Early Stage Investors

Question 1

Which are the main types of early stage investors?

Answer 1

Use FUEL.

• Founders, Family and Friends
• Angel Investors
• Corporate investors
• Crowdfunding platforms
• Initial Coin Offerings
• Accelerators and Incubators
• Technology Transfer funds
• Social Impact Investors

Question 2

What is the advantage of strategic investment from a transaction cost, hold up and decentralized pricing view?

Answer 2

Strategic investments are an intermediate solution: ownership reduces transaction cost (Coase), hold-up (Williamson) and exploit decentralised prices. (Hayek)

Question 3

What types of strategies can motivate corporate investors?

Answer 3

• take a window on the technology landscape, keep in touch with new trends, attract talent (acqui-hires)
• establish vertical relationships with innovators (downstream buyer or upstream suppliers)
• influence competitive dynamics (‘killer acquisition’), reduce competitive threats.

Question 4

Which are the main types of crowdfunding platforms?

Answer 4

rewards or donation
lending
equity funding

Question 5

what are the strengths and weaknesses of ICOs?

Answer 5

ICO appealing features:

• ‘democratization’ of fundraising, lowering its costs and disclosures
• funding without dilution (just a pre-payment)
• companies give up very few control rights than IPO
• investors find speculative opportunity

ICO weaknesses:

• potential fraud and lack of investor protection (anonymity)
• some founders took the money and ran, money laundering
• tax evasion for investors, thanks to anonymity
• projects not verifiable

Reason ICOs have not taken off: Regulator intervention:
- protection of investors required information disclosure
- are tokens securities? If so, they should fall into regulation
Utility vs security tokes
-taxation of both issue proceeds and capital gains