After 13 years of venture investing, and 30 years in tech, I’m going “all-in” on crypto and am joining CoinFund. Please read on to learn why…
I have always loved technology. As a 7th grader, I used to create “light shows” in my basement by plugging strings of Christmas lights and colored bulbs into extension cords and switches and synchronizing their flashes to music. I subjected my parents, brother, and anyone who came to visit to a three minute show of blinking bulbs and strobe lights while listening to Moog synth cover songs.
I was reminded of this geeky and unceremonious chapter of my life when I looked at this picture of one of my ethereum mining rigs from 2017. Back then, my kids and I brought visitors down to the basement to witness the blinking lights and scrolling console updates of stressed GPUs solving puzzling hash algorithms in exchange for some crypto rewards. No one understood what the heck we were doing. Another geeky chapter indeed (albeit, a much better investment than the light shows).
While I was late to crypto compared to the OG crypto believers of 2012–2015, I have moved from curious to crusader over the last five years. To me, this is the most exciting combination of tech innovation and market opportunity I have witnessed since the birth of the commercial internet in 1995.
Fundamentally New Tech Platforms
Major tech trends often start small, among those building the underlying technology. Think TCP/IP, Linux, and MP3s. Then developers come along and begin experimenting with the technology, improving it, and building new things atop it. This is exactly the case with crypto, but in even more profound ways. Bitcoin (and then other blockchain) network adoption happened slowly, with only scores of unique active wallet addresses in the early stages of the network, eventually reaching many more today.
Like open source before it, crypto embraces a share-what-you-make mentality. In crypto, we use the word “composable” to mean that many of the early primitives and protocols created are open and usable by other developers to power the next innovation. This tends to magnify the importance of each new invention.
The innovations from crypto threaten to impact all aspects of technology, restructuring the architecture below applications, using decentralized organizational, network and application structures and re-arranging the value chain of every market it touches. Structurally, crypto offers solutions to many of the challenges we see in today’s data monopolies, platform censorship, and in abusive fees charged by legacy middlemen. Most importantly, the global startup energy bubbling forth from this ecosystem is infectious.
Perhaps the strongest signal around crypto’s enormous possibilities for value creation are the number of otherwise informed people outright dismissing its potential before actually working to understand it. It reminds me of how hard record company execs worked to put the MP3 genie back in the digital music bottle. Or of how vehemently traditional TV and movie execs declared that Netflix would fail in original content. Or how certain all the legacy auto execs were that Tesla would never succeed.
A Killer Investment
Over its brief 13+ year lifespan, crypto has not only facilitated significant tech innovations but has proven to be the single best performing investment asset. If you are a professional investor tasked with finding the best returns in the market and you ignored crypto over the past decade, you missed the best asset class returns in eight of the last ten years and cumulatively overall. In fact, Bitcoin’s 200% CAGR is unmatched in all of financial history. Not even Tesla (63.8%) nor Amazon (33.5%) come anywhere close in 10-year CAGR.
The Cost of Ignoring Crypto — Data as of 3/13/21
When Tech and Culture Collide
All of the most impactful tech trends are supported by a symbiotic wave of cultural impact. The early internet (and AOL) was bolstered by attachment to newsgroups and message boards. The 2000’s internet was accelerated by the conveniences of ecommerce and digital media like streaming music and video. Mobile devices were propelled by texting and messaging. And of course our present social media addiction has created frighteningly large data monopolies. These moments when new tech is the zeitgeist create massive investment waves and re-arrange industries.
That is exactly what is happening in crypto. More than one hundred million people hold crypto assets, and this early adoption has largely been driven by retail millennial investors. With $85B total value locked (TVL) in DeFi contracts, we bear witness to an entirely new financial services industry being built on software protocols and smart contracts, not bankers. Now, with more than $3B of NFTs sold already this year, we see a profound intersection among artistic expression, community activity and digital assets. And we haven’t even touched the subject of DAOs, a novel community governance mechanism rising at the precise moment when so many are questioning the challenges facing representative democracy.
When Tech and Policy Collide
I am certainly not a lawyer nor do I have FinTech public policy bona fides. But over the course of my 30 years in tech, I have worked on technology that reached enough mass adoption to implicate policy several times. At Myplay and eMusic, I was at the forefront of digital music and testified in front of Congress multiple times around webcasting rates and streaming royalties, lobbying both the US and EU for fair, equitable and geography independent royalty regimes. During my time at Venrock, I worked with a large group of tech founders and VCs to pave the way for net neutrality during the Obama administration.
As we all know, in most countries, crypto regulation is, well, unsettled. There are already significant policy implications rising from crypto innovations, and many more are coming. While it’s often hard for engineers to appreciate the need to engage in policy discussions, if we don’t, others will, and we may not like the outcome. Incumbents are often experienced at using the wheels of public policy to grind innovation to a halt and prevent disruptive technology from impacting them. I look forward to more meaningfully joining the effort to prevent that from happening.
As I became more and more curious of crypto in 2017, I was lucky enough to find a team of true crypto OG technical and investing talent. CoinFund, started by Jake Brukhman in 2015, had been consulting to and investing in many early-stage crypto companies. In 2018, the Venrock partners and I invested in CoinFund and partnered with them. Over the next three years, we found quite a few deals together and partnered on several of them. As I reached the decision this year that I wanted to shift full-time to focus on crypto venture investing, it became clear to me that working more directly with Jake, Alex Felix, Oleg Golubov, Seth Ginns and the rest of their team was a perfect fit for me. There are few teams in crypto as deeply knowledgable and connected as CoinFund. And they have already done the hard work structuring their firm and funds in such a way as to allow the varied types of investing crypto requires. Finally, for me, this is a chance to really build a firm, not just an investment portfolio. Crypto, already a ten year wave that has created more than $2T of value, in my opinion, has at least another twenty years of transformation ahead of it, with at least 100x the value creation potential from here. I am so appreciative the CoinFund team welcomed me aboard for the ride.
I am beyond thankful to Venrock and my many partners there for teaching me all that I know in venture, for guiding me through the last thirteen years, and for being supportive of my varied interests in investing in various tech sectors, from consumer services to consumer products, from robotics to crypto. And finally, their support of me making this move by further investing in CoinFund helps cement the possibilities for further collaboration between CoinFund and Venrock moving forward.
(I am happy that I will continue to sit on the boards of Dapper Labs, Rarible, Running Tide and Simbe Robotics on behalf of Venrock.)
Turns out basement projects aren’t just for kids.