Scenius Insights: Deal Flow Digest December 2023
Special Guest Post from Ben Lakoff, CFA, GP of Bankless Ventures
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Welcome to Scenius Insights — a Scenius Capital publication platform for crypto and blockchain thought pieces, research, market commentary, and occasional musings.
This issue of Scenius Insights is prepared and contributed by Ben Lakoff, CFA. Ben is a General Partner at Bankless Ventures an early-stage crypto venture fund. Bankless Ventures completed their first close with >$30M in June'23 and focuses exclusively within the crypto/web3 space.
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Hello!
Please enjoy the December Deal Flow Digest, a monthly newsletter recapping recent Crypto / web3 funding rounds.
Be sure to check out the Airtable below with ALL the deals, and the recent hackathon/demo day results (in the links).
Note: December deals were run through Friday, 22-Dec-23. We’ll include the last week of December (unlikely to have many deals…) in the January report!
On Selling in VC
"Timing a sale is like timing the market – nearly impossible. Focus on building value, and the right time to sell often becomes self-evident.” - Chris Dixon (Andreessen Horowitz)
In the complex world of VC, one of the most challenging decisions for fund managers is knowing when to sell a position in a portfolio company.
As Fred Wilson points out in his 2016 post Selling: “Your returns will have as much to do with selling as buying. And buying is a fairly rational decision. Selling tends to be emotional. And that is why selling is the hardest part of investing.”
For years we have been told the best investors “lean into their best investments,” they tend to hold their winners given the extent to which winners dominate returns in VC. The truth is the best exit opportunistically along the way. There is a time to sell a portion of your stake as a manager with fiduciary responsibility. But knowing when to sell is not that simple. Selling often is more of an art than science.
Fiduciary Responsibility and Market Dynamics
For a VC, realizing returns is not just a goal but a fiduciary responsibility. Returns aren’t real until they are realized. DPI Matters. Decisions on when and how much to sell should align with this duty. The market context also plays a crucial role - liquidity opportunities are more common in bull markets while returning capital during tougher markets can build goodwill among Limited Partners (LPs).
Selling Smart, Not Selling Out
Selling doesn’t necessarily mean you don’t believe in the company - it doesn't mean you've stopped believing in the dream. Pigs get fat but hogs get slaughtered. Even if you believe a company has tremendous long-term upside opportunity, it’s not inappropriate to take some money off the table to manage that risk. Sometimes, the smart move is to play it safe and sell a bit when things are looking good.
It's All About Relationships
When you decide to sell, it's not just a transaction; it's a move that affects real people – the founders, the team, everyone. Keeping a good relationship with the company is key. This alignment ensures that selling doesn't adversely affect the company's operational stability or send unintended market signals. It’s possible to sell in a manner that doesn’t hurt the long-term interests of the company. Ideally you sell in a way that is imperceptible to the rest of the market.
Systematic Approach vs. Market Timing
Trying to time the market? Good luck with that. It's like trying to win the lottery. Perhaps a better play is to NOT optimize it. Instead it’s possible to have a system, a plan - a formulaic and systematic method (e.g. sell ⅓ on listing, ⅓ 6 months later, ⅓ at discretion). It might not be as exciting but can be a whole lot more reliable and less stressful. Some fund managers have sell targets and others have less structured approaches, but having an approach to sell is a useful discipline to cultivate as a fund manager.
Summary - On Selling
So to sum it up, there’s no easy answer. In bull markets, every time a portfolio company raises a subsequent round of funding, fund managers should assess their position – whether to continue as buyers or become sellers. There are often secondary market liquidity opportunities in bull markets.
The choice to sell is a complex mix of strategy, timing, and ….a bit of gut instinct. There's no magic formula, but staying disciplined, understanding the market, and keeping your responsibilities in check can help you make choices that work out best for both you and your portfolio stars.
Top Five Crypto Funding Rounds
Swan Bitcoin | $165M | 12/07/2023
Bitcoin investment platform Swan announced that it had raised US$165 million, of which US$125 million was used for private equity and venture capital. Founder Klippsten refused to disclose expenditure details, but he said that Swan's investment is mainly focused on the Bitcoin ecosystem. Klippsten said Swan plans to raise another $150 million in 2024 for expansion.
