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STILLMARK
This document is proprietary and confidential.
Investing in Blockchain-based Startups
@AlyseKilleen
July 2016
‣ Very little information exists to
support the development of a
mature angel and venture
investing community.
‣ Traditional VCs have yet publicly
expressed their strategies for
evaluating blockchain companies.
2#VentureCash: Blockchain-based StartupsJuly 2016 | StillMark Co.
• $1Billion+ Invested
• 200 Firms Investing
By the end of 2015
But still …
Forbes Entrepreneur 6.16.2016
3#VentureCash: Blockchain-based Startups
Article based on opinions shared by Alyse Killeen, Tim Draper, and Pamir Gelenbe, a
Partner at Hummingbird Ventures.
July 2016 | StillMark Co.
!!!!!!Venture!
!!Risks!
!!Team!
!!!!!!Ecosystem!
4#VentureCash: Blockchain-based StartupsJuly 2016 | StillMark Co.
INVESTING
The distinction between investing vs.
gambling is unclear, and the result is many
companies over-capitalized (creating
unhealthy incentives for teams) while other
companies lack the support needed to thrive.
CURRENT CHALLENGE
TODAY’S PRESENTATION
5#VentureCash: Blockchain-based Startups
!!!!!!Venture!
!!!!!!!
!!!
!!!!!!!
RISK
SPECULATION GAMBLING We’ll cover a few of the basics necessary for
an investment mindset and practice, with
specific consideration given to the diligence
and thoughtfulness that should be specially
applied to blockchain and cryptocurrency
startup investing as it differs from other
investments.
ABILITY TO
MITIGATE RISK
July 2016 | StillMark Co.
INVESTING
The distinction between investing vs.
gambling is unclear, and the result is many
companies over-capitalized (creating
unhealthy incentives for teams) while other
companies lack the support needed to thrive.
CURRENT CHALLENGE
TODAY’S PRESENTATION
6#VentureCash: Blockchain-based Startups
!!!!!!Venture!
!!!!!!!
!!!
!!!!!!!
RISK
SPECULATION GAMBLING We’ll cover a few of the basics necessary for
an investment mindset and practice, with
specific consideration given to the diligence
and thoughtfulness that should be specially
applied to blockchain and cryptocurrency
startup investing as it differs from other
investments.
ABILITY TO
MITIGATE RISK
July 2016 | StillMark Co.
Investing and accepting venture capital:
A. An expectation and commitment for the Company to create value and monetize that value, with a focus on
opportunities for scale in both value creation and monetization (e.g. decreasing incremental costs of service,
network effects – the increasing value of the Company product as the user group grows, etc.).

B. Can the Company and Team create value that will be recognized by consumers or enterprise users, and can the
Company and Team capture adequate compensation (via data, payment/fees, etc.) from the value they create?

C. Evaluate these two components separately.
7#VentureCash: Blockchain-based Startups
Creating Value vs. Capturing Value
!!!!!!Venture!
!!!!!!!
!!!
!!!!!!!
July 2016 | StillMark Co.
General Principles of Review
Considerations and Diligence
• Pain Point (i.e. the problem, and audience’s awareness)
• Proposed Solution
• Market
• Competition
• Critical Timelines
• Product/Solution Development
• Capital Needs
• Team
8#VentureCash: Blockchain-based Startups
!!!!!!Venture!
!!!!!!!
!!!
!!!!!!!
• Growth Projections (Users or Enterprise Sales Pipeline)
• Technical Barriers to Competition
• Time period the protection in expected to last
• Defining Key Metrics (KPIs)
• Current KPIs and the match to investment stage
• KPIs needed to raise the next financing round
July 2016 | StillMark Co.
Investing in blockchain companies requires special and
additional considerations, beyond the generalist basics
9#VentureCash: Blockchain-based Startups
!!!!!!!
!!!
!!!!!!!
July 2016 | StillMark Co.
Infrastructure def.: Infrastructure provides a platform for
applications.  Technology infrastructure generally does not
include the operating systems or software above the
hardware level except where WANs or cloud are used. Here
such transport mechanisms, along with platform or software
as a service may be considered infrastructure.

