Crypto Needs To Do Its Own Funding
There is plenty of money to be made when projects succeed. The venture capital world can take some risks when it comes to investing since, when things go well, the payoff is huge.
Venture capitalists are often at odds with users. The situation always arises when they want to get paid. This is the reason, after all, why they are doing it. Venture Capitalists do not give the money away for free. They want their payout.
This means that monetization of the platform becomes crucial at some point. We see this story play out time and time again.
At times, the monetization really creates a situation since it alters the user experience Of course, this is what happened to the likes of Facebook and other social media companies.
In the world of crypto, we are at the point where, even though we have our own currencies, we are still dependent upon the VCs.
Today, we got a price example of it.
Source
Coinbase went public in a highly anticipated move. The stock price went out at $381 per share, much higher than expected. This created a boatload of money for the early entrants.
Of course, we are not dealing with users. As we know, they got nothing. The early entrants here, in addition to the founders, were the venture capitalists.
How profitable can this be?
IN 2013, Garry Tan of Initialized capital put $300K into the project. He was one of the first investors into Coinbase. His angel investment helped the company to get going.
What is the value of that investment today?
Less than a decade later, and after today's highly anticipated Nasdaq listing for Coinbase's COIN stock, Tan's 2013 investment of $300,000 into Coinbase is now worth $2.4 billion.
From $300K to $2.4 billion in less than a decade. You do not need to many of then in your lifetime to really be set.
Unfortunately, we are witnessing the same thing these days. The amount of VC money flowing into the crypto space is enormous.
While this might sound like a good thing, it is not. Yes, it will allow for a lot of development to take place quickly. However, as stated, this will end up putting the users of the applications and the VCs at a crossroads. There will come a point in time that they want to get paid.
We also see the problem of the profits. The Coinbase situation shows how there is $2.1 billion that left the industry. It went to a firm most likely located in Silicon valley. Sure, the money might be reinvested in different crypto based projects but that does not change the fact that it is still feeding the same establishment.
This is what we need to change. Ultimately, we need to fund our projects so that the money stays within the crypto-sphere. We have the ability to do this, especially as the value of existing projects keeps growing.
We often talk about decentralization and here is an opportunity to do this with venture capital funding. Instead of being dependent upon the established firms, especially those located in the same geographic area, we can start to spread the wealth out.
Having a profit of $2.1 billion would go a long way to the industry funding a lot of other projects for itself. Of course, it is unlikely that was the only payout from Coinbase. There were a lot of angel investors involved meaning the money made today was a lot more for the early investors.
When we look at the multiplier effect, we can see how much of an impact this truly could have over a couple decades. The same $2.1 billion, to use that as an example, could be turned into 4 or 5 times that amount by going into other ventures. Rinse and repeat.
If we think about it, crypto projects should be easy to develop since we have the ability to fund ourselves. Naturally, the system is against us. Any self funding, the SEC wants to rule a security. This is how they protect the established system.
However, over time, we can start to move things in another direction. We should look for opportunities to get things developed on our own. This is how the early entrants can profit a great deal.
Funding is another way the industry can push the process of decentralization. We need to look at each opportunity to do that.
It is in our best interest.
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Which makes us a little hesitant even regardless of the lack of large liquidity to buy
But if you look at the bottom, for example, Bitcoin, some say to 100 thousand, but several months ago it was only 10,000, meaning a loss of about 80%
It takes courage and perseverance to make a step
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I think the return was give in return for the risk he put in. I think most venture capitalist spend a ton and most of them tend to fail. That 300k into 2.4billion is a 8,000 times return but I doubt it would of been worth that much if they never get listed. The banks are getting their chunk for getting everything processed and the people paying for it is obviously the retail people who buy in late.
The early people win if the trade works out and I think HIVE is fairly early that if everything works out, we can easily see a 10x or 100x.
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I have no problem with the return. VCs deserve their money because they tend to be rolling the dice on long shots.
The point is not the return but more where the money is going. It is funding the same ole people. And yes it was a huge risk at that time and likely no other way to get it funded.
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Yes, in an ideal world, that's what needs to happen. And I think it can at some point. But in the meantime, that capital brings with it many things that are positive as well. Mostly attention. Out of all the things lacking in most cryptos, that might be the biggest. It takes a lot of effort and, yes, money, for most cryptos to gain enough attention to become noteworthy to the mainstream. Time is the biggest factor. Money is a shortcut to that time necessary to build awareness.
