First Stage Investor Issue No. 35

First Stage Investor Issue No. 35

Bitcoin Is Back! Will It Hit $50,000?

Back in August of 2017, I wrote an article titled “It’s Bitcoin’s Time to Shine.” At the time, bitcoin was trading for around $2,900. About four months later, in December, bitcoin peaked at $19,783.06. Since then it’s been a bumpy ride, with bitcoin retracing all the way back down to a low of around $3,200 last December.

As I write this, bitcoin is trading at around $8,700. We are officially back in a bitcoin bull market. And I’m confident that the bottom is in for this cycle. If this is your first boom-and-bust bitcoin cycle and you’re still holding, congratulations. I believe we’re set to reap the rewards of our patience.

That doesn’t mean we’ll go straight up from here. Crypto is still a young industry and asset class. That means volatility is the norm for the foreseeable future. But it does mean we are beginning a new adoption cycle. I expect bitcoin to blow past its old all-time high of $20,000 in the next year. I believe by the end of this cycle, we could see bitcoin at $50,000 or higher.

The stars are lining up for crypto again. Bitcoin – and select altcoins – are headed for new heights.

Institutional Money Is Here

We have long expected institutional investors to lead this next bull market. We may have been a bit early calling for this, but it is rewarding to see it finally happening.

The most impactful institutional player entering crypto is Fidelity and its new Digital Assets division. Fidelity is a wealth management giant – both in terms of reputation and size. It manages around $6.8 trillion of assets for its customers. The importance of having such a huge and reputable financial player offering bitcoin trading and custody cannot be overstated.

I expect Fidelity Digital Assets will drive billions of dollars into bitcoin this year, which should push prices significantly higher. And I expect most of Fidelity’s clients will enter the space with a long-term buy-and-hold perspective, as is typical of sophisticated investors. This should be a strong price catalyst.

Fidelity isn’t the only financial giant moving into crypto. Bakkt, owned by exchange giant Intercontinental Exchange (ICE), is building out its own bitcoin futures and custody products. E-Trade has announced it will soon offer bitcoin and ethereum to its 4 million customers. Ameritrade is reportedly testing bitcoin and litecoin trading. Payment giant Square offers bitcoin to its more than 15 million users through its Cash App. Bitcoin sales boosted Square’s top line by $65 million last year. And just recently, AT&T announced it’s accepting cryptocurrency payments for its mobile service.

A Prime Catalyst

In May of 2020, the mining reward for bitcoin will be cut in half. That means there will be half as much new bitcoin coming on the market. Currently, the reward for every block mined is 12.5 bitcoin. It will be 6.25 per block in May of 2020. A block is mined every 10 minutes.

Mining bitcoin is a big business these days. The fact that half as much new bitcoin will be coming on the market means everyone (and especially the smart money) is in hoarding mode right now.

Halvings happen every four years. And they’re extremely powerful catalysts. In the last two halvings, bitcoin’s price started rising about a year before the actual event. After the 2012 halving, bitcoin’s price rose 9,000%. And after the 2016 halving, bitcoin went up 3,000%.

BeInCrypto’s Carl Bird did the math and explains what will happen next if we follow a similar pattern: “Considering a similar two-thirds decrease in growth, the next bull run could bring prices upwards of $150,000 for a single bitcoin in the years following the next halving.” The chart below shows the amazing effects of halvings.

This is why you want to own bitcoin for at least the next two years and probably longer. Take some profits along the way if you’d like, but hold some of it for the long haul.

A New Halving Variable

The big difference between next year’s halving and previous halvings is the presence of institutional investors. What will these big-money investors do as we approach the bitcoin halving?

I believe institutional investors will rush in to buy and bitcoin’s price will skyrocket. Then the institutional firms on the sidelines will get the feeling they’re missing out.

Their investors will ask, “Do we own bitcoin?” And then the sidelines will clear out as big financial firms catch FOMO (fear of missing out) and jump into the market.

This will be the first bitcoin bull market where institutional investors are participating in a long-term, serious way.

