Investing in Early-Stage Crypto Startups
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January 22, 2024
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February 27, 2023
Investing in Early-Stage Crypto Startups
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Investing in Early-Stage Crypto Startups
No more settling for typical VC experiences. Learn about this VC firm that helps supercharge web3 companies through innovative growth playbooks.
In this episode, we talk to Regan Bozman. He is the co-founder of Lattice, an early stage crypto VC. He also co-founded Dove Metrics, which was acquired by Messari this past summer.
Regan tells us the lessons he learned after transitioning from entrepreneur to investor. What he looks for when he invests in web3 companies, and finally his tips for founders just getting started in the space.
Subscribe to Zero to Three wherever you listen to podcasts to learn more useful insights about web3
Show notes
Timestamp
00:00 Introduction
00:52 Regan’s journey
03:09 How Dove Metrics was acquired
03:49 From entrepreneur to investor
06:29 Qualities to look out for in web3 companies
08:03 What gets attention in a bear market
08:47 Building in a bear market
09:42 Advice for just getting started
11:12 Emerging web3 topics
12:35 What’s next for Lattice
resources
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Show notes
Transcript
[00:00:00] Regan: OpenSea, Dune Analytics, no one cared about these companies for a long time. Both of those teams, they just pulled through it, they really had grit, and tenacity. The lesson we applied there was to really understand founders’ motivation mattered a lot.
[00:00:17] Kaz: Welcome to 023 podcast, where we interviewed emerging founders in the web3 ecosystems. We'll talk about how they got started, what they learned along the way, and we'll transform their stories into actionable insights. We're co-host. I'm Kaz. I'm Kevin.
[00:00:31] Kevin: Today we are joined by Regan Bozman, co-founder of Lattice Capital, an early stage crypto VC. He also co-founded Dove Metrics, which was acquired by Messari this past summer.
In today's show, Regan tells us the lessons he learned after transitioning from entrepreneur to investor. What he looks for when he invests in web3 companies, and finally his tips for founders just getting started in the space.
To start Regan begins by describing his career journey from employee to investor.
[00:01:03] Regan: I'm Regan, I'm one of the founders of Lattice. We're an early-stage crypto venture fund. My journey into the space, I grew up in New York and I was working kind of in, in tech jobs out of college and was fortunate to get a job on the deal team at AngelList. And so I moved out to San Francisco at the start of 2016. I don't think I knew what crypto was like. But at AngelList there were a few people like Naval Ravikant the founder.
And then we spun out CoinList about a year and a half after I joined. When I started talking to the people at AngelList who were leaving to spit out Coin List, it really felt like there was just a much more like blue ocean opportunity to really build something new.
Crypto had these, ICOs there were all of these methods to form capital. I was really excited to join and so I, I jumped over as the first employee. And I spent about three and a half years there kind of working across a large part of the business, but mostly working a lot with our customers who were mainly layer one blockchains, helping bring those networks to market.
And then I left CoinList at, like the beginning of 2021 was kind of just consulting for crypto projects. I really wanted to work with more early stage teams, really work on work, crypto native problems. Once CoinList hit a certain scale, I think a lot of the challenges there were business challenges that were a little bit less unique to, to crypto.
And then about six months of, just like working by myself, ideating me and Mike, who I, I worked really closely with at CoinList, got Lattice off the ground and we, we raised our first fund in summer 2021. Mostly after leaving CoinList, I'd been building this side project called Dove Metrics.
Basically Crunchbase for crypto is a pretty good way to think to about but really just found that there wasn't good way to just track fundraising events going on for whatever reason, all of the newsletters, term sheet, Crunchbase, strictly vc, that track this marketing venture.
I'm not actually sure why their crypto data was so bad, but me and, and Pierre, who I, I now work with at Lattice basically just kind built really it was initially just like a spreadsheet and then it was like an Airtable inside of a website, but really kind of built the best place to track fundraising rounds and then had this newsletter.
Where once a week, we would just announce them and that became the, the best place to, to get that data. And then we sold that business to Messari this past summer.
[00:03:18] Kevin: Next up, we'll hear about the acquisition process of Dove Metrics.
[00:03:24] Regan: We had known the team there for for a while. I knew Ryan Messari a bit and, they built a really compelling data business around like, on chain data governance folks that are happening definitely like a more full product than, than what we had at Dove Metrics.
It was a pretty like natural partnership. At the same time, our main focus was running Lattice and we kinda explored a number of ways to. Like use the distribution list for Lattice branding. I kind just like trying to like integrate it into the fund, but ultimately it just felt like that data should be done by a party, right?
