Coinbase IPO: How this investor picked Coinbase as an angel

Backing Sci-Fi Founders

By Collin West

There is a term in VC called investing in ‘Frontier Tech’ or ‘Sci Fi Tech’. Sci Fi founders are focused on the most cutting-edge technologies and often focused on markets that are non-existent today. 

And there are SO many easy reasons to say ‘no’ to investing in these teams - BUT we also know that many of the most successful and disruptive companies will come from the next Elon Musks of the world willing to say outlandish things like “I’m going to build rockets and go to Mars”.

So we asked ourselves, who has been actively backing these technologies AND successfully providing returns to investors? 

Well… Adam Draper, Co-Founder and Managing Director of Boost VC, has a pretty spectacular hit rate. He was an angel in Coinbase in 2012 (before most people had heard of bitcoin). And 4 of his first 20 angel investments are now unicorns which is an incredible hit rate. 

So this week we asked Adam about his thesis, what he looks for in sci-fi founders, and the next generation of startup successes. Here are some key takeaways:

1. Start with the Scientific Research

Every new technology that is hyped today – cloud computing, cryptography, augmented reality, virtual reality, human-brain interfaces, water desalination, vertical farming – is actually backed by decades of research.

These are not random bets on the future. There are scientists and researchers that have poured thousands of hours into refining ideas. Yes, there will be lots of false starts along the way too. Virtual reality, for example, had a false start in the 1980s, another 1990s, a small one in 2014 when Facebook bought Oculus, and is now experiencing a new start that is actually resulting in real adoption.

2. You Get Paid for Getting Timing Right

If the ideas are not new, then what makes startups and venture capital so difficult? A lot of the times it comes down to timing. As Adam says, “VC is about having clarity about where the market is today, not about predicting the future.” His example is crypto and the 2008 recession.

When Adam talked to Brian Armstrong, Co-Founder and CEO of Coinbase in 2008, it was obvious to Brian that the world would be on a single financial infrastructure. Brian’s also believed that the 2008 recession was the right time for something like Bitcoin to gain traction.

In his pitch for Coinbase, he had to explain what Bitcoin was, what Coinbase was, and why now was the right time to promote the benefits of a distributed and global cryptocurrency.

Looking at the dot com bubble of 2001, many of the ideas that were ridiculed (like food delivery and pets.com) have proven to be huge successes now that the technology and culture has caught up.

3. Back the Rational Person doing Irrational Things

Look at the most exciting products today – Apple iPhone, Tesla Model 3, SpaceX Starship, DJI Inspire, and Boom Overture. When the teams envisioned these ideas, they seemed crazy.

A cell phone with no physical buttons with hundreds of functions? A drone that you can sell to civilians for a couple hundred bucks? A rapidly reusable orbital rocket? All of these seem normal with the benefit of hindsight, but were truly crazy at the time.

I listen when I meet someone that comes across as an incredibly rational person that is adamant about making a seemingly irrational product. There needs to be that person – like Steve Jobs – who has absolute conviction, courage, and energy to see the project out to the end.

If you have an irrational person working in an irrational industry, it will stay fringe. You need someone that can raise venture capital, build a team, talk to lawyers, simplify the user experience, form partnerships, and much more. A rational person can build trust for irrational markets.