THE DIGITAL NATIVE TAILWIND

Blockchain Coinvestors Newsletter

Vol. 4, No. 2, January 2022

THE DIGITAL NATIVE TAILWIND

This year we have been asked a number of times to comment in the press or on podcasts and webinars regarding the trends in Miami and New York where recently elected officials are committing their cities to become global hubs of blockchain and crypto innovation. The question on every ones lips is why? But most of the answers given don't get to the heart of the matter in our opinion.

The key reason why this is happening is that digital natives will be the ones driving the future, and they are becoming a powerful and vocal portion of the electorate and they love digital monies, assets and mobile access. This is what we call a powerful Tailwind.

WHO ARE THEY?

Digital natives are those born after 1983 who have lived their formative years in a connected world. They don't know anything other than the Internet and the access that it has given them to all of the world's information. For most of their lives they have lived and breathed online access for their education, entertainment and now work. You can read more about them in our Newsletter Vol. 3, No. 3 which talks about Generation C which is what we called them more than a decade ago when we conducted global research into them. We then wrote the book 'The Fifth Era' which includes some of the key takeaways from that work. You can download the opening chapters for free at this link. Our research found that they are very different in many ways from those born before 1983.

WHERE ARE THEY NOW?

The foremost cohorts of digital natives are now 38 years old. They are increasingly filling important positions in their places of work, are moving into their peak earning years and are beginning to invest. More than half of the citizens of the US are now this age or younger, although the very youngest don't get a vote. But they are all getting older every day.

WHAT ARE THEIR VIEWS ON BLOCKCHAIN?

The digital natives love digital monies, assets and mobile access. 55% of all crypto is held by people between the ages of 18 and 44 while only 5% is held by those over 55 according to Triple A research. A significant majority of this age group who have not yet entered crypto say that they will within the next two years according to Statista. The digital natives grew up playing video games and in massive multiplayer online worlds which include digital monies and assets and they learned how to use them from a very early age. For them it makes absolute sense that the 'real world' should do so too. Conversely, they see it as laughable that 'real world' relies upon pulped up wood for its own monies and assets.

They are also taking an increasingly close look at politics. This is the generation that consistently says that it does not trust large corporations, financial institutions, and their political representatives. They also say they are extremely concerned about the state of the world and the role and responsibility of the leaders who brought us here. They say they want change.

WHY DOES THAT MATTER TO POLITICIANS?

When you are a politician your mandate is to represent your electorate. When an increasingly large portion of your electorate want digital monies and assets, then you need to think hard before just saying no. You may not get it yourself (the average age of the House of Representatives is 58, of the Senate 63 and as noted only 5% of people 55 and older have bought any cryptoassets so far) but that does not mean you can ignore it.

Especially when you begin to see that other politicians are receiving enormous positive feedback in terms of both funding and votes when they say they support these new innovations.

WHAT JUST HAPPENED IN MIAMI AND NEW YORK

This is not a theoretical conversation. Two of the US's largest conurbations just went to mayors who said 'I do'. Miami and New York.

Take the case of Manhattan County and New York City. The median age of the residents of the city is 36 years old, 65% are less than 44 and the largest single cohort is the 25 to 29 year olds according to the last US census. If you want to be Mayor of New York, or indeed any elected official in New York, you need to quickly understand what digital natives want. They want digital monies and digital assets including crypto and they want it now. And next year, and the year after, this will become even more true. So when Eric Adams went out and spoke to them, that is what he heard.

Meanwhile, NYC is the world's financial center. And you just will not be a global financial center if you don't embrace digital monies and assets when all of your major competitors are. London, Shanghai, Tokyo, Zurich to name just four all have lawmakers who are moving quickly to establish legal and regulatory frameworks for the coming wave of innovation. So Eric Adams got behind that narrative too. He was fully appreciated for doing so, and the ballot box proved it handsomely.

There is a tidal wave of electoral support for crypto coming, and smart politicians are getting on the right side to surf that wave.

WHY DO WE CARE?

We are not politicians. But we are long term investors in digital monies, assets and the innovation that is making them a reality - blockchain. We care greatly that blockchain is allowed to achieve its full potential. In that context two things really matter: tailwinds and headwinds.

A powerful tailwind that makes digital monies and assets an inevitability is that the future generation, the digital natives, want them. They are the future.

A headwind that can slow things down is legal and regulatory filibustering. The good news in the 1990's was that the US lawmakers created a framework that accelerated the Internet and made the US the global leader in it. All five of the most valuable companies in the world today are US Internet leaders (Saudi Aramco is a complicated story but might be among them too). The bad news is that, at least right now, it appears that the lessons of the 90's may have been forgotten. In addition, preservation of the past and the historical vested interests embedded in it may be getting too much air time.

In this context, this tailwind trumps the headwind. Whether it is in the upcoming election cycle, the one after, or the one after that, the digital natives will win the argument.

We are investing behind that inevitability.

REPORTING Q3 PERFORMANCE

As a fund of funds manager, our performance reporting is always a quarter behind as we wait for the last of our managers to report to us. We were excited to see our first fund's performance information arriving at Pitchbook, Preqin, and S&P this week.

The following table has the essentials. The fund is the best performing in the world according to the agencies and we are excited to share it in this newsletter.