During the previous bull run, the only institutional investors involved were hedge funds. And hedge funds trade in and out of positions quickly. I believe this bull run will be powered by long-term buyers like pension funds, college endowments and wealth managers. Retail investors will also provide strong buying pressure.

This bull run could get crazy, particularly because the macro environment for bitcoin couldn’t be better. The world is finally beginning to realize how out of control the debt situation is and how little is being done to address it.

Financial and monetary systems are beginning to break down, as we can see in Argentina, Venezuela and much of Southern Europe. The deteriorating global financial situation will propel people into alternative assets like bitcoin (and select altcoins).

We can see demand for bitcoin rising sharply in these places. In Argentina, where inflation is raging, citizens would have been better off buying bitcoin at $19,000 than holding the local currency. If they bought bitcoin low or regularly over time, they’ve done amazingly well in terms of preserving their wealth. Here’s a chart showing in-person bitcoin transactions in Argentina.

And here’s a chart showing bitcoin’s price in Argentine pesos.

So let’s see. We’ve got the bitcoin halving coming up in one year. The first major institutional crypto operations are launching now. The macro situation in the current financial system is ugly, which should drive people into alternative systems like bitcoin. Crypto technology is growing by leaps and bounds, with new features like the Lightning Network set to transform the way we use bitcoin.

I’d say it’s a good time to own bitcoin. Sure, I recommend owning altcoins too. But build your portfolio with bitcoin as the foundation. It’s the surest bet by far.

Recommendation: Taste

Invest in Good Taste


Startup: Taste
Security type: Crowd note (will convert into equity if the company is successful – this type of deal is extremely common and generally fair for both investors
and companies)
Valuation (cap): $3 million
Minimum investment: $500
Where to invest: SeedInvest
Deadline: June 14, 2019

I’m very excited to announce our newest startup recommendation, Taste.

Taste is an app that recommends movies and TV shows to users based on their preferences. It is available on the Google Play store and Apple’s App Store. It has a rating of 4.4 out of 5 stars on the App Store and 4.25 out of 5 on Google Play.

If you’re considering investing in this deal, I strongly encourage you to download the app and give it a try. I downloaded it more than a week ago and have been using it regularly. The app has a slick interface, and it smoothly guides users through the first experience.

How It Works

The first time you open the app, you are asked to rate a number of movies most people have seen. Based on the results, Taste recommends movies that other people with similar tastes like. As you rate more movies, the experience gets better because it learns more about your preferences.

Taste uses sophisticated personalization algorithms and machine learning to suggest movies and TV shows to watch. That means the quality of its recommendations should only improve with time. I also believe the data Taste is generating and gathering will be extremely valuable.


Taste has raised very little money so far – only about $75,000 from angel investors last year. Besides that $75,000, the founders have invested their own money and lots of sweat equity.

I love how much this team has gotten done with so little capital. The Taste mobile app launched in May of 2018 and has been downloaded more than 250,000 times since. The team is lean and is shipping out a very promising product. And it is rapidly expanding its offerings. This is a bootstrapped startup, which is my favorite kind.

A deeper dive into its offering page reveals some interesting metrics:

  • 300,000 registered users are generating 4.4 million screen views per month; 200,000 users have been added since the mobile app launch in May 2018.
  • There were 4,800 daily active users and 47,000 monthly active users in February, up more than 45% month over month.
  • Its match algorithm is 2.5 times more accurate than generic rating systems (based on management estimate), with more than 400 data points per user.
  • Of users who have linked Facebook, 30% have friends on the Taste platform.
  • It had 1,700 paid premium subscribers as of January, and acquisition costs for paid subscribers (six-month average) are down 20% month over month, bringing the ratio of paid subscribers’ lifetime value to the customer acquisition cost of paid subscribers to 1.43.

Taste is not a breakaway success yet, so the $3 million valuation seems reasonable.

