Icos potentially make entrepreneurs too comfortable too soon. Furthermore it is not uncommon that icos are oversubscribed, providing a surplus of capital, which will inevitably be spent anyway creating a major market inefficiency. In addition typically investors that come in at later rounds want to see signals the early investors remain confident and are following their money to the best of their ability. However icos offer no way of really knowing if those early investors are still confident in the team and its progress so you must rely on general market sentiment. Timing pressure of going Public. Firstly, many very successful companies choose never to ipo and go public because it can be a real pain in the ass often forcing companies to become short-termist and reactionary which is the number one killer of innovation and why many public companies get disrupted. I think most startups that will ico are naive to the implications of crowdfunding which demands having a permanent investor relations team communicating effectively with the community, and even when done well can still be very distracting from just getting the job done. Unlike normal crowdfunding your investors are largely speculators who can and will actively short you in the markets.
Entangled Group a venture Studio focused on the
It is this later activity that drives the most demand for billions in investment from VCs. Unlocking Sleeping Value, a combined 23 billion of value is held in Bitcoin and Ether, which is largely dormant yet accumulating value but which people are reluctant to bring offline where world they may have to pay capital gains taxes. Icos offer an outlet to invest profits from Bitcoin or Ether, converted into a newly launched crypto token, which in turn adds to their scarcity pushing the price up and in turn creating a self-reinforcing loop. Cons: Liquidity, the degree of liquidity to me is actually a challenge as much as it is a pro. I understand why early pre-ico investors and founders want liquidity but after issuance, tokens are traded on decentralised exchanges in what are effectively dark pools with zero to little transparency. That means the people you are backing can exit at the point of ico before any real value has been delivered essay or gradually dump their holdings over time ahead of the market if they feel things arent working out. Currently you just have to trust they wont. Incentive misalignment capital Inefficiency, this point on liquidity actually leads to a broader problem around misalignment of incentives. Professional investors want to know the people they are backing are locked in 100 to achieving success. Its a common belief the more financially comfortable a founding team is the less hungry and more complacent they are.
In Europe you only need to tick a box to declare you are indeed a sophisticated investor unlike the us where you must provide documentary evidence of your wealth. So here icos promise to break the monopoly on money in the us and democratise fundraising. There is also an argument to be made for making capital more widely available beyond traditional geographic hubs of vc activity like silicon Valley, nyc and London, both for smaller investors that want to participate and startups that hope to receive their backing. At a certain scale of fundraising money is often tied to you physically moving closer to the money itself which compounds the problem. This promises to better distribute capital to where its needed and arguably with deserved most. More social Enterprise, simply put, this will mean many projects currently unattractive to vcs because they lack an aggressive profit motive, can now get funded. Ive seen a lot of interest coming from the platform coop movement in icos which, typically as a non-profit industry, can finally see a way to aggregate enough financial firepower to compete technically with the centralised rentier sharing economy. Crowd Backed day 1, An ico-funded startup, like a standard crowdfunded company, has the benefit of an army of supporters only this time with the added network effect of not just seeing the product delivered but holding tokens that appreciate based on usage. This should dramatically increase virality gained from word-of-mouth, in turn reducing the need for costly marketing and user acquisition.
Convergence Thesis we champion which holds that major technology trends will begin to accelerate one another as they benefit from a shared distributed Web.0 architecture. A vibrant secondary market also means investors can get real-time pricing based on the progress of a company, as understood by the crowd. This potentially brings greater transparency to an otherwise typically secretive private market with very little disclosure. Democratisation, The argument goes: average joe is locked revelation out of the very early value available in startups because unless you are lucky enough to be friends-and-family with the right people you are locked out by regulators by not qualifying as an accredited / sophisticated investor. As a consequence you are forced to pay a premium at the point of ipo, when most of the value has already been extracted by vcs. It benefits VCs to keep retail investors locked out so capital is scarce, inflating their value. This compounds the wealth gap between the haves and the have nots. This idea is stronger in the us than say europe, which has a richer and more accessible angel market.
At this stage i am not saying I do or dont agree with them, because many have counter-arguments I later address in the cons section. Liquidity, liquidity enhanced venture capital, is how Brock pierce described his recent ico. This is basically because investors can trade tokens in secondary markets rather than have value locked up in the equity of a company. As most will know liquidity is the bane of VCs and their LPs who can see capital locked away for up to 10 years. Thats also a big problem with increasingly shorter technology cycles. Without icos Web.0 will likely be relatively cash starved until VCs can exit out of their Web.0 investments, many of which will likely be disrupted. I think this is especially true if you follow the.
Union Square ventures - we are a thesis -driven venture
Its rough, imperfect and happily open to criticism and feedback. Like most, we are still very much trying to figure out our exact position on this fast moving environment but this forms the basis of our current thinking. Introduction, before i kick off I need to assume you already know what an ico. If not please start here. Much of the reasoning for why icos make sense is because of what Union Square ventures calls. Fat Protocols : the idea that most of the value in blockchains are at the protocol layer, unlike web.0 which saw billion dollar companies emerge at the Application layer. The idea is in Web.0 that the commons infrastructures value, realised in the form of the tokens that underpin it, is in and of itself the unicorn and always greater than the sum of all applications.
