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Author Topic: [Looking for feedback] Bitcoin Angel Investment Forum  (Read 1864 times)
gweedo (OP)
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April 24, 2013, 05:48:56 PM
Last edit: April 25, 2013, 01:39:42 AM by gweedo
 #1

For a while I been thinking of starting a Bitcoin Angel Investment forum, because it is hard to invest in some of the hottest bitcoin startups, and they usually go to VC's and angels first. I hopping to create a forum where users can easily pitch and get seed capital for ideas that will change the bitcoin future.

To join the forum, you will have to signed and allow me to verify that you have control of at least $5,000 of wealth in Bitcoins. People I respect or have contributed to the community will be able to be join without doing the above part.

The way it will work, a suitable company will sign up on the forum. They will not lay out their company, they will ask if they can pitch to the crowd. I will then pm them, they will be asked for their elevator pitch, and a working prototype of the idea. Then the elevator pitch will be posted privately, only seen by members. It will be discussed in private. If the members vote saying that the user should be allowed for a full pitch the user will be allowed to join in the discussion thread, not the private one, but new clean one. Any questions or deals the members want to make can be done there.

Also the members will be able to pitch any time skipping the vote part.

After a deal is hammered out, I will be personality be acting as an escrow and release the seed funds based on the deal that is made. The escrow only applies to bitcoins, USD can be better handled with lawyers.

The company will be asked to post updates to a thread so we can track progress and they can ask for more seed capital if they need it.

I know this isn't perfect but this is a start of the first bitcoin angel investment forum, for users to pitch and get seed money. I hope to better the bitcoin community and make it a stronger network. I will not be poaching for people to join, and this is in the idea and in the design phase so anything can change. Bylaws will be written up, before full launch. I will also try to secure about 10 people to be include with the launch.

Give me some feedback of what the community think.
aantonop
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April 24, 2013, 07:26:24 PM
 #2

I can validate the premise that bitcoin startups are going to traditional angels and VCs. I am in the final steps of taking a first round of angel investment, all in USD. I am personally investing in BTC into the company, but all the investors are USD.

Speaking to VCs in Silicon Valley, there is a ton of bitcoin activity and interest. They're getting pitches, but they're also looking for opportunities to get onboard the crypto-currency bandwagon.

There is a need for this type of organization. I understand that several bitcoin-veterans have become benefactors and investors in bitcoin startups, but an investing pool would be a better way to spread the risk a bit.

What legal structure were you thinking of using in the legacy economy? None? Or some kind of legal structure like a partnership or fund?


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Terk
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April 24, 2013, 08:42:41 PM
 #3

I am new to bitcoin community, but I've been in the web business for 15+ years and I've been involved in seed stage funding on both sides, as a co-founder of funded startups and as an investment manager of a fund (though not in SV, I'm in different part of the world), so I thought I'll throw my 0.02 BTC.

1) Paying for being able to pitch is wrong. An angel or VC invests on average in one project per 100-200 pitched to them. It means that if I paid $1,000 every time I pitch, I should expect spending $100,000 - $200,000 for pitching alone to find an investor. I will never pitch to anyone who calls himself an investor and requires to be paid for ten minutes of his time of doing his job (hearing pitches is investor/angel's job).

2) $1,000 payment won't protect you from scams. The only thing you can be sure after that payment is that the scam will be huge enough for the scammer to be worth the risk. Additionally, your vigilance will be lowered, you'll feel falsely safe and will be more prone for scams because of that.

3) $1,000 will be a barrier for many people and you'll simply miss so many opportunities. You really want to hear as many pitches as you can, and it's your judgement what should let you filter the serious and good ones. If you doubt your skills in this department, then you shouldn't even start investing. I repeat: you want to hear as many pitches as possible. Not only from established companies but from the “garage kids” with great ideas and skills to execute them.

