Institutional Investors - Why they matter, What they bring to the table & Why the community both Loves and Hates them.

In this blog — you may have noticed, much of what we post is focused on being educational. There are reasons behind this — first — we believe it is super important for us to build the overall Cardano ecosystem, to support growth — both ours and other projects. It also comes from our team culture. We are very developer led, and we have a developer mindset. You should know by now, when we came out of stealth mode, our product was largely ready for testnet. We did this because we don’t believe in overpromising and under delivering — we like to stay both realistic and humble. Our tech team likes to make sure they can do a thing before they will let us (the Marketing Team) talk about it.

Our Marketing Team talks to our development team a lot, and this helps us write these blogs, and explain complex things like Concurrency in as simple as possible language. In that spirit, we are going to depart from our regular technical schedule of programming to talk about Private and Seed rounds, and why projects look to bring in Crypto VC’s and Big ecosystem players at this critical early stage.

In the crypto-community, many people back projects with a great collection of these big investors, while an equally vocal section of the community think these guys get tokens at a discounted price, getting the best deals and leaving the little guy to buy at market rates. Because of these strong opposing ideas (both are true, to an extent) we thought we dedicate this blog post to why these early investors are important, why they do get better pricing, and how they can be critical for the success or failure of a project. We will start with the benefits, and address the criticisms in the latter half of the article.

First and foremost — VC’s and early stage investors are educated investors. They have experience looking at hundreds (or potentially thousands) of projects, and looking at them from a few different angles; Here’s a few things that VC’s consider before they choose to support a project.

1. Will I make money on this deal — This one is obvious. This industry is about investments, and return on Investments is an important metric.
2. Is what this project is trying to do of value — This one is harder to measure, but whether or not a project is the next Facebook or the next Myspace is not only about money, it’s also about Impact.
3. Is the team the right mix of people — Can the team execute on their vision? Do the team have a successful track record of delivery? This is important for a number of reasons. Everyone knows about WeWork, or Theranos. They had visionary founders — but when does hype become BS? This is an important distinction.
4. Is the project achievable? This is similar to the above, with one important difference. Is the idea so big, so hard, that the team doesn’t matter — there’s just no way that a whole company or just a couple guys in a basement can invent the new wheel?
5. This is an important one — Is the project a scam? A rug pull? Will these guys take the money and run?

VC’s and institutional investors are as close to experts in evaluating projects based on these (and other) criteria. If a project has a great list of early stage investors, it’s a good sign that those companies have run through a Due Diligence process and have come to the conclusion that the rewards outweigh the risks. Two things that are often not considered by the wider crypto community when they think about these early stage investors are just as important as the ideas above.

1. Being early stage, they are often the first people to put actual money into a project — before it’s even started building in some cases. That is a risk — projects often fall down. Sometimes it’s malicious, more often it’s just that startups fail. Because of this exposure to risk, these institutions expect a discounted price.
2. Sometimes as important, or almost as important as the money they bring are the intangibles they also bring.

The risk point is easy to understand. We will spend a little more time outlining the intangibles. What is a network worth? This is a question as old as crypto. If I know the Founders at 3 big crypto-exchanges, does that mean I can get your token listed cheap (or even free?) maybe, maybe not. But undoubtedly (if I’m not lying) those relationships have value. In the case of crypto VC’s there are chances that their networks are wide, and deep. As an example from the non Cardano space — I give you Kenetic Capital out of Hong Kong (kenetic.capital). A medium size shop, they are deeply connected in the wider crypto community. When Vitalik Buterin is in Hong Kong, he inevitably spends time with Jehan Chu, the Founder of Kenetic. If you were an Ethereum based project — surely that relationship has value above and beyond the investment that Kenetic brings to the table?

These broad and deep networks can be accessed by the portfolio companies the same way they are in the non crypto space. There’s a reason that many startups try to get investment from Andressen Horowitz, and there’s also a reason why AH turns away exponentially more projects that it invests in. Investment from AH gives a “brand glow” to a project that can help open doors to more investors, get more meetings with industry players, and lends credibility to the project merely from the association. There’s a reason scam projects often steal the names of famous VC’s — they lend credibility.

In addition to their network, VC’s and Institutions can provide access to markets — an example here would be from the last bull market in 2018 — when projects that did well in Korea almost invariably worked with the crypto VC Hashed. (www.hashed.com) If a project wanted to be big in Asia, having the support of an Asia based VC with a great track record would have value. Names like Signum, LongHash, Hashed, Binance Labs, NGC out of Singapore or Fenbushi would be a huge benefit.

Third, and no less important, is services. Early stage investors can use their network and connections to provide introductions to marketing, advisory, development, and a host of other services that the project may not be able to access on it’s own. If the project wanted extra developers to shorten its delivery times, considering the market for developers right now, they are going to be in a competitive hiring war with all the other projects out there who are trying to do the same. Although, in WingRiders case, we are lucky to be so closely associated with one of the biggest development shops working on Cardano today. The Big system players, or VC’s can significantly accelerate a project through advice, connections and access to services. So we look to our early investors to provide value in other areas.

On the downside, I can already hear some of you saying -

“But crypto VC’s come in early, buy tokens at a huge discount, get shorter lockups than retail investors, use their name to lend credibility to a project and then dump and move on — rinse and repeat. It’s all hype”

Or

“Crypto VC’s don’t know anything — they just throw money at a bunch of projects and think that if 4 fail, the 5th one will 10x. It’s like monkeys typing Shakespeare.If you have enough monkeys you’ll get something readable.”

There are definitely examples of this. It’s always wise to do your own Due Diligence, look hard at a project and consider all angles. Ask yourself the 5 questions listed above. Can the team build it? Do they know what they are talking about? Do they have a track record of execution and delivery? It’s a good starting point for any potential investment, not just crypto.

There’s also been a maturation in the wider crypto-community that pushes back against this model — If too many tokens go to the “big fish” and whales, retail investors tend to shy away. If the token discounts and lockups tend to favor the institutions too much, “small fish” tend to look elsewhere. The market is slowly becoming more transparent. Projects (in most cases) have improved too. In general they raise less money, have more believable roadmaps, execute better and have better treasury management and systems in place. They also try to build active and engaged communities. Twitter Followers alone don’t deliver value. If you think so — you can always buy some.

In the coming weeks we at WingRiders will begin announcing more details around our move to Mainnet, or Private and Seed rounds, and most importantly, our public round. This blog is to help educate you — our community. We are really happy with the support and engagement we’ve had in our early interactions. We are now beginning to shift our docs to building and expanding our community. Our philosophy is to let everyone benefit from our platform, not just the big guys. Our focus is on building two things — A great product and a healthy community.

Peace.

The WingRiders Team