with the quotable quote “Eat like a bird, Shit like an Elephant”.

The CEO Topic: Brilliant and entertaining read, instructive about the concept of “Wartime” and “Peacetime” CEOs and a great way to understand what experiences shaped a great venture capitalist.

The CEO topic, but mostly instructive on company culture and brand, but also on execution. Reads like an adventure novel, so fun and worthwhile.

The Sales Topic: One of the great classics that ushered in the period of modern sales automation.

The Product Topic: This book is instructive on the product market fit process and how emotionally and intellectually challenging it is. Not for the faint of heart and for people who have been there and continue to choose to go there. The true entrepreneurs.

Extra Credit

This one is yet another classic, Brad Feld presents a very entrepreneur friendly way of looking at deal structuring and legal terms. Required reading.

I like Ori Brafman and this is a good book that will help business people reason about the concept of “leaderless” organizations and it provides useful case studies of such organizations like “Alcoholics Anonymous” which is essentially based on an “open source protocol” approach, simply publishing openly the values and allowing decentralized organizations to take advantage of these intellectual advances.

An important and in some ways cautionary tale of a man who is inseparable from the culture of Silicon Valley. Worth reading.

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Getting your startup funded by gumi Cryptos

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Hello, Miko here.

I am a General Partner with gumi Cryptos. We are one of few providers of early stage crypto funding for startups (we fund in USD but the projects we fund are crypto related), and we would like to help entrepreneurs understand the process and how to work with gumi Cryptos to get funding for your startup.

Therefore we want to provide a step-by-step overview of our process so we can set expectations and do business according to our values.

Steps:

0) Make sure your investment opportunity fits our thesis and investment criteria.

  1. Fill out an Application.
  2. Get invited for a Pitch Meeting
  3. Deliver the pitch
  4. gumi Cryptos quick huddle
  5. gumi Cryptos feedback
  6. agree on terms
  7. Due Diligence
  8. Sign Term Sheet
  9. Funding

gumi Cryptos is rapidly becoming a standout funding source for early stage crypto projects. Many of the bigger funds have retreated to later stages and plan to write bigger checks. We tend to write checks of $250,000 to $1,000,000 USD.

Because of the large flow of deals we are experiencing, please be patient with us and please give us feedback on the process of working with us. Thank you.

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Investment Criteria: are you a fit for gumi Cryptos?

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Hello.

The first step in getting financing from gumi Cryptos is to establish fit. If your investment opportunity does not fit our thesis or fund objectives, we can’t invest.

Our investment criteria is expressed by this short questionnaire:

  1. Is your investment opportunity angel, pre-seed, seed or series A?
  2. Do you use blockchain technology or provide a cryptographic asset?
  3. Do you have a multi-billion dollar addressable market?
  4. Can you provide a 20x or greater return on investment in the best case?
  5. Do you have either licenses from an appropriate regulatory body or sound legal advice that your business and financing plans comply with all relevant jurisdictions?

If you’re unable to answer yes to all of the above questions, we are unable to business with you.

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How to be a VC and not act like an entitled douchebag

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Hi, Miko here.

This blog post is supposed to be a guide on how do your job as a Venture Capitalist and yet not to act like an entitled jackass.

The problem is, I am not sure how to do that.

After 30 years of entrepreneurship, I have seen many VCs act like Ivy League wank-shifter*. I don’t wake up in the morning and see an asshat looking at me in the bathroom mirror. However, I do see how doing the job makes you look and act like an A-class F-Tard.

gumi Cryptos is my first time as a General Partner with a Venture Capital fund. It is also my induction into VC twatwaffledom.

I’m sincerely trying. But I need your help to avoid becoming a complete tool.

My Pledge:

I won’t hold it against anyone for calling me in (or even call me out) and feel free to throw the words from this blog post back in my face. If I agree that the behavior you point out is troubling, I will apologize to anyone affected and make an effort to do better.

Things I’ve seen myself do already:

Parking Asshattery. Yesterday I pulled my car up in front of an entrepreneur’s office and parked my car directly across their driveway. Why did I do that? It was San Francisco and I wanted to avoid being late to the meeting. Just the kind of good intentions that the road to hell is paved with.

“California no”. Instead of simply saying “no” to an opportunity, just saying vague things and letting the conversation trail off.

Short email replies. When faced with the passion and lifes’ mission of an entrepreneur, I have sent emails essentially saying something like “thank you for showing us this opportunity, after careful study I do not feel that it is a good fit for our fund at this time.”

Not “getting it”. Of course I am going to not get it. Travis Kalanick of Uber and Joe and Brian from AirBnB had the hardest time getting anyone to invest in their concept of “strangers will pay to jump into your car” and “people will allow strangers to stay at their houses for money”. Most huge companies have a contrarian thesis and most VCs including myself have their own views of what the future will look like.

“Ghosting”. Not getting back to entrepreneurs for extended amounts of time. Or ever.

Looking at your phone or laptop during a pitch meeting. That’s what those douchey bound half sized notebooks are for. Tip of the nib to Jason Calcanis for pointing this out, and to Pantera for supplying me with many such notebooks.

I’m sure the list goes on.

Without excusing it, I can see how easy it is to become a walking cliche simply by valuing doing a good job as a VC and not trying to do a better job being a human being.

VCs face a lot of investing deadlines in parallel, and get a deluge of thousands of requests for financing. They also have to manage high pressure situations with existing portfolio CEOs and their own partnerships. It doesn’t help that anyone in a position of power or authority is a target for people’s projections and unresolved parental issues.

But it doesn’t excuse bro-baggery.

I’m happy to be held accountable to this, so if you’re read this far, feel free to use this to your advantage. If you can share this or indirectly point other VCs to this, feel free to do that also.

Miko

*I use the term “Ivy League Wank Shifter” to imply both that many VCs went to ivy league schools (Yale in my case–wanker points for mentioning it here) but also in the spirit of “World Class Wank Shifter” as if there were a top grade A5 level of wank shifting that one can get pedigreed for.

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Our Fund Thesis

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We have a rather large and complex thesis, but broadly speaking we believe that blockchain technologies enable a transformation of the Internet, the Economy and Society. We believe that we are in the early days of this transformation. Imagine that we are in the year 1989 before the Hypertext Transfer Protocol (http) was introduced by Tim Berners-Lee. So we have TCP/IP and FTP and some of the extremely basic protocols that define the Internet.

We believe that the Internet of Value is being created, and that we are in the early part of this.

Because we believe we are early, we are focusing our investments on early segments such as infrastructure platforms, novel consensus algorithms, developer platforms, middleware protocols, compute resource sharing, programming models and frameworks, ecosystems components such as exchanges and wallets. These are all relatively low level components and horizontal (industry neutral). We believe that primitive applications in certain vertical industries, namely financial services and gaming will also be feasible.

As far as investing outside of our core areas, I would hesitate to encourage entrepreneurs to apply. We do believe that VCs are “pattern matchers” and we think successful entrepreneurs are “pattern breakers”. So because of this we are willing to entertain ideas outside of our core thesis. But in such cases it would have to be an exceptional entrepreneur.

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Apply for funding

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Hello. We do get a lot of requests for funding. Because of this we make an effort to save as much time as possible and make sure that anyone who is invited to a pitch meeting is someone who we can write a check to.

We have kept this application down to the bare minimum and so we hope you won’t find it an imposition to provide this information requested below:

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