opinion

My Farcaster app coin thesis 

Idea: Invest small amounts in the low cap app coins of your Farcaster friends

It is commonly understood that VCs return the fund usually with one or two of their investments while all other assets in the fund go to zero. 

This makes intuitively sense if you know that 90% of all startups fail, which means that you really have to manage to invest in the 10% of startups which return your fund.

One strategy which I have observed VCs employ is a sort of spray-and-pray where you seize the opportunity in the market through investing in a thesis that generates a lower bound threshold which triggers the investment. Simply put: what are the points that make you go, „oh wow, this is potentially a really promising project!?“

In the last sub-cycle, six months ago, I was pissed at the market. I felt as if VCs had privatized price discovery of the legit projects, offering them at inflated levels to retail, while at the same time meme coins were trading at absurd valuations, leaving me as more of a value investor in the dust as I couldn't figure out in which meme coin to invest in.

But now it seems as if the tide has finally turned with a lot of builders having launched app coins trading at small evaluations launching reasonably useful products which I can inspect and judge out in the open.

A dream which I had a long time ago now suddenly feels like becoming a reality as there are numerous app coins from people who I have followed for years on Farcaster who I've become friends with whose apps are decent and whose coins seem reasonably priced for what they're doing.

It feels as if, using a few elegant criteria, I can now invest between $50 and $200 per project into actual things that may have a fundamental value at last, and where there is a good chance that while 90% may fail, one or two projects could return the entire investment.

So this is my app coin thesis for this sub-cycle, which consists of investing small amounts of money into a lot of projects started by friends or people who I have followed here or on CT in the hope that some of them will become huge breakout successes.

A few criteria that seem useful to me:

1 The app has some utility that goes beyond the usual crypto circle jerk. Meaning, what the entrepreneur tries is to establish and implement net new consumer behavior.

2 The coin has not been passed around yet to the usual suspects of investors who will unreasonably inflate a project's value proposition to sell it to some greater fool. Instead, I am looking for projects who have somewhat ghost-launched their token and they are still actively trying to find product market fit for the app that they are building.

3 The project's main value accrual thesis is that a great app will catapult the token value to higher highs. The product works decently well. And it is clear that a main focus of the project is to improve the product.

4 The founders are known personally to me, meaning I know them as fully doxxed and I have seen them at conferences or I've known them or seen them engage on FC for quite some time. They have a reputation to lose.

With these few simple criteria, I hope to invest a small amount of money from now on and over the next few months in the hope that I will see some breakout successes like Zora, which was very reasonably valued at 27 million USD market cap just weeks ago but is now probably going to be valued at the same level as other popular memecoin launchpads who have had their price discovery done more privately.

For me, this is really a huge dream come true. 

I am just a software developer. I am not part of a cabal. I don't want to sell my soul. I generally value my freedom to speak my mind higher than improving my net worth. I was never born into family wealth or as part of a socially influential class. Which means, for most of my time in crypto, I haven't had the education, the connections, or the money. And for sure not the accessibility to make such investments. 

But now I feel as if this is a unique chance of making really great investments into products that I believe in.

I would love to see this cohort of Farcaster-builders setting an example in accessibility to potentially really great investments beyond just last sub-cycle's 6-month short-term optimization. 

For me, crypto-consumer apps have a life-cycle length far beyond that. And if this thesis of investing in crypto-apps turns out to be correct, I would love to have witnessed us being able to allocate capital in the next Facebook or Amazon, but without the necessity of being part of some unnecessary cabals. 

The apps which have launched their AppCoins make me hopeful that this future is already here, and that it is just not equally distributed yet.

Here’s to hope! See you in the app coin trenches!