We felt it made sense offloaded and, you know, give it to a partner who was able to, take it to its full potential.
[00:04:02] Kevin: When Reagan made the career transition, he tells us there are some similarities with being an entrepreneur and investor. He dives into this further.
[00:04:12] Regan: The part of the reason we started Lattice is there were just very few crypto funds where the partners or people on the investing team had ever worked in the space.
You look at traditional venture and you know, a lot of gps at top funds, they were engineers or product managers or operators at big companies, like they had this entrepreneurial or operational experience. Presumably that kind of drove how they invested and you just didn't see that in crypto.
I think part of it is, it's a very early industry and so it's not like there's that many companies where you could have really built a long career.
And so Mike and I felt like the experience we had at CoinList was valuable to entrepreneurs and I think there's two angles to that. We felt we just had some empathy that I think founders resonated with. You know, we didn't come in on this like silver horse from finance. We, we had really just been kinda grinding in this space.
The second was you know, the kind of content of what we were doing at Coin List was both , Building out a traditional company in the sense that Mike was doing a lot of closing deals. CoinList did really this enterprise sales process, which, you know, that's existed for a long time, but crypto is weird, right?
Sometimes you're selling to DAOs, you gotta get community input. It's a little bit different. There's not many people who had, and so he felt like that content was valuable to founders. We'd also worked with a lot of teams on their token launches.
I think the biggest lesson coming into Lattice was less about our experience specifically and more just what we had seen from our angel investments and view is really.
Any meaningful company in this space is gonna have to build through multiple cycles. you know, these markets, they go up, they go down, right? You're very unlikely to build something really meaningful, like you start in a bull market. You launch in a bull market, gets big in a bull market. It's just like not enough time.
Some of the teams we've been really fortunate to work with from, the angel perspectives, so like OpenSea, Dune Analytics, our view was no one cared about these companies for a long time. OpenSea's addressable market for, honestly two or three years was probably like 500 people and Dune like.
Every investor had said no to those guys. They just really, and both of those teams, they just pulled through it, they really had grit, and tenacity. The lesson we applied there was just trying to sus that out and really understand founders motivation mattered alot and we're always gonna be wrong some percent of the time.
And now, there was four of us total. We have these two funds. There's about 60 portfolio companies. So there's that experience and then there's the investing side. I think really the biggest difference is just, you know, like day to day, it's a little bit less stressful than running a company, right?
You really need to see whether or not a fund is gonna do well. And so I think that's hard for us having doing this for a year and half that uncertainty is just challenging.
[00:06:50] Kevin: When Reagan talks to web3 companies, here are the qualities he looks out for.
[00:06:56] Regan: 2021, first half of 2022 was, was kind of crazy, right? It was like this, like market mania. Things were happening really quickly and we've slowed down a lot over the last nine months and, you know, just talked a lot internally, like what are the biggest lessons we, we've taken away from that time.
The team component, which I talked about earlier we still think these things are really important. Understanding people's motivations is really important. And hopefully we've gone a little bit better at like trying to like read those signals. The other biggest criteria is like our team solving real problems.
That sounds really like basic but, There's a lot of businesses in crypto that kind of have this attitude of build it and they will come. So that could be L1s, it could be scaling infrastructure, it could be insurance. There's just a lot of things that people build without really critically testing the assumptions of, okay, like who am I solving this for?
And now I think even more than market size, like we really just wanna understand, okay, you're building this, who are your first three customers? And, we wanna talk to them and, I really wanna understand that this is like a life or death thing for them and they're willing to pay for it. And that's, I think really like this, the biggest criteria for us beyond that, we need to think about, can this be big?
Both understanding that there is market demand and that like the way the team we're talking to builds really like they deeply understand the market they're going after. That is like the biggest criteria for us now, you know, beyond that there's certain categories we like and, and we don't like.
But I think team and solving a real problem is, that's the two biggest criteria we look for amongst team.
[00:08:34] Kevin: How do investors handle a bear market? Regan tells us what gets the attention during this phase.
[00:08:41] Regan: I tend to find that as a bull market, subsides in kind of a bear market sets in if he sets in investors, like just go back to infrastructure. It's like basically, okay, we funded a bunch of products, no one's using them. So maybe we can like just tell ourselves the reason people aren't using them is infrastructure is not good enough, so we're just going to go fund that.
