Hello world, and welcome to the ninth issue of Thursday Thoughts.
Each week, founders and investors share their thoughts on fundraising trends and strategy.
Besides having founded Dove Metrics, Regan Bozman is a co-founder of Lattice Capital, an early-stage crypto fund. He shared his experience and answered a few questions.
Your fund focuses on early-stage deals - how do you compete in these small rounds when larger funds are continuing to look even earlier?
Things have gotten way more competitive over the past year and this has forced us to go even earlier and move quicker. So we're often looking at very early rounds where we can write a $200K check into a nascent team - most funds are so big that writing a check this size just doesn't make sense.
We've also started explaining fund structure more to founders we talk to - (in my biased opinion) taking a $250K check from a fund like ours makes a lot more sense than from a $100M fund. The math is simple - if you are less than 1% of a fund's size, you're either a very small check for them, or they have 100+ portfolio companies - either way, you're unlikely to get much attention.
How do most founders get on your radar?
We try to stay on top of ecosystems that we're really excited about like Terra and so do a good amount of outbound there. We also spend a lot of time talking to other investors and companies in the portfolio, which helps drive inbound introductions.
How has the current fundraising environment impacted your investing strategy?
We've done a few things as valuations have skyrocketed. One is to say no to more things - we universally say no to anything that is $50M pre-launch unless the team is just insanely talented or we have an incredible amount of conviction. So this has forced us to be more patient. We've also started looking where other investors aren't - for example, a lot of financial applications on Solana are raising insanely competitive, highly-priced rounds. We're fans of Solana and hope to do more investing there, but just given our fund structure we can't really afford to overpay for stuff. So we are looking at emerging Web3 primitives - we just invested in an Arweave project we're very excited about - and areas that are less crowded from a capital perspective.
What other advice would you give to a founder fundraising today?
The biggest mistake that I see founders making today is raising these huge party rounds. Allocation can get competitive and I totally understand why founders want to try to make everyone happy, but I often see these cap tables where a bunch of funds got squeezed down such that their allocations are pretty minimal in the context of their fund. These companies end up with a bunch of investors who just don't have enough upside and so aren't going to fight as hard for them.
Thanks again for your insights.
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See you on Tuesday for Dove Dispatch #13,
Pierre