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State of Crypto 2020: DCG Founders Survey

As we enter the final stretch of an eventful 2020, we polled the founders and CEOs of our more than 150 portfolio companies on a range of topics and trends.


More than six months into the COVID-19 crisis and its economic shockwaves, our industry has emerged as an outperformer. Roughly three-quarters of our survey respondents believe the value of their business has increased in 2020, and four in five rated their company’s performance against expectations as “outperformed” or “neutral.”




Information taken from DCG's 2020 Q3 Survey.


Bitcoin has outperformed other major asset classes in 2020. While volatility is presently near all-time lows, it was higher in March than in any time in the last five years. Against that backdrop, crypto companies that earn revenues based on digital asset trading volumes have been notable performers. Obvious beneficiaries are digital asset exchanges, of which there are twenty-two in the DCG portfolio.

In emerging markets (EMs), across Africa, the Middle East and South America, signs of a global economic slowdown exacerbated fears of local currency devaluations and capital controls—prompting many to look to cryptocurrency as a haven for their savings. Our venture portfolio includes five EM-focused exchanges; collectively (on a median basis) their net profits improved by approximately 80% between Q42019 and the end of Q22020.


Custody providers, which charge customers a mix of subscription and transaction fees, and primarily serve large professional investors, have also benefitted from the asset class’s relatively resilient price performance and increased institutional investment.



There are no physical storefronts in our portfolio. And, in many cases, there aren’t even physical offices, with distributed workforces long common in crypto. Two of our five largest portfolio companies by headcount, Xapo and Kraken, were fully and mostly remote, respectively, prior to 2020. Approximately 25% of current job openings across the DCG portfolio are available on a fully remote basis.

Despite these advantages, our portfolio hasn’t been COVID-immune. One in five executives polled cited “COVID / remote work” as the primary challenge their business has faced in 2020, while an equal number selected “third-party delays”—often a biproduct of COVID-related disruptions.  


Asset-Driven Outperformers
COVID's Effects




Information taken from DCG's 2020 Q3 Survey.

Operational interruptions and economic uncertainty often prompt enterprises to retrench to their core operations—to shore up their ‘bread and butter’ business and conserve cash. As that happens, it’s common for more innovative projects, where blockchain implementations generally fit in, to be delayed or cancelled. Founders of enterprise blockchain companies interviewed emphasized that, even when innovation isn’t formally shelved at a client firm, workplace changes affect their sales processes. For example, if a company experiences layoffs, a primary point of contact may depart abruptly. This can be a major setback, as having a project champion in a large organization is key to getting significant projects over the line, and those relationships are often dearly nurtured over a lengthy period.

Enterprise blockchain companies in our portfolio are navigating the headwinds differently. Alex Fowler, CEO of Transparent, a company building blockchain-enabled B2B cash settlement solutions, observed that this crisis may prompt enterprise-focused startups to get major customers on their cap table at an earlier stage. “We took on more strategic corporate investors than is typical for a company of our size and maturity, but it proved a major advantage. Key enterprise partners were aligned, so they stayed committed to innovating amid shifting business priorities,” he said.  


QoHash, which provides large organizations with sensitive data tracking and integrity solutions, saw sales cycles and live projects freeze up as customers focused on transitioning to remote work. Later in the Spring and Summer, interest returned as large firms grew concerned about how information is downloaded and stored by employees in less secure home environments.


Getting multi-million-dollar SaaS contracts signed is demanding, so QoHash cleverly productized its sales process, which includes scanning a prospect’s internal systems to appraise its full stock of sensitive data. That scan is now billed as “Recon”, a standalone product. “Recon is the biggest hack in enterprise sales we could come up with,” stated QoHash’s Founder & CEO, Jean Le Bouthillier, “Pricing starts at $20K and it shows value immediately; when they start asking for features outside the scope of Recon, we pitch our SaaS product.”

The Talent Challenge


66% of our companies reported growing in headcount this year. On a blended basis, our survey respondents expect their team size to increase by more than 35% in 2020. By comparison, a study by Cambridge University revealed that, in 2019, industry-wide, company headcount increased 21%.