Line Next | $140M | 12/13/2023
Line Next, a venture dedicated to the growth of the non fungible token (NFT) ecosystem, has raised $140 million as it prepares to launch a global NFT marketplace in January 2024. The Line Next venture branched out of the popular WhatsApp-like messaging app from South Korea, Line, which is dedicated to exploring Web3 initiatives. Peter Thiel-backed private equity firm Crescendo Equity Partners led the $140 million funding round.
MapleStory Universe | $100M | 12/18/2023
Nexon has announced a $100 million funding round for the MapleStory Universe. The Japanese video game publisher is building a Web3 gaming economy that consists of a blockchain-infused massively multiplayer online roleplaying game (MMORPG), a mobile-based version of the game, a software developer kit (SDK) for developers to build decentralized apps, and a Sandbox platform for players and creators to craft their blockchain games.
Andalusia Labs (Risk Harbor) | $48M | Series A | 12/13/2023
Digital asset risk infrastructure-focused Andalusia Labs, formerly known as RiskHarbor, has raised $48 million in a Series A round at a valuation “north of $1 billion”. The startup has three major digital asset technology solutions, a layer-2 blockchain called Karak, a crypto risk management marketplace called Subsea and a security-centric institutional platform called Watchtower. All aim to provide digital asset support to institutions, developers and consumers through their respective niches. Lightspeed Venture Partners led the round; other investors include Mubadala Capital as well as existing participants like Pantera Capital, Framework Ventures, Bain Capital Ventures and Digital Currency Group, among others.
Igloo | $36M | Pre-Series C | 12/04/2023
Insurtech startup Igloo has raised US$36 million in a pre-Series C funding round with asset manager Eurazeo’s Insurtech fund leading the round. Existing investors Openspace Ventures and La Maison also participated in this round. According to data from insights platform Alternatives.PE, Igloo’s post-money valuation stood at US$210 million in the last quarter of 2022. The startup claims its pre-Series C valuation now stands at 50 per cent above the previous valuation.
Click to see all of December’s funding rounds here:
December Crypto VC Fund fundraise Announcements
5-Dec-2023: Heartcore Web3 - The Denmark-based company has raised 15 million euros ($16.3 million) for its first Web3 fund set to allocate to founders building upon crypto infrastructure Heartcore says is primed for wider adoption. Venture capital firm Heartcore Capital is investing in the crypto segment’s application layer protocols as part of a bet on technologies that foster user interaction with the space.
7-Dec-2023: Bitcoin investment platform Swan announced a fundraising of $165 million, of which $125 million will be used for private equity and venture capital. Founder Klippsten refused to disclose expenditure details, but stated that Swan's investments are mainly focused on the Bitcoin ecosystem. Klippsten also stated that Swan plans to raise another $150 million for expansion in 2024.
Hackathons
Upcoming
LFGHO - Hackathon January 12 - 24
A virtual hackathon!
Recently Completed (results in links)
ETH India December 8-10
Taipei Blockchain Week December 11-13
Want more for 2024? Check out the (s/o Nathan) 2024 Ethereum Events Calendar. Many of these events have hackathons around the event dates!
Demo Days
Upcoming
Polkadot Vietnam December 22
World Crypto Forum January 14 - 19
Recently Completed (results in links)
Demo Day - India Blockchain Week December 4 - 10
Light Cycle - Web3Port Demo Day December 1
Web3 Futurefi 2023 Summit December 18 - 19
About Ben Lakoff, CFA and Bankless Ventures
Ben Lakoff, CFA (https://twitter.com/benlakoff) is a General Partner at Bankless Ventures (link: https://www.bankless.com/why-were-launching-bankless-ventures) an early-stage crypto venture fund. Bankless Ventures completed their first close with >$30M in June'23 and focuses exclusively within the crypto/web3 space.
Bankless Ventures is a $40M early-stage Web3 Venture fund launched in 2023 to empower pioneers to explore the frontier of Web3.
To learn more, visit their website at: https://www.bankless.ventures/
DISCLAIMER
The information above does not constitute an offer to sell digital assets or a solicitation of an offer to buy digital assets. None of the information here is a recommendation to invest in any securities.
Scenius Capital Management LLC, its affiliates or Funds are not providing any general advice or personal advice regarding any potential investment in any financial products. This letter is an informational document and does not constitute an investment recommendation. Information in this letter may include data and opinions derived from third-party sources. Scenius Capital Management LLC does not accept liability for the accuracy or completeness of any such information or opinions which can be subject to change without notice. The information set forth herein does not purport to be complete and no obligation to update or otherwise revise such information is being assumed.