For the first time, we have a truly global technology revolution on our hands, fueled by smartphones, sensors and blockchain tech.
A version of this post was originally published at thebarefootvc.
The price of bitcoin reached $ 10,000 on Tuesday. This just in: Make that $ 11,000. Over the years, I have seen a significant change in conversations around virtual currencies, from “It’s for drug dealers!” “There’s no underlying asset!” and “It’s a fraud!” to “How do I buy bitcoin?” and “Can you help me look at this ICO?” And we are no doubt at the cusp of more widespread acceptance of the concept. It’s important to note that a fair amount of the recent capital in the market is driven by speculation from the astronomical returns that cryptocurrencies have achieved in 2017, and a “fear of missing out.”
True alpha returns have been difficult to achieve in the globally low interest-rate environment and softening of many real estate markets, all factors that have been fuel for cryptocurrency market cap growth. Many of these investors have not experienced the price volatility that many earlier investors have, and it remains to be seen how a significant shock to the market will be handled by these investors. However, there are other, newer investors who are believers in the concept of a more decentralized transaction system, particularly in light of increased cybersecurity risks, as well as widespread geopolitical uncertainty. Additionally, many early investors in bitcoin and ethereum have either held or reinvested profits into other cryptocurrencies.
I believe that these cryptocurrencies (which are built on blockchain tech) emerging as an asset class are just one application of blockchain technology. Bitcoin at $ 10K and a cryptocurrency combined market cap of $ 300 billion is only an introduction to what the underlying technology means in terms of value creation.
I went to my first bitcoin conference in 2013. I knew that decentralized technology would form the thesis of the new venture capital fund I was launching, and I was interested in learning more how bitcoin would contribute to the thesis. That conference reminded me of the first time I logged into the internet in 1994 — I literally got goosebumps thinking of how revolutionary the technology could be.
I bought my first bitcoins after Mt. Gox imploded and China first shut down bitcoin exchanges in April 2014, when the price hovered around $ 400. Early in 2014, I launched FuturePerfect Ventures, an early-stage venture fund, to invest in the infrastructure and early use cases around blockchain and other decentralized technology.
While similar to the internet in many ways, I viewed the buildout and new business models that would emerge as exponentially larger in potential. For the first time, we have a truly global technology revolution on our hands, fueled by smartphones, sensors and blockchain tech. In 2000, there were only 415 million internet users in the world, only 8 percent of which were in developing markets. By 2017, the number of internet users had grown to 3.9 billion, 40 percent of which are now in those same developed markets.
Imagine what will happen when the next three billion people come online and the opportunities for value creation that will follow — particularly in markets where there is no legacy infrastructure in place and decentralized technology can leapfrog financial institutions, real estate, capital markets, identity platforms (and more) as we know them in the developed world.
I broke down the first fund’s investment thesis into four categories that I believed represented opportunity in the first phase of the technology: Infrastructure (the blockchain wallet); emerging-market use cases (including payments; for example, Abra); enterprise migration (including supply chain management — see Everledger); and identity management (for example, Civic). Our second fund builds on these areas as we see new protocols and applications continue to emerge, with the added thesis of tokens as a new asset class.
The combined market cap of Google, Amazon, Apple, Facebook and Microsoft is now at $ 3.4 trillion. Given the inherently global, accessible and nonlinear nature of decentralized technology, I would not be surprised if we quickly exceeded this number. The real excitement — from established investors to bootstrapped businesses in far-flung places — comes from the palpable potential that the next phase of this new market buildout has to create value by, and for, all seven billion people in the world.
A technology veteran with over 20 years as an entrepreneur and VC, Jalak Jobanputra founded FuturePerfect Ventures in 2014. She has invested in more than 80 early-stage companies over the past 15 years, resulting in several multi–billion dollar acquisitions and IPOs. She is widely renowned as a blockchain thought leader, and was one of the first investors in the blockchain space in 2013. She was recently named one of Institutional Investor’s Most Powerful Fintech Dealmakers. Previously, Jobanputra was a director at Omidyar Network, managing mobile investments in emerging markets, and SVP at the New York City Investment Fund, where she launched a seed tech fund and the Fintech Innovation Lab. She was also at Intel Capital in Silicon Valley from 1999-2003, on the founding team of a web startup in 1997, and a tech/media/telecom investment banker at Lehman Brothers in NYC and London. She has served on multiple advisory boards for the White House, NYC Mayor’s Office and the U.S. State Department, and serves on the board of directors for the Center for an Urban Future. Reach her at @jalak.