Bitcoin’s Path to $1M: A VC’s Analysis

Frequently Asked Questions

FAQ

• Where is the transcript for this webinar?

  Speaker 1:

  Hi, I’m Mike Collins, I’m the founder and CEO of Alumni Ventures. Today I’m going to talk a little bit about Bitcoin’s path to a million dollars. I think what I bring to the table here is some pattern recognition and venture capital opportunity analysis, and I’m going to go through kind of how I think about it. We think about it and hopefully you’ll find that interesting and can add that to your own heuristic about Bitcoin and crypto.

  So before we get going today, we’re speaking about Alumni Ventures, our views of the associated investing landscape. Nothing is investing advice. This presentation is for informational purposes only and not an offer to buy or sell any securities, which are only made pursuant to formal offering documents. In addition, this is an asset class that we invest in as a venture capital firm. We hold on our corporate balance sheet and many of us invest in personally.

  So again, use your own common sense, your own analysis, speak to other people.

  All right, so what are we going to do today? Why Bitcoin? Looking at it from a disruption theory, again, I was privileged to know and call myself a friend of Clayton Christensen. Clay would send me actually even previews of his books. So a lot of what you’re going to hear is kind of through the lens of his frameworks on disruption, specifically viewing Bitcoin as a disruptor to gold as a repository of value—risk reward, broader adoption, VC outlook, investing in the future of Bitcoin, et cetera.

  Okay, next slide. So again, just a little bit about my background. First job in venture capital in 1986. I’ve really been at the intersection of technology, venture capital, innovation, entrepreneurship. Started Alumni Ventures in 2013 really to bring venture capital and early-stage investing funds and deal access to retail investors. Just a really hard asset class for individuals to get access to and to do the right way, in our opinion, which has a lot of deals—well-diversified, co-invest with tier-one lead investors.

  So that’s me. Alumni Ventures—we’ve been around, we’ve raised $4 billion, almost 11,000 investors. We’re one of the most active venture capital firms in the world. We have 10 VC teams located in the venture hubs making deals literally every day. We made 300+ last year. Our back office is in Southern New Hampshire.

  Speaker 2:

  That’s us. I think we’re very well regarded.

  Speaker 1:

  As a co-investor. Very important distinction. As a firm, we don’t sit on boards, we don’t price rounds, we don’t lead deals. We’re positioned as kind of an entrepreneur’s way to top off a round. We typically do 5 to 15% of a round. We’re a favorite uncle. We leave our entrepreneurs alone, except checking in and trying to be helpful. So in our niche, in our lane, we have a very good reputation.

  And again, we do every year an Apex 50 of some of our investments. These are a few of the names of companies that we’re investors in. Again, over a thousand companies, but that just can be overwhelming to people. But here are some of those names. You can check out a full, complete list of the Apex 50 and check out our entire portfolio on our website.

  These are the people we co-invest with. Again, we are really proud to be in this ranking. We believe there’s strong correlation between really good entrepreneurs and the ability to have really good lead VCs. So we think that’s a pretty good strategy. And these are some of the firms we most commonly co-invest with. Again, for those of you—if any of you don’t recognize these names—these are leading among the top venture capital firms in the world.

  And this is our team. Won’t spend a lot of time on that. Let’s jump right into it.

  So what’s the thesis around Bitcoin? There’s really two. One—with disruption theory—we believe that Bitcoin is going to be the leading repository of value that replaces gold and precious metals as a repository of value. We think it’s disruptive. It’s better. It’s better by an order of magnitude than gold bars or gold coins, and it is replacing it, and we believe it will continue to replace it over time because it is better.

  So again, with a lot of pattern recognition, I don’t have to make this or the other argument—it is. This is fulfilling a need. For thousands of years, there have been repositories of value in society. It is an important part of capitalism. It is an important part of really any economy, going back to shells. Okay—gold for a long time and by tradition has been thought of as a repository of value.

  There are problems with it that—as we move into a digital world—a digital repository of value just makes all kinds of sense. And if you literally just view Bitcoin as taking over gold and silver as a repository of value, you’re going to get to a certain number. And I’m going to go through that a little bit.

