May 21, 2023
Dear Friends and Family,
Welcome to one of the possibly soon-to-be-extinct species - a newsletter written 100% by a human, not AI!
Although we are constantly looking to improve our tech stack - which nowadays includes several great AI tools - we prefer to put together our thoughts using our brains.
Call us old-fashioned, but we believe that's what our investors, friends, and family appreciate!
It's already been five weeks since our last update, so here's a quick one:
On April 27, all roads led to Neustadt. Our venture partner, Uli Spindler, invited 40 investors and founders to his fantastic venue amid a vineyard to talk about Web3 Venture Capital, network together and enjoy great food and wine.
The evening sun provided a great reception to get acquainted before Alex Höptner got everyone excited by sharing his outlook on the impact of tokenization on the financial services industry.
Due to the overwhelmingly positive feedback from this event, Uli plans to host another dinner in the near future, focused on venture capital investors, family offices, and funds-of-funds investors.
If you would like to be informed of upcoming events, please let him know.
Some ideas may seem crazy and outlandish until they aren’t.
Before Airbnb, would you have let a stranger stay in your home? Or ride with a non-professional driver before Uber? And what about streaming music instead of owning it before Spotify?
We had similar reservations when we first heard of Talentir, a Vienna-based startup whose business model transforms YouTube videos into tradable assets.
We have joined the CEOs of Bitpanda and Storebox, who previously founded successful businesses themselves, in this pre-seed round.
Talentir operates at the intersection of the creator economy and new financial products through tokenization.
Videos from artists and influencers generated $30 billion in advertising revenue on YouTube alone last year.
With Talentir, content creators can sell future revenue streams from their videos partially or wholly to fans or investors while those can financially benefit alongside their favorite artists.
Read more about why we invested in Talentir on our blog. The article also includes a short video by Lukas explaining how their service works.
We are excited about blockchain applications in the creator economy industry, where the "Own" feature of Web3 becomes a reality, with the potential for mass adoption.
The line between failure and colossal success can be very slim.
This was the topic of a recent discussion I had with a founder who, some years ago, sold his business for a very respectable 3-digit million amount to eBay.
He told me that twice his company was preparing documentation to file for insolvency, and once, a trade sale deal died one day before signing. But eventually, his startup became a big success story.
This was also the topic of a recent video with Daniel Ek, founder of Spotify, who said that “every really successful entrepreneur has had at least three near-death experiences with his or her company”.
I love hearing founder stories like this.
Being an entrepreneur is not for the faint hearted (and trust me, being a VC is neither - but I am not complaining!).
Many founders and VC investors only know the time of cheap and abundant money that characterized the past ten years. Every follow-on round seemed to double the former valuation or even more.
Venture capital has always been about taking risks, accepting early and frequent failures, but also reaping huge rewards.
Inflated up-rounds do not necessarily indicate signs of success but often only reflect the need of large funds to allocate their money.
This does not benefit either the founders or the early-stage investors because it makes them think that they have reached the end of the rainbow when in fact the jury is still out on their success story.
I began my learnings in Venture Capital and Private Equity at 3i in early 2000. Shortly after, the dot-com bubble burst in March, causing chaos in the market.
Companies valued at over a billion dollars just weeks earlier (the term "unicorn" didn't exist back then) experienced a 95% crash.
In those days, valuations weren’t derived from Softbank’s or Tiger’s latest cheques but from stock market valuations. So you got the complete truth without any padding.
It wasn't until 2004 that tech stocks began to pick up again in a significant way. But since then, what a ride it has been!
Technology has been the primary driver of growth and the defining theme of my generation (born in 1965). And economic cycles have never slowed down the pace of innovation.
On the contrary, the speed of innovation is constantly accelerating regardless of military conflicts, stock prices, or interest rates. This is particularly evident in the flood of AI tools that appear in our Twitter feeds every week.
The reaction to existential threats is what sets apart those who thrive from those who falter, demonstrating true resilience and determination.
Doing the right things instead of doing things right (perfection is for when you can afford it) is what founders need to focus on in tough times.
Or, what Facebook once called "Move fast and break things".
The current funding environment may seem very challenging to many startups, but it can bring out the best in exceptional founder teams.
"Success in startups is directly proportional to the number of hard conversations you are willing to have" is a motto we keep in mind every day.
Countless hurdles will have to be jumped over until a startup becomes successful. There will be many sleepless nights, disappointments with team members, dreaded emails from prospects, product recalls, and software bugs. And not to mention scarce liquidity.
Our approach when investing in new teams is to strongly emphasize the importance of open and honest discussions about challenging issues from the very beginning, as it significantly increases their likelihood of achieving success.
If founders lack intellectual honesty, they will not succeed.
But as long as you can discuss everything respectfully, many problems can be solved, even if it is five to twelve.
New technologies always come with jargon and buzzwords. Remember the term "Information Highway" used to describe the internet?
Nowadays, there's a lot of talk about crypto, blockchain, and Web3.
Our investment thesis is that blockchain will become a common feature, and people won't even realize they're using it. So, the terminology used to describe it will only matter for a little while longer.
Nick Ducoff has written an excellent article about this future called "It's going to be blockchain, not crypto" which we highly recommend for weekend reading.
Investing in a Web3 fund is an excellent way to learn about new technologies early, and for every investment decision, we write extensive deal memos that are available to our LPs.
Additionally, you can become part of a network of savvy VC investors through regular in-person events.
Investing in many startups also provides a more balanced risk/return profile, rather than just betting on a few angel investments.
Plus, with valuations back to reasonable levels, 2023 promises to be a great vintage!
Our target LPs are family offices (primarily first generation) with an affinity for venture capital, private (semi-professional) investors, and Fund of Micro-Funds.
If you know someone who might be interested in our fund, please don't hesitate to connect us via email or make a direct warm intro.
We're always on the lookout for founders leveraging Web3 tech to solve problems 10x better, faster, or cheaper, and if you should come across a great team in this space, we would love to hear about them.
Thanks for reading!
Wolfgang, Ben, and Sagar