What Are the Promising Verticals for VCs? | European Blockchain Convention

[Music] hi thank you all for being here I feel like it's the last leg of a marathon and some of us are a little bit more finished for the Finish Line than others so what we're going to be discussing today is really a round robin of the global landscape of what VCS are looking for what they're excited about as well as some things to consider if you're on the other side going for funding so I'll hand it over to Sarah and let our panelists introduce themselves yeah thank you so much thank you for having me um my name is Sarah um I'm the managing director of blockchain Founders group we are a startup accelerator so we help startups at the very beginning early stage we have a program and we run it twice a year and at the end of the program we decide whether we want to invest or whether we don't we are pretty agnostic um but only web3 crypto blockchain and yeah happy to discuss the we World hey how's everyone doing I'm rich Bond the founder of block counts group we focus preed to seed stage Investments primarily infrastructure um what really makes us unique is we also have a recruiting firm um which is very synergistic with our Venture fund we'll come in with not only Capital but actually with a more of a traditional head hunting business we'll help our founders with Market data hiring strategy anything Talent related GM everyone uh my name is Anon head of hollow Ventures uh which practically is uh venture capital and private market fund of H group uh on the group uh on the group level we are multi-stage fund manager out of Europe uh running several funds on the liquid book side private market and hft analo strategies great thank you so one of the first questions and I'll let uh Sarah kick off what are some of the interesting trends that you're seeing in Deal flow coming in I feel like the markets obviously come back we're seeing really increase and really exciting projects so what are some of the trends or key areas that you're seeing yeah sure so maybe quickly look back we had like really strong topics over the last year so we had the defi summer we had a super strong area in refi we had meta Wars we had nfts so we had like super strong Hypes over the last years at the moment I don't see like such a super dominant hype not the one thing but several different things coming back or being more important now well I mean we can't Deep dive into several but just to to mention some um I think deep deep in is getting like a super strong topic um energy Energy Services services around the whole topic are getting super strong um the whole topic around tokenization is still a big one and I think it will definitely stay um of course defi plays also a role um we have defi which is still um or payment everything around payment I think this is the most obvious case and this is still an important thing and yeah well everything around meme coins which is not something for for Investments but um not for classical Investments let's put it that way but yeah I just mentioned some topics so I will hand it over um we can discuss about some things more but this is what came to my mind yeah I think to kind double down I think stuff we're seeing on the tokenization front and real world assets is quite interesting I think with the evolving regulatory environment um we've seen institutions kind of dip their toes into the water but especially with like the upcoming US election um throughout Europe the regulatory uh Clarity people are starting to get I think it's allowing institutions to be more aggressive with their capital and feel more comfortable interacting um I think we're starting to see people realize that real world ass and stuff of this Nature has yet to really pull away from the linkage to traditional systems a lot of these protocols have heavy linkages to the traditional systems and are built on top of them um so seeing ways to actually utilize blockchain technology to draw true efficiencies rather than kind of these double fees double settlement times that actually kind of hinder that blockchain efficiency Anton anything to add yeah um I think outside of vertical perspective what we are on our site is basically Venture Capital guys and private Market guys uh moving away from the private Market side to the secondary Market site um especially given the fact that this cycle uh most of the upside has been already been captured uh by the private Market uh and a lot of uh at least directional players are seeing much better upside with essentially special situations or secondary Market deals uh so we see a blend of um or a hybrid strategy you can call it plan of private market and secondary Market uh with OTC for example great so I think something Sarah mentioned is I'd like to go into a little bit more is the residual hype cycles that we've seen right over I've been in the space since 2014 so there have been quite a few how do you think that has changed the way that VCS look at projects as well as how projects approach VCS because I I I believe there's been a maturation but I might might be wrong I think investors um more now than ever are really looking for Market validation and at least if you're early stage like a path to customers um whether that's you have on your PC potential pilot Partners um but actually helping um yourself validate that problem I think goes a long way because of these hype Cycles I think a lot of these very hyped narratives have proved out over the years that they don't always last or not sustainable um so any way as like a Founder you're able to further validate the issue you're trying to solve um makes a world of a difference um in my opinion I think uh T Test um I think the reason Dy present because on the protocol level um Founders are looking um on their protocol from the fundamental perspective uh and how to fund raise and on the investor side uh fund managers are are looking for number one variable which is risk adjusted return so in my perspective I think there is a principal difference between the fundamental value and the price and performance and the two does not always correlate so I think it brings a lot of um miscommunication as well sometimes yeah maybe to add on that what we are also seeing I mean if we are at those crypto conferences and within our bubble there are many things and people are super excited but if you kind of step out people still asking those question questions about where are the use cases so where can I really use the technology and we have many use cases that exist because we have the web 3 or the blockchain technology but beside that I think