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 with 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 has 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 (ICO) 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, responsible projects will include governance measures to protect investors and to restrict the distribution of their token supplies over a time frame 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 proved to be scams.
Brukhman says that CoinFund has backed founders whose privacy choices run the gamut from being totally open on social media, to those who shield their identity with pseudonyms. But he says the firm always makes a point of knowing who it is dealing with before investing.
“From our perspective, we’ve never had to invest in something that had a purely anonymous founder. We never found a project where, you know, it was so important to invest in it that we should have taken that risk on founder anonymity, and so we just haven’t done that,” he says.
You can find the whole interview with Brukhman, as well as the first three episodes of Crypto Playbook, here.
