Future of Blockchain Investing
Cryptocurrency has been creating a lot of buzz of late, with both bitcoin and ethereum prices hitting record highs, again and again. Even Fortune 500 companies like Microsoft, Intel and JPMorgan are adding Ethereum and Blockchain, the technology created to support both and dubbed Web 3.0, to their strategic roadmaps. They’ve recently joined the Enterprise Ethereum Alliance (EEA), comprised of some of the world’s best-known enterprises, along with startup blockchain innovators. EEA provides resources that help these companies to leverage Ethereum to address “specific industry use cases.” Companies are always looking to cut costs, and blockchain could potentially help do that with faster financial transactions or more efficient supply chains.
With seemingly endless possibilities for this technology, a flood of new startups have emerged, so venture capitalists are buying into blockchain, too. I spoke to Thomas J. Carroll, Chief Information Officer at Avant Global, a business advisory firm which invests its own capital in startups. Avant Global was an early investor in blockchain startup Ripple, a payments platform for real-time financial transactions that’s gained tremendous momentum considering its young age. It counts among its customers global banks like Bank of America, UBS, and RBC.
Carroll says of investing in blockchain, “VC is buying in because blockchain has the potential to disrupt areas far beyond fintech where much of the attention has been focused. What’s intriguing are the many use cases across sectors where the implementation of the blockchain can live. Big and small companies are now beginning to evaluate the cost benefit of implementation in the transition from proof of concept to the emergence of shared infrastructure. One of the most unique and necessary applications will be ingovernment. Lawmakers in the states this year launched the “Blockchain Caucus” to focus on “sound public policy toward blockchain-based technologies and digital currencies”. We are beginning to see the lean in occur on a global scale as well. Seen from projects like Smart Dubai in its partnership with both IBM and with global blockchain specialist ConsenSys. It’s considered the first city-wide implementation of the technology. Blockchain could eventually be the government for government. It’s going to be the foundation for a lot of change.”
While it remains to be unseen just how effective blockchain will be in some areas, it’s certainly already making waves and attracting interest beyond the blockchain enthusiasts of the world. Earlier this year, blockchain was clearly among the hottest topics at the always headline-grabbing annual South By Southwest Conference (SXSW), with long lines and crowded rooms both common conditions at related panels. Last month, hundreds gathered at the Ethereal Summit in Brooklyn, New York, to attend panels peppered with world officials and industry leaders, including World Bank blockchain lead Rosanna Chan, and former Prime Minister of Haiti, Laurent LaMothe, a tech entrepreneur and blockchain advocate. At Coindesk’s Consensus 2017, Abigail Johnson, the chairman and Chief Executive Officer of Fidelity Investments, commended the public blockchain after announcing a new integration with Coinbase for Fidelity’s wider customer base.
Carroll isn’t surprised blockchain is alluring to corporations across industries, governments across the globe, and to curious consumers. “As an investor, I’m looking for solutions to problems in new paradigms, where resources are allocated to save time, prosper innovation, and create value across industries that can be leveraged on a global scale. Blockchain has that potential.”
But while VCs are betting on blockchain, initial coin offerings are outfunding them. A Coindesk study found that in 2017, blockchain entrepreneurs raised $295 million through VC funding. ICOs have year-to-date raised in that same period.
“It’ll be interesting to see the projects technical robustness that initial coin offerings continue to raise for” says Carroll. “ICO’s are a great way for companies to get funding from those who are bullish and trusting ofthe value created by the network’s development. As always, performing your due diligence as a prudent investor practices will lead you to your conclusion.
“But no doubt the application of blockchain will drive the fourth industrial revolution.”