it's getting more and more important for VCS um that there's also a bridge between web two and web 3 of course not for all of them but it can be a clear Focus to try to bridge those worlds as as we just said um institutional is coming into the market it's getting bigger people want to understand it we we need to ease still the system for everybody to to end up basically sure so I'll take something that was said earlier and I'd like us to look into a little bit more so we're a global panel and the regulatory environment in the US um is making progress forward we've got some clarity in some areas other areas still scarce and we're in an election cycle uh how do you think over the past or what have you seen in the past let's say 12 to 24 months in my observation what I've seen trending is there has been a movement where previously it was very heavily us is where a lot of the VCS were and they were investing in US companies or certain regions how has that changed over the last let's say two years is the question on the compliance side or no just for investment trends for VCS where are you seeing projects coming from and where are you seeing funding going um yeah I think if you take the crypto of private Market in general the space is pretty much separated between ape on one side and United States on the other side and there are actually very few Crypton native fund managers out of Europe uh so we are few of them basically on the hoto group site um and then with regards to funding I think many great developers are coming from Apec Middle East I feel like Dubai uh is becoming a great Hub and uh you know Network effect for Crypton native Developers um so but I we don't see very very clear you know changes in the past as you said 12 months for example on that side yeah and to speak um as I mentioned we have a recruiting arm as well with our Venture fund um I would say a lot of teams are going very Global with their talent so they may be based in the US or based in Europe but key core contributors like Engineers might be in different jurisdictions um which is a testament to kind of the users they're going after um they might be going more on a global scale versus kind of focusing just on the US and regarding what you mentioned the regulatory side I think of course the space is getting more regulated but we are still far away from the traditional Finance Market um and I I think sometimes of course the hurdles are higher for startups but on the other side um I think worst case scenario for a startup is you build something it's going amazing your your team is growing the product is really cool but then any kind of new regulation kicks in and for any reasons it's not allowed what you're doing anymore so I think on that side it helps that regulations is getting more clear and we have it to just prevent those from my perspective worst case scenarios absolutely and that's a perfect follow to my next question what are some key considerations if folks in the audience are founders going for funding or in the situation where they're they're build or pre-build or build what are some key considerations either learnings from projects you've invested in or things that they should know you know aside from your previous example what are key topics where they could look at a key takeaway and and bring that back to their daily life well they there are many I can start um so the first thing that comes into my mind was already mentioned you need to be able to sell your product of course you need to build a good product whatever the product is but you can have the most amazing product if there's no founder that can sell the product nobody will ever get to know about that product so being able to sell whatever you build is going to be from my perspective one of the most critical things because especially in blockchain we have like amazing tech people but sometimes we are lacking still on the marketing and selling side because you really have to go out and do that hard job so also within our acceleration accelerator we really try to push Founders to to go out to sell to do that and another thing that I realize quite often is I think if you start a startup there are thousand of things coming to you and you need to take care of so many things but at the end Founders need to learn to focus on the real priorities and this ass sets so easy but for me this is one of the most key and changing things because it's super hard always thinking about what is the one priority and how can I stay stay with that priority because overwhelming things happening Co calls emails whatsoever so everything is kind of disturbing you but if you if you're not 100% clear of what the most important Target is and you're not willing to focus on that you kind of get lost in other things that also might be easier to work on because I think this is something human so we are tending to doing the things that seem to be pressing but they are maybe not the thing that needs to be done right now yeah and I think to take it a little bit of a different route um if you're a founder and you're fundraising I think it's wise to realize how small the space actually is um if you look around the room right now there's people from all over the globe but you don't know no who knows who until you actually know so even though our fund we focus on infrastructure that doesn't mean I don't every once in a while chat with like a gaming project although we might not make an investment into gaming if you're checking off the boxes um how we go about due diligence for an investment that doesn't mean I'm not willing to pass the deck to a gaming fund or an investor that might be interested so I think keeping in mind that every time you're having a conversation with a potential investor a potential partner or whatever it is on your day-to-day business to always always be putting your best foot forward and think of it as this is your dream investor this is your dream partner even though on the surface level they may not be um you don't know what other doors they could open for you um on my side I believe it's important to know the difference between the deal site and the product site and I think the product site is usually tackled um um always good because there is no one who knows the protocol better than the founder does but we've passed on many deals um even though they had amazing fundamental site you know great product great Revenue model but we simply passed because of the deal because relation was too high the vesting schedule was not within our mandate uh so I would say if you want to fundraise from VCS it's important to understand the as