• The Problem: Blockchain core and associated
infrastructure is in early development and not
comprehensive to serve the needs of existing and
future applications; the necessary infrastructure to
serve current and future needs is not fully understood.
Infrastructure immaturity is delaying app development
and scalability.
Application
• The Problem: Many opportunities to address consumer and
enterprise problems and pain points. The Company’s problem
statement should be tested and evaluated in advance.

• Solutions: Efficiencies vs. New Value

• Efficiencies: Cost savings and opportunities to
serve larger markets (and the masses). 

• New Value: What can now be done just because
blockchain technology exists?
10#VentureCash: Blockchain-based Startups
!!!!!!Venture!
!!!!!!!
!!!
!!!!!!!
Venture Dynamics: Application vs. Infrastructure
July 2016 | StillMark Co.
What is the reliance and dependencies on the core blockchain infrastructure?
A. What is the state and expected progress of bitcoin core, and how does this impact the pace of progress for the
Company?

B. What is the ability of the Company to achieve scale with and without development of the core infrastructure? 

C. Do the Company’s timelines (product, growth, team, capital needs) match with a realistic timeline for core
infrastructure development? Have other scenarios for the pace of core infrastructure development been
considered and planed for?

D. What is the risk of the pace of core infrastructure development? What is the cost of this risk?
11#VentureCash: Blockchain-based Startups
!!Risks!
!!!!!!!
!!!
!!!!!!!
!!!!!!!
!!!
!!!!!!!
Questions unique to blockchain and cryptocurrency: RISK
July 2016 | StillMark Co.
12#VentureCash: Blockchain-based Startups
!!Risks!
!!!!!!!
!!!
!!!!!!!
!!!!!!!
!!!
!!!!!!!
How does regulation and the regulatory environments affect the Company’s business?
A. What are the Company’s risks as a result of foreseeable or possible regulatory changes (or lack of change in
contentious regulatory environments)?

B. What will the cost of regulatory compliance be for the Company?

C. What is the risk of the pace of core infrastructure development? What is the cost of this risk?
Questions unique to blockchain and cryptocurrency: RISK
July 2016 | StillMark Co.
13#VentureCash: Blockchain-based Startups
!!Team!
!!!!!!!
!!!
!!!!!!!
A. Is the Team suited to the challenges and special
RISKS of this ecosystem?
July 2016 | StillMark Co.
!!!!!!!
!!!
!!!!!!!
14#VentureCash: Blockchain-based Startups
!!Team!
B. Is Executive Leadership building the Company for
global breadth in developed and emerging markets?
July 2016 | StillMark Co.
15#VentureCash: Blockchain-based Startups
!!!!!!Ecosystem!
!!!!!!!
!!!
!!!!!!!
‣ Is the Company’s product/service and goals (i.e. the Company’s value
proposition) consistent with the Satoshi value proposition?
‣ How will this impact the Company’s ability to form key partnerships and
business development? Scalability? Sustainability?
July 2016 | StillMark Co.
16#VentureCash: Blockchain-based Startups
!!!!!!Ecosystem!
!!!!!!!
!!!
!!!!!!!
Venture Dynamics: A connected ecosystem
Investing in a target Company given the intertwined nature of the ecosystem:
A. In traditional angel and venture investing, an investment in one target Company precludes you from investing in
that Company’s competitors, and this is a critical component of the investment practice.

B. Given this condition, how do traditional investors select a target Company to invest in from a competitive set of
companies?

