Chain Venturer: Regan Bozman of Lattice Capital

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Happy Weekend 🙋🏻‍♂️,

Welcome to Chain Venturer, a series of intriguing conversations with crypto investors. This week, we have Regan Bozman from Lattice Capital.

Lattice is an SF-based crypto venture fund co-founded by Regan Bozman and Mike Zajko. The firm last raised $60M for its second fund in August 2022. It has extensive experience in community management, setting up communication platforms like Discord, and logistical support such as connecting teams with legal and accounting services for token sales.

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-Marco

In case you don’t know…

I’m an investor at Primitive Ventures. We back founders who believe that crypto represents the new socioeconomic primitive that will redefine individual sovereignty and financial paradigms.

If you’re building an interesting project → DM me here.

If your project is too early in the lifecycle, I also run a syndicate, you can check it out here.

Anyway, enjoy this week’s conversation.

GameStop experiencing the average crypto token unlock

Regan Bozman of Lattice Capital

Regan Bozman is the Co-Founder of Lattice Capital, a San Francisco-based early-stage crypto venture fund. Lattice’s portfolio companies include Ethereum, Maple, Li.Fi, Privy, Lagrange, ImmuneFi, Galaxy, Filecoin, and CyberConnect.  

Prior to Lattice Capital, Bozman co-founded Dove Metrics, a leading crypto fundraising data company that was acquired by Messari in 2022. He also offered his expertise as a Web3 GTM consultant from January to August 2021, working with clients such as AngelList, Aztec, Index Coop, and Maple. 

Between March 2019 and February 2021, Bozman was the Director of Business Operations at CoinList, a crypto startup known for its regulated ICO platform. He also co-founded Odjo and served as Chief of Staff at Handy, which was acquired by ANGI Homeservices in 2018.

His earlier experiences include internships at Bridgewater Associates and a role in Marketing/Business Development at Push44. Bozman studied history and economics at Harvard.

Here’s my conversation with Regan Bozman.

Quick takeaways:

• Lattice has extensive experience in community management, setting up communication platforms like Discord, and logistical support such as connecting teams with legal and accounting services for token sales.

• Bozman emphasizes a counterintuitive strategy that Lattice often recommends to teams: launching tokens during a bear market. This allows a project to establish a base of token holders on a low-cost basis who are enthusiastic about the project's future.

• Crypto founders tend to be financially savvy and often have access to liquidity much earlier than their counterparts in traditional startups.

• There’s a trend toward vertical integration, where crypto companies are not only developing applications but are also controlling underlying technologies to enhance the utility and efficacy of their tokens.

• Bozman expresses enthusiasm for the potential applications of stablecoins, particularly in emerging markets. He highlights a convergence of trends, including high interest rates that make branded dollars more appealing and the reliability of cost-effective blockchains like Solana.

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What was the defining moment that drew you into the world of crypto?

Bozman's journey into the cryptocurrency space was somewhat atypical; he started working in the field before fully grasping it or feeling a strong excitement for crypto.

He moved to San Francisco at the beginning of 2016 to work on the deal team at AngelList, a platform that facilitates capital flow into early-stage startups. Here, Bozman was part of a team that helped streamline this marketplace, engaging in venture-related activities, though not directly as an investor.

In the summer of 2017, this experience led to the spin-out of CoinList, a company aimed at constructing infrastructure around primary capital formation for crypto. CoinList was a joint venture between AngelList and Protocol Labs, primarily established to manage the Filecoin token sale. This project needed a platform that could handle token sales compliantly, incorporating KYC procedures and accepting fiat money—services that were absent at the time.

Bozman became the first employee of CoinList in October 2017, following his boss, COO Graham Jenkin, from AngelList. His decision was driven by his admiration for Jenkin and a belief that the crypto sector offered more room for innovation than the established processes at AngelList. To Bozman, the cryptocurrency field presented a vast "blue ocean" of opportunities for innovation and new product experimentation.

Despite starting with a minimal personal investment in crypto—holding just about $100 in Ethereum—Bozman's initial tasks at CoinList threw him into the deep end. One of his first responsibilities was to sift through over 2,100 token sale applications submitted to CoinList’s website. This process exposed him to the chaotic and often nonsensical side of the ICO boom. This exposure included outlandish projects like a company wanting to raise $400 million to build a hotel in space, integrating a token in an unclear manner.

The defining moment: However, the true potential of crypto became apparent to Bozman almost a year and a half later when he began making small angel investments and met with early-stage founders who were genuinely innovating.

• A notable encounter was with the founders of Instadapp, who were then teenagers in India. They had developed an application that bridged MakerDAO and Compound, key platforms in the nascent DeFi space. Impressively, they secured $30M in their smart contracts within a week without venture funding.

This experience highlighted the transformative power of permissionless capital markets. It underscored how individuals could make significant impacts regardless of their geographical or financial backgrounds. This realization was pivotal for Bozman, illustrating both the cryptocurrency world's problematic and profoundly empowering aspects.

What led you to launch Lattice Capital?