I said the product side fundamental side but also being able to structure the deal properly that it feeds the market and feeds the current um you know appetite of investors yeah to to add on that basically understanding the legal part exactly yeah this is like oh yeah I I totally agree on that we quite we see that quite often and of course everybody wants to get the best out of the deal for himself and if you might agree with somebody at the very beginning and then your cap table is kind of ruined you you might never be able to solve the problem and so yeah take care about the legal thing and another thing that one last thing is I see it quite often that founder struggle of the team is growing because they are not used to Leading a team and so how do I cope with people what can I expect how much work can I put on them and if the team is still small like one or two team members or maybe five every member is like super important and so you don't want to lose them but you also need to do them the right things and so um yeah filling people's time with the right task coming back basically to the first thing I said is also hard at the beginning perfect so in our last few minutes I think something that is interesting and I didn't realize the benefit until uh tax bit my company went for a few rounds a few years ago uh decent Siz rounds and it was kind of in the really big cycle our VCS are incredible extension and I think it's something that I didn't realize until we had that at our at our disposal and and I am very close with a lot of our VCS especially their comm's teams so what are some key areas that you all as VCS would like either your investe or report Cod to understand or something that is a benefit That You Don't See utilized enough but but people should consider yeah for me um I would say outside of our Capital um we're very focused on talent and I think Founders need to understand if you want to build an All-Star team you need All-Star players you can't have an A+ player and a few B players surrounding them that isn't going to lead to eventually your vision and this all our team so I think prioritizing talent and how you go about that can be really crucial for your eventual success because if you have early hires that don't pan out that can set you back very significantly um because then you have to retrain someone get them up to speed and it just becomes a whole messy process so if you're looking to build an All-Star team don't take shortcuts to it um make sure you're going after the best talent the question was more on the operational side or investment side I didn't get it you take it either General value yeah yeah I think um it's definitely much more than about m capital and cash and I think it's important to find an investor that's competent I think uh within the vertical that you build your product with if that's the five protocol you want to find investor that focuses on the five for example if that's Ai and blockchain intersection you know similar similar applies um and I think it's also quite important to find investor uh that also is a great fit when it comes to the stage they come on the cap uh because I think it's super high value if you have a strategic investor that can basically double down and size uh their position along the way and uh I think you know given the fact that venture capital is is basically um a game of exceptions and a game of extreme outliers um and we as wec we want to find this one bet and then have very big you know outsized uh uh conviction bet in this protocol so I believe it's this is very important yeah maybe um in general VCS can kind of help you and guide you so they can mentor you coach you help you with open questions help you to find the right team help you to focus on the right things and also make a lot of introductions um so it is basically a man power or Man force behind which you can just use in case you are unsure about certain decisions um of course sometimes there come things like reporting with it as well but I think what I experienced um Founders should know about their numbers anyway so um yeah I think it's just you have somebody to ask who's more experienced in that way and if you have like a strategic investor and you know it's always a win-win situation because as investors we want you to succeed because then we are successful as well so we have like the same thoughts and we aligned on on the targets and this is something really positive great uh I had a few people submit questions ahead of our panel and one of the main questions that came up quite a few times was people looking to get into the VC area so they might have been in Industry on on the other side and then they say I see all these VCS I want to I want to go work at a VC how either did your path go to get to your role now or what are some key tips for someone looking to get into a role like yours um in my opinion I think um of course it's important to be competent but at the same time I don't think as a VC you need to understand you know the most technical complexities or in intricacies on the technical side but I do believe you need to understand the commercial side and the business side really well um uh things such as deal structuring uh but also really what the market wants and needs and then as a wec you know I don't really care about being the most uh you know technically uh competent person in the room what I care about is finding the right people the right team that's very um able and uh very knowledgeable on the technical side and we understand the commercial side really well the business side well I think it's not that easy to to get into the VC space honestly um so if you found a startup and exited or just I don't know even if you if you close it down this is something that is highly valuable because you understand the other side um but if you want to enter I mean there are amazing education options for example from the US The Venture Institute you can go through they have an amazing Network you can try to really learn the way how VCS are thinking um but in General it helps to get in contact with those people and maybe also try to offer to work for free any sessions make introductions start as Venture partner go to conferences really try to deliver any kind of positive value without directly wanting a super high salary or something like that and and this yeah I think this is the way how how you how you can do it because quite often people in the VC space kind of start maybe not in the web 3 space but in the classical web at web 2 VC space kind of start after they studied as a venture um analyst basically or analyst