A Positive-Sum On-Chain Venture Ecosystem

While investing in startups has grown significantly more accessible in recent years with the popularity of AngelList rollups, SPVs and more accessible information on accelerator batches, we still have a long way to go to democratize and streamline startup investing. In a world with 1000x software, perhaps we'll see 1000x startups. How can we ensure the best financing environment for founders and investors alike?

The average retail investor does not have any insight into the population of startups that are raising money and the current infrastructure / workflow of venture investing does not make it efficient to manage a portfolio of 100+ angel investments. There is a real time + money cost to managing these investments due to mostly antiquated compliance and operational tasks. 

There’s this narrative on Crypto Twitter that “Memecoins” are meant to democratize access to wealth creation through startups that are funding their operations using crypto tokens. This is a laughable proposition at best, and likely will also be found to have criminal implications even with a much more pro-crypto administration entering the Whitehouse in 2025 ($TRUMP coin and $MELANIA notwithstanding, cringe). Memecoins are not startup investments, at least in their current form.

Balaji S. put the memecoin phenomenon succinctly in this recent tweet: 

Tokens like Bitcoin, Ethereum and Solana have real communities, real infrastructure and real funding behind them. They are comparatively “safe” crypto investments but still considered high risk investments.

But using tokens as a medium of financing offers real advantages. The workflows are significantly more seamless, and large portfolios of startup investments are much less expensive (time + money) to manage. Accepting smaller investments as a founder is not only easier, but beneficial and high leverage as you build early communities & demand. 

The infrastructure is all there for decentralized fundraising and captables to not only exist, but proliferate. Balaji runs through all the details in his proposed Mirrortable cap table structure that details a typical investment process including onchain KYC, compliance, document signatures, cap tables and more. 

That post was written 4 years ago. Decentralized infrastructure has continued to mature and be battle tested. So if the infrastructure is in place, why is it still not happening? 

I think the largest deficiency of on-chain investing today is the lack of contract automation tooling. See #16 from Balaji’s post: 

In essence, the legal frameworks we’ve developed over decades of early-stage investing to align incentives and provide investor protection still haven’t transferred to token investing. Things like long employee and investor lockups, secondaries, information rights, liquidation preferences, revenue recognition and accounting standards, employee vesting and clawbacks — all these critical functions have not been translated on-chain. 

Until these checks and balances and incentive structures have been codified and popularized in token offerings, crypto investing will remain largely zero-sum and looked at as a casino by most of the world. The tooling is all there for us to improve the foundation, the rest is up to us to popularize. Maybe we need someone like Garry Tan and YCombinator to pioneer the standardization of onchain investment terms like they did with the post-money Safe.

If you are working on the smart contract and other legal-infrastructure-as-code that provides for true aligned incentives between founders and investors, we at Script Capital would love to chat.