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Outlier Ventures Weekly Brief Issue #50 View Online
 
  contact@outlierventures.io
 

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…

Thousands of blockchain-related startups sold tokens to retail investors and essentially went public in the past few years. They are all early stage businesses without clear product-market fit. They certainly aren’t mature enough to have dedicated investor and analyst relations teams. No quarterly earnings or forward guidance. The market is left to make decisions off the scraps of a blog post or a press release. I am becoming less convinced that the token public markets are irrational but rather are acting totally rationally in the face of a lack of information. When information is scarce we should expect herd dynamics and rumours to disproportionately drive price. We also have this interesting dynamic where some projects, usually US-based, don’t want to be seen to directly discuss a token they have issued to avoid the ire of the SEC. So solid projects are disclosing even less information about the business. None of this is particularly insightful (thanks for reading), but it is important because public market prices are used as a proxy for the state of the industry. Daily movements are irrelevant as a health metric.

If these projects would have raised capital via an equity sale to venture investors the vast majority would be struggling to raise their next round. There aren’t enough customers. The market for the vast majority of the products is too small. We are about to have a glut of high performance smart contracting platforms fighting for a relatively small and stagnant market. The market has grown slower than expected by many. So we have many public projects that raised large amounts of money that are burning through it monthly with no paying customer or new influx of capital on the horizon. Its just the market doesn’t have this information to help make informed decisions. Private companies raising B and C rounds however are sharing information with their investors. They have meaningful traction and growth metrics, Certainly the dynamics of the hottest deal lead to higher valuations, but these investors have more information to price the startup. It makes sense to see Anchorage, Bison Trails, BlockFi and Token for example raising money. There is a market prepared to pay today for what they want to sell.

The price of bitcoin or any particular token was never a useful proxy for the progress of the space, but it’s becoming less useful by the day. We should instead look at the number of A rounds and later that close. 88% of deals are seed and A rounds with only 12% B rounds and later. The metric to watch is the ratio of B+ deals versus A and earlier. Ignore CMC and get yourself onto Crunchbase, that’s where the real action is.

Watching: Game Changers on Netflix
Reading: White Teeth by Zadie Smith
Listening: 2Shy By Shura

Be Kind,
Lawrence

 

From The Stack

  • Hype Codes did a piece on how Outlier Ventures is building its presence in China - Link
     
  • Fetch released an update to how autonomous agents can share weather data with one another - Link
     
  • Watch Trent's latest talk on a radically open data economy - Link
     
  • Catch up on the submissions, results and talks from the Cosmos DeFi hackathon  -  Link
     
  • Agoric released a new post on bypassing security trade offs in smart contracts - Link
     
  • Golem's guide to building dApps with gWASM is now out - Link
     
  • Chainlink is hiring for roles across development, marketing, community and design - Link
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