investment manag or something like that whatever the title is um and so if you already did something else it's it's not that easy yeah and I think um figuring out a way to create your own proprietary deal flow um can make you indispensable no matter what fund you are at no matter what you want to do and I think there's a lot of ways you can go about that um the way I like to think about it and was kind of the origin of B Hunters group um I was thinking like if you are a startup founder where are you going first and that's legal you might do tax and accounting these are all like pretty Central nodes within the fundraising ecosystem um our thesis was if you're a founder and you're looking to hire five Engineers you're going to need Capital to do that so we have this proprietary deal flow that comes from the recruiting business and that's our Edge on the deal flow front so I think if you're looking to break in in there's tons of big name firms out there that just from the name alone they can bring in their own deals but if you want to get at that table um I think adding a deal flow that they do not have and your own proprietary one um stemming from an underlying skill you might have or connection to a certain industry involved around fundraising um I think goes a very long way great and then final question is another thing I get asked often is what public or nudes resources if it's Twitter if it's Twitter plus where do you go to get your keep your finger on the pulse of what's happening in the industry because you all have to be ahead of what's trending and mainstream and our our ever like always moving space so where do you get your tips tricks and keep your kind of finger on what's Happening I think it's not the one thing I think Twitter or X for sure is a great opportunity um I think also conferences hackathons because especially with hackathons you get in contact with builders that want to do something new that is not yet available and in general you have many different kind of newsletters and so um yeah you kind of have to Screen through them and think about what might help you um and then of course have the deal flow or have talks to other VC is kind of connect in the whole scene um and yeah just read a lot I guess what's happening what's going on where are the transactions where where's the focus going um which is not like a linear process yeah um kind of what touch on like ultimately we're trying to be the first to a narrative so I think Twitter is a great place because often if it's all over Twitter you're most likely late to it um especially if you're waiting for a few years for it to pan out um you might get caught in that hype cycle um I think there's a lot of good service provider companies out there as well I think the tii is an awesome resource um and there's a lot of companies that provide this awesome research and data um that is readily available um so definitely I think looking into providers like that in my opinion I think X and Discord are great um but I think at the same time uh there is a lot of noise of course on these platforms uh so I think it's quite important to um to understand and distinct facts from you know uh opinions and especially given the fact that venture capital is a game of probabilities where you basically assign probabilities for uh for a sequence of events that you believe will happen in the future you you form your thesis but then you still must be able to make adjustments along the way and be able to flip your bias very fast so I think uh also to to add to that um I think venture capital is much more about the relationship business and it's about investment business so it's about who you know not necessarily what you know I think as much uh so as being connected with other VCS staying in a close circle of uh venture capitalist private Market investors I think actually that gives the edge and the value on the information side I think something that all three have used you've said in different ways but it's the same Trend it's who you know it's your network it's being mindful of well it might not be an investment opportunity with the fund you're talking too they likely know someone that might be and it's a much warmer intro than going in cold so as we have 2 minutes left anything that you think we should dis let make sure the audience knows or any other tips that you think we should share we're not going to make Market predictions so I won't ask you that um I think you know um I would love to go back to the point of from the fundraising perspective I think it's so important to understand the the difference between uh when you structure your deal for VCS between the product side and fundamental side um and the deal so I think as I said before we've passed through many deals that had amazing fundamental value uh great USPS you know sizable uh sustainable competitive Advantage relative to the rest of the competition but the deal was just too pricey for example valuation was just outlandish so I think it's so important important to structure at least on the token side right but actually both token and Equity as well uh proper valuation uh is a right investing in place and structure all the supply parts uh in a convenient way that you don't have uh an outsized inflation coming in the environment when there is no emple liquidity for example in crypto space in general but that usually kills the token quick question cuz you just hit on something um a few years ago valuations were through the roof have you seen even though the market seems to be back and seems to be driving have you seen Down rounds because the valuations in 2020 were pretty substantial um I think something that's very distinctive for this cycle is basically the format of the deal where there is low market cap and high FDF which is fully diluted valuation and I think both VCS and private Market investors as well as protocols will have the reality check the cycle so I believe that next cycle we will see much more reasonable valuation much less multiples uh because simply there is no marginal buyer to buy something with you know $100 billion doll valuation and inflation coming along way just nonsense defitely anything else to add um just as like I guess closing thoughts um if you're fundraising right now I think there's a lot of VCS that are still actively looking and hungry I think with the summer things naturally slow down so so if you have been fundraising don't be discouraged I think things are about to pick back up um especially summer being over um so yeah I don't take a no personal I think that's important perfect thank you thank you thank you thank you