Our portfolio companies are collectively hiring for more than 800 roles. Approximately 45% are engineering jobs, 15% are in marketing and business development, and 15% are in product and design, with other openings across operations (5%), legal and compliance (5%), customer service (4%), finance and administration (3%), and data science (3%).

Recruiting is a challenge and, often, a growth bottleneck. Some companies are filling many roles at once as they scale rapidly and building a team that plays well together is tricky. Many have limited HR capacity, and screening and interviewing processes can be exhaustive.


Others are making their first foray into non-technical recruitment. “We are hiring for business development roles for the first time as our focus shifts from building public infrastructure to enabling people and companies to build things on top of that infrastructure. It’s not just engineers with their heads down anymore,” stated Muneeb Ali, Founder & CEO of Blockstack.


Increasingly, we’re seeing a high demand for individuals who have both technical expertise and the desire to be external facing. Maturing token projects and developer tool providers seek  “community marketers” or "developer relations" professionals that can liaise between internal engineering and product teams and users, and creatively build community fervor. For a nascent space—there aren’t generations of seasoned blockchain developers to lure out—technical extroverts have been hard to find.

At DCG, we’re more actively supporting our companies with their hiring efforts than ever before. “It’s time for mass talent adoption—our companies are set to give top talent from tech, finance and beyond a home. Our approach boils down to two things: keeping the best people in the space and helping our teams build pipelines to diverse candidates—whose skills and perspectives we absolutely need, but who may not be giving crypto a proper look yet,” stated Casey Taylor, VP of Development at DCG.


Our 2019 year-end survey revealed that executives were broadly more positive on the state of regulation than a year earlier. This survey suggests that regulation remains a prime issue, but that the nature of the regulatory concern has evolved.



Information taken from DCG's 2020 Annual Survey.


Information taken from DCG's 2020 Q3 Survey.

What was once viewed as an existential threat to the industry, regulation is now mainly characterized as an impediment to sustainable growth. Many executives welcome regulatory clarity and consistency—over no regulation or de-regulation.

“It’s really important that we start to see some consistency and coordination across regions,” said Simone Maini, CEO of Elliptic, a blockchain forensics and analysis company, “there are still plenty of opportunities for regulatory arbitrage at the moment, where businesses are trying to operate in jurisdictions with looser regulations.” She believes harmonized rules across geographies would support institutional crypto adoption.

In July, the OCC, a US federal regulator, published a letter advising that banks could provide digital asset custody services. While it remains to be seen how the guidance will translate into law or practice, it was widely hailed as a bullish development.

For those founders more fearful of regulatory overreach, the FATF Travel Rule may be a lingering factor. In its June 2019 guidance, FATF, an intergovernmental advisory body, set out suggested KYC requirements for virtual asset service providers (i.e. centralized exchanges). Many companies took a wait-and-see approach to the guidance, looking for signals on how stringently member countries would enforce it. Many continue to decry the technical difficulties of compliance.


In a 12-month report, published in September, FATF revealed that it's evaluating whether transfers to and from unhosted (non-custodial) wallets should be controlled or banned. This has alarmed those in our community who view unhosted wallets as central to crypto’s promise of giving people financial autonomy, with total control of their assets.

Justin Newton, Founder and CEO of Netki, a compliance solutions provider, feels that responsibility falls on the industry to embrace and comply with responsible regulation before outright bans are perceived as the only option. He stated, “this is the worst-case scenario I have been concerned about since Travel Rule implementations excluded non-custodial wallets; that (their exclusion) would be used as an excuse to carve them out of the ecosystem entirely. If that happens, everything we all have been building dies.” His company’s TransactID solution could allow non-custodial wallets to comply with the Travel Rule’s KYC provisions.

Regulation Back in Focus
DeFi Abou More Than Tokens


Our respondents identified the rise of “DeFi” as the most bullish crypto development of 2020, followed by “BTC resilience” and “Stablecoin surge.”




Information taken from DCG's 2020 Q3 Survey.

Information taken from DCG's 2020 and 2019 Annual Survey.




Information taken from DCG's 2020 Q3 Survey.

