Former DCG, Blockchain Capital investors launch $20M early-stage fund at crypto advisory firm Reverie

After a couple years of dabbling in angel investments, crypto advisory firm Reverie is now bringing a bigger checkbook to bear. The firm is launching a flagship $20 million fund to invest in pre-seed and seed-stage crypto companies, its co-founder Larry Sukernik exclusively told TechCrunch.

The fund, anchored by two U.S.-based institutional investors that Sukernik declined to name, follows two years of relatively smaller investments in about 40 companies, including decentralized exchange Osmosis, blockchain scaling-focused Sovereign Labs and Solana-focused crypto marketplace Orca. The firm has also advised projects like money market provider Compound, and trading platform dYdX. While Reverie plans to be a generalist crypto fund, it’s looking at decentralized social media and security, right now.

While the fund’s investment thesis isn’t exactly uncommon for the space, it stands a good chance of standing apart from the bulk of its peers because it wants to favor companies building products that are not speculative in nature.

“We realized over the years that you can’t cash in IQ points for users,” Sukernik said. “Every successful company in the world — whether it’s Apple or Facebook or Google — started with building products people want, not technical research. We want to build a home that goes back to basics and focuses on the basic ingredients that traditionally made companies great, iterating on product-market fit.”

Many investors are focused on technical innovations or speculative growth for their portfolio companies, but Sukernik thinks it’s a better idea in the long run to focus on building products that people want.

While that may seem an obvious thing to aim for, I can tell you from my experience covering this industry that a lot of crypto companies struggle to find demand for the projects they’re building — even if they’re unique and innovative!

In general, Sukernik thinks a lot of VCs don’t think about building sustainable companies or protocols, but use speculation as an onboarding tool into crypto. “They’re going to help create a product for a gambling casino-like experience. That way, people are attracted to it and they stay once you get them in the casino. But we reject that premise… There’s a way larger market in non-speculative products and building things people love.”

Sukernik said he isn’t trying to imply that all speculative projects are inherently bad, given that his firm has invested in some of the largest exchanges, but he wants to go beyond that area and focus on founders that take features of crypto and mix and match them to create “special products” that will be sustainable in the long term.

Sukernik stressed that the fund was strategically set to $20 million because Reverie wanted to start small, and it’s harder to deploy a $100 million fund, for example, “in a profitable way.”

“You have more money than there are startups… We don’t need that much money, there’s not that many companies being started in crypto, and [the $20 million] is enough for us to prove the thesis that a hands-on investor can make generational businesses.”

Sukernik and his co-founder Derek Hsue were investors at Digital Currency Group and Blockchain Capital, respectively, before they started Reverie with an aim to have a more hands-on role in helping founders build companies.

Reverie co-founders Larry Sukernik and Derek Hsue. Image Credits: Reverie

The two were fed up with the way crypto venture was being done when the firm launched in 2021, Sukernik shared. Many VC firms have small teams that are responsible for managing portfolios of 100s of companies. “When you have a large fund and a small team, you don’t really have time to spend with founders. So, to me and Derek it was important for us to look back and say we were a part of the process of building a company.”

Most crypto investors are “just money guys, they’ve never run companies or if they have it was a long time ago so they can’t give good advice or recent advice founders need,” Sukernik said. “And we didn’t like that… we wanted to get more hands-on.”

“Obviously, in this business, most things don’t work out,” Sukernik said. “That’s just the name of the game; I don’t know what Reverie is going to look like 10 years from now, but I know for sure we’ll always be investing in early-stage founders and going to be long-term partners to them. Everything else remains to be seen.”