Collaborative Investments - Can DAOs shape the fundraising future - Petar Atanasovski | Attic42

hello it's been a long day so I born here in Belgrade and in the high school I used to have a a rock band but obviously my guitar playing skills were never so good to be able to come to this stage so thanks to it belr team for inviting me and for trusting my other skills are worth for all of you and this stage for me so when I was thinking what is the topic that I should talk about today I decided to choose something that they didn't teach me in school and obviously they didn't teach me on my MBA so I had to go through trial and error and to see how the these things are functioning uh in in in practice so that's why today we will talk a bit about investment uh when we talk about the investment or any topic usually I start with trying to break up silos and to see how that looked like throughout history and basically the history of investment as is uh as long as our ability as a humankind to spend the whole year at a specific place and to plan in advance so basically from the moment when we were able with the Agricultural Revolution to have our home for 12 months in a year uh we started to think how we can actually now uh collect all those products and what we don't need for specific specific purpose now to invest them in the future and obviously to make some profit and the point of investment didn't change over time but what we are specifically interested in today are modern ways to invest which appeared after World War II when basically the first VCS and the private Equity uh started to roll out as as as a model uh in order to understand that story we need to uh see who is behind that story and what are all the personas that that we need so the first one that we will start today is Alice and Alice is a successful founder a successful uh businesswoman and someone who wants to invest uh her own her own money so if she wants to go with a conservative approach and obviously if Alice is from Balan she would have number one choice as real estate so for all those who are not familiar they would here teach you in balcons first you have roof on top of your head you have your four walls and then everything else is settled down that's what we still have as a legacy if she starts thinking okay what can I do with uh with my apartment it's obviously not a liquid and I need to diversify my assets then she would spread her choices to gold ETFs bonds or even um Blue Chip stocks but if she wants to go with a bit uh open-minded approach then she would obviously be maybe here among you and think about beside regular stocks about crypto uh maybe be part of the VC track and listen to some of our pitches and decide to participate uh in our in our startup as an angel investor but one day she just received receives a call from Bob and Bob asks her to invest in his VC so Bob is planning a new VC and obviously what Bob needs to do he needs to stand out out all all these other options that Alice has on the table and he needs to set say to convince her that he is the best option so what's his story Bob is a managing partner at VC maybe you met him also here at the conference and obviously he has some traditional model how he works on so basically he has 12 uh 20 LPS in his VC uh Alice should be one of them then the lifespan of his VC is 10 years he say okay I will invest for three years then I will follow up for the remaining three or four years and the last part of my lifespan in this VC will basically be dedicated to the exit strategy uh he has has great investment thesis he has a great Network and basically he is uh pitching to to Alice that he will be able to provide 5x to her which is not something that uh gold or uh real estate can can can provide so what he says he says I have a great great Network and I speak with 50 startups every week that's something which is also important for you to keep in mind and now we come to the most important person here that is Eve and Eve has a brilliant idea and uh she wants to to build her startup so what are her goals she obviously wants to move fast to hire right people she wants to make uh right choices loue product to to the market but keep runways so she can sustain that business and once uh when the product is launched to have ATT traction and then to scale that's pretty much uh in a nutshell how how her journey could look like obviously she has few options on the table one of those options is that uh she will bootstrap that another option is that she will get some grants but also she can go through the fundraising process and of course anything that we do in life has some risks so basically risks as the she will run out of money she will make wrong choices along that way uh make a wrong deal or she won't be able to sell uh her idea or her product to the market and the same as Bob she needs to stand out and to convince others that her idea is brilliant and that she is able to deliver that and now if she decides to go with a fundraising path there is something which we call a reality check and how that reality check looks like uh in in the real life is basically that if you take a look at the wh's portfolio companies 65% of them will fail or failed already and that's pretty important to keep in mind because this is the mat behind all these big numbers that we need to be aware of uh in order to understand if we want to to to talk with v and if you want to raise money from them how they're actually able to make money and how they're actually able to make 5x so basically if you go to the bottom they will earn money and they will come to those 5x only by these minor percentages or 0 point something uh percentages of the companies that they invest in so how the thought process looks like from from a VC perspective from Bob side first he will think about what's your track record and can you actually deliver so if you already proved that you can deliver through previous company comp previous Acquisitions previous multipliers for for VCS that's obviously a plus then can you raise again in 18 months usually when you when you agree with the VC the lifespan of that that investment should be 18 months so basically they expect from you to explode during that period they will Pro provide you with the fuel and that investment is nothing more than your promise then in 18 months from now you will be in a better position and raise the next round then can you go with 100x of my investment in less than 10 years uh why is that important because if you remember the lifespan of a VC is 10 years and 100x is obviously important because of this left side of the slide because if they don't see the potential of 100x then basically they are not sure that the math will work for them obviously if they don't see a potential for 10x they won't even bother