What we’ve learned from this first sourcing phase
Over the past few months, our learnings and meetings have allowed us to open up our vision for Cardashift and shed light on the path to follow.
A few weeks ago, we wrote several articles on our investment thesis and how we wanted to boost the impact investing ecosystem.
During the recruitment of batch 1, we were able to translate theory into action… and we have a lot to share about what we’ve learned from our interactions with community members, other funds, impact partners, and the entrepreneurs themselves!
Intention first, design second — An innovative and recognized strategy for impact assessment & reporting
In our article Boosting early-stage impact investments: the role of a decentralized ecosystem published in December 2021, we lamented the lack of methodologies adapted to early-stage impact investing. The tools and taxonomies available were too complex or without enough scientific basis.
For Batch Genesis sourcing, our approach has focused on projects’ impact intention rather than asking them to fit into exhaustive grids that may not have been relevant.
Entrepreneurs have greatly appreciated this sourcing method. They feel more comfortable stating their ambition but also assuming improvement areas. Other impact investing actors have understood this position. Some shared that the lack of flexibility in impact assessment and measurement was a harrowing aspect for their entrepreneurs. The latter ones need to spend much time justifying the impact they generate, or they should generate.
This first feedback confirms the idea already stated before the ICO to focus on assessing the impact intention and designing with them their core strategy, once they are pre-selected, to put impact at the heart of their actions and business model.
With the selected projects for Batch Genesis, we are finetuning this second part of our impact approach, the “design to impact” method. In contrast to the need for exhaustiveness in current reporting methods, we want our projects to focus on one or two key challenges to address and control their externalities on the rest. We prefer a company that tackles a subject radically than one that tries to answer positively to all the SDGs criteria.
This element is perceived as a critical differentiator factor of our acceleration value proposition, and we will continue to communicate its value in the coming weeks.
A token is a captivating tool for non-blockchain actors
In all honesty, before the project sourcing phase, we had little idea of the quality of the projects and the partnerships we would be able to establish.
Finally, as expressed in our article First project cohort recruited!, this Batch Genesis is even beyond our initial ambition in terms of potential and purpose of impact. And we are not the only ones to think so!
Other investments and/or impact players have validated most of these start-ups.
Similarly, we were not sure how an initiative like Cardashift would be received by more traditional actors in the start-up or the impact ecosystems.
Once again, our model has generated a lot of interest and excitement. What amazed our contacts the most was the future development of the economy around the token, for two main reasons: the ability of this new financial tool to federate and capture non-financial value.
- The citizen-investor role
We have evoked this concept for the first time in the article Crypto holders: Try impact investing! before the ICO. The observation was simple: in front of a purely financial rationale of funds, crypto holders, being also citizens, could more easily take social and/or environmental considerations into their decision-making processes.
The more we shared this point of view, the more we found echoes among the different actors.
Non-for-profit organizations are the most sensitive to this. For them, this could represent an alternative to donation models with a more powerful way to engage investors and reach other audiences.
Impact entrepreneurs we’ve met were also very interested in this idea, notably those with a BtoC approach. They have all seen the value of creating their community and having investors who will be potential users of their solution.
Finally, traditional investment players, like VC funds and even well-known banks, perceive the potential of being able to address a whole new category of investors, more committed and civic-minded.
At the end of these multiple discussions, we realized that we could further take the concept.
Today, we have 5,000 citizen-investors worldwide, having raised $10M to launch impact projects. What could we do if we were 100,000, 1 million, or even 1 billion?
- The link between impact and tokenization
We were afraid that the word “blockchain” would scare people in the impact ecosystem.
After a few quick explanations, many of them had seen the potential of a tool like the token.
Two elements has been perceived as game changers regarding the current issues on impact valuation:
- Linking token valuation mechanisms with the achievements of impact KPIs
- Creating a token from proof of impact and giving it a financial value
It shows the difficulty of the current financial model to properly value the positive contribution to society and/or the environment. The token makes it easier to align investors’ economic interests with impact generation asked by citizens. All the more easily since the citizen and the investor are often ones and the same with the token.
Our Batch Genesis will be the first opportunity to deep dive into these innovative models with the inputs from the Cardashift community.
