The eagle – a bird of prey poised on the treetops; eyeing their prey with longing, lustful, laser-sharp eyes. A movement; a sound; the elegant swoop; authoritative power; snatch; grab; drag the prize off with skilled precision. Evolution has taught success; starvation the lessons of failure. Wait; assess; circle; pounce.
Venture Capitalists (VC’s) leverage the same formulaic precision. They hunt great teams with great ideas, matching high growth potential to high growth markets. The upside is clinically viewed; the downside an occupational hazard. The stakes are high, but so are the rewards, with their risks managed through the portfolio effect.
For every 1,000 companies VC’s assess – they will back around 10. With a filtered hit rate of 1%, it’s a Darwinian Landscape – where the fittest get fast forwarded and the laggards languish in the graveyard of ambition. But even as the top ten fittest are backed, only one is expected to be a standout; the one that generates multiple returns that pay for the other nine, in which mediocrity and failure are the de facto standard. It’s a high risk play; but if managed effectively, highly rewarding – and frankly it’s well deserved.
VC’s playing a fundamental role in driving growth and development by providing the rocket fuel to commercialize new technologies. This means they play at the very frontier of new paradigms; at the leading edge; at the front end of uncertainty. If they shape the future, the future is theirs to own – and ultimately someone else’d to buy. As a result, their investment patterns give us leading signals as to where the technology will ultimately head.
To date, a little over $1.2bn has been invested into Blockchain technologies and Bitcoin based applications, with the investment growing commensurately with the self perpetuating symbiosis of the media coverage that it generates.
The above graph summarises this investment growth with data taken from Coindesk’s Bitcoin Venture Investments updates. Coindesk regularly publish and update the global venture capital investments flowing into the Bitcoin/Blockchain space and it is here that we can get an idea of where the smart money is .
The majority of early VC funding in the Bitcoin/Blockhain space was in the finance sector. This is hardly surprising given Bitcoin was the first crypto-currency and the first true use-case of the Blockchain. In the early years, monies flowed into Bitcoin-based applications, mainly wallets, payment systems and exchanges, but as the lines became increasingly blurred between Bitcoin and its underlying Blockchain technology, so the emphasis has begun to shift .
This infographic from William Mougayar gives a top-level view of the where the Blockchain ecosystem was within Financial Services at the tail end of 2015.
Whilst so many of the above applications have been based in the bitcoin space, more recently, increased monies have flowed into establishing the infrastructure and “payment rails” upon which Blockchain can thrive. Recent bigger ticket VC activity reflects this :
- Blockstream ($55m series A round Feb ’16 to develop their “sidechain technology” – total raised $76m)
- Chain ($30m series B September 15 – to build commercial blockchain networks – total raised $43.7m).
- Digital Asset Holdings ($60m – Jan 16 to work with consortia of financial institutions to build the financial infrastructure necessary to enhance financial markets)
Like the internet in 1995, the early and higher value investments tend to go into building core infrastructure. Once built, subsequent application layers were built e.g. the web browsers on top of the internet protocols. If we consider how the internet has evolved to in 20 years and the substantial organisations that have been created, we should reasonably expect to see so much more to come once the core blockchain infrastructure has been built, tried and tested – and it won’t all be finance based applications.
This infographic produced by Venture Radar paints a picture of nonfinancial ecosystem for the Blockchain space.
There are far fewer companies within the nonfinancial ecosystem currently. This is, however, likely to change significantly and very quickly once the enhanced infrastructure has been built – and use cases can be developed more effectively . Indeed, to get even closer to this extent of this effect, within Coindesk’s Venture investment updates, they also detail smaller angel and seed based investments that have been publicly released. This means you have easy access to the where early stage funds are flowing.
So whatever industry you are in, by checking out Coindesk’s Bitcoin Venture Investments updates, you can get a feel for where the technology is heading by following the money being invested. This access to information will help give you insight into where some of the opportunities and threats to your organisation will come from. After all the VC’s are out there targetting the best prey they can; to back the fittest and the best; and whilst they don’t always get it right, their methodology drives growth and development and has been proven in establishing and driving the future of technology.
If you are interested in understanding more about the Blockchain, its power and its challenges, why not check out my new book Down The Rabbit Hole, a book for business & non-technical people, like you, to truly understand the Blockchain & to capitalize on its power. Its available on :