Reflecting on Haystack’s Investment In Cognito
Nearly 8 years ago, when I was on the verge of finishing Haystack Fund I, I was introduced to a tall, lanky kid who was dropping out of Stanford. I was living in downtown Palo Alto at the time, so took him out to Fraiche for frozen yogurt. He was a very active participant in the Stanford Bitcoin Club, and I had a few friends in that group.
He and his classmate Alain were working on a ID verification system for KYC for companies who were experimenting with digital currencies, mainly Bitcoin at the time. In that initial fund, Haystack had some familiarity with Bitcoin. I invested in friend Vinny Lingham’s company, Gyft, which had a clever hack around providing a way for users internationally to diversify their digital assets. While not a “web3” company then, Gyft may have been one of the first legit “crypto exits” as it sold to First Data. Back then, one BTC was about $450.
These founders, John and Alain, were working on what was then called Blockscore. They raised a small amount, then went to YC, raised a bit more – never more than around $2M in the life of the company. They were really quiet, earnest kids running a small company and found lanes for revenue quickly. The team worked out of a small office behind some condos in Menlo Park. They never cared about hitting the fundraising trail, or getting any press or coverage. Some key employees left, and then came back. They received some acquisition interest over the years, but never anything that made them stray from the course.
Fast-forward to the end of 2021. BlockScore had changed their name earlier to Cognito, and were doing very well. Profitable. Still quiet. And larger companies began to take notice. Earlier this week, it was announced Plaid would acquire Cognito and the team for over $250M. Remember, these kids only raised about $2M. They didn’t get caught up in all the noise around them. LPs ask me about how long does it take for seed funds to return. I typically guide them to brace themselves for 7-10 years. Blockscore took 8 years, right in that range. I missed out on the chance to invest in Plaid’s Series B back in 2015, so we are now blessed with a return *and* stock in Plaid. Over the years, it’s been a pleasure to be a small river guide to John and Alain, and I know they cared deeply about their colleagues, their investors, and doing the right thing. Congrats to you all and the team, and best of luck on the next stage of the journey!