INVESTING IN TIMES OF UNCERTAINTY

Blockchain Coinvestors Newsletter

Vol. 4, No. 18, October 2022 

INVESTING IN TIMES OF UNCERTAINTY

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way - in short, the period was so far like the present period that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only." 

Charles Dickens

Charles Dickens perfectly summarizes how we are feeling this weekend as we sit down to write this newsletter. It is a confusing and uncertain time that we are living through as we enter the fourth quarter of 2022. The world is anything but certain. Our emotional mind is unsure whether to fight or to fly, and our stomachs are full of butterflies. But our rational self reminds us that this is always so when markets become volatile. Times of great chaos bring great opportunity to investors, but most of us become chilled and don't act. The challenge for us as investors is to look through the superlatives in the media, and focus on the essentials that will continue to be true in the coming years as it relates to our investment thesis and strategy.

 

So in the midst of this volatility we want to remind our readers of some things that we are sure are true.

 

Central to the Blockchain Coinvestors' investment thesis is that digital monies, commodities, and assets are an inevitability. This is the central foundational theme underlying our investment strategies and it is why our fund performance is proving so exceptional:

  1. While we have digitized communications and content through the transformative power of the Internet and its key protocol - TCP/IP - we will not transition to a true digital economy until we also digitalize commerce. Because while every industry, business and individual communicates and shares content digitally today, we still rely upon some very outdated ways to transact. And we all transact, all of the time. So digital payments are inevitable, and the world's payment infrastructure will need to be upgraded to enable this future.

  2. The corollary to the need for digital payments is that we also will need to have digital assets. Just as we all have a P&L and a Balance Sheet, so we need to have digital flows and digital stocks. A digital economy can't work without both. So it is inevitable that the world will need to upgrade all of its infrastructure to be supportive of digitalized ownership records, and digital assets that can be issued, traded, and held in digital wallets and exchanges.

  3. Just to complete the triumvirate, in addition to digital monies and digital assets, we will also find digital commodities a transformative improvement over what we have today. Today, you don't know where your precious commodities have come from, and what sins may have been created in their sourcing and/or mining, and processing. If you want blood free diamonds and responsible gold, you need digital platforms to track their provenance. If you care about carbon, you need to know that your allocations and credits are what they purport to be. If you drink coffee, you probably should care about how it was processed, and if you eat lettuce, you want Walmart to succeed in driving out e-coli from the supply chain. All of this implies that digital commodities and digital provenance and supply chain tracking are also inevitabilities.

So in a world of chaos, we stick by our central thesis that digital monies, commodities, and assets are inevitable, and that the world will have to upgrade all of its financial infrastructure to support this digital transformation.

 

This is where we focus our investment activities at Blockchain Coinvestors.

  1. We are early stage venture investors and selectively invest into the mid stage too

  2. We focus on the space where internet, fintech, and blockchain come together to enable digital commerce

  3. We take a global investment view since we know there is no longer any monopoly on innovation

  4. We ensure diversification in everything we do

  5. We believe that investing with the best investors in a space is the best strategy

  6. By doing so, we build asymmetric information and proprietary access for our direct investing activities.

Conversely, our Investment Strategy has never included public liquid market trading in cryptoassets:

  1. We are not traders

  2. We do not focus on public liquid cryptoassets

  3. We do not invest in crypto hedge funds as a core strategy

  4. We do not use leverage

  5. We have never participated in staking, yield management, or other new and unproven strategies, and we believe that no one should until counterparty risk is well understood

  6. The core of the current crypto crisis is that big bets were made by traders who did not understand the counterparty risks they were taking onboard

So while we share the same feelings that most of you probably do - about this time of uncertainty and volatility - we get great comfort that our core investment thesis is inevitable and that we should take advantage of the opportunities that always surface in down markets and continue to make high quality early stage investments.

 

Recessions are good times for early stage investors, and returns are highest for the funds that invest in the early stage in the two and three years following the depth of a recession.

 

In terms of our funds:

  1. We will hold the final closing of Blockchain Coinvestors Fund III (Fund of Funds) before Thanksgiving. The fund is invested in 29 blockchain venture capital funds, is primarily in dry powder, and has all of the coverage we want in the outstanding set of funds it is committed to.