The 1,700 paid subscribers are an encouraging sign. They show the app is providing value to users and monetization is possible. But I actually recommended to the team that it pull back on premium options for now, as they don’t seem very user-friendly. I think the team should add as much value to the free product as possible instead, to boost growth and usage. The team was very open to feedback and seemed to take the recommendation seriously, which is a good sign.

Taste had already raised $200,000 as of May 28 on SeedInvest, which is an impressive raise. The team notified Taste users about the fundraising through the app, and it appears that users are investing in the product, which is always a good sign. Taste could raise as much as $400,000, which I am confident it will put to good use. Bootstrapped startups tend to be extremely efficient with capital, and I’m guessing this team can do a LOT with $400,000.


Taste is still in bootstrapping mode. It’s burning very little cash, and most key team members are working just for equity (shares). The co-founders, John Lin and Justin Messina, have worked together for the last seven years. John is the CEO and a designer by background. Justin is the chief technology officer and a full-stack developer (advanced programmer). Having a team that’s worked together before is a positive signal in startup investing, and having founders with useful technical skills is a good sign too.

The Early Investing team spoke with Lin for about an hour and came away from the conversation extremely impressed. He is clearly passionate about what they’re building and has a palpable drive to succeed.

Taste is using technical contract workers when needed and seems to have a very good handle on this process (which is not easy). They have a good relationship with a mobile development group in South America that provides excellent services at reasonable prices.

The Vision

For now, Taste rates only TV and movies. But long term, this team is thinking big. It’s had music recommendations in private beta testing for six months, and it is nearly ready to launch.

Taste plans to eventually launch podcast, book, game and other new categories of recommendations. Here’s an excerpt from Taste’s Q&A on its deal page that explains how its system is built to scale and grow into new categories.

Question: What is the lead time for the development of each new category? What
are the efficiencies in the development of each new category?

Answer: The efficiencies are exponential. The movie category took us eight months to build and collect enough data to release to the open public. The TV category took us four months. We intend to open multiple categories at once in 2019.

We are able to do this because the database has been written in a way that’s simple to scale. Our unit for recommendation is an item and most of the elements relating to the item are very similar. Our goal is to make categories and items open to user-generation within two years.

On the algorithm side, the system’s written in such a way that data can be computed separate or combined with other categories. Our system’s smart enough to know which cross-category correlations to use when necessary. We built the system this way with scaling across category in mind since day one.

The team has clearly put a lot of long-term thought into how it’s building this company. With the ability to launch multiple new categories relatively quickly, it’s more likely that at least one of them will be a breakaway success.

Movies and TV have provided a great start for Taste, but it’s possible that restaurant recommendations or mobile games or another category will end up being the most profitable.

At that point, the team can focus on that category or can continue to support multiple categories if others are still being used.

When investing in the very early stages of a startup, it’s good to see clear expansion options. In a pinch, the company can pivot to a similar but better area. Taste has expansion and pivot options galore.

How to Invest

First, you’ll need to register for an account on if you don’t have one yet. Once you’re registered, go to the Taste investment page and click the blue “Invest” button.

Follow SeedInvest’s instructions through the investment process and make sure you complete the investment.


This opportunity, like all early-stage investments, is risky. Early-stage investments often fail.

Expect to hold your position for at least three to five years. An earlier exit is always possible but should not be expected. All that said, I believe Taste offers an attractive risk-reward ratio. 

Disrupting IPOs

IPO Disruption Underway

Startups are in the business of disruption.

It’s the sharp-edged knife they use to carve out a piece of a market dominated by legacy companies.

Successful startups eventually launch an IPO.

But now it’s the IPOs themselves being disrupted.

When companies go public, they have a choice. They don’t have to join the public markets through a pricey IPO underwritten by big banks.

But until recently, that’s what they traditionally did.

The big banks pressure these companies to use their underwriting services in an IPO. It’s essential, they say, to sidestep certain IPO risks… like fast-falling share prices.

By buying shares in advance, selling them to institutional investors and setting the IPO price, banks prop up prices in case of weaker-than-expected demand. Or so they say.