Bozman's path from CoinList to Lattice Capital involved several parallel developments. At CoinList, he occupied a pivotal position, connecting with promising teams early on, such as Solana in 2018. This exposure allowed him to recognize the potential for a more significant role within the crypto space beyond his duties at CoinList, prompting him to explore and build a personal brand in this emerging field.

Starting in early 2018, Bozman began making modest angel investments. 

His early interactions included meetings with the founders of OpenSea and Dune Analytics, which proved pivotal, although not all investments were successful. This phase of making angel investments expanded his network and introduced him to many influential figures in the crypto community.

By 2020, the idea that combining efforts could yield greater results began to take shape. Bozman, along with his CoinList colleague Mike and a few others, started a syndicate of operator angel investors named Free Company. This initiative allowed them to consolidate deal flow and investment resources, leading to successful investments in projects like Audius, Axie Infinity, Yield Guild Games, and Ribbon.

As the crypto bull market intensified, the traditional coordination model among investors began to falter due to logistical challenges and the fast-paced nature of funding rounds. This experience ran concurrently with Bozman's role in Dove Metrics, an initiative born from his desire to contribute more significantly to the crypto ecosystem than his role at CoinList allowed. Dove Metrics began as a simple Google doc listing active crypto funds and evolved into a key source of fundraising data, culminating in its acquisition by Messari.

The genesis of Lattice Capital came when Bozman decided to leave CoinList in January 2021, wanting to support early-stage teams more directly in a crypto-native context. Recognizing a gap in the market for hands-on support in areas like token launch strategies, narrative building, and community engagement, Bozman and Mike envisioned a new type of fund that could effectively offer go-to-market strategies. Initially conceived as a $5M fund, Lattice aimed to operate part-time but quickly expanded into a $20M fund requiring full-time attention.

Can you explain how your consulting experience influences your support to your portfolio companies? What's your overall approach to adding value?

Bozman believes that as investors, specializing in a narrow set of skills is more effective than overpromising and underdelivering. This philosophy stems from Lattice's expertise in bringing protocols to market, a skill honed over six years, beginning with CoinList and extending through Bozman's consulting work. Lattice distinguishes itself by offering concrete, actionable support rather than vague strategic advice.

For instance, Bozman highlights that Lattice has extensive experience in community management, setting up communication platforms like Discord, and logistical support such as connecting teams with legal and accounting services for token sales. They have also been instrumental in crafting marketing materials that demystify complex protocols for general audiences and have successfully closed numerous business deals within the crypto space. This hands-on experience gives Lattice a unique edge in genuinely assisting crypto projects.

Lattice primarily focuses on two key areas:

1. Token Launch Support: This includes everything related to the launch, from designing the token and its economics to executing the launch strategy, whether through a fundraising event, a liquidity bootstrapping pool (LBP), a fair launch, or an airdrop. Bozman emphasizes the importance of tactical decisions like selecting the right legal partners, foundation setup, and market-making strategies. These might seem mundane but are critical for a successful launch and can severely set a project back if mishandled.

2. Commercialization Assistance: For infrastructure projects, Lattice helps in securing customers and closing deals. They leverage a proprietary CRM database containing thousands of contacts in the crypto industry, which can facilitate introductions and business development. Bozman notes that Lattice's ability to help write case studies, produce marketing materials, and recruit sales and business development personnel stems directly from their firsthand experience in these areas.

Additionally, Bozman is actively involved in assisting several portfolio companies with follow-on fundraising efforts, which he considers a fundamental aspect of venture capital support. Despite the common perception of investors as minimally helpful, Bozman and Lattice strive to debunk this notion by being actively engaged and resourceful partners in their investments.

Based on your insights, particularly regarding token launches, what are one or two crucial tips that founders should prioritize to ensure a successful launch?

Bozman emphasizes a counterintuitive strategy that Lattice often recommends to teams: launching tokens during a bear market, though this advice is seldom followed.

He explains that projects with robust communities often correlate with scenarios where retail investors could accumulate tokens at a lower price over an extended period. While this isn’t universally true, it's a common trait among projects with a stable base of token holders.

• For instance, during the Solana sale, the token was available at a clearing price of 22 cents, excluding American buyers, and remained under $2 on major exchanges like Binance and Coinbase for months.

• This accessibility contributed to a strong, long-term holder base. Similarly, the Chainlink community, known as the Link Marines, likely benefited from purchasing the token at low prices, fostering a loyal group unlikely to sell.

Bozman argues that releasing a token in a poor market allows a project to establish a base of token holders on a low-cost basis who are enthusiastic about the project's future. He contrasts this with launching at a valuation of $10B with an 8% float, which he views as problematic.

Current trends in airdrops also complicate this, as projects attempt to maximize the notional value of the airdrop from the outset, leading to inflated fully diluted valuations (FDVs) that make it challenging for holders to buy more tokens after the initial offering.

This strategy can prevent scenarios reminiscent of the ICP launch, where token prices plummet continuously. Bozman highlights the importance of building a narrative and ensuring some upward price momentum to maintain holder interest and avoid immediate sell-offs post-airdrop.