Those who believe Ethereum will retain its crown emphasized the tremendous time required for blockchain projects, even those that demonstrate superior transaction speeds, to build community and network effects. They argue that Ethereum’s community strength gives it ample buffer to implement a scaling solution. Conversely, the Ethereum bears pointed to the fact that developers have been doggedly pursuing a fix to scaling issues since 2014, to no avail, with a lot of hyped solutions, like Plasma, sharding and roll-ups, seemingly falling short.

To put DeFi in context, it helps to reflect on our industry’s beginnings. In distributing server capacity globally, blockchain technology allowed us to limit our reliance on centralized internet actors. Bitcoin incentivized those who formed the new decentralized network. By executing code on top of that network, traditional software applications can be replicated and enhanced. Enter Ethereum in 2015: a public, decentralized network to run financial and non-financial applications.

Today, “DeFi” is a buzzword referring broadly to attempts to offer financial services via decentralized technology. In the same way rattling off jargon from the early internet days would draw blank stares from Gen Z, today’s DeFi terminology is likely to evolve as the winners and prominent use cases take hold. If the movement succeeds in scalably offering faster and cheaper financial services (i.e. credit, loans, savings products) it will simply be the way of “finance” in the future.

Our founders expressed that no matter the performance of DeFi token prices in the near-term—which have plunged recently—the protocol development and business growth of 2020 bodes well for the industry’s future.

Those interviewed were quick to contrast the DeFi movement with the ICO bubble of 2017, pointing to the talent and professionalism of today’s innovators. “The caliber of the founders is impressive; many left high-paying jobs to start companies in the DeFi space. They’re more commercial, productive and ethical (than the 2017 crop),” observed Larry Sukernik, who leads venture investments at DCG.

A handful of DCG portfolio companies have been direct beneficiaries of the movement’s growth. An example is Multis, which leverages decentralized protocols to provide cheaper financial services to startups. Multis uses smart contract technology to debit its monthly account charge of approximately $30 from users’ wallets, making it the first company to run crypto-based subscriptions. Confident that its product delivers real value, Multis decided to end free usage and charge account holders in year-one.

The market’s rapid growth was a boon for Multis, but brought operational challenges. “It’s the Netscape moment of DeFi,” said Thibaut Sahaghian, the company's Founder & CEO, “The frenzy is painful from a micro perspective because companies in the space are suffering from network congestion and skyrocketing fees.”

Stablecoins, digital currencies backed by a reserve asset, are arguably the fastest-growing DeFi subset. USDC, the dominant compliant digital dollar stablecoin, has grown in circulation from approximately $400M in early 2020 to more than $2.8BN today.

Digital asset exchanges and payment companies have benefitted from surging stablecoin volumes. “USDC rapidly became the most popular asset on our platform behind Bitcoin. The growing demand for stablecoins in Latin America, and Argentina specifically, is due to the fact that buying dollars as a form of savings is a regular monthly habit for middle-class Argentinians, due to cyclical devaluations and loss of trust and credibility in the Argentinian peso,” stated Sebastian Serrano, CEO of Ripio, an Argentinian digital asset exchange and payments company.

Michael Moro, CEO of Genesis, noted that the stablecoin investment market is rapidly maturing, “as more exchanges and OTC trading firms have adopted stablecoins, borrowing demand for USDT/USDC/PAX has seen a corresponding increase. Those three stablecoins comprised nearly 35% of the Genesis loan portfolio at the end of Q32020, compared to 12% at the end of 2019, and 1% at the end of 2018.” In July 2020, Genesis announced a partnership with Circle, the company behind USDC, to exclusively distribute USDC yield and lending services to institutional customers.

Executives view stablecoin growth as a constructive step on the path to mass adoption. In attracting new audiences who psychologically accept "digital money" more readily than "decentralized currencies", stablecoins can play an onboarding role for the wider industry.

Our founders were split on whether DeFi’s current technical underpinning, Ethereum, will remain the dominant transaction-based blockchain. 


Nearly six in ten respondents expect industry consolidation to accelerate, particularly in the exchange and wallets & custody spaces.  





Information taken from DCG's 2020 Q3 Survey.

