Thursday Thoughts #7

MapleLeafCap

Hello world, and welcome to the seventh issue of Thursday Thoughts.
Each week, founders and investors share their thoughts on fundraising trends and strategy.

MapleLeafCap is a leading angel investor, actively investing in crypto.
Recently, he backed Jenny, Solv Protocol, InsurAce, and Impossible Finance.

He sat down with us and answered a few questions.

You are a small investor compared to some of the megafunds being announced these days. How do you compete to get into competitive rounds?

Ultimately the projects and investors self-select one another. I’m probably not saying or doing something extraordinary, but hopefully, if we see eye-to-eye, it’s generally because of the founders:

  • See the value in ongoing debates about the business model and roadmap, and to have such conversations succinctly telegraphed and marketed to a broad audience.

  • Value my undivided attention should they need it.

  • Feel the need to reciprocate given all the help provided (whatever it may be) — which by the way I don’t really expect from anyone, it’s just a by-product.

  • Believe that the longer-term focus, reputation, and bilingual/cultural reach are something they want to be associated with.

I do feel that the runway remains for a firm that can professionally craft a thesis and deliver it in an impartial, digestible, and stimulating fashion. That’s something I will continue to focus on and will look to do institutionally, stay tuned!

There is a clear trend ongoing in venture capital from angel investors to super angels to ‘solo capitalists,’ where these funds are sole GP’s and the brand of the fund is very intertwined with the brand of the individual. Do you think this will play out in crypto?

Yes, in fact, it’d be especially relevant. I have this thesis that open, permissionless value networks would significantly magnify the leverage of one’s domain expertise beyond what information networks already accomplished. Having global liquidity and attention at one’s fingertips can be an extremely powerful tool, and what better way to utilize it than to be an investor?

On a tangent, it would seem clear that infrastructures and tools that allow these domain expertise owners (aka investors) to do their job better would be decent investments themselves.

In a recent tweetstorm you mentioned the idea of using tokenized vesting schedule of ERC20, instead of the current private-round token issuance mechanisms - can you explain it a bit more? Why would this be more efficient?

I have this (hopefully not misguided) idea that the lines between crypto VC funds and liquid VC funds would blur meaningfully in the next 5 years. We are already funding mostly using USDC/USDT, the vesting schedules are already pretty clear-cut (X% TGE, Y month cliff, Z month linear unlock), the OTC deals on listed tokens are already happening, and the legal contracts for the most part are boilerplate. Assuming the SaaS infrastructure and custodians get to a decent place, these kinds of SAFT agreements are really just ERC721 / smart contracts with ERC20 tokens wrapped within them subject to some liquidity terms (whereby the legalese can be stored off-chain or on-platform, but that’s just a pdf anyways). I really don’t see why such an NFT cannot be directly held within one’s custodied account (might need to be non-transferrable) — with the obvious benefit being this asset can directly interact with all the DeFi primitives we see today.

You are very sharp in tokenomics - what are the main tips you would give to founders designing their tokenomics before starting a fundraising process?

Why thank you, I’d hope it’s sometimes helpful as the product gains traction.

I generally believe that tokens are optionalities on line items of a project/protocol, whereby they can represent any complex logic should the stakeholders choose so. Coincidentally we are also really at the 1st inning of designing such primitives whereby best practices haven’t really emerged yet. I wouldn’t call the below “tips”, but more like my evolving opinions:

  • While a token may start off as a vote token to comply with regulation, the voting-based introduction of value-connection may be best associated with both a pull and a push — i.e. if the token-holder wants something in return, they’d better work for it by some kind of contribution back to the protocol.

  • It’s no consensus yet, but I think one wants to (a) retain most protocol revenue for growth vs. token holder returns and (b) allow for continuous, measured inflation policies to allow for flexibility when a project needs to get aggressive around growth.

  • You want to think really carefully about whether your pace of delivery/growth can match that of the inflation % vs. circulating market cap. Experimentations will for sure be done here, but there’s nothing worse than diverging valuable management resources appeasing a bunch of angry retail mobs. Additionally, mismanaging such curves could really introduce challenges when it comes to raising secondaries via locked-token issuances.

Lastly, this is really veering on the “opinionated” side — governance is not a crutch for indecision and/or shrugging off executive responsibility. I hold a belief that eventually token-holder rights/recourse would be sorted out, and issuers would be held accountable for the actions and promises. When in doubt, operate on the same ethical and economic standard as you would if you were issuing equity/going IPO, I think a lot of answers would become clear that way.

What other advice would you give to a founder fundraising today?

The only way to know what kind of partner you want is to talk to a lot of potential folks and get to know them early. It probably doesn’t hurt to stay organized and put yourself out there proactively (starting with people you trust).

Thanks again for your insights.

Join our Telegram group and follow our Twitter account to stay up to date and get notified when content is out!

See you on Tuesday for Dove Dispatch #11,

The Dove Team