Uber paid some of the most powerful banks on the planet $100 million for their underwriting services. And it still saw its price flop on IPO day and continue to drop in the days that followed.

Uber wasn’t the first big IPO to feature a company bleeding red and with slowing growth. And it won’t be the last. So that’s no excuse for the banks.

IPOs give private companies one last big payday, which many of them need.

They also give big private market investors one last chance to get in on a company early and cheaply.

On IPO day, institutional investors capture the notorious “one-day pop.” Underwriting banks set share prices low to encourage a pop of 10% to 20% when the stock is listed.

It doesn’t always work out that way, but when it does, everyday investors are walled off from this last little bonus the big banks give to their big clients.

IPOs are an antiquated and costly system designed to reward founders and well-connected investors.

And they’ve been the primary vehicle for a public listing for the past century…

It’s time for an alternative.

As it happens, Slack is about to show us one.

The Growing Appeal of Direct Listings

Slack has elected to do a direct listing, essentially a straight-line path to the public markets.

The direct listing, scheduled for June, will allow its employees, early investors and insiders to sell their shares on the Nasdaq to ANYBODY.

And why not? Slack doesn’t need the money an IPO provides.

As of January 31 of this year, Slack had roughly $841 million in cash.

That cash should last for around 8.6 years at Slack’s current burn rate.

Slack’s revenue grew 82% in 2018, which is slower than previous years’ growth. But its losses have also shrunk.

Spotify did a direct listing last year.

So far, shares are up 3% from their offering price. But they’re down 18% from their opening price.

Airbnb (currently carrying a valuation of $35 billion) is also considering a direct listing for later this year.

Not Only for Unicorns

Direct listings don’t just appeal to the big startups. Much smaller companies are beginning to employ them too. In our First Stage Investor portfolio, we have a few companies seriously considering this alternative. Most of this information is confidential, but one company that has made its plans public is Digital Brands Group (DBG).

DBG intends to list on AIM, London’s junior stock market, later this year. And next year, if all goes well, it will do a direct listing on the Nasdaq.

The AIM listing will enable current shareholders to sell their shares through brokers specializing in England’s public markets.

Its follow-up listing on the Nasdaq would enhance liquidity even more (see our “Portfolio Update” section for more information on DBG’s future growth and “exit” plans).

Direct listings appreciably shorten the wait for liquidity. Early investors don’t have to wait the legally required six months after an IPO to sell their shares because no new shares are issued.

Direct listings also allow a company to go public without further dilution, so early investors and employees own a bigger stake in the company and get a bigger financial reward for their shares.

Spotify cracked the door open. And plenty of companies will be watching Slack’s offering to see if the direct route really works.

If it does, it will open the door even wider for mega direct listings.

The first wave of direct listings will consist of companies with rapid revenue expansion or growing profits or a red-hot brand.

Based on the pipeline of large startups thinking about going public, about 15 to 20 companies would qualify.

As for smaller and earlier-stage startups like DBG, we should see more of them retreat from the passive approach of letting the “liquidity event” take care of itself.

As an investor, I prefer that.

Direct listings give startups better control over the timing and circumstances of their exits.

Old Dogs, New Tricks

Mobius Could Teach Schiff a New Trick

Cassette tapes killed record players. CDs killed cassettes. And digital music has killed CDs. Sure, people grumbled when each new technology emerged. But I haven’t seen a CD player for quite a while. People eventually accept new technology and move on.

Of course, some get stuck behind. I still drive a manual shift car. My uncle wrote all 20 of his books (my favorite: It’s Not Over ‘Til It’s Over by Al Silverman) on his beloved Smith Corona manual typewriter.

And then there’s Peter Schiff, a stock and gold investor of some repute. He loves gold. And he seems to hate anything that dares to challenge it. He must have read somewhere that bitcoin was “digital gold.” He’s been lashing out against that idea recently like a hurt adolescent.

“I don’t think bitcoin has anything in common with gold,” he says. “I mean it tries to pretend to be gold, but I think it’s fool’s gold.”

