Minterest’s village of supporters
A BLOG POST ON MINTEREST’S FUNDRAISING PROCESS AND STRATEGY PENNED BY FOUNDER, JR
Minterest has phenomenal investors behind it. In them, the protocol has a village of supporters, each a working member of Minterest’s tribe, who partner us in delivering the protocol. I’ve been asked by several people how we achieved such an outcome, so I thought it worthwhile to provide a detailed personal perspective.
I’ve been involved in startup fund raising for more than two decades, yet this was my first crypto project. It was something very different to what I knew and in unexpected ways it truly surprised me. I never thought I’d pen a blog remotely like this one about VCs.
An extensive fundraising process
The demand for Minterest was incredible. In the first 5 days we received soft commits for more than the total, and we could have likely wrapped up the raise there and then. Yet, we undertook a 3 month, extensive and intensive process involving nearly 150 separate pitch meetings. We did so deliberately to achieve the outcome we have now; a broad portfolio of stellar investors who are genuine partners, consistently accountable in their support of the team and the protocol.
Fundraising is often a very demanding process on start-up teams. It usually requires many hours of time from key personnel, who are then not able to focus on the business, so early on I partnered with two extraordinary advisors, Joeri van Geelen and Matthew Niemerg. Joeri has an impressive network within crypto, he is highly respected, genuinely liked across the sector and his business development social capital is world class. Matthew is a true blockchain techie, with a Ph.D. in mathematics and a deep comprehension of cross chain architecture. He is highly respected for his capability and is an extraordinarily intelligent man, one I colloquially describe as smarter than a tree full of owls.
Their commitment was unrelenting, Joeri pitched with me late into his night given he was then based in Singapore and Matthew, as he lives in Miami, was up at 4am for months doing the same. David Post, ex-Managing Director of IBM Blockchain Ventures and now Managing Director at Chainlink Labs, was also brilliant as was Simon Schwerin, a partner at leading blockchain thinktank – Iconomy. Kyn Chaturvedi, then CBDO of Tomochain, Vietnam’s largest blockchain project, also joined as an advisor and quickly became the team’s COO.
Our fundraising strategy
In designing any sort of fundraising strategy three fundamental questions need to be answered: why, how much and from whom? Defining why you want the money usually determines how much you need but it’s “from whom” that often influences how successfully the project performs. Great private investors bring enormous value far beyond money. They bring new perspectives, skills, knowledge, networks and act as eyes and ears of the project, keeping it strategically abreast of what is a relentlessly changing environment in crypto.
As a general principle, I prefer not to raise money from the public when the project is in its uncertain early stages. It often places pressure on teams who prioritise seemingly important metrics which cater to the demands of public investors. This pressure may seem beneficial in keeping the team focused but for great people who flourish in high-accountability and delivery-focused work environments, such pressure is unnecessary and counterproductive. It frequently leads to a culture of short-term decision making which could have long-term negative consequences for a protocol like Minterest. Almost always, the team is better served early on by professional investors who, if necessary, can sustain a longer-term view.
I do admit to a competitive advantage in startups, although only one, and which my daughters frequently remind me of; I’m older than everyone else! I’ve been involved in startup fundraising since 1996 and one thing I have learned, is that some investors will promise the world to get an allocation but may not necessarily deliver afterwards, which we absolutely did not want for Minterest.
Fulfilling the ‘village of supporters’ approach meant undertaking an extensive and intensive fundraising process, pitching to as many investors as possible, and then distinguishing those who would best empower the team and the protocol. At the outset we decided our focus would not be to simply secure money and nor was a VC brand terribly important. We wanted a portfolio of investors who would add real, long-term value. That meant crossing off some of the very largest VCs, often found on the US West Coast. The sheer scale of their portfolios meant their minimum investment would be so large that it would dominate the allocations in the private offering, and thus undermine the broad portfolio approach.
What we looked for
- TRACK RECORD
Investors with stellar track records in being powerful long-term supporters and who could be verified by teams they had already invested in.