  2. Fund IV (Early Stage Token) is open for its quarterly subscription window now, and will be again in December. It continues to find compelling early stage opportunities leveraging the knowledge we receive regarding the investments of our 45 and growing blockchain venture fund partners.

  3. Fund VI (Mid Stage Growth) is also accepting capital, and has just begun to invest into opportunities at greatly reduced valuations from the first half of this year. Fund VI also leverages our asymmetric information and proprietary access resulting from our unique position within the blockchain investment ecosystem.

If you would like to participate in any of these funds, please contact any of our team, or email us at IR@blockchaincoinvestors.com

 

We hope that you are weathering this storm in the public markets, and trust that you will not allow yourself to be chilled into inaction. We appreciate just complex this current time is, and hope you stay safe and well.

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 40 pure play blockchain venture funds in the Americas, Asia and Europe; and in a combined portfolio of 400+ blockchain and crypto projects including approximately 60% of all 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 Fund III (Fund of Funds) was created to provide diverse coverage of the best blockchain pure play venture funds in the Americas, Asia, and Europe. Blockchain Coinvestors Funds I and II have already experienced significant appreciation. Fund I Net TVPI is 5.45x with an IRR of 79%. Fund II shows equally impressive early results with Net TVPI of 2.13x and an IRR of 106%. Almost all of our fund investments are performing as top quartile against the Cambridge Associates Venture Benchmark.

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. Our funds are open to investors that meet the Qualified Client definition with a minimum subscription level of $250,000 at the discretion of the Manager. 

 

  • Blockchain Coinvestors Fund III (Fund of Funds) was created to provide diverse coverage of the best blockchain pure play venture funds in the Americas, Asia, and Europe. Blockchain Coinvestors Funds I and II have already experienced significant appreciation. Fund I Net TVPI is 5.45x with an IRR of 79%. Fund II shows equally impressive early results with Net TVPI of 2.13x and an IRR of 106%. Almost all of our fund investments are performing as top quartile against the Cambridge Associates Venture Benchmark.

  • Blockchain Coinvestors Fund IV (Early Stage Token) provides direct access to promising private stage token projects accessing our relationships with many of the world’s leading blockchain investors. We leverage asymmetrical information from our 40+ VC Funds to pick the most attractive opportunities. 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.

  • Blockchain Coinvestors VI (Mid Stage Growth) provides direct exposure to the emerging category leaders in the blockchain and crypto ecosystem. The fund leverages our unique sustainable competitive advantage (USCA) in blockchain, web3, and fintech to create a concentrated portfolio of between 20 and 30 investments with attractive return profiles and visible paths to liquidity. The fund assesses the more than 400 blockchain and crypto projects in which we are direct and indirect investors and employs a robust investment framework to select investment opportunities into the leading mid stage growth rounds - typically Series B, C and D. This is a continuation of the mid stage investing strategy of the Fund Manager that has included investments in Bitwise, Brex, InfiniteWorld, Securitize, Uphold, Wyre, 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@blockchaincoinvestors.com to learn more.

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.

October 25-27, 2022

 

FinAccelerate is an intense accelerator program empowered by one of the world's leading and largest law firms, Jones Day. The program covers the fundamental areas of law relevant to innovative fintech companies and enables selected fintech businesses to access leading investors, corporations, financial institutions, and potential JV partners to accelerate their business.

 

Over the course of 3 days, applicants have the opportunity to engage with a strong ecosystem of world-leading advisors, investors, and partners to the program, like Matthew Le Merle of Blockchain Coinvestors, Chris Larsen from Ripple Labs, and Andrew Siegel of Galaxy Digital. 

REGISTER NOW FOR UPCOMING WEBINARS AND CALLS

 

Our investment team hosts regular 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:

 

AMA with Blockchain Coinvestors

- October 10th, 7:00am PT
- October 10th, 12:00pm PT

 

Meet the CEO: Live Session with Yellowcard Founder Chris Maurice

- October 12th, 8:30am PT

 

Investing in Early Stage Tokens

- October 24th, 7:00am PT
- October 24th, 12:00pm PT

 

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

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