A lot of our friends and family have asked about conducting or contributing to an ICO or IPO and what the difference is. In an effort to clarify, here are our thoughts, learnings, and how we implement them at our own company.
The Evolution & Lessons of Venture Capital (VC):
VC 1.0 = offline via Family, Friends, Banks, Funds eg Apple
VC 2.0 = online via Kickstarter, Indiegogo, StartEngine, SeedInvest eg Oculus
VC 3.0 = blockchain via Bitcoin, Ethereum, Waves, Stellar eg EOS
The great part is each evolution is backward compatible and not mutually exclusive so it only gets better!
Before the JOBS Act, one traditional “yellow brick road” from startup to success was paved by the streets of Sand Hill Road in Silicon Valley to Wall Street in New York City. Either your startup, backed by West Coast VCs went public on stock exchanges courted by east coast Investment bankers or it performed a Merger or Acquisition with one that already had. Today, these exchanges both make money by charging $1M+/year to list and stay listed. Despite these high fees, they are ironically open primarily 9:30am-4pm on weekdays in a global 24/7 market.
So where are we now? Well it’s not immediately obvious and the incumbents won't tell you but the times are a changin’...After the JOBS Act the floodgates were opened to investors regardless of their income to invest early in companies so they might see the highest returns. With the advent of crowdfunding platforms such as Kickstarter and Indiegogo and crowdequity platforms such as SeedInvest and StartEngine these platforms solved the trust problem for distributing funds.
However, emerging only recently, Blockchain tech such as Decentralized Exchanges (DEXs) and Smart contracts now solve this problem of safely distributing funds among entrepreneurs and investors. This will challenge VC 1.0 and 2.0 models to adapt or primarily become marketing and investor networks.
Moreover many in the VC community believe Spotify’s direct listing on NYSE is a turning point because it buffed Wall Street’s traditional route of more exclusive access. Additionally, Telegram’s Billion Dollar ICO was topped by EOS $4B ICO which is larger than many IPOs and was listed on exchanges during its campaign. In the midst of all this, Uber is planning potentially the last great traditional IPO for the second half of 2019.
A new stairway to Heaven has been built! Bitcoin and Ethereum are more valuable than many public companies and they never had VC backing and never went public using the traditional means. As we speak, the infrastructure for capital formation and allocation for ideas is being born. Before the blockchain’s killer app can fulfill its purpose as a mature fundraising tool, two additional mechanisms need to be built. First is an SEC Registered DEX as imagined by Waves, Coinbase, and Tzero.
Secondly, moving voting and governance to the blockchain for quick and verifiable decision making is essential. Together they enable self-hosting, increased liquidity thru multi-listing of coins on exchanges, and atomic swaps of coins from one blockchain to another like moving shares from NASDAQ to NYSE.
Finally, popular companies like Facebook, Amazon, Alphabet, Apple, and Microsoft can self-host their own shares and would only list on exchanges for additional liquidity saving millions of dollars a year to invest in startups ;)
To give you an idea of the wealth distribution in the USA today, here are the numbers:
500 - Billionaires ~ <1%
10M - Millionaires ~ 3%
320M - Remaining ~ 97%
Rather than a fear of wealth redistribution, this will be the greatest wealth creation event in our lifetime, a cambrian explosion of new currencies backed by the reputation of the issuer ...cryptocurrency is the new credit system. During depressions & bear markets it is credit that dries up and swallows the ambitions of the hopeful….this no longer has to be the case.
-Musicians trapping to sign to a label can presale their songs, album or tickets to shows
-Fledgling movie stars or directors can presale rights to the films without a distributor
-Struggling artists can fund their works before they start
-Internet startups can presale their software
-Robotics companies can presale their hardware
-Medical companies that aren't yet profitable can presale their treatments
-Small biz can get started without a bank loan
-Students can fund their education without going into debt
-Space explorers can presale their rooms & homes on a Moonbase and Rocket companies can presale tickets to Mars and beyond
-[Insert your idea here]
New Money & The Cryptocurrency Revolution
With your talent & dreams, the bar is lowered not for quality but for the activation energy or initial cost to get started. How many people might believe in your dream and support you with funding? How many of your friends, family, or fellow dreamers would you support?
For example, here’s a few ways to raise $1M:
VC - 1 investor giving $1M
Seed - 10 investors giving $100K
Angels - 100 investors giving $10K
Crowd - 1K investors giving $1K
During the tech revolution so far the likes of Microsoft and Facebook have each created handfuls of billionaires and thousands of millionaires...think of Gates, Zuckerberg and others.
These are great and inspiring however the number of people that can participate in this wealth creation was limited to accredited investors (aka millionaires and billionaires), and early employees.
Similarly but surprisingly Bitcoin and Ethereum have both created handfuls of Billionaires and thousand of Millionaires as well out of accredited and unaccredited investors...think teenager Erik Finman, Winklevoss Twins, and Vitalik Buterin. Imagine turning a $1K investment into $1M dollars!
Unlike before this market size is not limited by the credit of banks but by the faith we have in each other to create a brave new world. Ultimately the secret to success is to get in early and take advantage of every opportunity.
The future will be created faster and faster - hold on and let’s build together! Like Ms Frizzle said, “the best way to learn is to do” so feel free to learn about our Security and Utility tokens.
CEO MANNA Robotics