talking with you so it might sound cruel it might sound as not fair but it's how this mathematics works so it's important for you as a Founder to be aware of that in order to in order to to to be able to position yourself and to understand what kind of game you're entering another important thing is who else is investing and who is already on the cap table that's something that can if you remember about risks from Eve that she made some wrong choices and if uh some if she has a mask cap table that can be a huge red flag or uh or in the best case yellow flag for for an investor not to go into into that deal and last but not least question is are you actually ready if you're not ready for the fundraising that means that you need to go and to look for other options and those other options are would usually be some grants incubators or accelerators programs what you as a Founder need to think about if you are about to enter some kind of of that program or to apply for it first is what obviously what you will get uh will it enable you to move faster will it enable you to expand your network in a useful way will it provide you uh some funds or at least access to some funds then second thing is what do you give beside your time obviously what is the business model on the other side who are the sponsors there who who is financing uh that incubator or accelerator how they earn money and how we actually they uh sustain so what is actually Your Role beside providing your time and being committed to the specific problem uh to the specific program and again last but not least is how will it affect your cap table if they're taking some portion of your Equity how that how that will uh look like in the future stages when you want to raise from from VCS or some from some other investors so those are three things for you as a Founder to think about when you actually want to go with with some program which is uh usually going before uh the fundraising part last year we organized the very first incubator here uh which was basically the first private Equity web free incubator uh in in Serbia and uh obviously it was it was a great experience and we had some some some takeaways so first of all first lesson learn is that that program got great great feedback uh many people including mentors who participated in dozens or hundreds of similar kind of programs said that it's it was the best shaped and organized uh program of its kind um it's not just because like we are super smart with that but it was because one of the reasons is because we were investing our own money and we were trying to see okay what we can actually do with our own money how we can actually maximize the potential of this kind of uh of of the program and we didn't have any kind of Burden uh from from from other external factors we were actually free to organize whatever we want and to shape it completely around the needs of the local market and local Founders in that specific stage of the web free startup uh another important lesson was that domain specific knowledge is very needed which means that program is great but once when you are facing specific problem you need someone to help you with resolving that specific problem and to to unblock you so you can move super fast that's something which is very very important when you're are dealing with something which is not uh wellknown field and which is not a problem that someone else already solved on the market so if you're in the traditional industry which has like a template approaches that might not be the case but here in the web free when you're usually first uh uh on the market to to work on a specific problem or you're working on the market with some other people but no one solved that so far it is very important that you have smart people around you that can help you with a specific uh domain and unblock you uh if you're focusing on the region or even locally here as as we were last year it's very hard to have continuous pipeline of ideas and continuous pipeline of Founders it's obviously great when you do it once it can be great if you do it two times but then at some point like two to three four years from now you will come to the problem that you have a very limited Supply because this is not China this is not India this is not even you know some super large market so we need to be aware what is the number of people that we have how demography looks like and how we can actually shape the model around that obviously there is a need for funding it's not easy to bootstrap this especially if you take a look at these numbers that I had for VCS then you need to understand that incubators are even more riskier because you're entering super early so it means that if 65% of the VC portfolio companies fail for incubator you can expect that number to be even even bigger so in order to be able to sustain you need to be in this place for a long period of time and you need to have funding to to support all these startups uh along their their journey and one of uh also important thing was we obviously need to to adjust our model and to think about what is the fair for everyone in this ecosystem so you can actually continue with your journey even after the program and at some point you can raise funds from from from traditional investors so those were key lessons from from last year and one of the questions that people pretty frequently ask me okay this was super great do you think now to go with something which is more general not web free focused my usual answer was no we might even put a bigger focus on something which is more specific so narrow down our investment thesis and our uh our approach because that's the biggest value that we can actually bring with a specific help in the specific part of the industry not to go too too too wide when you take all of this into consideration and many talks that that I had with people and many feedback loops then we came to the thought process how that could look like in the future so first thing if you remember that I said uh that we are limited with the supply and pipeline of funders and ideas it means means that we need to create a global program and Global Network if you want to have sustainable sustainable uh sustainable model and another thing is that you need to provide funding opportunities which means that again that you need to have a network of people who will actually support your startups not just you as as entity or you as a company or consor of companies you need to have a larger network of investors that will be able to provide various funding opportunities for those startups then you need to have focus on the problem solving because in these super early stages it is very important that those people move fast and if you want to enable funders to move fast beside funding you need to provide them