The Inquisitive VC – Sterling Witzke, partner at Winklevoss Capital

Sterling Witzke graduated from Stanford in 2005 and did various consulting roles until she joined the founding team of RelayRides, now known as Turo, as Chief Business Development Officer. Turo is the first U.S. peer-to-peer car-sharing service and has raised over US$460M in funding from investors including Kleiner Perkins, American Express, August Ventures, Manhattan Venture Partners, and many others.

Witzke went on to complete an MBA from Wharton. While still a student, Witzke joined Dorm Round Fund as a Partner. Dorm Room Fund is one of the first venture capital funds in the US run by students, for students, and is backed by First Round Capital.

Dorm Room Fund has made over 200 investments and has invested in recognized companies like Blockstack and FiscalNote. Portfolio companies have gone on to raise over US$400M from the likes of First Round Capital, Google Ventures, Sequoia Capital and Y Combinator.

In 2014 Witzke joined Winklevoss Capital, which is the family office of Cameron and Tyler Winklevoss, also known as the Winklevoss Twins. The Winklevoss Twins are internet entrepreneurs that co-founded HarvardConnection, later renamed ConnectU. They are also well-known proponents of Bitcoin and are the founders of the Gemini Exchange.

Discussing the thesis of the firm, Witzke stated: “We are just looking for the best and brightest founders. We are early stage focussed in both our traditional venture investments as well as crypto. It is really all about making the best investments up and coming at the time.”

Witzke also clarified the geographical mandate of the fund, by stating that the more traditional non-crypto venture capital investments tend to be very US-focused, as that is the market they understand the most. For crypto, the fund invests globally and has seen a lot of interesting projects coming out of the US, Berlin and other global locations.

When asked where she sees the most opportunity with blockchain technology, Witzke stated that she is particularly interested in identity applications. According to her, identity “is a space that I think is a relatively low hanging fruit, massive market and can move the needle for literally billions of people in the world.“

Being in the venture capital and crypto space for over six years Witzke has noted some interesting changes. In regards to venture capital, Witzke said that companies are raising larger rounds earlier and earlier, and as a result, there has been a proliferation of seed-stage funds, and pre-seed stage funds.

On the other side of the spectrum, she also noted well-reputed venture firms have also raised multi-billion dollar funds to compete with investors like Softbank, who operate the Vision Fund, a venture capital fund with over US$100B in capital.

In regards to crypto, Witzke noted that “we are starting to see a maturation of the space, and one of the biggest things we have seen is that Founders we have worked with in non-crypto investments, after an exit or acquisition, their next project has been to start a crypto-related company.”

Winklevoss Capital has around 85 active portfolio companies and the firm has increased its focus in working very closely with these companies as a result of COVID-19. In regards to specifically how Winklevoss Capital is helping their companies in this situation, Witzke stated that they are making sure that the companies are all doing their contingency planning, helping with fundraising for the companies that are trying to raise right now, and helping with cost-cutting among other things.

Given the uncertainty of the macro environment, the team at Winklevoss Capital is trying to make sure that each of their portfolio companies has a runway of a minimum of 12 but preferably 18 months. In spite of COVID the firm is still interested in looking at new companies that are raising as “the innovation in this space doesn’t stop just because of Coronavirus.”

The general view on investing in this situation, according to Witzke, is that investors are being much more careful and more thorough with investments. She expects to see valuations change and become more aligned with our new reality.

Winklevoss Capital’s most recent publicly announced investment was in the seed round of TaxBit. TaxBit provides cryptocurrency tax automation software targeted for crypto users, exchanges, and merchants.

TaxBit raised US$5M in the round and other investors include TTV Capital, Valar Ventures, Dragonfly Capital Partners, Collaborative Fund, and TaxBits pre-seed investors Global Founders Capital, Table Management, and Album VC.

“One of the reasons we invested is that it is such a massive pain point. Anyone who has tried to calculate their own tax obligations on crypto trades from more than one exchange knows what a huge headache this is and what a high pain point it is for the space in general,” Witzke stated.