4) $5,000 signup fee will be a barrier for most people wanting to invest. It will effectively create a millionaires club. Let me calculate what any reasonable person should calculate. To pay $5,000 to join the club, I would need to have at least $250,000 budget for angel investing - and that would mean that I literally spent 2% of my fund just to join some forum, not investing in anything yet and not having any guarantee that it'll lead me to good investments. There's no way I'd spend more than 2% of my fund on joining the club. And even at 2%, I would join only if I would strongly believe that it will significantly improve my position and investment opportunities - and you need to have some convincing success stories for that. But keep in mind, knowing that the club provides barriers for startups, like paid pitches, isn't that much promising. But even if I'm convinced and want to join: to have $250,000 gambling money, I would probably need to have at least ~$1M of liquid assets. Angel investing is very high-risk and you should only put your play money here. So that's the minimum reasonable level which should allow reasonable people to even think about joining your club - and that's still with many doubts and ifs about the $5k fee.

5) You should want to earn money with your angels and with startups, not on them. All these fees don't make that clear.

6) I'm not sure what kind of projects you keep in mind, but we're in an online area where barrier of entry has been significantly lowered in recent years. Smart people can do great things having as little as $20,000. The $20,000 - $100,000 per project is a very common range in web industry for seed/angel round and clubs like this usually invest collectively. That means three-six angels per project and that means $5,000 - $30,000 angel commitment in a project. Let's assume $15,000 on average. So to spend $250,000 fund, an angel would need to invest in 16 projects. Assuming 20 angels that is 64 funded projects, which is really huge. This again tells me that $5,000 signup fee isn't worth paying.

7) As for spending $5,000 per angel on hosting and domain name, so possibly $100,000 from 20 angels - I'll leave that with no comments. Or... I might have just the perfect domain name for you and it's only $75,000. PM me if you're interested ;-)
(but seriously, I do have a perfect domain for that).

-

What I think you should change:

1) Pitching is free. Everyone can pitch you by some web form and that automatically creates a thread in an “inbox” section of your angels forum. Every angel has access and can view the pitches. Some angels will be heavily involved in that, other won't. If any angel thinks that the pitch is promising, he moves the thread to “discussion” section to start discussion about the project. This will be your initial filter of incoming pitches and it can be done collectively by angels. The rest is as you've described - you discuss the project and if angels decide to move it to the next level, you invite the founder to a newly created thread.

2) Signup fee should be small enough to allow angels with $100,000 gambling money to jump in. That is no more than $2,000 signup fee and preferably $1,000. The $100,000 fund should allow the angel to invest in four-five projects on average (assuming three-six angels per project). Keep in mind that being involved in more projects takes time and if someone doesn't want to be a full-time investor, he might want to limit their commitments. Angel investing is not fire&forget style of investment. Also, $1,000 fee should be significant enough to make only serious people to join.

3) If you specifically want to create an exclusive club and need to charge $5,000 signup fee per angel, you should spend that money on hiring a professional to manage your portfolio. Someone to work with funded startups on a daily basis, to keep track of their progress, to consult things, to help them if necessary with their business model or simply by connecting them to the right people and opening doors. This is a fulltime job and if the club provides that, it would create a great added value for angels, which actually might be worth that signup fee.

-

I hope at least some of these comments are helpful. There are various styles of investing and you might have something different in mind than I do, so my assumptions might be wrong. Perhaps you think about investing in established companies with working products - of course that requires millions to invest and investors who aren't scared of $5,000 signup. But that's not seed investing and I was relating to seed stage.

Besides my comments, I think it's a great idea. Bitcoin insiders / early adopters are the right people to invest in bitcoin startups, as they can provide so much more than money. But smart investing in people isn't that easy, especially if you don't have experience in that. It's always easier and safer to do it in a structured way and in a group, where people like you can discuss things together and use their collective wisdom. That's why I like your investment club idea.

That said, you shouldn't be crazy to try to invest in everything bitcoin-related and leave no space to SV. Having Silicon Valley invested will help bitcoin get recognition, get involvement of some serious “outside” money, be even more talked about and be harder to fight once governments decide they need to fight it. If we keep everything in our own circle, well... we'll keep it in here. And we want bitcoin to spread to the world. Having SV as evangelists always helps. So please don't invest in everything that's viable and leave some space for them ;-)

aantonop
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April 24, 2013, 09:13:23 PM
 #4

I'm not sure what kind of projects you keep in mind, but we're in an online area where barrier of entry has been significantly lowered in recent years. Smart people can do great things having as little as $20,000. The $20,000 - $100,000 per project is a very common range in web industry

^^ This is absolutely right. The sweet spot is $75k - $125k perhaps a bit higher than above, because of the legal and regulatory costs for bitcoin.


