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!