Crowdstart Capital vs Traditional Venture Capital

At first sight, there might be no big difference between an investment by Crowdstart Capital CSC or a traditional venture capital firm – both select promising startups, invest, create value and, finally, help them being acquired  by a target company.  However, If you look at the details, two major differentiators can be unveiled.

First, Crowdstart Capital does not manage a fund financed by so-called Limited Partners, or LPs, typically comprised of financial institutions such as banks, insurance companies or hedge funds. CSC invests money originated with a digital token sale, or ICO. By offering its digital token XSC, CSC collects money that is invested in startups. The XSC token holders do not own any shares in CSC, nor in the portfolio companies, and they are not entitled to receive any financial return in the form of a dividend or another payout.

Instead, the token holder can trade their XSC tokens on cryptocurrency exchanges and profit from a potential increase of value. The fundamental, underlying reason for an increasing value of each XSC token over time is embedded in the CSC investment scheme: 75% of the profits made in the case of a financial transaction, such as an acquisition, will be reinvested. That means, every positive financial transaction may add to the total value of XSC tokens. Since the total amount of issued tokens will not change, each token should profit from the CSC investment scheme.

The next major differentiator between CSC and traditional VC investments is the specific investment process. A traditional VC typically acts quite opportunistically by trying to stir interest for their portfolio companies with a big number of different potential target companies in order to maximise the takeover price. We at CSC, as our colleagues over at traditional VC firms,  also like to profit from investments. But, our goal is not to maximise the takeover price. Instead, we focus on a streamlined, efficient investment and startup development process that is closely aligned with our industry partner’s strategic roadmaps: by guiding our portfolio companies right from the start, working together with them to build their products in a way they can smoothly be integrated into our industry partner’s business units, we optimise the startup’s way to exit.

Within a 6-12 month’s period, a startup should be ready to be acquired and to add value to our partner’s balance sheets immediately. This guided tour to exit can be regarded as a leaner, quicker and more solid version of the traditional VC approach.

We at CSC are fully aware that our approach is a new one. In the fall of 2017, we can not yet prove that the CSC way works. However, we can prove that we have been quite successful in our field of investment, the Blockchain technology. With our company Datarella, we have been working on Blockchain projects with industry leaders since 2015. Our most visible project is the Building Blocks project, United Nation’s first Blockchain project ever, that we developed for the UN branch World Food Programme in a Jordanian refugee camp in the first half of 2017.

Based on our extensive working experiences in the field of Blockchain as well as our team’s personal experiences in building companies, investment funds and working in C-level positions in major global companies, we strongly believe that CSC will become a success in the startup landscape. We actively seek conversations with venture capitalists and would like to learn from them, and to discuss various investment approaches.

First and foremost, we focus on our digital token sale that will start on November, 1st. Before, we offer a portion of our digital tokens to selected professional investors in a pre-sale. We thank all participants in the token sale in advance and are looking forward to investing in promising Blockchain projects!

Guiding more startups to successful exits

Most of the new business ideas I have are nonsense. They come up; I instantly like them, I discuss them with whomever I can find – until I realize that they aren’t half as good as I thought they were in the beginning.

Having been an entrepreneur for more than 20 years, this insight is an easy one – in the late 90’s, that was much harder to accept. Maybe it’s a matter of wisdom of age, or just the fact that today most key performance indicators of the startup exosystem are common knowledge: VCs must agglomerate quite a bunch of portfolio companies until one of them proves to be the exit star that cross-subsidizes all others and pays for the complete fund. Then, there are well-known startup techniques, such as agile business development, that allow for a lean approach, minimizing costs and risks of wrong development paths.

In other words: the startup world has become more transparent, better known, more mature. And, yet. Despite these myriads of mentoring classes and acceleration programs and these libraries full of How-To-Found-A-Business-Books, it seems that the gap between a startup’s plans and expectations and the market’s needs has not diminished much. Each day, I read about startups with ideas I don’t grasp even after thinking several times about them. Sure, it could be my fault, lacking some fantasy like everybody before Steve Jobs presented us the iPod. But, I’m not alone: well-respected entrepreneurs and investors are telling the same story: the majority of startups produce useless products and services.

Since lamenting never makes any sense, there must be a way to change this imbalance. Some aspects of the typical startup process should be adapted to allow a more professional, streamlined way of leading a startup to a successful exit. This is exactly what my colleagues and I are trying to achieve: to bridge the gap between a startup’s precondition and the need of a real, existing consumer, or corporate business partner, respectively.

With Crowdstart Capital we combine our experiences as entrepreneurs, investors and top managers, as well as our existing business with leading industry companies and guide Blockchain startups in the fields of Industry 4.0, Energy, LegalTech, Helthcare and Space on their way to exit. We will ICO in November and start investing in Blockchain projects right afterwards. It will be a fascinating journey – if you feel addressed, come and speak to us.