Gold is money, he says. “There is no way [bitcoin] can even function as money.”

It’s an odd argument. Gold is many things, including a “store of value.” But it isn’t money.

You won’t see people slapping down a bar of gold for a cup of coffee anytime soon. On the other hand, Starbucks recently announced it’s willing to accept bitcoin as payment.

Schiff thinks bitcoin holders are suckers too young to know better. “A bunch of young inexperienced kids are going to be dumb enough to buy bitcoin. Maybe they will. But as they get older they’re going to learn better.”

And, as a parting shot, he says it’s going to end in tears. “Now we’re in a bear market and… You have these false rallies, we’re having one now… Pretty soon it’s mostly going to be stories about people who lost their life savings because they put real money instead of play money into bitcoin.”

It would be one thing if Schiff said that bitcoin hasn’t completely solved its technological issues and must be considered, to an extent, unproven and risky until it does.

But Schiff is more absolute: Bitcoin has “no value to hold” and is a “pump and dump scheme.”

Bitcoin is 10 years old. Gold is tens of thousands of years old.

There’s a legitimate argument here that bitcoin is simply too new to act as a “store of value” in the same way gold does. But Schiff does not go down that road.

You get the feeling that bitcoin could climb to $100,000 and Schiff would still not change his mind. It’s not easy to say, “I was wrong.” And that makes Mark Mobius’ story rather remarkable.

Old Dogs Can Learn New Tricks

Mobius is every bit as well-known an investor as Schiff. He joined Sir John Templeton’s emerging markets investment group in 1987 and became its executive chairman in 2010. He co-founded Mobius Capital Partners in early 2018. And he has called bitcoin a “real fraud.”

But he’s changed his mind.

“I believe bitcoin and other currencies of that type are going to be alive and well,” the 82-year-old Mobius recently told Bloomberg.

He’s still not endorsing bitcoin as an investment. He hasn’t invested himself and gives no indication he plans to do so.

But he sees the need for bitcoin. “There’s definitely a desire among people around the world to be able to transfer money easily and confidentially,” he says.

Well said. Take note, Schiff.

Portfolio Update

Portfolio Update: DBG Swings Into Acquisition Mode

Digital Brands Group (DBG) expects growth to take off this year, with revenue increasing by 4.6X to 5.9X and reaching between $17.5 million and $22.5 million – depending on whether the company acquires one or two brands before the end of the year. First quarter revenue was 65% higher than it was in the first quarter of last year. And sales will accelerate throughout the year, Hil says.

DBG is an online direct-to-consumer company specializing in lifestyle brands. Its first product was high-end jeans made from quality denim and designed and stitched in-house. Since those early days, it’s expanded to leather jackets and leggings, suede jackets, trench coats, technical outerwear, hoodies, tees, button-downs, and terry cloth. It’ll introduce cashmere sweaters and pants this fall.

The majority of its products sell well. But that’s not why growth expectations are so high. DBG has adopted a holding group growth model. It grows via acquisitions. It plans on buying five to 10 consumer brands (that must generate at least $5 million in revenue). DBG intends to grow them into $250 million companies within five years.

Hil previously scaled custom tailored clothing brand J.Hilburn to $55 million in revenue in just six years. He used that expertise to launch DBG’s second brand, men’s luxury suiting and sportswear brand ACE Studios, this past January. Hil expects it to do around $1 million to $2 million this year. So when Hil says DBG is on schedule to meet its revenue goals this year, that carries weight in my book.

A look at the chart below suggests DBG is executing on the growth-by-acquisition plan we first outlined in our September 2019 issue.

The holding group model will allow DBG to cut costs and deploy a marketing strategy across all brands that focuses on tailored, targeted and relevant content. Its new chief marketing officer, Laura Dowling, is supremely qualified. She comes from similarly structured holding group companies Tapestry (holdings include Coach, Kate Spade and Stuart Weitzman) and Swatch Group (Harry Winston, Omega and Breguet).

