Empress continued its Investor Panel & Start-up Pitch night series recently with a discussion of the future of the fast growing FinTech sector, including blockchain, crypto-currencies, ICOs (Initial Coin Offerings) and a host of other related topics.
The event was held at Point 72 in midtown Manhattan and featured four VCs including Robert Levine from Emerging Star Capital; Jalak Jobanpurtra from FuturePerfect Ventures; Morgan Polotan from Gencast Ventures; and Wendy Xiao Schadeck from Northzone.
The panel also featured two corporate-backed venture executives including Mary Liu from BDMI (Bertelsmann Digital Media Investments) and Ganesh Kumar from the Strategic Planning Group at American Express.
For those of you who may not be familiar with this part of the world, some basic definitions:
A crypto-currency is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Bitcoin become the first decentralized crypto-currency back in 2009. It is designed to be secure and in many cases anonymous.
Crypto-currencies use decentralized technology to let users make secure payments and store money without the need to use their name or go through a bank. They run on a distributed public ledger called block chain, which is a record of all transactions updated and held by currency holders.
Here is how the IBM Think Academy explains Blockchain in about three and a half minutes:
Bitcoin: Was the first and is the most commonly traded crypto-currency to date. The currency was developed by Satoshi Nakamoto in 2009, a mysterious figure who developed its blockchain. It has a market capitalization of around $68 billion as of late September 2017.
ICO (Initial Coin Offering) is an unregulated means of crowdfunding using crypto-currency – which can be a source of capital for start-up companies. In an ICO a percentage of the newly issued crypto-currency is sold to investors in exchange for legal tender or other crypto-currencies such as Bitcoin.
Robert Levine kicked off the evening with an overview block-chain and ICOs. He boldly defined crypto-currency / blockchain as “the renaissance of the internet” and characterized ICOs as “a Klondike-type gold-rush.” Levine said that “fear and greed are now driving the huge price fluctuations.” Over the last year, the value of Bitcoin has risen from $605 to over $4,000 as of late September.
Levine cited the fact that an inflection point had be reached in August of 2017 when initial coin offerings had raised $1.2 billion and surpassed early stage VC funding according to a report by CNBC.
Levine also talked about the “Swiss Crypo Valley” located between Zurich and Zug, where there has been a proliferation of blockchain startups and their mammoth ICOs reflecting a growing interest in decentralizing applications and services.
Zug is the home for crypto-powerhouses including Ethereum, ShapeShift, Xapo, Melonport and Monetas. With currency so central to blockchain tech, and regulation still up in the air, it makes sense that Switzerland has attracted lots of early-movers in the space.
Jalak Jobanputra is the founding partner of Future\Perfect Ventures and a tech veteran with over 20 years as an entrepreneur and VC. Her firm is an early stage micro venture capital firm “partnering with entrepreneurs who are humanizing data” according to crunchbase.com.
Jalak observed that “The crypto currency / ICOs took markets by surprise, few people in the Silicon Valley had ever heard of it earlier this year. There are lots of speculators now, and lots of new business models coming out. But 90-95% of these business models will not survive. It will be hard to predict which will be the next big thing.”
Jalak cited Everledger as a success story in the sector – which is a global digital registry for diamonds powered by the blockchain and its decentralized ledger. Knowing a stone’s origin can stop fencing and insurance fraud, winnow out synthetic diamonds and those sourced in war zones. The company’s scope is being expanded to build anti-counterfeit databases for other precious goods.
She also said “we’re seeing way too much deal-flow. Lots more protocol development (for validating new blocks) needs to be done, they need to be built out and made more stable. We’re at the very early stages of getting all the secure information people need and want.”
Seems like this whole sector might be the start of the “next big thing.”