  Speaker 2:

  Yeah, okay. So—

  Speaker 1:

  Disrupting gold and slicing off a store of value. So there are other stores of value as well, right? There’s clearly fiat currency, U.S. dollars as a reserve currency. There’s real estate, there are collectibles. People buy condos on South Beach—we have them basically stay empty as a repository of value. They buy art. Stocks in particular are a huge place where people park value.

  But we think gold is not that great. Its value is largely derived because it’s what people view its value to be—in the same way Bitcoin is—but it’s big, it’s heavy, it’s bulky, it’s hard to transport, it’s hard to store. A digital version that is not controlled, that has finite supply, is just a superior alternative. And we’ve just seen that replacement over time.

  So today we’re talking about the entire crypto market being about a trillion dollars. This is, again, rough order of magnitude depending on the day. We’re looking at Bitcoin at a hundred thousand. So we think there’s—if you run the numbers—a really good case of a 10x firm here. Could be a little less, but directionally we think this disruption is not complete yet.

  Okay, next slide. Key characteristics. It’s really about—disruption is really about—doing something that makes a product or service more accessible. So streaming replacing video just made it easier. It also tends to grow the market, right? By making it more accessible.

  A lot of times the incumbent is kind of stuck in its own ways and kind of gets picked off from below with something that isn’t quite as good initially. And then the companies kind of retreat up-market is kind of the classic story of disruption.

  But in venture capital, we see—I mean, this is the world we live in. We invest in technologies and people and startups that are looking to disrupt. And disruption grows the market, grows access, improves standard of living, and puts the company or technology that it is replacing to bed. It is creative capitalism, creative destruction. And so we believe Bitcoin is disrupting gold as a repository of value.

  In addition, I think it will chip away at some of the other repositories of value. And that is really the math as a venture capitalist I run, which is: what is the size of gold as a repository of value? And you get something like 20 to 30 trillion dollars—so still significantly bigger than Bitcoin is today.

  If you take all of the repositories of value—stocks and real estate and fiat currencies—it’s several hundred trillion dollars. So you say to yourself, okay, will Bitcoin peel off a few percent there?

  And let’s bring this to a more manageable scale. Let’s think of a family office that has a hundred million dollars of assets—very wealthy. And they’re going to say, well, we want to diversify our holdings. And we’re going to own some stocks, and we’re going to own some fixed income, and we’re going to own some venture capital, and we’re going to own some real estate.

  What percentage of their portfolio are they going to have in crypto? Historically, it has been none or a very small percentage. So we are starting to see adoption in organizations. We’re starting to see them in endowments and pension funds, where they’re starting to believe that we need to own a few percent of our entire portfolio in this—especially when you have inflation, especially when you have debasing currencies, especially when you’re seeing technology trends move digital.

  That you’re going to see an increasing number of individuals, family offices, corporations, and just anybody that has a portfolio view—that this is an asset that belongs in the mix, like real estate or fixed income or like stocks or bonds, et cetera.

  So we think that that journey has begun and that disruption is happening but not yet complete. And that basically says: there is still room to go.

  So why is Bitcoin better than gold? I could go on for a long time about this, but:

  • One: fixed supply—21 million coins. Significant number of those have already been mined.

  • Portability—okay, you’ve got to go, you’ve got to transfer, you’ve got to do things across borders, you’ve got to do it fast.

  • Trustless—okay? So the ability to own your things and not have people get at it is a benefit, right?

  This is durable. Yes, you can lose your passwords. Yes, you can put it on a device and lose the device. Those things happen. But beyond that, the ownership is direct and clear and very hard for people to come and take it from you. So all of these things are very appealing to people as a global, decentralized system.

  So this is another feature of this, which is: if you live in North Dakota, it’s one thing. If you live in Venezuela or China or India or many other places, your options for repositories of value can vary—differently.

  Speaker 1:

  So again, we just love that this is a set-and-forget system, that it’s decentralized, that there’s a fixed supply—and all of that leads, I believe, to an analysis that gets one to a million dollars. Now, I’m not giving a timeframe, but I’m generally saying that this is the direction it’s heading. This is a number that one would, as a venture capitalist, be comfortable with, which is roughly a 10-bagger from here. That’s a venture return—that’s an investable situation for sure.

