I Had My First Liquidation Event!

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How I Got My First Carry Check

After running syndicates for nearly three years, I’ve recently experienced my first liquidation event—and the impact has been eye-opening. While I can’t disclose the company name, this event highlights the liquidity potential in token investments, particularly when compared to traditional startup investments.

Here’s the story: We invested in a company during a private token sale, participating in a Simple Agreement for Future Tokens (SAFT). This allowed us to purchase tokens at a significant discount prior to their Initial Coin Offering (ICO).

Over the past two years, the company has been executing effectively and driving consistent value to its token ecosystem.

A Unique Liquidity Event

Just a little over two years into the investment, we decided to sell a portion of our tokens—around 25%—giving liquidity back to our investors while maintaining the upside on the remaining 75% of our holdings.

This is an example of one of the most exciting advantages of crypto investments: liquidity. Unlike traditional startups, where you often wait 7-10 years for any liquidity (typically through an acquisition or IPO), crypto tokens offer the potential for much faster liquidity events.

Why Liquidity Matters

One of the key advantages of investing in crypto projects through ICOs or SAFTs is flexibility in exit timing. By selling a portion of the tokens early, investors can lock in returns and reduce risk while still participating in the potential future upside. In traditional startup equity, this would be nearly impossible so early in the lifecycle of a company.

For example, if we had made a similar investment in a typical Web2 startup, it could take a decade or longer before investors saw a return. However, crypto markets offer an opportunity for liquidity within a much shorter window. These early liquidation opportunities can create new strategies for managing risk, allowing investors to de-risk while retaining exposure to future growth.

Navigating the ICO Landscape

However, ICOs come with their own risks. Unlike equity investments in startups, where you own a portion of the company, tokens often don’t represent ownership but rather utility within a platform. This can introduce volatility, as the value of the token is often tied to the success and adoption of the platform. ICOs also have faced scrutiny due to a lack of regulatory oversight, meaning due diligence is more critical than ever.

In our case, the company has consistently delivered on its roadmap, and the value of its token has grown significantly. This success enabled us to return the original investment to syndicate members, along with a substantial profit—all within two years.

The Role of Syndicates in Web3

Syndicates have become an increasingly popular method for investing and also for participating in token sales. By pooling capital from multiple investors, syndicates enable individuals to participate in larger token sales that might otherwise be inaccessible. This collective approach not only reduces risk but also opens the door for more frequent liquidity events, as we’ve just experienced.

For syndicate investors, the ability to exit early while still holding a significant portion of the tokens is particularly appealing. It balances short-term gains with the potential for long-term rewards as the token continues to appreciate over time.

A Look Ahead

As the crypto market matures, I anticipate more structured and transparent investment opportunities for Web3 projects. With growing institutional interest, ICOs and token sales will likely continue evolving, offering investors a wide range of liquidity options.

This first liquidation event has been a key milestone for our syndicate, and it underscores the potential of crypto investments for offering rapid returns in a space where traditional timelines would keep investors waiting for years.

Stay tuned for more exciting updates from our portfolio as we continue to explore and capitalize on opportunities in the ever-evolving Web3 space. And if you’re looking to get involved in crypto investments, syndicates can be an excellent way to diversify your exposure and manage risk while taking advantage of this new liquidity landscape.

Resources

If you enjoyed this week’s newsletter - feel free to check out some of our past articles:

• How to Start Angel Investing
• Risk vs. Reward: The Realities of Startup Investing
• Deep Dive: SAFEs vs. Priced Rounds – What Founders Need to Know About Fundraising Options
• Beyond VC: Alternative Routes to Fundraising for Start-ups
• How to Start Angel Investing #2
• The Ultimate Guide to Crafting your Start-up Pitch Deck

?? That’s all for now friends! See you next week.

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Disclaimer: The Cap Table DOES NOT provide financial advice. All content is for informational purposes only. The Cal Table is not a registered investment, legal, or tax advisor or a broker/dealer.