In conclusion, Bozman advocates for launching at a low FDV if the project is serious and believes the market will eventually recognize its value. This approach not only rewards the community more significantly beyond the airdrop but also aligns long-term holder interests with the project’s success. This perspective, though not widely held, addresses common mistakes in token launch strategies.

What are your views on the dynamics of founders selling tokens, particularly in the early stages of a crypto project still seeking product-market fit?

Bozman believes that there isn't a definitive rule for when founders should sell their tokens, suggesting that the decision is largely context-dependent. He provides a rough framework, stating that Lattice is generally comfortable with founders selling below 5% of their holdings during early funding rounds like Series A or B, particularly if there’s a justifiable reason for the sale.

For example, he discussed a scenario involving founders who have been earning below-market salaries and are facing significant life events, such as having a baby. In such cases, Bozman supports the founders' decision to sell a portion of their holdings to secure financial stability, as long as it doesn’t significantly alter their motivation to continue building the company.

Bozman also reflects on the broader cultural ethos surrounding founders in Silicon Valley, which often places them on a pedestal. He acknowledges the challenging nature of being a founder compared to being an investor, yet he critiques the notion that investors should unconditionally worship founders. He points out that crypto founders tend to be financially savvy and often have access to liquidity much earlier than their counterparts in traditional startups, which can lead to behaviors not typically accepted in the tech industry, such as running multiple companies simultaneously.

Further, Bozman observes that the norms in the crypto space might be pushed beyond reasonable boundaries, leading to potential conflicts of interest and behaviors that can harm token holders and shareholders. He notes instances where founders have raised significant funds, sold tokens, and then disengaged from the project, leaving investors with losses. Such actions, he argues, should be openly criticized and addressed as they undermine the integrity of the crypto ecosystem.

Overall, Bozman underscores the importance of evaluating each situation on its own merits while maintaining a firm stance against unethical practices that can damage investor trust and the broader market landscape.

What sectors are you currently interested in, and what is Lattice's investment thesis for the next 18 to 24 months?

Bozman highlights an intriguing trend among consumer crypto companies finding new monetization strategies. He notes that companies with unique distribution advantages are venturing deeper into the tech stack. For example, while Lattice is not an investor in Blur and Blast, these companies have developed a robust community and market presence with Blur, attracting professional NFT traders. This success led them to explore further opportunities, such as rolling out their own Layer 2 (L2) solutions to capitalize on their incentive design capabilities.

Similarly, CyberConnect, a part of Lattice's portfolio, has built one of the largest crypto social apps and is now developing its own L2 to streamline and enhance user integration across social apps. This movement signifies a broader pattern where companies that have established proprietary distribution channels are now leveraging this advantage to create more integrated and comprehensive solutions, essentially monetizing their infrastructure.

This shift suggests a trend toward vertical integration, where crypto companies are not only developing applications but are also controlling underlying technologies to enhance the utility and efficacy of their tokens. Bozman articulates that this approach not only offers more value to users but also aligns with the growing need for platforms to own more of their operational stack. He acknowledges that while some may view this cynically as a maneuver to increase token utility, it also represents a strategic move to build more value around the protocol by harnessing a robust user base and distribution network.

Bozman concludes that the ability to attract and maintain an engaged user base in crypto is challenging, and those who succeed are well-positioned to enhance their ecosystems through deeper vertical integration. 

Given your experience with startup infrastructure, business intelligence, and deal intelligence companies, what gaps do you see in this sector? If you weren't running Lattice, what kind of solution or product would you want to develop in this space?

Bozman expresses enthusiasm for the potential applications of stablecoins, particularly in emerging markets. He highlights a convergence of trends, including high interest rates that make branded dollars more appealing and the reliability of cost-effective blockchains like Solana, which facilitate inexpensive money transfers. Companies like Bridge have already built substantial businesses by providing foundational rails, yet Bozman sees significant room for growth in embedding crypto rails more deeply within these ecosystems.

On his wishlist, if he were not leading Lattice, would be to innovate further in the token launch space. Bozman, having spent considerable time developing CoinList, believes that while the sector is still nascent, it holds vast potential. He recognizes the challenge of balancing the desire to run numerous token sales with the need to maintain a quality standard, ensure profitability for users, and uphold a brand's reputation—likening it to the exclusivity of a nightclub. Despite some launch pads erring by releasing what he terms "shitcoins," Bozman remains convinced that there is room for a more blockchain-centric approach in this area, suggesting an opportunity to create a significant business that improves upon current models.

Rapid Fire Questions

1. What's one piece of content every aspiring investment professional should read/watch?

   • Dumb Money (Movie).

2. What’s your biggest investment mistake?

   • Mid-curving stuff, like mid-curving SOL.

3. What’s the most underrated use case of crypto?

   • Having fun (e.g., Gaming/Gambling).

4. What’s your most contrarian view in crypto right now?

   • Investing in private rounds currently seems unwise. Doing venture deals right now is dumb.

5. What’s the biggest risk that the crypto space is facing?

   • Financial nihilism meme coin stuff.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.