So to conclude this newsletter. The Digital Natives are here, want their digital monies, assets and mobile access, and will let their elected official know so at the ballot box. Miami and New York are not outliers. They are simply the leading edge of smart politicians recognizing where their bread is buttered.

Expect the rest of the House and Senate to follow, even if it takes a few years for the future to arrive.

Our investment thesis, and the returns of our fund, are directly benefitting from this tailwind. As the facts show.

Thank you for reading.

Alison Davis
Matthew C. Le Merle

ABOUT BLOCKCHAIN COINVESTORS

Launched in 2014, our goal is to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and crypto projects. The strategy is now in its 9th year and has to date invested in more than 30 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of 300+ blockchain and crypto projects including 30+ blockchain unicorns. Our funds rank in the top decile amongst all funds in their respective categories on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in Grand Cayman, London, New York, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.

FUND PERFORMANCE

Blockchain Coinvestors Funds are continuing to generate strong returns. As of Q2 2021 our funds rank in the top decile amongst all funds in their respective categories on both Pitchbook and Preqin with Net IRR exceeding 60% for Funds I and II. This remarkable performance results from powerful tailwinds driving the world towards a future in which digital monies and digital assets are ubiquitous and the businesses and projects providing blockchain and crypto products, services, and infrastructure benefit disproportionately.

BLOCKCHAIN COINVESTORS FUNDS

Blockchain Coinvestors’ goals are to provide broad coverage of the emerging unicorns and fastest growth blockchain companies and to capture superior returns from investing in the leading blockchain venture partnerships:

  • Fund III is open only to investors who meet the Qualified Purchaser definition with a minimum subscription of $250,000.

    • A “qualified purchaser” is an individual or a family-owned business that owns $5 million or more in investments. The term “investments” shouldn't include a primary residence or any property used for business.

  • Fund III Parallel is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. Please contact ir@blockchaincoinvestors.com if the minimum is of concern.

    • Currently, an individual or entity is a qualified client if he, she, or it: (i) has a net worth of $2,200,000 prior to investment in the fund (excluding the value of his or her primary residence).

While the two funds are substantially the same, there may be some funds and investments that are only available in the Qualified Purchaser vehicle. Blockchain Coinvestors funds can take investments via IRAs. We support several providers, including AlgoIRA, Kingdom Trust, Millennium Trust Company and Pacific Premier Trust Company (Pensco).

Blockchain Coinvestors has launched an Early Stage Token Fund that is open to investors who meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. This Fund expects to have access to early stage tokenized projects that few others can access through its relationships with other leading blockchain investors. The Fund will target 20 to 30 SAFTs as well as positions in traded tokens when excess capital is on hand. This is a continuation of the direct token investing strategy of the Fund Manager that has included private stage investments in Acala, Filecoin, NEAR, Polkadot, Structure, and others.

Please visit the Blockchain Coinvestors website to learn more about our offerings. You can also reach our Investor Relations team directly at ir@blockchaincoinvestors.com.

BLOCKCHAIN COINVESTORS SWISS

We are excited to announce that Blockchain Coinvestors Funds are now available through Swiss certificates for those of our non-US investors who prefer this approach. The underlying fund is the same, however, our Zurich based team at Blockchain Coinvestors Swiss, who will introduce in future weeks, can provide detailed information regarding this investment option. Email us at mlemerle@fifthera.com to learn more.

LINQTO
'Private Investing Made Simple'

While our funds are only available to Accredited Investors who are also Qualified Clients we believe in the democratization of investment access to all investors and look forward to that day. In the interim, we have partnered with Linqto which is an easy to use Mobile and Web app that makes it exceptionally easy to invest into attractive opportunities. The provide access to Accredited not Qualified Client investors as well as much lower minimums. Go to Linqto.com or download the app from your App store to use this approach.

BLOCKCHAIN COINVESTORS ANGELLIST SYNDICATE

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Please join us and our partner Lou Kerner on AngelList.

Click here to receive the insightful weekly crypto newsletter and webinar invitations from our Blockchain Coinvestors partner Lou Kerner.

Digital Assets Week is coming to California: March 22nd and 23rd in San Francisco, and March 25th in Palo Alto. The focus over the 3 days is on digital security, digital assets, and institutional crypto. We invite you to join Matthew Le Merle at the event to learn from the sector's most experienced leaders. We will have a limited number of passes available for our investors on a first come, first served basis. If you are interested in attending, please email ir@blockchaincoinvestors.com.

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

Our investment team hosts bi-monthly webinars and calls to help educate our community about the Fifth Era, fintech, blockchain and crypto. We discuss important trends, tailwinds and investment themes including what we have learned and how we are using our knowledge to inform our own investment thesis and actions. Below is a list of upcoming webinars for which you can register by clicking the links:

Blockchain Coinvestors Investment Thesis

- January 24th, 7:00am PST

- January 24th, 12:00pm PST

What is DeFi?

- January 31st, 7:00am PST

- January 31st, 11:00am PST

Institutional Investors - Making the Case for Blockchain

- February 7th, 7:00am PST

- February 7th, 12:00pm PST


Recordings of past webinars and calls can be found at www.blockchaincoinvestors.com/webinars.

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