THE ROLE OF OUR BLOCKCHAIN COINVESTMENT STRATEGY

Blockchain Coinvestors Newsletter

Vol. 4, No. 1, January 2022

The Role of our BLOCKCHAIN Coinvestment Strategy

We hope that you had a happy holiday, and wish you a prosperous New Year.

Our first newsletter of 2022 focuses on the Blockchain Coinvestors' investment strategy and the specific role that coinvestments play within it. We are excited about the progress to date from our 2020 and 2021 coinvestments as shown in the opening exhibit (We invested into Coinbase and Ripple in 2019 before we had organized our coinvestment vehicle so they are excluded from this summary).

Blockchain Coinvestors Investment Strategy

Launched in 2014, our goal at Blockchain Coinvestors 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.

We have three principal components of our investment strategy:

  1. Our fund of funds invests in pure-play blockchain venture capital funds and builds a large, global, diversified portfolio of investments

  2. Our coinvestment strategy focuses on placing additional equity capital into the category leaders and emerging unicorns of blockchain

  3. Our new early stage token fund focuses on direct investments in early stage tokens of leading crypto projects

Today we will focus on the coinvestments.

Why Coinvestments?

The intent of the coinvestment program is to allow our investor circle to identify the emerging unicorns of the blockchain space and to add additional capital into their follow-on and mid-stage rounds. Since the fund of funds only provides a small capital allocation to each given its broad diversification, this can represent an opportunity to put more capital to work once the signs appear to favor some players over others in any specific sub theme within blockchain. 

To date we have invested into 16 coinvestments although we expect more in 2022.

Coinvestment Filters

On an ongoing basis, we monitor the more than 300 companies that the fund of funds are now invested into, and we watch for the category leaders as they emerge. We then see if they meet a set of filters for qualifying as a Blockchain Coinvestors coinvestment:

  • Backed already by leading blockchain VC's

  • Beginning to emerge as a leader in its category or strategy

  • Round being led by leading VC

  • We can be direct investors into the company

  • The company supports us having an allocation

  • We can see at least some of the Due Diligence (although we are a coinvestor and do not do primary due diligence on the company ourselves)

If it meets all or most of the filters, then we contact the company directly and ask for an allocation.

Coinvestment Process

Currently, we are making coinvestment allocations out of the fund of funds each of which have a 20% allocation for coinvestments. However, often we receive a larger allocation than the funds require. When this is the case, we offer that additional allocation to our fund investors. 

The process is quite simple:

  1. We send out a coinvestment opportunity email with a summary of the company and the minimum for the investment

  2. We give the majority of the allocation first to the coinvestment class (investors who have invested more than $1m in one or more of our funds)

  3. However, we never exclude any of our fund investors from coinvestments

  4. If you are interested you just email us back and indicate your potential interest level

  5. We then open up the data room with supporting materials (we do not conduct primary due diligence relying on the lead investors in each round)

  6. If there is sufficient interest we create a single purpose SPV and close all of our capital into the round

All the SPV's are 1% mgt fee and 10% carry with a one time 1% org fee. So very low cost compared to the VC LP's who are paying 2% and 20% to get into the same rounds.

We do not have a target number of coinvestments per year, however, you should expect an average of one per month or so in 2022.

Blockchain Coinvestors AngelList

Continuing the theme of the democratization of investing, we have a rapidly growing Blockchain Coinvestors syndicate on AngelList providing access to selected coinvestments. Here the filters are somewhat different. We use the AngelList syndicate to invest into early stage Blockchain companies that we are excited by, but which do not meet all of the filters of the main coinvestment program. Sometimes they are at a very early stage, sometimes only one or two of the leading blockchain investors have already come on board, sometimes we can only get a small allocation that does not justify the creation of a dedicated vehicle - in this regard AngelList provides a practical solution.

We expect to invest into two companies per month at the Blockchain Coinvestors AngelList syndicate. If this is of interest, you can join the syndicate even if you have not invested into one of our Blockchain Coinvestors funds by clicking here. AngelList is an open platform for any accredited investor.

We believe the performance of the coinvestment program speaks for itself, although it is still early days, and hope you will take advantage of it in 2022. Please email us at ir@blockchaincoinvestors.com if you have any questions.

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.

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:

Options for Investing in Blockchain & Crypto

- January 10th, 7:00am PST

- January 10th, 12:00pm PST

Blockchain Coinvestors Investment Thesis

- January 24th, 7:00am PST

- January 24th, 12:00pm 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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