Winklevoss Capital Launches Investor Syndicate with an Eye on Bitcoin

Pete Rizzo
Dec 3, 2014 at 14:00 UTC
Updated Dec 4, 2014 at 07:00 UTC

Winklevoss

Winklevoss Capital, the family office led by two of the largest known holders of bitcoin – brothers Cameron and Tyler Winklevoss – has officially launched an AngelList syndicate that will broadly focus on tech companies, possibly including promising digital currency startups.

Announced in September and launched on 25th November, the syndicate has amassed 21 backers to date, including AngelList CEO and co-founder Naval Ravikant, serial investor Bill Lee and ex-head of Google Express Tom Fallows.

Winklevoss Capital principal Tyler Winklevoss indicated that, while not broadly advertised in the initial launch promotion, the AngelList syndicate will consider bitcoin and blockchain-focused companies for potential investment.

Winklevoss told CoinDesk:

“Our long-term thesis has been and continues to be that bitcoin and blockchain technology are going to prove to be two of the most significant and pervasive technologies the world has ever seen.”

Winklevoss also opened up about their company’s larger investment strategy, which arguably proved conservative in 2014 when compared to more active investors in the bitcoin ecosystem.

Notably, Winklevoss spoke out against aggressive bitcoin investment approaches, perhaps hinting at the strategy both his firm and the syndicate will adopt in 2015.

“Our goal as investors is to earn meaningful returns, not participation medals,” Winklevoss said. “Blindly investing in every bitcoin company strikes me as the marketing-PR tail wagging the economic dog.”

Winklevoss Capital is also an investor in AngelList, the early-stage investment platform that has so far raised $24.1m in VC funding.

The infrastructure phase

In contrast to some of his more recent, loftier presentations that have focused on advanced blockchain applications and autonomous economies, Winklevoss struck a decidedly measured chord when speaking about his investment strategy.

While he acknowledged that Winklevoss Capital and its new syndicate could invest in projects that help the ecosystem advance toward its full potential, he asserted his belief that bitcoin’s business community first requires more basic investments.

“The current venture investment opportunities generally remain in the core ecosystem – bitcoin the asset – and the infrastructure layer companies – merchant processors, compliance processors, vaults or storage systems, exchanges, miners, investment vehicles, tax reporting providers – but will eventually shift towards the application layer companies,” he said.

Once these investments are provided, an ecosystem that goes beyond single use cases such as buying and selling bitcoin, he said, can develop. Still, he framed infrastructure investments as crucial to this larger goal.

“We will start to see companies facilitating use-case scenarios that were simply not possible before the emergence of bitcoin. This application layer phase will really start to unleash the power of bitcoin and blockchain technology,” he said.

Anticipating growth

Winklevoss also cited his company’s public investments as evidence that the kind of big-picture strategy is already being deployed by Winklevoss Capital.

In particular, he noted the firm’s investments in bitcoin services provider Xapo, file storage network Filecoin; two-factor authentication provider Authy; and Matternet, a transportation network for drones, as examples of investments that show the range of opportunities his firm has so far pursued.

Winklevoss suggested that he sees a synergy between even these seemingly disparate projects, noting how Matternet drones could one day be hired and paid for with bitcoin.

However, he cautioned that, above all, Winklevoss Capital and its new syndicate will seek to time its deals in the space in line with its expectations for this growth.

“Web 2.0 applications could not have been built, let alone have succeeded, before a critical mass of users had been on-boarded with broadband Internet connections, which couldn’t have happened before infrastructure companies like Cisco [and] Telecoms built the routers and switches and laid the fiber that combined to form the backbone of the Internet.”

He added:

“Facebook could not have come before Google and so on. The same is true for bitcoin.”

Flexible deal count

Although the official AngelList syndicate page indicates that Winklevoss Capital will seek to fund five deals per year, Winklevoss indicated this investment figure is likely to depend on a host of hard-to-predict factors.

Still, he suggested that given that bitcoin is likely to play a significant role in tech investments in the coming year, the AngelList syndicate’s activity can be expected to reflect larger trends.

“There’s a good chance we will be running more than five syndicates per year,” he said.

Further, he suggested that Winklevoss Capital will pursue some investments independently of the syndicate, should they be unable to secure this allocation.

He also pledged transparency to participants, noting: “Our backers can message us at any time and we will do our best to respond.”

Backer sentiment toward bitcoin

Winklevoss went on to address the potential views of participants in the AngelList syndicate regarding the bitcoin ecosystem, suggesting that the nature of the AngelList platform makes any definitive conclusions difficult to pin down.

One of the benefits of AngelList, Winklevoss argued, is that it allows like-minded investors to connect without geographical constraint. “Some of our backers we know offline, but most of them we do not,” he said.

Still, Winklevoss suggested that his firm’s highly vocal stance toward bitcoin is likely to be reflected among investors, concluding:

“While we don’t know their thoughts on the bitcoin ecosystem and its opportunities firsthand, we imagine many of our backers are interested in bitcoin and the other types of deals we have done, and they look forward to taking a look at our overall syndicate deal flow in the future.”

Winklevoss noted that AngelList syndicate backers simply get first priority to participate in investments and are not obligated to support every completed deal.

Investment image via Shutterstock