Julianne Brands – October 2018
Strategies for Investing in Blockchain Startups
Hosted by OVF and CBRE – Oct 9, 2018
· Kate Mitselmakher, Founder & General Partner, Bloccelerate Fund
· Nick Grossman, Partner, Union Square Ventures
· Andrew Hoppin, Partner, ChainLink Fund & Co-founder, CoverUS
Blockchain best suited where:
· Immutability matters
· Either transparency or anonymity/confidentiality matters
· Multiples entities involved, and trust is an issue
· Millions/trillions of transactions
· A centralized architecture fails, and peer-to-peer works better (eg, YouTube, not Comcast)
· Disintermediation can/should occur
· Asset tracking, audit trail, provenance (supply chain/channel integrity, collectables, Republic of Georgia land deeds, Walmart/IBM food safety pilot)
· Identity tracking (voting, security, authentication, Illinois personal IDs)
· Inefficient, legacy marketplaces (healthcare, finance, insurance, natural resources, commodities)
· Aligning participants, re-enforcing good behavior via common incentives (gaming tokens, CryptoKitties, rewards programs, token miners contributing to platform stability/security)
· Be cautious of investing in tokens as an investment security – regulatory rules in flux; coins and tokens may be taxable; lack the rights, protections, and liquidity of equity; custodial burden of being a fiduciary and holding tokens.
· Be cautious of investing in equity – only the tokens may be liquid.
· Focus on business fundamentals – exceptional team? what problem are they solving that couldn’t be solved otherwise? Compelling value prop, business model, and go-to-market plan? Who pays and who benefits?
· Bet on the problem being solved, not the technology itself. Like betting on Netflix disrupting Hollywood Video, regardless of whether by DVD or streaming.
· Place a lot of bets and see which flowers bloom – maximize diversification because market so nascent and frothy. A small number of winners will emerge – as occurred during Industrial Revolution and Internet Revolution. Pick sectors (5+ companies), not winners.
· Opportunities to invest in both infrastructure and apps.
· Security still an issue – eg, while Bitcoin may be hard to hack, exchanges (Mt Gox) and wallets are not.
· Avoid private or enterprise-specific blockchains
· Bitcoin or Ethereum could do what most tokens and coins do today.
· Be humble and focus on learning – many ways to be wrong
· How to ensure data integrity and not just data accuracy (garbage-in, garbage-out, garbage persisting forever)?
· Will decentralized blockchain-based platforms be more trusted than centralized brands and authorities? How soon?
· Will blockchain better position individuals to prevent unauthorized uses of their personal data?
· Will blockchain accelerate wealth creation in developing countries?
· How efficient is a blockchain, if each transaction is duplicated a millionfold?
· Will Facebook’s anticipated digital tokens become the world’s global currency?