1RoundTable bets on ‘long-term, less volatile’ strategy with new growth-stage crypto fund

Seeks to raise up to $800M for Fund IV

The past couple of years have been challenging, and sometimes deadly, for many crypto and web3 startups, but Dan Tapiero, CEO, CIO and managing partner of 10T Holdings and 1RoundTable Partners, is not worried.

In fact, in the midst of raising the firm’s fourth fund, he seems to be positively cheery about the state of the crypto market despite how things are going. “The deals right now are incredible,” he told TechCrunch+. “It’s the single best time to invest in companies . . . the prices in the secondary are 50% to 80% discounted from previous rounds — and that’s for companies that are doing well, too.”

Tapiero’s optimism isn’t that surprising when you think about the fact that this is a pretty big firm in the space. With over $1.2 billion in assets under management, 10T counts major crypto entities like Gemini, Kraken, Yuga Labs and Animoca Brands as part of its portfolio.

And 1RoundTable Partners (1RT), Tapiero’s growth-stage firm, is also raising a not-insignificant amount for its upcoming fund: a minimum of $200 million and up to $800 million. The new fund, which is slated to close its first closing in March, will focus on growth-stage companies across three major buckets — infrastructure, blockchain and financial services — as well as smaller buckets: blockchain gaming, NFTs and metaverse.

As the bear market thaws, Tapiero sees few other growth equity investors dedicated to the crypto space at this point in time. “It’s never been the case that the landscape has been this empty, so we’ll raise as much as we can. We’re seeing some strong interest from really large players like large family offices, sovereign entities or national entities that want exposure to the space and are essentially new,” he said, adding that the firm has taken in “a small bit of money” and has made some investments already.

Taking the long view

With the new fund, 1RT plans to make about 10 to 15 additional investments with hopes of gaining another five to 10 board seats across those portfolio companies, Tapiero said. “Not only will we be focused on investing in companies, we will potentially bring [more developed companies] public.”

But Tapiero isn’t going to simply invest in any viable project that lands on his desk: Startups should meet a threshold of $40 million to $50 million in revenue to be considered. “Historically, we don’t want to pay 10x to 12x revenue,” Tapiero said, adding that the firm has passed on over 100 deals in the past few years, including now-defunct companies FTX and Celsius, as well as big names like Blockdaemon and Alchemy.

Instead, Tapiero believes he can bet on companies that have “already proved themselves in a certain business area, have built a moat, have about a 100 employees and more than $50 million in revenue.”

Why that number? His logic is, when a business gets to about $40 million to $50 million in revenue, it has already managed to address the problems a new business usually faces, he said. “Starting from zero is a way different business, and I was willing to give up that upside for stability, because the volatility in this space is 10 times of what it would be in the traditional world.”

That way, he believes the firm can make a bigger bet in a “more conservative way” but still have exposure to bigger companies with potential for greater returns and stronger revenue. “I want to go to sleep, and in five to 10 years, I want a five to 10 times return. It’s a long-term, less volatile move.”

Tapiero also noted that the new fund has been specifically built to withstand three-year-long bear phases, because during those prolonged periods, the market can drop up to 70%.

That long-term view appears to extend across 10T’s strategy. Even during the crypto winter, its portfolio didn’t “get hurt as much because we didn’t pay high multiples,” Tapiero said, adding that the firm also gets direct deals from companies, and it can buy stock at “massive discounts” on some crypto companies that are performing well.

And although passing on deals means potentially passing on moonshot opportunities, it has prevented the firm from “feeling the pain during the bear phase,” he said, pointing out that as a result of that strategy, the firm has been able to raise this new fund.

Going forward, the CEO sees some liquidity arising from these investments, too. “I see us as sitting in the middle of this ecosystem with more developed companies,” Tapiero said. “I suspect that in the next 18 to 24 months, we’re going to start to have some exits with portfolio companies that are going to IPO, or we’re going to potentially have the ability to SPAC them ourselves.”

1RT will be focused on investing and operations, as well as bringing its companies public, and in some cases, have dual listings, Tapiero said. “This is a new thing in the last few weeks we’ve been thinking about.”

SPACs and exits are inarguably a great thing to look forward to for a firm like his, but Tapiero doesn’t see 1RT leaving the growth-stage space of crypto for the “true venture capital Silicon Valley” space in pursuit of more opportunities. “I’m not interested in finding the next great technology that will change the world,” he said. “I leave it to those guys, and they can make the 1,000x returns.”