What do you do as a sell-side analyst when you write the seminal research report on Bitcoin? You join a new type of venture capital firm that invests solely in the blockchain ecosystem.
That’s what Spencer Bogart, head of research at Blockchain Capital, which has made dozens of investments in blockchain did. Bogart was previously at Needham and Company, joins us on this week’s episode of the Tearsheet podcast.
We talk about the transition from the sell-side on Wall Street to venture capital and how his experience impacts his research. We also discuss his newest fund which was funded in its own cryptocurrency, BCAP. This form of investing, still really just an interesting experiment, could potentially change the mechanics of investing in private companies.
Below are highlights, edited for clarity, from the episode.
What was it about Bitcoin that caught your attention when you were on Wall Street?
“Like a lot of people, I looked at Bitcoin as something highly unlikely to succeed, but also very intriguing intellectually. Eventually, it finally got to a point with Bitcoin and its underlying technology that it made sense for a company like Needham & Co. to get out in front of the opportunity, start meeting all the companies in the space, and become a thought leader.”
The transition from sell-side research to venture capital
“One of the hardest things going from a traditional sell-side research role where you’re covering large publicly traded companies to a venture role is that you really have to go without a lot of data in the beginning. With a sell-side research approach, I would start with a quantitative approach when analyzing a company, look at its multiples and growth, how it compares to its peers, and then layer on a qualitative aspect of whether we believed a company would continue to grow and whether it has a sustainable advantage.
With venture capital, it’s the exact opposite. You have to start with a qualitative aspect and then layer on a quantitative approach when thinking about an investment opportunity. We call ourselves ‘stage agnostic and seed biased’. The vast majority of our investments were made in seed and Series A rounds. Companies at this stage just don’t have a lot of data to work with.”
Why should the vp of marketing at Goldman Sachs care about blockchain and Bitcoin?
“We look at blockchain as fundamentally changing the way value is transferred in a digital world. If you think about some of the other ways to transfer value digitally, like Paypal, they generally have made it easier to use legacy infrastructure, but they haven’t created new pipes. Blockchain is that new infrastructure and architecture for value transfer.
For a company like Goldman Sachs, it’s definitely time to be diving in to blockchain. It could still be a year to five years out, though, that blockchain is knocking on their door, ready to disrupt their business.”
Blockchain Capital’s new venture coin
“For our third fund, we did what we believe is the first fully-compliant Initial Coin Offering. We sold tockens, BCAP, the ticker for our ICO, on a one-to-one basis with the U.S. dollar. Doing it this way, we raised capital from over 700 investors around the world in an average check size you wouldn’t normally see in a venture fund.
We wanted to practice what we preach and use the technology we advocate so strongly for to disrupt our own industry. Venture capital suffers from two primary problems: access and liquidity. VC has typically been the domain of privileged endowments and institutions. And capital is normally locked up for 5 to 10 years. Our tokens will be traded in a way that their holders won’t have to wait this long to sell their investments.”