I’ve recently been listening to a lot of podcasts about startups and venture capital, and what I’ve noticed is that while eCash may not be a startup in the traditional sense, there are plenty of parallels between the eCash project and the startup world.
For example, when people invest in a startup, they become a part of something called the cap table. A cap table provides a breakdown of the ownership structure of a company. Since eCash has a fixed supply of 21 trillion coins, anyone who holds XEC could consider themselves as being part of a theoretical eCash cap table as they know exactly what percentage of the total number of coins they own. For example, if someone is holding 21 billion XEC, they know they will always hold at least 1/1000th of the total supply.
Another parallel I could draw was the way funding for startups usually happen over multiple rounds. They start with a seed round when the company is just starting out. Then as they reach certain milestones, there might be more funding rounds such as a series A, series B, series C, and so on. This is what’s known as milestone based funding, and what usually happens is that with each new milestone that’s achieved, the company receives a higher valuation along with more funding.
I think investing in eCash can be looked at in the same way. For example, the launch of the rebrand could be seen as milestone 1, the launch of Avalanche post-consensus as milestone 2, with the next major milestone being the launch of Avalanche pre-consensus. While the market-cap of XEC may have gone down after these milestones due to the irrational nature of the cryptocurrency market, I’m confident that the real value of the eCash network has undoubtedly increased with each milestone. How long it will take the market to realize that value is anyone’s guess, however.
In addition to milestones, another factor investors might look at when investing is something called product velocity. Product velocity refers to the speed or rate at which a product or feature moves through the development process. While some may think the product velocity of eCash is slow, it’s important to keep in mind that developing eCash isn’t like developing a new toaster oven, or the next gaming console. Because eCash is trying to be sound money for the world, there are much higher stakes involved. A bug found in a new video game might disappoint a handful of gamers, but it’s not the end of the world. That wouldn’t be the case if your money suddenly disappears or stops working. I have faith that the eCash developers are taking their time in order to ensure everything is well designed and thoroughly tested before deploying.
I bring this all up because recently I also found myself growing impatient with the speed of eCash development. How come everything’s taking so long? Why are we not getting any updates? Then I watched this fireside chat with Jason Calacanis, Brad Gerstner, and Ibrahim Ajami, and I realized something.
eCash is basically a startup still in the seed stage of its life cycle, which makes me a seed stage investor, and the job of a seed stage investor, also known as an angel investor, is to increase a team’s probability of success. Not badger the team every day asking why things aren’t happening.
When an angel investor invests in a project, it’s like entering into a marriage with the team. It’s about forming a long-term relationship because seed stage investments can last ten years or more. This is different from late-stage investors who invest in companies that have already established themselves in the market. Seed stage investors are looking for projects that are unknown to the wider market.
As such, investing at the seed stage of a project comes with a huge amount of risk. This is why angel investors generally write smaller checks when investing at this stage, because they realize that the chances of failure are high, and the chance of success is quite small. But they also know that if you are able to find that diamond in the rough, the returns can be astronomical.
For example, Peter Thiel famously led Facebook’s seed round with a $500k investment for 10% of the company in 2004. When the company went public 8 years later, it was valued at roughly $100 billion, a 20,000x return.
Of course, there are no guarantees in any investment, especially not at the seed stage. But I believe eCash has the potential to be another diamond in the rough. This isn’t a team that’s using their funding to drink mai tais on the beach like some may think, but a team that is grinding away at solving difficult problems.
As Jason Calacanis says in the video above, it’s not how you start, but where you finish. The eCash project may not seem like much today, but as far as I’m concerned, we’re still so early. See you at the next milestone.