The Fifth Protocol (2014)

Cryptocurrencies are an emergent property of the Internet – almost a fifth protocol in the Internet suite. If Satoshi Nakomoto did not exist, it would still be necessary to invent them. Someday, they will be used by the machines in our network, on our desk, in our garage, and in our pocket to exchange value and achieve consensus at blinding speeds, anonymously, and at minimal cost.

Source: https://startupboy.com/2014/04/01/the-fifth-protocol/

Crypto Asset Analysis + Seed Investments

Presentation from our Annual Team Offsite at Stinson Beach in July 2017 included below.

This shares some of our internal discussions on how we’re starting think about evaluating new types of crypto projects + assets.

As an active investor in startups built around open source software, we’re increasingly excited about new + interesting business models to support community activity and have been participating in the cryptocurrency space since WordPress.com started accepting Bitcoin in November 2012.

As a firm focused on pre-seed and seed investing, we believe there will continue to be opportunities for venture capital firms to invest the initial startup capital into new crypto projects (as part of an initial equity financing or as part of an agreement in exchange for future protocol tokens.)

We’re interested in potential opportunities in:

  • Decentralized applications (ie projects like FunFair for Decentralized Gaming)
  • Enabling infrastructure (ie projects like 0x (Decentralized for Trading Tokens) or zCash (Blockchain + technology focused on privacy + selective transparency)

In particular, in potential crypto investments we’re looking for:

  1. Applications that truly need to be distributed (“Need to be built on a blockchain”)
  2. Solid technical team (with expertise across Internet infrastructure and crypto)
  3. Utilization Token tied to business model
  4. Potential for Strong Network Effects

If you think you’d be a fit with our portfolio based on the above information, please reach out – it’d be great to learn more.

True Science Investments

Presentation from our Annual Team Offsite at Stinson Beach in July 2017 included below.

This shares some of the lessons from our investments involving life sciences (starting with Ginger.io in 2011 + Moleculo in 2012) as well as some of the evaluation criteria we think about for potential future opportunities.

As a firm, our focus is leading the first institutional round (usually pre-seed or seed) with investments of $500k to $3m. We often invest with angels and love research work coming out of universities or other labs.

For companies based in core science or research – we like to see:

  1. Great science with large potential impact
    1. Therapeutic applications in healthcare
    2. Other non-healthcare applications with high margin potential
  2. Founder is a leader in the space
    1. Ability to develop cornerstone IP + reputation in the space
    2. Multi discipline teams; cross discipline individual expertise
  3. Path to efficacy (or similar metric) on less than $10m of paid in capital
  4. Market size + Product + New Type of Regulatory Risk
  5. Platform opportunity with large market potential
    1. Ability to build defensible data moat is key
    2. More data makes technology better; increases enterprise value

If you think you’d be a fit with our portfolio based on the above information, please reach out – it’d be great to learn more.

Bill Janeway on Productive Bubbles (2015)

In a bubble you stop worrying about whether there’s gonna be more money behind you. The coordination failure through time is eliminated. That’s the functional role that bubbles can play at the frontier of the innovation economy. And this is simply a-a follow on to suggest theoretically that you should expect to see in bubble conditions riskier start-ups, further out crazier ideas, ones that might require so much money to get going. “Geez we’re gonna start a new automobile company. From scratch?” That only under something resembling bubble conditions would anybody take it seriously. And then Nanda and Rhodes-Kropf went out and actually looked at the data and what they found was that going back now 15 years start-ups that were founded during the dotcom, telecom, internet bubble at the end of the 90’s had a, a bimodal distribution. It wasn’t a normal distribution. More of them failed completely. But those that succeeded, succeeded bigger. There was an actual empirical demonstration of the phenomenon of financing risk that they talked about and the coordination failure that a bubble solves.

Source: Bill Janeway on Productive Bubbles 

The next wave of computing

The next wave of computing is going to be a massive shift away from cloud computing. There are two major problems with cloud computing: (a) users don’t own their own data, and (b) remote servers are security holes. With a move away from cloud computing, decentralized systems like Bitcoin give explicit control of digital assets to end-users and remove the need to trust any third-party servers and infrastructure.

Source: The next wave of computing – Muneeb Ali – Medium

Why is ARKit Better Than The Alternatives?

// https://medium.com/super-ventures-blog/why-is-arkit-better-than-the-alternatives-af8871889d6a

Apple’s announcement of ARKit at the recent WWDC has had a huge impact on the Augmented Reality eco-system. Developers are finding that for the first time a robust and (with IOS11) widely available AR SDK “just works” for their apps. There’s no need to fiddle around with markers or initialization or depth cameras or proprietary creation tools. Unsurprisingly this has led to a boom in demos (follow @madewitharkit on twitter for the latest). However most developers don’t know how ARKit works, or why it works better than other SDKs. Looking “under the hood” of ARKit will help us understand the limits of ARKit today, what is still needed & why, and help predict when similar capabilities will be available on Android and Head Mount Displays (either VR or AR).

 

Data Sources for Tokens + Blockchains

One is Token Filings from William Mougayar (who run the Token Summit)

http://startupmanagement.org/2017/07/20/introducing-token-filings-a-transparency-directory-for-icos-and-token-sales/

Second is Coindexter from Jonathan Libov (who was previously at USV)

http://whoo.ps/2017/07/19/hello-coindexter

Token Filings is more offering facts + recent news (think SEC Edgar) while Coindexter is more focused on primary research + commentary.

FTSE Russell to Exclude Snap From Stock Indexes Over Voting Rights

https://www.nytimes.com/reuters/2017/07/26/business/26reuters-snap-russell.html?src=busln&_r=2

The stock index provider said it made the decision based on client feedback, the latest sign of the growing importance of corporate governance rights to investors even as technology companies move to concentrate power with insiders.

It plans to require new constituents of its indexes to have at least 5 percent of their voting rights in the hands of public shareholders, though current constituents will be given a five-year grace period to comply.

It probably won’t change anything at Snap, but this may start to affect governance decisions for future private companies when they get ready to go public – especially if other index providers follow FTSE Russell’s lead.

(Related data on index + mutual fund ownership of US stocks: http://www.wsj.com/graphics/index-funds-taking-over-sp-500/)

 

SEC Issues Investigative Report Concluding DAO Tokens Were Securities

https://www.sec.gov/news/press-release/2017-131

The SEC’s Report stems from an inquiry that the agency’s Enforcement Division launched into whether The DAO and associated entities and individuals violated federal securities laws with unregistered offers and sales of DAO Tokens in exchange for “Ether,” a virtual currency. The DAO has been described as a “crowdfunding contract” but it would not have met the requirements of the Regulation Crowdfunding exemption because, among other things, it was not a broker-dealer or a funding portal registered with the SEC and the Financial Industry Regulatory Authority.

This opinion blog post does a good job discussing the implications of this particular enforcement language:

https://www.inc.com/brian-d-evans/sec-report-about-the-dao-ico-being-a-security-is-g.html

As the report goes on, they continue to explain that ICOs that are offering investments must register with the SEC. However, they also point out that certain exemptions may apply. In some cases, if a token is not a security, but instead has an actual utility, then the ICO (Initial Coin Offering) may not have to register with the SEC since that would not necessarily be considered an “investment” or security. They have not released detailed explanations of exactly what would or wouldn’t be considered a security, but only commented on The Dao.