Bitcoin insiders / early adopters are the right people to invest in bitcoin startups, as they can provide so much more than money.

^^ This is the main value proposition for your investment club. It's not about the money, that's not difficult to raise, especially now. It's about the expertise, and that is enormously valuable.

One thing to emphasize is that entrepreneurs are evaluating the angels, just as much as the other way around. My initial request for funds led to interest by more angel investors than I am willing to engage in the first round, leaving me with some choices. From my perspective, a monetary investment from an angel is a means to ensure that they are engaged in my business - their money is the "anchor" that hooks their focus and attention into helping me succeed.

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Lemon
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April 24, 2013, 09:37:23 PM
 #5

This is pretty damn interesting. We've got with traditional FIAT funding for 60%, but have opened up 40% via BTC to the general public - I'd love to see more BTC based investments in bitcoin projects.

You may want to reduce the barrier to entry though, it won't appeal to move investors.

https://crypto.pm/ -- public cryptocurrency exchange currently in testing.

https://escrow.pm/ -- fee free automated escrow.
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April 24, 2013, 10:11:19 PM
 #6

This is pretty damn interesting. We've got with traditional FIAT funding for 60%, but have opened up 40% via BTC to the general public - I'd love to see more BTC based investments in bitcoin projects.

This is exactly why I am exploring this angel forum.

I'm hoping you'll receive a lot of interest. We had 99 (out of 571) cryptoshares snapped up within the first 24 hours.

https://crypto.pm/ -- public cryptocurrency exchange currently in testing.

https://escrow.pm/ -- fee free automated escrow.
ninjaboon
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May 15, 2013, 10:29:49 PM
 #7

Still looking for more feedback and more people to get involved. I have been speaking to lawyers and angels non-stop, this is going to be huge.

watching this thread. My business partners and I are going to launch a few Bitcoin Trading sites that cover the S.Americas and S.E Asia region.
Would love to join and pitch on your forum as our seed funding is still ongoing.
Keep us posted.

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May 16, 2013, 08:55:58 PM
 #8

Looking good!  Grin
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May 17, 2013, 03:36:33 AM
Last edit: May 17, 2013, 03:00:50 PM by NYCesquire
 #9

I'm glad to hear that you've been speaking with other attorneys about this.  Based just on what I've read in this thread, you'd either have to register under the Securities Act as a broker/dealer or federal and state MSB regs as a money transmitter (but probably not both).

The companies for which you'd be brokering investments would almost certainly have to satisfy state Blue Sky laws and Regulation D exemptions.  If you think FinCEN is tough... well, you've never had to deal with FINRA and the SEC.

Good luck!

Marco Santori is a lawyer, but not your lawyer, and this is not legal advice.  If you do have specific questions, though, please don't hesitate to PM me.  We've learned this forum isn't 100% secure, so you might prefer to email me.  Maybe I can help!  Depending upon your jurisdiction, this post might be construed as attorney advertising, so: attorney advertising Smiley
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May 17, 2013, 03:00:11 PM
Last edit: May 18, 2013, 01:11:50 AM by NYCesquire
 #10

Becoming an accredited investor will permit a fund to accept your investment without triggering Securities Act registration requirements in certain cases, but it will not permit you to  broker and deal in other people's investments with funds.

Are you a registered broker/dealer?

Marco Santori is a lawyer, but not your lawyer, and this is not legal advice.  If you do have specific questions, though, please don't hesitate to PM me.  We've learned this forum isn't 100% secure, so you might prefer to email me.  Maybe I can help!  Depending upon your jurisdiction, this post might be construed as attorney advertising, so: attorney advertising Smiley
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May 18, 2013, 06:31:15 AM
 #11

This sounds like a great idea. I actually was thinking that there does need to be some better ways to increase community involvement. I wasn't thinking on your level (more like a kickstarter level deal except instead of rewards you get shares) But raising the minimum definitely adds a bit more incentive/clout.

I don't have that much money in bitcoins. But if you're looking for a graphic designer, I would help.

█ Professional Design & Multimedia █

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