1/ crypto VC is going through an explosive 🧨 phase

there are big funds (>$500M AUM), a lot of small funds (<$50M AUM), and *tons* of prop firms + angels

i’ve done 15 deals in the last 3 months as an angel + small fund @CoinSharesCo VC.

observations + implications... 👇🏾

2/ the big firms need to deploy in size - $5M checks and up

a $250M fund could do a $5-10M deal every month for two years and still be under-allocated

and there aren’t enough companies raising series B / C / D rounds!!!

every deal i’ve done lately is under $50M valuation

3/ so we see firms competing to take down entire rounds.

a recent series A financing had two firms competing to take down the ENTIRE ROUND, and it eventually got upsized, a LOT.

if a company is putting up user acquisition / growth and a revenue story, it’s highly competitive

4/ most projects and co’s don’t need money tho - why would a founder take 20-40% dilution when they’re banking cash and crypto? so they do 5-10%

so the valuations go up, but available allocations go down, resulting in an even bigger squeeze on allocators who *need* to deploy

5/ add in the onslaught of non-crypto M&A that’s coming, which is culling the herd of investable unicorns

add in the wave of SPACs and direct listings taking later stage opportunities out

there just aren’t enough places to put capital in size rn

what’s a fund to do?

1/ @Square buys $50M of #Bitcoin w/ its balance sheet 🚀

let's untangle what corporate treasurers do and why this matters...

the role of corp treasurer didn’t exist until the 1970s, when co's faced high inflation and financial uncertainty

2/ in this environment, companies with no cash management or treasury strategy were losing 10-12% / yr to inflation

modern corporate treasury is typically focused on cash management and managing the opportunity cost of capital

holding cash is *not* a strategy

3/ when i worked in corp treasury, we mostly traded the overnight and short term rate markets

we could earn a nice 3-5% return in these very low-risk assets w/ time preference

treasurers today are living in a radically different world!

RATES ARE 0

TARGET INFLATION IS >2%

4/ faced with this new reality, corporate treasurers (and all investors) are looking at alternatives

#Bitcoin is a highly liquid asset that trades 24/7 in an increasingly regulated and structured global market - and its an effective portfolio diversifier!

5/ Square’s willingness to hold bitcoin on its balance sheet as a treasury asset speaks to:

(1) the changing landscape that treasurers must navigate, and;
(2) their ability to manage the operational, risk, and compliance requirements of holding bitcoin directly