A lot of Laura’s initiatives have already seen positive results. She’s using targeted texts to help trigger conversions. Conversion rates are up more than 19X – from 3% to 58%. And click-through rates are up 12X – from 6% to 72%. Laura has also begun doing fewer one-time product notifications and more longer-term campaigns that involve multiple communications with a customer. This multi-touch approach has resulted in a 79% increase in sales volume.

Laura’s other initiatives are paying off too, with a 66% increase in new customer growth and an increase in average order value from $129 to $149. Laura told me she thinks this boost in growth is sustainable far beyond this year. She also said not to be surprised if growth in many of these important metrics accelerates from this point.

As for the endgame? A buyout from one of several giant merchandisers is very possible. Amazon is used to dominating everything it touches, but it’s off to a slow start in the retail lifestyle space. Walmart and Target loom as possible interested parties too.

DBG is exploring following up its current raise on StartEngine with a listing on London’s junior stock market, AIM. Hil said British investors are eager to fund high-growth retail opportunities. They’re much rarer in Europe than in the U.S.

DBG is also weighing the option of going public via an OTC listing in the U.S. The company wants to not only let its past and current investors buy and sell shares more easily but give its founders and the early employees of its acquired companies a shorter pathway to liquidity.

Most exciting of all, DBG plans to trade up to the Nasdaq sometime in the second half of 2020.

To invest, go to the DBG investment page on StartEngine here. Shares are priced at $0.53. We’ve already recommended DBG a record three times. And we continue to be impressed with the company’s progress. Its current raise ends July 1.

If you’re interested in investing, DBG has offered an incentive exclusively for our members. Invest before June 13, and you get a $500 store credit for DSTLD products. If you invest between June 14 and June 21, you’re eligible for a $250 credit. And if you invest between June 22 and July 1, you’ll get a $125 credit.

To ensure you receive your credit, email DBG here with your full name and the date of your investment. DBG will email you with additional instructions on how to redeem your credit. Perks become available once the portal releases your investment to DBG. Your credit can be used to buy store products until January 1, 2020.

Portfolio Update: Arbit Expands Into Competitive Intelligence

We recommended you invest in Arbit in 2017 on the strength of its addictive and easy-to-use polling technology. We liked how it enabled companies to conduct market research through connecting with their customers while encouraging engagement.

Earlier this year, Arbit added another major piece to its product offerings, providing deep-dive competitive intelligence.

Arbit’s main customers are venture-backed startups (Lessonly, Parascript, Gladly and HackerOne, among others) that seek data and insight into why potential clients choose their competitors’ products.

“We think we can tease out the underlying motivating factors behind new product adoption behavior,” says Arbit co-founder Alex Bullington. “The data we generate is typically beyond the reach of a startup’s VP of Marketing or Director of Product Marketing.”

Arbit is targeting startups employing 50 to 250 people that are experiencing rapid growth and face competitors that are new to the market.

Sometimes, Alex says, these competitors appear out of nowhere. Little is known about them. Arbit helps fill that data gap.

Arbit is utilizing a subscription service model for this product offering that will generate recurring income. It recently closed its first contract under this model at a recurring charge of $1,500 a month.

Alex told me that the demand and need for this type of service are greater than ever. “There’s been a definite ramp-up in competition. I’m seeing 10 times more startups intent on disrupting their industry than five years ago.”

The stakes are very high, he says. You either succeed and make a mint or fail and go home. “These markets are overly saturated, and the competition is fierce, bordering on ruthless. And it’s getting worse.”

Arbit will continue to build out its competitive intelligence platform and begin automating the collection of this data as much as possible.

Alex believes the data collected from this new service – like its valuable polling data – will give Arbit some lucrative monetization options down the road.

In the first quarter of this year, Arbit’s revenue was evenly split between its old line and new line of business. The company’s operations are cash flow positive, and it has no immediate plans to raise capital.

The Wall Street Journal has called ICOs the “new road to startup riches.”
Top ICOs like Etheroll jumped 7,108%… ARK launched 17,131%… and IOTA rocketed a rare 204,159%.