Dear investors,
I would like to start this letter by sharing with you a song of Bob Dylan, the first song writer to get Nobel Prize in literature:
This is my message to you: The times are changing.
We, the entrepreneurs, and you, the investors have lived in a symbiosis since the early days of venture capital. You need us to multiply your money. We need you to provide the much needed capital to invest in our dreams. The numbers of this game are very known to all of us.
For every 100 ideas you listen to, you choose 1 to invest on. For every 10 ideas that you invest on, 1 ends up being a success. So, for an average entrepreneur, our chances of success are 1% for getting initial capital and, for those who get capital, 10% for being a success. Therefore, our chances of being a success are 1/1000.
It´s a tough game for the investors as well. According to this Quora thread of Venture Capital returns, only 15% of the VC funds in the US raise a good enough return to justify creating a second fund. And the US has the most mature VC industry in the world. Those numbers are worst if you are in a developing nation.
The VC Game is a tough one. We all knew what we signed up for. But we must admit that, in the historic symbiotic relationship of entrepeneurs and VCs, we the entrepreneurs are the weaker part.
I remember the first investment offer I got from a VC in Brazil. He would agree to invest USD$30k in my idea if I put my house as a warranty in case the startup failed. Also, there are “accelerators” who want 40% of equity of your startup for their “smart capital”, which means your startup will not get actual money, just introductions.
But, for our felicity, the times are changing. The VC Game is changing. And that tsunami of change is brought upon you by the blockchain technology. And as Bob Dylan said: “You better start swimming or you will sink like a stone.”
The tsunami I am talking about is the advent of ICOs (Initial Coin Offerings) or, as it is also called (Token Offers). If you do not know what ICOs are, watch the video below before continue reading…