Over the last few week, on a number of occasions we mentioned the idea of 
Venture capitalists are often called "Angel Investors". They are risk embracing individuals and entities that are willing to fund early, start up projects in hopes of it becoming a huge success.
These companies tend to minimize their risk by spreading the money across many different projects. The ultimate goal is to hit it big on a project or two. The payout when a project excels is absolutely amazing.
Coinbase was funded using venture capital money. With the recent move of going public, the early backers have the opportunity to cash out. Even if they remain involved, their holding has a value now determined by market activity.
As we are about to see, the values can be enormous. This is vital to remember: when right, it is highly profitable.
Garry Tan of Initialized Capital was a believer in the project as far back as 2013. This caused the fund to get involved with Coinbase to the tune of $300,000. It was quite a sum in something that was highly uncertain at the time.
The confidence was obviously rewarded. Tan's stake, once the stock hit the open market, were worth $2.4 billion. That is a gain of $2.1 billion in about 8 years.
Initialized Capital was not the only one to make a lot of money off the Coinbase explosion.
Kevin Durant is one of the highest earners in the NBA. He and a partner have an investment company called Thirty-Five Ventures. They get involved in the 2017 round of funding.
While it is unclear how much Durant and his partner invested, reports are their stake was worth 53 times more than when they got involved.
Not a bad return for 4 years.
Obviously not everything is going to be successful or replicate the results that Coinbase provided. However, these is an example of what can happen when one gets involved by investing as an Angel Investor. Returns that are orders of magnitude above what was put in.
This is the potential that exists.
The key is going to be for SPInvest to find projects that it believes can really appreciate over the years and find success. This is more than just buying tokens, it is sizing up project teams and getting involved in the early stages. In return, the fund will get a significant stake (token) in the new project.
Hence, if it is successful, the payout to SPI will be enormous. Of course, there is no need for an IPO since the tokenization process already puts the project on a market.
The above examples show how tilted the existing system is. Most people look for a few percent a year. Those who are involved in the funding game, while being risk takers, are able to size things up and aim for a healthy payday. Of course, it must again be stressed that this is not a guaranteed path in the sense that there are plenty of projects of going bust.
Nevertheless, when we look at the potential, there is an opportunity to help to give projects the initial stake they need.
Will there be an 800x return? Not likely but it is possible. There is a much greater chance at a 53x even though half of that will be a stellar return.
This is the appeal of taking this course of action. As we can see, the timeframe is very long-term. Projects take a long time to progress forward. Coinbase was highly successful yet the initial seed money investors were involved for 8 years (a common timeframe for VC agreements). Yet as we can see, the time was worth it.
We have another lesson. It is easy for us to expect stuff overnight but, in the technology world, there is a long time period for things to unfold. Thus, it might not be best to judge projects based upon what they did over a year or two.
Either way, SPInvest is in a position to operate as a Venture Capital fund, at least to some degree. This is a worthwhile path to take knowing that a couple of projects could really enhance the return of SPI.
With cryptocurrency, we are embarking upon a new financial paradigm. The opportunities are now opening up to those outside the exclusive circle of Silicon Valley or Wall Street.
This will help us to garner returns that most were excluded from.
