According to Jupiter research, with the resurgence of crypto prices, the number of “digital wallet users is expected to exceed 5.4 billion globally by 2028. This is a 46% increase from 2023, when there were 3.7 billion digital wallet users.” Globally, interest rates are falling again, and the army of digital asset conference events and the pouring of $18.9billion into Bitcoin ETF’s - all since the last crypto winter in 2022 - has (still) not been enough to capture professional investor attention. But the message is starting to be understood. In the first half of 2024, BlackRock, the world’s ‘largest asset manager’, saw 23% of its net inflows emanating from its BTC ETF. Allocations into projects and funds remain sclerotic. Why capital is still so hard to come by and what actionable solutions are there for founders, builders and fund managers in this new fast evolving space? Recent years have demonstrated that asset allocators can achieve satisfactory returns just investing US equities. However, interestingly, both gold and Bitcoin had a better risk adjusted (as measured by their Sharpe ratio). Even though Bitcoin, since 2011, has been very volatile, experiencing a standard deviation of 150% p.a. compared to the S&P 500 of 14.6% p.a. it has had a compound growth rate of over 100% p.a. versus the S&P 500 growth of only 14.58% p.a.
Sharpe ratio over five years
Source: CaseBitcoin.com
Jamie Diamond, CEO of JPMorgan, the world’s 5th biggest bank, (but largest outside China), has been less than positive about blockchain-powered cryptos - although now the JP Coin has over $1billion a day in transactions and the Onyx blockchain it runs on reportedly has over $2billion. Layered on top of the fundamental unfathomability of most digital assets, blockchain projects and fund management strategies face a number of headwinds. Many of the early entrepreneurs in the space have never engaged deeply with the investor and financial community before. Consequently, ‘Venus is talking to Mars’ most of the time. Significantly, of the hundreds of projects and funds we have seen since 2016, less than 5% of the founding teams have a distribution, sales and marketing team. If no-one knows you, you’ll not raise funds. Or, as traditional asset managers have learnt to over the years, distribution is king. After all, why do you think the banks and big life assurance firms managed to accumulate such large funds despite such mediocre performance? Early adopter investors in most sectors (not just digital assets) tend to care little for the technology detail and focus much more on the founders. Whilst the current generation of leaders are often world class, we’re still paying the price for the cavalier, conspicuous consumption ‘crypto bro’ culture which pervaded until 2021/22. This crowd was not investable in serious allocator circles and created enduring reputational damage for the sector. Headquartered in UAE, we see the wealth and commitment ready to deploy into the space. It’s not yet institutional money - that’s still three years away from joining the party. And that’s a good thing - the capital ready to back you is controlled by a human not a corporate, i.e. someone who wants a relationship with you, who wants to enjoy the ride with you and who can stomach some bad news along the journey without bailing. But to convert this firepower and intent into committed capital requires our beloved friends and partners to shake up their fund-raising approach.
Here’s our top 16 time tested and results proven tips for success:
1. Deploy a member of your C Suite to be solely responsible for capital raising.
2. Put that person on a traditional finance bootcamp course.
3. Burn your pitch deck or put it into your data-room and leave it there.
4. Create a compelling weekly diet of audio and visual (AV) short clips (under 2minutes).
5. Adopt LinkedIn as your capital raising platform, AV distribution centre and source of potential investors.
6. Get a set of professional reportage style photos and videos taken so you have a stock to use as part of tour social media strategy.
7. Post 3x per week, 52 weeks a year. Avoid social media regulatory issues by telling your own story, show thought leadership in the sector and offer a weekly CTA for folks to join an audio or webinar. No need to pitch your project or fund.
8. Remember that your personal (not corporate) profile on LinkedIn is where the juice is.
9. Change your narrative to asking for advice and not capital. As the saying goes: “If you ask for capital, you’ll get advice, if you ask for advice you may get capital”.
10. Avoid talking about your technology or strategy and focus on your people and their story.
11. Find and talk about your “why” and your “different”, avoiding at all costs, “best or best in class”.
12. Cut your conference and booth attendance budget by 50% and spend that money on marketers focused on your socials, salespeople sending 250 DM’s per week every week and T&E with your target investors.
13. Get yourself on TV or radio.
14. Write articles like this one, wherever you’re invited.
15. Accept that, volume of pipeline will succeed much faster than limited, targeted outreach.
16. Start today, not tomorrow!
Moreover, one of the challenges, especially for wannabe fund managers, is they typically have come from traditional banks, or asset managers where the back office is looked after - as are all the compliance systems and processes. Much of these activities can be outsourced to third party fund administrators, but the real hard work is our good old friend, ‘distribution’, as after all, if an investor has not heard about you, how can they buy your fund or shares in your company? There are two other factors well worth bearing in mind - the power of the press and TENACITY. Whilst it takes a lot more time than advertising, public relations done properly can be a very powerful tool to help build your brand and raise awareness of your company/funds - so make the press and journalists your friends. Finally, it is amazing how ‘stickability’ builds confidence and trust - just keep your head held high whether it’s running a business or managing a fund as investors love to see a track record. The longer you are around, the more tenacity you show, the more credible you are. After all, 23% of firms fail within a year, after five years, 48.0% have faltered, and by 10 years, 65.3% of businesses have closed.
So, with traditional investors focused on founders rather than the technology, how can blockchain startups and crypto focused funds improve their fundraising strategies? And, should they shift their focus to relationship-building and personal storytelling rather than tech jargon? Founders can tap into the pools of investable capital wealth that is looking for a home. Leveraging social media and public relations more effectively together with visible persistence are proven keys to success in helping raise capital and encouraging investors to be ‘sticky’.
This article first appeared in Digital Bytes (29th of October, 2024), a weekly newsletter by Jonny Fry of Team Blockchain.