  Okay. Again, you can go ChatGPT, Google, Gemini—your own research—on numbers, on pros and cons, on how gold is better than Bitcoin, in what sense? But again, a lot of things give you some numbers. I tend to look at a lot of our venture deals as kinds of downside/upside, floor/ceiling. And so if I look at disrupting gold, I get to roughly a $13 trillion to $20 trillion market cap.

  Usually when there’s a disruption, you actually expand the market—you just don’t replace. When you disrupt DVDs and you go to streaming, you actually grow the market pretty meaningfully. So I think this is a conservative number, but it gets you at about $600,000 per coin for Bitcoin. That’s just a pure swap—low end. I think that’s the conservative number.

  I think even if you’re just replacing gold and the market expands over time and the economy grows over time—that’s another thing that’s not really captured in my floor number—but it’s like, I feel really good about that particular number as a venture perspective. And again, I’m looking through the lens of my hammer and this is a nail. So as venture deals, we’re looking at four- to eight-year time horizons. You like to make five to ten times your money. You like to make three to five on the floor and ten times your money plus on the upside.

  If you really blow gold out of the water and you start now chipping away as a store of value that just belongs in every well-diversified portfolio, you’re looking at a million dollars per coin. And again, I think you could make an argument of two to three million dollars per coin. And again, as a venture capitalist, we have learned over time: you don’t get out a spreadsheet and get to the 19th decimal point. You generally say, hey, I’m investing in this A round, it’s at $50 million pre. Is this a company that can get sold for $250 million, but has a 30% chance of being a unicorn—because of the size of the problem, the alternatives, what we’re disrupting, growth in the market, blah blah, competitive landscape. That’s how you do venture. That’s as close as you can get. And then you’re betting on the team.

  So again, try to bring that perspective here to just looking at Bitcoin as a venture deal, and that’s where I come out. I think it’s got a floor of maybe half a million—$600,000—in the kind of venture timeframe. But I think it’s got a really good shot at a 10-bagger. Again, risk/reward—there’s always these things you look at as venture deals.

  One of the things you deal with as a venture investor is the government decides to outlaw your technology or regulate it, or the incumbents use the system to keep competitors out.

  I think that for Bitcoin five years ago was a much bigger risk than it is today in the United States. There are Bitcoin ETFs. I think with a hundred-plus million people with crypto, the genie’s out of the bottle. I think it’s going to be very hard to outlaw this. Clearly, there are governments that have—but it really hasn’t impacted things materially in the medium and long term. Again, just the structure of the technology makes it very hard to whack-a-mole this down.

  So again, one of the big risks comes out of government regulation, outlawing it. I think that’s historically been probably the biggest risk. Again, I think that has been mitigated significantly. I think generally the current government in the United States has no plans to. They may compete with it, but I don’t think they’re looking to outlaw Bitcoin.

  Okay, listen—and I think there are other tailwinds. We are seeing other crypto technologies start to solve real problems in DeFi, smart contracts. I think with AI, we’re going to need more authentication systems, betting markets. We are seeing more distributed ledger technology companies start to solve real-world problems. These aren’t memes. These aren’t things without a coin, without a purpose. We always come back to: what’s the problem that this technology is solving, right? We don’t want a technology looking for a solution.

  And as these things, I think, over the next decade start to solve real human problems, I think we’re going to see a kind of updraft on Bitcoin as a repository of value. So I think risk-off for crypto is largely the case at the moment. I think—you never say never—I think there are 20-, 30-, 50-year risks of things that would need to be done to the protocol with quantum computers, et cetera.

  But I think those are, in a venture time horizon—which I give again as five to ten years—not serious. But I think there’s going to be updrafts as we get more and more innovative decentralized ledger platforms and this technology becoming an important part of our AI/digital world. I think we’re going to see more of it and I think that’ll become a tailwind. So it may speed things.

  Again, we look at this as a technology that we’ve been investing in for—I think we’re on our sixth or seventh fund. So we just think it’s a powerful technology and that there are—you like to get into markets early where you’re establishing real strong moats and network effects. And we’ve invested in 50 or 100 companies in this space. I would encourage people to visit our website, check out our portfolio of crypto blockchain companies. We think it’s going to solve real problems that humans have and it moves society forward. So we’re believers in it.

