Jake Brukhman is a computer scientist who worked at Amazon and on Wall Street before founding CoinFund, one of the first venture capital firms dedicated to cryptocurrency investing. He is also the latest guest on Fortune’s new podcast Crypto Playbook (available on Spotify, Apple and YouTube) where Brukhman shared his insights based on a decade of investing — and offered some very practical tips for those coming to this market for the first time.
His first piece of advice for newcomers is that it’s safest to choose major cryptocurrencies that have an established track record. Doing so will let investors gain exposure to crypto, and benefit from its upswings, while also letting them stay clear of the hyper-volatility and outright scams that can come with newer projects.
“As a new participant just entering the space, it is absolutely much safer to stick with the big names. You’re not going to go wrong if you are investing in Bitcoin, investing in Ethereum. These are projects that have been around for over 10 years at this point, and have very well established communities and ecosystems,” said Brukhman.
CoinFund had the good fortune to invest in Ethereum when it was just 60 cents, compared to the nearly $4,000 it is trading for today, but his advice still holds.
In the podcast, Brukhman went on to note that, as the crypto industry has matured, a set of norms and guardrails have emerged to ensure blockchain projects are managed responsibly. These new practices focus primarily on token management and creating incentives to align founders and investors.
In the past, most notably during the Initial Coin Offering mania of 2016, blockchain project founders would rush to sell millions of tokens to retail investors — and then fail to follow through with their plans, causing the price of the token to slump or collapse altogether.
Today, Brukhman notes that responsible projects will include governance measures to protect investors and to restrict the distribution of their token supplies over a timeframe of several years. He says that 90% of the crypto projects CoinFund chooses to back have these attributes — which is a pretty clear indication that newer investors should also look for these qualities before putting down their money.
Finally, Brukhman shared that his fund shies away from projects with anonymous founders. While this may seem obvious, it’s worth remembering that the original appeal of crypto for many people was as a new form of money that was not controlled by governments, and that protected the privacy of its users.
The most famous example, of course, is Bitcoin whose founder Satoshi Nakamoto has never disclosed his identity to this day. Satoshi enjoys nearly mythical status among crypto fans for building the first and most successful blockchain, and for acting with complete integrity — but unfortunately, he is the exception not the rule. Subsequent projects run by anonymous founders have typically proven to be scams.