In this case, I agree with jfang, at the time this fund put up $300,000, Mt Gox was happening, bitcoin was just starting to become a "thing" and there were probably less than a hundred cryptos in existence. Coinbase was a huge risk but has really been instrumental to the growth of this "industry", despite all it's shortcomings.
Hive and Leo are doing it the old-fashioned way; they're earning it. But $300,000 invested from a venture capital fund with connections to the media and other big money could certainly make things happen faster. That said, as you pointed out, there's a price to pay to the users. And not a small one. While having someone like that involved might help break it out, it would also probably lessen the upside considerably.
Still a long ways to go in the crypto world. Very early yet....
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This is massively insane in terms of the ROI, which even raises a lot of ethical questions. I feel, very strongly, that we do need our own kind of funding as you've rightly said. I think that the room to make such kind of ROI is getting smaller by the day as the regulations get stricter and tougher. Thanks for sharing.
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What ethical questions does it raise?
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In the strict evaluation of things, one wonders what percentage of that jumbo ROI was actually taxed. And if taxed, was the tax relatively fair when compared to other more regulated sectors such as real estate, solid minerals, etc.
While the above observations are debatable, the highly unregulated nature of the crypto space at these formative years also give room for a lot of market manipulations and rigging which only the few early adopters/venture capitalists benefit from.
Right now my stake isn't that big, but I have been trying to put at least a portion of it back into other projects in hopes that they will end up being successful. Cub is probably the best example of that lately although the fact that I stand to gain something from it too might negate the fact that I am supporting it.
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If you fund a project with crypto how can the SEC lose its shit? you're not touching dollars
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Coinbase might have a shorter run than expected. As you previously mentioned we are moving to tokenomics. Once we are further down the path of adoption, there is less and less need to convert legacy fiat into crypto - you will just earn crytpo. If we move to DEX exchanges like Polarity we will remove the need for most of the centralized exchanges of today.
As the tokenomics help to build strong communities, we will see more self funding. We have seen several projects on this chain get funded by the community wanting to see things built and succeed, understanding the more that happens here, the better for everyone.
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I like this idea i just now feel we'd have some problems making that happen. I actually after leaving what i call the traditional investment businesses. I was a stockbroker and commodities broker for some big firms. I tried my hand at venture capital. i was there only about 6 months working in mergers and aquisitions. I didn't like it. It was a great deal more foreign to me than how some of the businesses i had worked for in more prestigious firms at went.
Anyway, here's what i learned and what i'd say. One issue is that remember venture capitalist, often times they aren't just like normal investment people. They are like the elite of the investment industry. So they really know how to invest and make money. They know about everything. So their decisions are always good decisions.
The problem with inhouse funding in crypto so to speak. We already do that and we do it poorly. One example is this hive proposal system. Look how ridiculous that is. So first i'd expect alot more of that sort of thing. Yes in idea it sounds great to have this power taking away. However you do need qualified people to make important investment decisions in some cases. Maybe on a level like this.
For example venture capitalist often times just deal with accredited investors. So not only do they have mostly big money clients they have alot of expertise as i underlined earlier. So you could have some real crappy shows with self funding in crypto as we've had many many times. Often times its just someone with the biggest stake on the platforms making the call. Or its one big entity deciding who gets funded.
Thats not how it works in the Vc world. In the Vc world the most qualified educated people on investing for the most part make the best decisions. Also Vc's wanna make good money. So niche markets.. small projects and redundant projects maybe can garner the smaller vc's but certainly not the bigger vc's. So i would imagine if we tried to self fund crypto projects or any projects they'd work something like they've worked already with our various funding mechanisms which haven't worked well or haven't worked at all.
So another problem with crypto funding is some things are off limits. I'll give you a specific example. My project Bitcoin MYK i can sell it to a vc. Why? because really its' about growth of a big social network that runs on freemium services? Where have you heard that before? Well thats similar to what happens with most social media sites. The crypto element being the twist and other things i won't get into.
Now as you mentioned vc's dont care about your privacy . your ethics your ideologies at the end of the day how does this make money for them and how much can it make? Now i can sell a vc on my project will have a billion users and all that because its based on a freemium service model. So they can go okay we put advertising on this we sell some data. The problem with crypto it wants it data off limits so now the vc's can't make money.
I think that should be an option for the people. I call it the tech check. if you want your data sold and its your choice you can. if thats off limits you've limited them. Now you only have the money inside crypto to work with. You now got inexperienced investors in many cases investing in things going nowhwere. Again example the hive proposal system. So those are some of the obstacles you'd face.
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