- LONG TERM VIEW
Investors who wouldn’t just flip MNT, but who were true believers in Minterest’s long term future, and so would be part of the journey with the protocol and its user community.
- VALUE ADD
Investors who had either their own communities we could engage with, or deep commercial experience in crypto with industry networks and/or who would potentially be long-term liquidity providers to the protocol.
Three substantial VCs offered to lead the round; having a large VC leading the raise can be advantageous in many ways. It provides additional credibility for the project and confidence to other investors that the round will close successfully. It also usually speeds up the process, as their presence provides security to others, who will often short circuit their own due diligence, trusting the lead to undertake this professionally on their behalf. The lead investor is also very influential in determining who other investors are, and for us, that was a potential issue given we had our own highly defined investor profile and a firm view on the ideal number of investors we were seeking.
When VCs lead, they usually require very significant allocations; half the raise is not uncommon, and often with significant discounts to the raise price. While many of the aspects of a large VC lead were appealing, it ran counter to our fair and equal ‘village of supporters’ strategy. We had a team highly experienced in fundraising and the internal confidence to run a disciplined program, so we opted to run the process ourselves and thus, turned lead offers down.
I have deep respect for many of the VCs we chose not to include in the round. Some have global, well-respected reputations, but their structure, investment mandates or team priorities did not necessarily align with what we prioritised for Minterest, and this determined our final selection.
A fairer and more inclusive financial system
Minterest ended up with commitments exceeding US$20M, we definitely had the opportunity to raise more than was allocated, and building a lending protocol properly from scratch while keeping an eye on its cross-chain future does require significant time and money. However, Minterest was built to create a fairer and more inclusive financial system and raising money solely from professional investors felt inconsistent with such principles, so we structured the fund raising to take less early on to enable Minterest to include the public later.
Our village of investor supporters
Along the way I met a truly diverse group of people across the planet and discovered that Crypto VCs are nothing like traditional start-up VCs, at least not like many I have encountered. As a rule, crypto VCs are polite, respectful, punctual, generous with their time, happy to introduce other investors and willing to provide high value advice on everything from corporate structuring to treasury operations. They are attentive, passionate, interested, ask intelligent questions, excited about how the project fits into the future of blockchain and actively explore ways they can contribute to its success. Above all, they expect, like all Minterest’s investors, to work hard for their allocation. As I write this, one of them just messaged me saying “Make them work. Don’t give away the goods for a hamburger date and a movie.”
I’ve been doing this for decades and thought I’d seen it all, but it turns out I haven’t. I am genuinely humbled by who Minterest’s tribe of investor supporters are, and for their trust in our team. Who they are, is probably best illustrated by my answer when I was recently asked the question, “Who are your professional mentors?” While I have people that I reach out to for perspective, the real answer, and one which amazed me when I spontaneously said it, is “our investors”.
We have open and forthright conversations about our challenges, we hold nothing back, and the team and I make relentless requests for support, yet no-one flinches. Their support is rock solid and delivered in a myriad of ways, and they consistently deliver well-considered and strategically super smart insights. As CEO, having a network of support like this is spectacularly powerful.
The source of my inspiration is not just what I do, but also, who I do it with. It’s not just the technology I’m passionate about, it’s also the people creating the technology, and to my absolute astonishment, it’s also very much about the people funding it. I’ve been excited about blockchain for years and now due to my recent experiences, I’m proud to say my commitment to crypto mirrors what I see in so many others – it’s locked-in.
So welcome to Minterest, in your best interest
Minterest is a unique borrowing/lending protocol built by industry leaders to service the billions in Total Value Locked (TVL), in DeFi lending projects, with the specific aim of putting user benefits at its core. It provides users with a decentralised financial platform that is fair and inclusive.
The Minterest protocol has the world’s first buyback mechanism, which automatically passes on surpluses to contributing platform users. This way, users receive protocol rewardson top of industry leading borrowing/lending rates, creating the potential for the highest long-term yields in DeFi. The protocol also has an on-chain treasury which captures and shares liquidation surpluses with users.
11, October 2021