Nevertheless, we want to go further and work on building an infrastructure that could be able to help companies or even non-profit organizations to benefit from the impact they create: how to enable a project reducing our carbon footprint or improving the level of education to be financially rewarded for the positive impact brought to society?
These reflections are at the heart of the discussions among impact-oriented actors. Significant initiatives have been launched to tackle this issue, the most famous example being the ecosystem built around carbon offset credits. In the blockchain world, several protocols are specialized in this theme, such as the iXO protocol or Topl, that we’ve met.
However, there is still a long way to go and blockchain technology can be a vital enabler in several aspects: traceability of the impact-proof, transparency, and liquid marketplaces.
Before the ICO, developing a carbon blockchain-based market was part of the discussions. The inputs from impact-oriented actors put this type of ambition back at the heart of the talks. Building the infrastructure with the relevant partners that will allow tomorrow’s projects to develop and be financed under the best conditions is more and more present in our thinking to improve the Cardashift ecosystem.
This first sourcing phase was, therefore, very rich in learning. We could realize what Cardashift could bring to the world of impact. This pushes us to develop the ambition further in community building and product roadmap.
Expand our offer to reach all the needs of the impact investing value chain
The other hypothesis that we wanted to verify during this first phase was the relevance of our exclusive positioning on early-stage projects.
Indeed, our first feedback on the market showed us that there was a brick missing at this place. Our White Paper focused our investment thesis on early-stage projects with funding requirements between $0.5M to $2M. At the seed stage, impact entrepreneurs lack funding but are too risky for traditional investment funds and can accelerate their start-ups.
These first months of meeting projects and partners have proven that Cardashift can be relevant to a broader area of the value chain.
First, we can have a role more upstream, as developed in our article on the Shift Factory concept. Rather than waiting for ambitious projects to emerge, we aim, as “architects of the unknown”, to design the new solution ecosystems to be explored in several industries. Then, once we’ve identified the missing actors, we can launch them by recruiting a team of entrepreneurs.
Secondly, Cardashift’s offer seems also relevant in higher funding rounds, starting with Series A, for two main reasons:
- There is still a lack of funding from the current VC ecosystem for capital-intensive industrial projects after the seed phase. For example, in Q1 2021 in the U.S., industrial projects represented only 3.6% of all the VC funds investments. As we will not make the green transition with tech products alone, developing these projects is a vital priority for Cardashift. According to AgroTech’s successful entrepreneurs, on this kind of project, there is also a missing funding brick to move from the first test plant to the industrialization and commercialization of the solution on a larger scale. At this stage, needs are more around $20M
- Impact-focused companies are often of public benefit. So, building a solid citizen commitment around their initiative makes sense. That’s why several ambitious projects, already in a more advanced stage of development, have asked us to help them create their token and set up their community of citizens-investors. On our side, we believe these projects, which will likely constitute the great organizations of tomorrow, are also built with a base of citizen-investors capable of directing their societal mission.
As we will detail later, our ambition for these more notable fundraising events is not to replace existing players but to partner with them by developing new co-investment models (equity & token).
Realign our baseline and broaden our ambition following these learnings
All this learning has led us to reflect on our positioning and purpose. We realized that our current baseline: “Cardashift is a community-run launchpad that raises funds, builds and accelerates startups solving social and environmental issues.” It might not be as relevant as before.
1️⃣ We want to discuss with our community the following broader and more ambitious vision around impact:
“Enable citizens-investors to build the world of tomorrow.”
It is more in phase with what we would like to develop in terms of infrastructure and financing bricks with Cardashift
2️⃣ In the spirit of the blockchain ecosystem, we want to make Cardashift an open platform. We are fully aware that it is neither desirable nor viable to take care of this entire upcoming ecosystem alone. It is why one of our key objectives for the coming months will be to gather and aggregate all relevant actors:
- Deepen our relationships with existing investment funds on the co-investment side
- Spread our message to the most to build committed communities
- Develop a whole infrastructure to meet all the needs of projects, with notably a marketplace for acceleration skills so that each start-up can have the proper support
We need to share this broadening of our perspectives with our community. Its commitment from the beginning has been a driving force for the project and we want to continue to move together toward this vision.
Written by Yannis Baala, Reviewed by Auriane & Anaïs — Impact Team
