I got on Facebook in 2004 while living in Scottsdale, Arizona… grudgingly. I was pretty happy with my MySpace profile song selection but friends back east kept telling me that I had to get on Facebook. I watched as Facebook swept East to West, on its way to becoming one of the most valuable tech companies in the world. It was clear to me Facebook was something special. But as a non-accredited investor, investing was not an option.

In 2012, I rode in my first Uber. It blew my mind that I could use an app and a stranger would show up to give me a ride. This was revolutionary. But I couldn’t invest in Uber. I still can’t.

One of the most exciting aspects of crypto investing is the opportunity to invest in early-stage companies, protocols, and projects that historically have only been available to accredited investors. Retail investors now have many of the same opportunities, and the same risk, as the “smart money” entering the space. Paying attention to what the professionals are doing in a sea of ICO (initial coin offering) scam coins is the prudent course of action. When used strategically this can be a huge advantage for the savvy retail crypto investor.

A few things to keep in mind. The crypto investing landscape is shifting rapidly. Many projects are concerned about being classified as securities. This presents a real risk to teams as they make their fundraising decisions. In 2017, a crypto team’s decision to raise money seemed like a choice between a venture capitalist (VC) or offering an ICO. Now the choice is between VC, public ICO, or private ICO (i.e. accepting investment only from accredited investors). Over 80% of the ICO fundraising so far this year has been into private ICOs.

However, the timeline from private ICO to availability for retail crypto investors is likely to be much faster than waiting on traditional early-stage tech companies to IPO (initial public offering). Once the network is active and has utility, the likelihood of being classified as a security decreases significantly and the token will most likely become available to the retail investors.

Recognize Risk

As retail crypto investors survey VC investments, they should remember the mindset of a venture capitalist. VCs are comfortable with most of their investments failing and are planning to win on the home runs that can make a 10X or better return. They also know they have the deal flow, or access to investable projects, to allow this approach. Retail investors likely do not.

Also, as discussed extensively on Coin Savage, crypto is venture capital with liquidity. If the fundamentals, competition, or execution change, the investment money is not locked-in for a set period of time. VCs can simply sell into global crypto markets and move on to other projects.

Finally, some of these investments are in the company and not the token. This is an important distinction. The assumption is that if the company succeeds so will the crypto asset. This is not necessarily the case. If a project’s token does not have real utility, it’s possible the company could succeed as an investment and the asset fail. The most notable example of this is the contentious debate surrounding Ripple (the company) and XRP (the digital asset). Much has been written on this subject, and it’s not my intent to rehash the pros and cons here, but it serves as an example of being mindful of distinguishing the company from the crypto asset.

Investments by Major Crypto Venture Funds

This analysis reviewed content from leading fund; web pages, posts on third-party platforms, Crunchbase, and media reports. I note this because all of this information is available to the public and doesn’t require any special access. Prior to making any crypto investment, it would be wise to investigate a project’s leading investors. As often mentioned in the industry, do your own homework.

The selected funds represent a sample of the most respected crypto investors in the world. While not exhaustive, this group serves the retail investor as a good starting point for following the “smart money” in crypto. A quick scan reveals several assets that have had multiple top-tier funds invest in them. Block.one is the team behind EOS, currently the 5th most valuable crypto asset. Zcash is also on the list and is 21st in market cap (per Coinmarketcap). Using these two as examples of our sample funds expertise in picking assets, looking downstream we can see projects that might be the next top 20 crypto asset emerging from the pack. Below are a few of these projects and their investors.

Listed on Major Exchanges

BAT (Brave)

Investors: Pantera Capital, Digital Currency Group

Brave is a web browser that uses the BAT (Basic Attention Token) to provide users an ad-free experience. I used Brave for the first time last week and it’s amazing how different it is to view a website full of ads and then switch to the same site on Brave and not have them. It feels lighter, a higher quality experience as you’re able to view the content you want to see without the annoyance and distraction of pop-ups and banners we’ve grown accustomed to.

Pantera invested in their seed round which raised $4.5M. This was followed by an ICO in June of last year which raised $35M to continue the project’s development.

0x Protocol

Investors: Metastable, Blockchain Capital, Multicoin Capital

0x protocol (ZRX) is a decentralized exchange for ERC20 tokens. There are several projects competing in this market, but 0x attracted significant attention from reputable investors. Their ICO raised $24M in August of 2017 with over 13,000 token holders. 0x Protocol has also made traction in the market, with over 35 DApps and Relayers currently using it.

Early Stage and Not Readily Available

RightMesh

Investors: Blocktower Capital, Multicoin Capital

RightMesh’s technology connects people by retrofitting existing mobile applications and building new, P2P mesh applications for people without internet access. They raised $18M in a private token presale ICO that ultimately raised the additional funding to reach the $30M ICO goal. Purchase of Right Mesh is currently available on IDEX.

Unavailable Crypto Assets

The following crypto assets are currently unavailable for purchase by retail investors.

Orchid

Investors: Andreessen Horowitz, Blockchain Capital, Polychain Capital and Sequoia

Orchid is building a distributed marketplace for computation, storage, and bandwidth that is completely anonymous. Orchid raised $4.7M from crypto investing heavyweights; Andreessen Horowitz, Blockchain Capital, Polychain Capital, and Sequoia. They followed this with a massive $125M raise in a private ICO. There are no immediate plans to offer coins to the public in a follow-on ICO. However, as noted previously, retail crypto investors should keep this project’s development and token sales on their radar because the time from private sale to public availability is likely to be much faster than traditional tech investing timelines.

Following the smart money is not a guarantee of return on investment. This should not be interpreted as financial advice, but paying attention to the projects that professional investors believe in is a good data point in any retail investor’s toolkit.

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