Falcon Global: Fund Closure No Sign of Declining Bitcoin Demand

Falcon Global Capital is taking aim at what it considers the misconception that the firm is struggling to garner interest after closing its bitcoin investment fund due to declining demand.

Such characterizations first emerged in a Bloomberg article that drew parallels between the fund closure and the decline in the price of bitcoin this year. Though the article suggested this development was perhaps negative for the company – which has often been portrayed as an investment fund, Falcon Global Capital believes it is simply moving to better capture already strong customer demand.

Speaking to CoinDesk, co-founder Brett Stapper stressed that while the fund has indeed been closed as reported, Falcon Global Capital did so actively and as a way to align its service with the needs of customers, most of whom aren't interested in having third parties manage their bitcoin holdings.

Stapper suggested that the fund closure was part of a planned pivot that finds the one-year-old company shifting its efforts to prioritize its more popular consulting service, a shift that was approved in August and executed in November.

He further downplayed the significance of the fund, which had sought to allow customers to purchase up to $10m in bitcoin:

"In terms of our operations, [the fund closure] changes nothing. We're talking about the same things with the same clients, the only difference is that instead of us being responsible for the transactions, they handle that on their own. We're confident that there's enough companies in the space right now to help with that."

Stapper went on to suggest that Falcon Global Capital is in the midst of a period of growth, expanding to 10 employees while seeking to relocate its physical operations.

Understanding over investment

As for the 25 clients that had enrolled to participate in the bitcoin fund, Stapper said all but two have remained customers of the firm and went on to purchase bitcoin.

"Two of them did decide that they were no longer interested. The other ones did not, and now they hold their own bitcoin," Stapper said.

The transition to consulting this kind of customer, though unexpected, is one of the benefits of operating as a startup, according to Stapper.

"We're in the fortunate situation in that we're operating with a startup mindset. When you see something that's not working and you see something else that is working, you pivot and you focus on that," he said. "That's exactly what we did."

Stapper also suggested that his clients want to better understand bitcoin before investing, estimating that 60%–70% of his clients aren't considering a bitcoin investment at any time during the next year.

A long-term model

Though bullish on the prospects of bitcoin based on his market observations, Stapper believes that managed bitcoin funds are unlikely to catch on with bitcoin consumers long-term.

"I think there's still a market, I just think it's going to become smaller and smaller as time goes on," Stapper continued. "When you're teaching somebody about bitcoin the first time and what it enables you to do, to maintain your own assets, maintain your own cash, it's easy to explain to them. It defeats the purpose of bitcoin to have others manage your money."

Stapper added that he believes the fund could have been compelling for another two-to-three years, but that this seemed short-sighted given the opportunities in the bitcoin space.

"We didn't like the idea of having a business model with a short-term expiration date in one of the most exciting industries that exists," he said. "That seemed like a bad decision for us."

The comments are notable given the continued interest in bitcoin funds and investment management firms, with Binary Financial, Bitcoin Investment Trust and Pantera Capital all serving this market.

Institutions and governments

Looking ahead to 2015, Falcon Global Capital indicates it intends to focus on institutional and municipal clients. Stapper hinted that it is even working to help governments incorporate blockchain technology as a means to save money, though he did not provide further details.

Consulting will account for the firm's revenue going forward, Stapper said, even as it looks to introduce a research product in the year ahead and continue its lobbying efforts.

"For every one customer we had, we had 10 more customers that were much more interested in hiring us to consult them on what they needed to know about bitcoin to make their position," he explained.

As a result, Stapper is confident that interest in bitcoin will be enough to buoy this arm of his business, concluding:

"There's enough demand for consulting, we're seeing it everyday."

Images via Falcon Global Capital