The blockchain market is expected to have a compound annual growth rate, or CAGR, of 69.4% from 2019 to 2025. There is an impressive amount of opportunity in this sector and Draper Goren Holm is the startup venture studio and incubator that is investing in the most promising talent and early-stage startups in blockchain. Founded in 2018, Draper Goren Holm already has a robust portfolio of nine early-stage startups like Ownera, the institutional blockchain for digital securities.
LA TechWatch chatted with Founding Partner Alon Goren to discuss the decision to build a blockchain venture studio and recent investor activity.
Who were your investors and how much did you raise?
It was technically a $3M Series A into our management company LLC. Tim Draper did the majority of it but David Bleznak, CEO of Totle, participated as well.
Draper Goren Holm is a venture studio that incubates and accelerates early-stage blockchain startups. We advise companies and also do accelerator style investments sort-of similar to Amplify here in LA or Techstars. Our portfolio includes the west coast’s leading blockchain investment event that we incubated, CIS, which was listed this year as one of Inc’s “20 Conferences You Can’t Miss in 2019.” We also cofounded Ownera, the institutional blockchain for digital securities.
What inspired the start of Draper Goren Holm?
We were building a little portfolio of synergistic companies within the blockchain space and we decided to formalize and scale it. Within about a year, we had bootstrapped nine amazing portfolio companies and realized that our platform was incredibly valuable and, if scaled, could be even more exciting. So that’s where we are now.
What makes you drawn to creating an incubator for blockchain startups rather than just creating your own blockchain startup?
In a sense, this is a startup. I think we’re doing a version of what others have done but in a very different way.
What market is Draper Gorn Holm targeting and how big is it?
We are undividedly focused on the blockchain technology market. Some reports forecast that the blockchain industry will be worth $60B by 2024 (IBM, 2018). While the market is largely driven by enterprise tech giants (IBM, Microsoft, Amazon), those enterprises are constantly sourcing emerging technology for customer use cases, scooping up patents and equity where they can.
That said, we believe that estimate is a tiny fraction of the potential outcome here. If you look at digital securities (which will be blockchain-enabled), they are the next logical step in the evolution of regulated assets. Every major bank is either implementing or experimenting with digitizing securities. If take one SMALL subset of securities like Alternative Investments, there are over $7 trillion in the USA alone.
We’re investing in the companies that will power the future of the WHOLE regulated and unregulated asset market. In the future, they’ll still just be called securities, just like ALL companies are “internet companies” now.
What’s your business model?
We funnel the brightest entrepreneurs in blockchain into our ecosystem, as early as we can, and we invest in them as early as we can. We then help them grow as best we can and double-down when we can.
What was the funding process like?
Just like a startup. We put together a deck with our track record and vision and pitched to all of our closest investor connections.
What are the biggest challenges that you faced while raising capital?
Our model was different. We weren’t a normal startup and we weren’t a normal fund. Lots of explaining the economics instead of focusing on the differentiators. Once we learned to navigate and simplify the explanation, we were much more successful.
What factors about your business led your investors to write the check?
We got lucky that we didn’t have to go out of our inner circle because our investors have been a part of what we do and have been involved in various capacities in the past and present. I believe we have proven the model sufficiently – that is really exciting – but I think the most important factor is that our investors trust us and understand that we are in it for the long-haul.
We got lucky that we didn’t have to go out of our inner circle because our investors have been a part of what we do and have been involved in various capacities in the past and present.
What advice can you offer companies in Los Angeles that do not have a fresh injection of capital in the bank?
Figure out how to continue to survive and grow with no outside capital. If outside capital is necessary for your long-term vision, go for it and swing for the fences, but if you can survive today with nothing, you’ll be better equipped to adapt to a future where outside capital is not guaranteed. People who are veterans of the blockchain space are acutely aware of the ups and downs of hype and market movement. Don’t let the short-term market dictate your future.
Where do you see the company going now over the near term?
We’re going to continue to fund the next generation of entrepreneurs and companies that are building the tech for Web 3.0. We have some fresh ideas for our events and guerilla marketing tactics for our portfolio companies – stay tuned.