  So just a few of our companies—again, we have coming up on a hundred investments in the space. We’ve been doing it for a long time. I could put—we’re in a lot of really—

  Speaker 2:

  Cool companies in this space. I’ll just leave it at that. These are just a few. And again, we—

  Speaker 1:

  Believe in the space we run. Yeah, this will be the commercial part of the presentation, which is—we have funds in the space. So we’re one of the most active VCs. We invest with tier-one players. We have a large and diversified portfolio. We have a blockchain fund. We have an AI and robotics fund. We have a strategic tech fund.

  We do a lot of deals that we syndicate to individual investors that are in our family. So again, we’re at the tip of the spear. So if you’re totally happy with your venture portfolio, that’s great. If you’re perhaps open-minded, we find that we have a bunch of different types of people that work with us. Some people just love technology. Some are brand new to venture capital and want to dip their toe in the water. Some have made their screw-you money and are looking to pay it forward, and they enjoy the process of backing people trying to do amazing things.

  We have other people who are alpha-seeking and trophy-hunting, and we have people that are just kind of very disciplined asset allocators and just view this as a logical place to put a slice of their portfolio. So whatever your flavor, whatever your—

  Speaker 2:

  Persona, we can be a pretty good partner. So—

  Speaker 1:

  We do have—coming over the chat—we do have questions. So: how does the adoption curve of Bitcoin compare to historical technologies that you’ve seen, like the internet?

  I think it’s very similar. I think that this is one that is, in a way, very pure. So it’s definitely more subject to graphs and charts than I think many disruptions are, where you have more fits and starts and a lot of noise in the system. This is kind of a classic disruption. I think it’s very textbook. A lot of technology disruptions take a couple of decades—it’s almost like one generation. And so I think if you go back, I think we’re kind of on that curve.

  I think it was 10 to 20 years before it got out of the fringe, early adopters, and I think we’re in the middle of the growth acceptance—probably at the beginning of the middle part of the adoption curve.

  So I think it’s very similar. Like the internet, you had a .com bubble, you had a bubble burst, you had companies that were 10 years into the internet before you had Uber, kind of thing. So these things do take time. Technologies move much faster than humans. Adoption of technology—humans are slow. They don’t like change. It takes time. They need to be driven. So I think it’s very similar.

  How do you balance risk/reward? Listen, I think it’s true for any asset. I think I’m a believer in diversification. I believe in having a strategy. I believe in a very disciplined approach to kind of dollar-cost buying, being patient, not watching the pot boil. I mean, I think these compound over time.

  So my advice to people for a decade has been: whatever makes sense for you—it could be $5 a week, could be $50,000 a week—but whatever you have as an appropriate allocation to your portfolio, just buy it every week randomly. Set it up. That’s definitely easy to do these days. And this is true if you go into venture capital, go into the funds, go into every vintage. Don’t try to pick the time—that is hubris.

  Same thing if you want to buy the S&P or if you want to buy Treasuries—do it on a consistent basis. Depends on your risk profile, your age, your recovery period, what’s your lifestyle—that’s personal. That you need to sort out with your cabinet of advisors. But whatever you do, do it consistently—and then just don’t day trade it.

  What is the minimum investment for your funds? 25 grand. And our funds have a portfolio of 20 or 30 companies. We hold reserves. So it’s really about investing in—at a $25,000 minimum—you’re investing something like a thousand dollars into a tech startup where the A rounds are led by Accel or Bessemer. That’s kind of amazing. So that’s our minimum.

  Can you use retirement funds to invest? Yes, you can do that with Bitcoin—we actually have a portfolio company that does that—and you can do it with our venture funds.

  So again, if these things are of interest to you, I urge people to do the research. Check it out. If you’re interested in one of our blockchain funds, if you’re interested in getting in some of these new protocols and coins and teams—we’re really excited about what we’ve done. Track record, performance with that team—we’ve been at it a while.

  So if you want to participate in that, we encourage you to check it out, do your research, talk to someone. We’d love to be your venture partner.

  So—quick half hour. Hopefully you found that interesting. Again, try to bring the lens of a venture capitalist to looking at Bitcoin and crypto through the lens of a venture capitalist. So that’s how we see Bitcoin—if it were a—

  Speaker 2:

  Venture deal. So—be well.