And so I think that's where like I see a lot of attention today, you know? Specifically within infrastructure scaling solutions anything around cross chains that could be bridging, that could be security, that could be like applications built on top of cross chain bridges. There's a lot of attention there.
But I think really like infrastructure is the dominant narrative is, is what we see today.
[00:09:19] Kevin: In addition, Regan tells us what founders should keep in mind while building in a bear market.
[00:09:26] Regan: Setting up your company to survive I think is the biggest thing we talked to with founders keeping two to three years of runway, being cognizant that like these markets can shift pretty quickly. That's really the biggest thing.
If you're selling into DeFi companies, you're selling into NFT projects, right? There's a lot of markets that are just not growing, and so I think being really honest about like what is working and what's not is good for companies. I kind of mentioned companies solving real problems. I think for us, like, just finding a really specific niche market that like you can serve very well and there's real demand for today. Like that's where you've seen companies I think like do well and grow.
I don't know that any of is, is rocket science or super new, but that's how we would guide companies in the bear market.
[00:10:13] Kevin: The next topic we talk about is Regan's advice for founders just getting started in the web three space.
[00:10:20] Regan: One is deeply understanding your market. Crypto is weird, right? There's a lot of weird incentives? Why do some of these L1s like traded insane valuations? Why is there so much money ecosystems? Why are these people excited about Solana, excited about Polkadot?
I think deeply understanding your market from first principles makes a lot of teams just don't do that.
They kind of end up then just like chasing this dream that when the music stops and the bear market starts, right? Actually turns out it's just not there. That's really the biggest thing we've seen for teams. I'm gonna sound like a broken record, but just really trying to identify a really simple pain point and trying to solve that very well.
I think you look at how a lot of traditional software companies got started, right? And maybe use Slack as an example. Essentially they were building a game and they needed a way to communicate internally. They were just solving a problem they had.
It wasn't like, okay, this is how everyone on Earth is gonna communicate, right? It's just like, Hey, we have this problem. We know it's a real problem and we are going to start by solving that. There's been too much of just build it and they will come or build it.
This market's not here today. We think it'll be here in a year. There's been way too much of that in crypto versus just like deeply understanding, okay, like these are the market participants, these are their top three problems, and like this is the one we can solve and so we're just going to like work we already closely with them, iterate with a few design partners and really solve that.
[00:11:43] Kevin: It's safe to say many builders and founders who would like to know what's the next emerging topic in web3, Regan tells us two categories he's particularly interested in.
[00:11:53] Regan: Two categories we've been excited about, but I think are still pretty nascent. One is kind of token incentivized physical infrastructure networks. So you look at something like Helium as, as probably kind of the biggest example. We've been spending a lot of time in this category where I think, you know, the big unlock is that kind of token is tokens as an incentive to bootstrap the supply side of these marketplaces.
It's still early and like there's not a ton of demand for any these products. So there's a lot that's not working, but I generally think it's, it's a pretty interesting design space and we've seen some really exceptional teams going after it.
I've been spending a lot of time web3 consumer, I generally think like.
Some of these web three marketing tools like Galxe and Layer3. And you know, I think we're starting to see some really interesting consumer experiences enabled by crypto.
I think starting to see some really interesting things happening in web3 consumer and I think what me excited is that I think you have this kind of protocol level flywheel where.
One or two of these products start to work at scale. You just like expand the user base wallet and all other products. So I think there we can that category grow a lot even if 1 or 2 apps hit some scale.
[00:13:12] Kevin: To wrap up. I ask Regan what's next for Lattice and what's next for him?
[00:13:18] Regan: What's next for me is, Lattice. I mean Mike and I are, we are doing what we wanna be doing, and this is our focus.
For the fund, it's really. The same and like a lot more on the same side, all we want do is early stage investing in crypto. And that sounds really simple, but, I think it's actually very different how a lot of funds have scaled space.
We have a small team, we're four people today. Maybe we'll be five or six by the end of the year. But we just wanna keep working with early stage founders and really just build the best practice in the industry around that.
We need to do a lot more on like, getting the brand and the fund out there. We have a lot of ideas around research and content we wanna put out. Like there's a lot we need do, but it drives back to just getting better at the same mission, that we pursue today.
[00:13:58] Kevin: If you like this Zero to Three episode, please leave us a review. We're just starting out, so every review really helps follow us on Twitter at zip c com if you don't wanna miss an episode. That way you'll be able to see every time a new show goes live. That's all from me today. Thank you for listening to this episode of Zero to Three.
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