with a specific problem solving skills uh again focused around specific domains then you need to create inclusive and collaborative model that is pretty much everyone familiar with so all those players that we remember from the beginning you can stand out among all options they have on the table and they will see you as a great channel for them to funnel their Investments which means that you need to align your models with their familiar mathematics and uh numbers how how they operate obviously if you have so many players here it means you need to incentivize all those all those uh members and to have uh so all of them have skins in the game and all of them want your your incubator in your program to succeed and all all them work in favor of your startups and when you look at all of that this is the model that we ended up with so basically uh on the top of this model obviously we have startups and Founders and as I mentioned they have access to two types of funding one is the traditional investment funding and other one is the bounties pool bounties pool is pretty much something that ecosystem Partners can use as um can can can use as their model for Grants their models to build community and it's Equity free so basically it's something that we as a startups are used to in if we want to expand our our our reach to the specific Network to the specific ecosystem we know how to work with those uh with those models and then you have investment pool which is obviously going through some investment models either safe or soft or whatever and of course you have a program in the background uh behind the investment pool you have investors behind the uh the bounties pool you have ecosystem partners and all of them can delegate mentors and investors are also delegating a a steering committee which is basically handling governance along with a team uh who is working on the program and who is managing all all of this so basically if you map you have so many stakeholders here because of obviously you have Founders and startups on top but also in order to make it happen you need investors you need uh Partnerships uh you need mentors you need steering committee and you need a team that will actually uh move this dayto day and make it happen so all of them need to be incentivized and the way how you incentivize them is similar to the VC model basically you have a carry formula and out of that carry formula you make uh everyone's uh if if there is a success everyone is sharing that success and obviously investors get first uh first checks in order to cover their their initial Investments so the more and more I was thinking about this it reminded me that some of these pain points in the traditional Finance can be actually really resolved through dlls and that this model that I'm trying to to to to uh present looks like something which is a natural fit and perfect fit for for for dlls why why that is the case well first of all you have a transparency and you have fair game for everyone being fair uh it's it's pretty um huge question mark what it means because if we ask here uh what would be fair uh we would get like hundreds of different answers but if we have a transparent model it means that all of us agreed to work based on that model and all of us can actually contribute to make this model better uh another important aspect that D and web pror can bring is the liquidity so basically we can instantly uh support operations and in instantly fund startups much faster than than in traditional world and again we have that kind of transparency through through mobile funds uh very important thing is that if we have a shared model and transparent model we have also a collaboration and shared ownership and we know what is the what is the logical way how who is accountable for which part we also have a community and uh investors uh Network build uh which is important again because you cannot move this for a long time alone and you have a governance which means that if something is broken we can fix it together and we can work as as as a collective around the model that that um uh that this will be in the future all of that together can bring completely a new model how we approach to the Investments which is also important for someone who is talking from the Balkans perspective because we from this region we somehow cut off the traditional inv M opportunities and we can now be in the same position as anyone else in the world and we can actually you know build and support new startups here from the region but also globally by operating by by operating from anywhere so those were my thoughts about the investment now if we have some time for questions [Applause] yeah I think there is a mic coming hey great dog um question in terms of when a startup decides that they want to raise money but then these startups have some challenges in the beginning and first okay and here's a use case for the challenge so if you want to build a D5 product sometimes it's hard to be fully compliant with the law because you have to build up an MVP test it oute and then like um validate a couple of hypothesis and then actually have a use case to raise money with so when you're in this position is it better to maybe move away from VCS more towards business angels when there is this large of a risk or are VCS also willing to take this risk and maybe learn with you MH yeah uh usually they would go you know during the due diligence process they would obviously you know assess all the risks and in which stage you as a startup are um obviously one of the things that VCS but also Ang investors need to have is a super strong Network so even if they are not able to help you in house with a specific problem they need to be able you know to direct you to someone one who can help you with the problem solving but if you take a look at these kind of programs like incubator is these kind of programs should be focused around problem solving because it's super cool today we can basically uh we can take any book from Amazon or any course you know and even we can come to the same theoretical knowledge as someone who is going to Harvard or Stanford you know best universities but uh the point is not for you to get you know theoretical knowledge the point is how you actually apply all of that on a specific use case that you have on a specific problem that's why you need to tailor the program around that that will actually help you that if you you still don't have a validated product and if you still have you know regulatory risks those programs should enable you to move faster and to validate it faster in a more efficient way with less money Etc so they should be tailored around that for for you to to reduce that risk as much as possible thanks no more questions first time second time thank you very much [Applause]