July 2016 | StillMark Co.
!!!!!!!
!!!
!!!!!!!
17#VentureCash: Blockchain-based Startups
!!!!!!Ecosystem!
Venture Dynamics: A connected ecosystem
‣ What is the impact of an investment on the Company,
and on the ecosystem?
July 2016 | StillMark Co.
STILLMARK
THANK YOU
This document is proprietary and confidential.
contact: alyse@stillmark.co
July 2016 | StillMark Co.
@AlyseKilleen

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Investing in Blockchain Startups (Seminar) The Blockchain Event Las Vegas_7 2016

  • 1. STILLMARK This document is proprietary and confidential. Investing in Blockchain-based Startups @AlyseKilleen July 2016
  • 2. ‣ Very little information exists to support the development of a mature angel and venture investing community. ‣ Traditional VCs have yet publicly expressed their strategies for evaluating blockchain companies. 2#VentureCash: Blockchain-based StartupsJuly 2016 | StillMark Co. • $1Billion+ Invested • 200 Firms Investing By the end of 2015 But still …
  • 3. Forbes Entrepreneur 6.16.2016 3#VentureCash: Blockchain-based Startups Article based on opinions shared by Alyse Killeen, Tim Draper, and Pamir Gelenbe, a Partner at Hummingbird Ventures. July 2016 | StillMark Co.
  • 5. INVESTING The distinction between investing vs. gambling is unclear, and the result is many companies over-capitalized (creating unhealthy incentives for teams) while other companies lack the support needed to thrive. CURRENT CHALLENGE TODAY’S PRESENTATION 5#VentureCash: Blockchain-based Startups !!!!!!Venture! !!!!!!! !!! !!!!!!! RISK SPECULATION GAMBLING We’ll cover a few of the basics necessary for an investment mindset and practice, with specific consideration given to the diligence and thoughtfulness that should be specially applied to blockchain and cryptocurrency startup investing as it differs from other investments. ABILITY TO MITIGATE RISK July 2016 | StillMark Co.
  • 6. INVESTING The distinction between investing vs. gambling is unclear, and the result is many companies over-capitalized (creating unhealthy incentives for teams) while other companies lack the support needed to thrive. CURRENT CHALLENGE TODAY’S PRESENTATION 6#VentureCash: Blockchain-based Startups !!!!!!Venture! !!!!!!! !!! !!!!!!! RISK SPECULATION GAMBLING We’ll cover a few of the basics necessary for an investment mindset and practice, with specific consideration given to the diligence and thoughtfulness that should be specially applied to blockchain and cryptocurrency startup investing as it differs from other investments. ABILITY TO MITIGATE RISK July 2016 | StillMark Co.
  • 7. Investing and accepting venture capital: A. An expectation and commitment for the Company to create value and monetize that value, with a focus on opportunities for scale in both value creation and monetization (e.g. decreasing incremental costs of service, network effects – the increasing value of the Company product as the user group grows, etc.). B. Can the Company and Team create value that will be recognized by consumers or enterprise users, and can the Company and Team capture adequate compensation (via data, payment/fees, etc.) from the value they create? C. Evaluate these two components separately. 7#VentureCash: Blockchain-based Startups Creating Value vs. Capturing Value !!!!!!Venture! !!!!!!! !!! !!!!!!! July 2016 | StillMark Co.
  • 8. General Principles of Review Considerations and Diligence • Pain Point (i.e. the problem, and audience’s awareness) • Proposed Solution • Market • Competition • Critical Timelines • Product/Solution Development • Capital Needs • Team 8#VentureCash: Blockchain-based Startups !!!!!!Venture! !!!!!!! !!! !!!!!!! • Growth Projections (Users or Enterprise Sales Pipeline) • Technical Barriers to Competition • Time period the protection in expected to last • Defining Key Metrics (KPIs) • Current KPIs and the match to investment stage • KPIs needed to raise the next financing round July 2016 | StillMark Co.
  • 9. Investing in blockchain companies requires special and additional considerations, beyond the generalist basics 9#VentureCash: Blockchain-based Startups !!!!!!! !!! !!!!!!! July 2016 | StillMark Co.