In Bitcoin this represents a market cap of just under 20bn (as of 12-April-17). Whilst I think this argument in principle holds one of the key aspects of my previous post was that if you combine machine learning with the Application layer you could see private companies hoover up the data, to build monopolistic positions through genuinely smart contracts. These very likely could be vc funded because they are looking to create proprietary positions. However for machine learning to be able to deliver any value at all it first needs lots of data and that requires major adoption of the infrastructure first. They key incentive for this network effect in most instances is the token that underpins. Pros: Below ive listed writers the regularly championed benefits of icos by its enthusiasts.
Gpu, fpga, embedded systems etc.) to increase performance and efficiency, as well as lower cost. Education Technologies edTech ). Simple technology tools that address clear pain points for either school administrators, or teachers, or parents, or students, whose usage can grow fast enough and which can then become new platforms, or communities, or marketplaces. Advanced technology tools,. Machine learning, natural language processing, etc., that can leverage the existing data sets in the education sector to build new services, with a high technical barrier.
Modern learning solutions that empower career change or enhancement. Start-ups focusing on K12 students' modern skills development. Products and tools that serve international students in the. Sinovation Ventures occasionally invests in projects beyond these focus areas. Such projects are led by exceptional teams and typically have an immediate and clear synergy with our portfolio in China. In my previous post I wrote 99 of Blockchain Startups Are bullshit. This was in part based on the belief innovation in protocols should be owned and financed by the community by way of an Ethereum like ico (initial coin or token offering or through consortia like hyperledger, not as conventional vc funded ventures. With a recent flurry of related news I wanted to look pragmatically at the pros and cons of icos in their current form, how they could / should evolve and where we, as a new vc dedicated to this emergent paradigm can play a role. Its this thought process I wanted to open up here to the community.
Essay, writer - official Site
Consumer robotics that address the mass market with a simple device plus powerful salon software combination. Commercial and industrial robotic solutions that either complement or partly / fully replace undesired blue collar jobs, with a clear economic benefit. Deep Software, new - machine learning optimized - applications for specific verticals (e.g. Finance, retail and HR) or for specific functions (e.g. Sales and marketing) that can show a clear roi from day one and can create a dense data network effect in the long-term. Start-ups that eliminate intermediaries (e.g. Agents, brokers, middle-men) and the relevant system inefficiencies, through use of data science and artificial intelligence. Start-ups that are building products that leverage new computing architectures dates (e.g.
Sinovation Ventures strives to become the founders' true partners, with unique support for our teams in the. S., as well as in beijing, Shanghai and Shenzhen. We believe in and practice a "full service" venture investment model; as a result, beyond capital, we also provide a wide range of services to our portfolio companies, including recruiting and networking opportunities, marketing and public relations advice, as well as manufacturing resources and connections. Sinovation Ventures' investment focus areas in the. Include: iot and Robotics, consumer iot start-ups that build focused, high user engagement devices, whose usage can spread fast, and which can then expand to become a new platform, or a community, or a marketplace in their respective category. Industrial iot start-ups that provide sensor solutions or software solutions based on data apartheid from existing sensors that can turly disrupt traditional industries, through. Efficiency increase, damage prevention, management predictions, etc.
in beijing, Shanghai, shenzhen and Silicon Valley. We currently manage an estimated.3b aum between five usd and rmb funds in total, and over 300 portfolio companies across the technology spectrum in China and the. We are one of the first Chinese ventures firms establishing a presence and investment practice in the. S., we invest in start-ups at seed, series a and Series B stages. We evaluate the project teams and their technologies primarily on their merit for the. Market, but also evaluate their potential for successfully entering the China market in due time. In such cases we strive to become the best "go to China market" partner for our start-ups, while in the meantime transferring our rich collective learnings from our China portfolio into our.
Will shredder they overcome the existential risk of building a breakthrough business? We immensely respect the determination, ambition and grit all our founders possess. Our hope is to nurture those relationships into something which extends beyond the standard investor/founder dynamic. We aim to be a voice of objective reason, a benchmark of trust and an arbiter of growth for all our entrepreneurs. We view the companies we invest in not as clients, but partners. Celebrating together in the spoils of victory while enduring all the trials and tribulations and doing whatever necessary to persevere. Our advisors are an intricate part of the compound. We know what we dont know which is why weve partnered with thought leaders that understand the intricacies of many different industries and various components of businesses.
Mbuyiseni Ndlozi opens up about his thesis - 702
We are an alliance of mutants: investors, community builders, platform makers, content producers and a lazy-but-truly-amazing dog. Our diversity offers a unique multi-angles perspective. Our common ambition: make you succeed worldwide. We've all heard the "we invest in teams, first and foremost" ideology time and time again. While we believe that's true, at Ranch vc we like to take it a step further. We look to invest in how people think. In apple their decision-making abilities. Can they roll with the punches?