Consolidation can result from big players buying smaller ones to limit competition. If it’s a strong upstart, that likely requires a hefty balance sheet. Alternatively, fledging startups may be acquired by competitors for their technology or personnel—dubbed “acquihiring.” Executives interviewed noted that several projects that raised large sums in the crypto bull market of 2017 have struggled to find product market fit and may make strong acquihire candidates in the near future.

While relatively few crypto companies have the balance sheet strength to pay the valuation multiples upstarts command, some look to larger financial organizations as potential acquirers. Michael Shaulov, Founder & CEO of Fireblocks, a platform for enterprises to store and trade digital assets, was skeptical about that happening in the wallet & custody area, “the small subset of crypto companies that are leading from a tech and servicing standpoint are expensive and banks aren’t going to be able to justify paying $300M-$500M for wallet technology at this stage. If they want the shiniest technology, they need to partner with the provider or license it.”

Industry Consolidation


Our executives ranked “global recession,” “inflation” and “hunt for yield” as the main macro crypto adoption drivers.




Information taken from DCG's 2020 Q3 Survey.

In our 2019 year-end survey, respondents were asked what they viewed as the biggest opportunity for digital currencies. “Trustless, inclusive financial systems” (~60%) was the dominant response, well ahead of “investment potential” (~16%). In today’s persistent low-yield environment, it appears that digital currencies’ return potential is key to investor appeal.

Institutional investors have increased their overall allocation to digital assets in 2020. Grayscale and other digital currency asset managers have seen substantial capital inflows. In the third quarter of 2020, Grayscale raised approximately $1 billion, more than 1.5x the capital it raised throughout 2019, and 84% of inflows came from institutional investors.

Another form of “smart money” entering crypto is large enterprises, which was in the spotlight this month when Square announced a $50M investment off its balance sheet into Bitcoin. Decisions to allocate a portion of corporate treasuries to crypto assets reflect the key adoption driver our group foresees: with interest rates near zero and inflation fears rising, treasurers’ mandate is to look for alternative cash repositories to preserve purchasing power.

With more big buyers on the horizon, our executives are bullish on Bitcoin price dynamics. Only 9% feel the price of Bitcoin will drop from current levels, while a large portion predict significant gains in the next 6-12 months.




Information taken from DCG's 2020 Q3 Survey.

"Smart Money" Adoption
Looking Ahead


Roughly 60% of our executives planned to raise capital in 2020. Thus far, approximately 20% have done so.


Venture money has seemingly flocked to the crisis’ winners, while waiting for tangible signs that the harder-pressed will see relief. Our gaming portfolio companies have led the most fundraising activity (the % of the sub-sector that has raised capital), while we made the most new investments (five) in companies that support digital asset trading, by providing data services or investment market infrastructure. Only two portfolio companies in the enterprise blockchain space and one identity and compliance business managed to raise capital this year. Less than 20% of our digital asset exchanges raised capital in 2020. As many significantly reduced their net burn or even turned profitable this year, executives need a compelling reason, like very low-cost capital, to dilute ownership.


We asked the approximately 30% of respondents that confirmed they delayed fundraising about their plans; nearly half intend to raise capital imminently.




Information taken from DCG's 2020 Q3 Survey.

Encouragingly, our companies’ priorities have stayed on course. At the end of 2019, we asked our executives what would define a successful 2020 and the dominant response (52%) was “user/customer growth.” Today, the same portion maintain that hitting growth targets will make 2020 a winning year.


In our Q12020 report, we stated, “We look to 2020 with a renewed sense of opportunity...our companies have done the hard work. They’ve built capable teams and well-run businesses that are poised to thrive in a supportive environment.”

2020 has been filled with the unexpected, sad and norm-shattering—but it provided our space with that “supportive” opportunity we believed it was primed for, and it has delivered. One event that would definitively mark the end of an industry in the shadows is getting people excited: 95% of our survey respondents said a major US IPO would be a positive development.

We agree. The industry’s maturity can be measured in many ways; but one is to evaluate progress in terms of where we are on the spectrum of “(dirty) little secret” to “universal truth.” After building, that comes down to education and access. It governs our approach at DCG.  

We provide capital and a robust community for our portfolio companies to help navigate the challenges of building and operating in a nascent space. We encourage them to share their learnings with one another, and we share their stories and insights with the world beyond.  

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