  • 10. Infrastructure def.: Infrastructure provides a platform for applications.  Technology infrastructure generally does not include the operating systems or software above the hardware level except where WANs or cloud are used. Here such transport mechanisms, along with platform or software as a service may be considered infrastructure. • The Problem: Blockchain core and associated infrastructure is in early development and not comprehensive to serve the needs of existing and future applications; the necessary infrastructure to serve current and future needs is not fully understood. Infrastructure immaturity is delaying app development and scalability. Application • The Problem: Many opportunities to address consumer and enterprise problems and pain points. The Company’s problem statement should be tested and evaluated in advance. • Solutions: Efficiencies vs. New Value • Efficiencies: Cost savings and opportunities to serve larger markets (and the masses). • New Value: What can now be done just because blockchain technology exists? 10#VentureCash: Blockchain-based Startups !!!!!!Venture! !!!!!!! !!! !!!!!!! Venture Dynamics: Application vs. Infrastructure July 2016 | StillMark Co.
  • 11. What is the reliance and dependencies on the core blockchain infrastructure? A. What is the state and expected progress of bitcoin core, and how does this impact the pace of progress for the Company? B. What is the ability of the Company to achieve scale with and without development of the core infrastructure? C. Do the Company’s timelines (product, growth, team, capital needs) match with a realistic timeline for core infrastructure development? Have other scenarios for the pace of core infrastructure development been considered and planed for? D. What is the risk of the pace of core infrastructure development? What is the cost of this risk? 11#VentureCash: Blockchain-based Startups !!Risks! !!!!!!! !!! !!!!!!! !!!!!!! !!! !!!!!!! Questions unique to blockchain and cryptocurrency: RISK July 2016 | StillMark Co.
  • 12. 12#VentureCash: Blockchain-based Startups !!Risks! !!!!!!! !!! !!!!!!! !!!!!!! !!! !!!!!!! How does regulation and the regulatory environments affect the Company’s business? A. What are the Company’s risks as a result of foreseeable or possible regulatory changes (or lack of change in contentious regulatory environments)? B. What will the cost of regulatory compliance be for the Company? C. What is the risk of the pace of core infrastructure development? What is the cost of this risk? Questions unique to blockchain and cryptocurrency: RISK July 2016 | StillMark Co.
  • 13. 13#VentureCash: Blockchain-based Startups !!Team! !!!!!!! !!! !!!!!!! A. Is the Team suited to the challenges and special RISKS of this ecosystem? July 2016 | StillMark Co.
  • 14. !!!!!!! !!! !!!!!!! 14#VentureCash: Blockchain-based Startups !!Team! B. Is Executive Leadership building the Company for global breadth in developed and emerging markets? July 2016 | StillMark Co.
  • 15. 15#VentureCash: Blockchain-based Startups !!!!!!Ecosystem! !!!!!!! !!! !!!!!!! ‣ Is the Company’s product/service and goals (i.e. the Company’s value proposition) consistent with the Satoshi value proposition? ‣ How will this impact the Company’s ability to form key partnerships and business development? Scalability? Sustainability? July 2016 | StillMark Co.
  • 16. 16#VentureCash: Blockchain-based Startups !!!!!!Ecosystem! !!!!!!! !!! !!!!!!! Venture Dynamics: A connected ecosystem Investing in a target Company given the intertwined nature of the ecosystem: A. In traditional angel and venture investing, an investment in one target Company precludes you from investing in that Company’s competitors, and this is a critical component of the investment practice. B. Given this condition, how do traditional investors select a target Company to invest in from a competitive set of companies? July 2016 | StillMark Co.
  • 17. !!!!!!! !!! !!!!!!! 17#VentureCash: Blockchain-based Startups !!!!!!Ecosystem! Venture Dynamics: A connected ecosystem ‣ What is the impact of an investment on the Company, and on the ecosystem? July 2016 | StillMark Co.
  • 18. STILLMARK THANK YOU This document is proprietary and confidential. contact: alyse@stillmark.co July 2016 | StillMark Co. @AlyseKilleen