The No Hands Syndrome

Last week I saw this tweet from Dan Primack who covers the VC sector for Fortune:

I replied to it and I also mentioned it in a comment thread here at AVC recently.

Here’s what I can’t reconcile.

Bitcoin/Blockchain is one of the fastest growing sectors in startupland. Here’s a chart from VC Tom Tunguzblog.

fastest_growing_investment_categories

I know that measuring something using y/y growth rates can be misleading because of theย small numbers involved. But Bitcoin is the fastest growing area in startup investing over the past three years.

And yet not one VC in a room full of them (90 of them) raised their hands when asked how many would invest in a bitcoin startup.

Maybe the distinction is bitcoin vs blockchain. I understand that. But bitcoin and blockchain are joined at the hip. You don’t get one without the other. So I’m still scratching my head.

But I do know one thing. When not one hand goes up in a room full of VCs, go there. It is going to be profitable.

#blockchain#VC & Technology

Comments (Archived):

  1. Al Mazzone

    100 Years ago, I imagine Albert Barnes asking a room full of museum directors who would buy any of the Impresionist painters. No hands went up.Add up the value of the Barnes collection now.

    1. pointsnfigures

      The reason the Art Institute in Chicago has a tremendous collection is exactly that fact. Bertha Palmer lead the way (https://en.wikipedia.org/wi

    2. Donovan Francis (abrm312222)

      I have been hearing about this bitcoin for about a year now. Where or how can I invest in this venture from a reputable company?

  2. Dave Pinsen

    If William Mougayar were there at least one hand would have gone up.

    1. William Mougayar

      Not only that, it would be the first hand ๐Ÿ˜‰

    2. JLM

      .It would have been both hands.JLMwww.themusingsofthebigredca…

      1. William Mougayar

        Lol ๐Ÿ™‚

  3. Cindy Gallop

    Great post, Fred. Also applies to another ‘no hands up’ area for VC – sextech:https://www.hottopics.ht/st

    1. Dave Pinsen

      Historically, online porn was profitable enough out of the gate that it didn’t need VC, no? Did the founder of Kink.com take any?

    2. Matt A. Myers

      I could believe the “no hands up” similarity, however I think it ends there. Sex toys etc. are physical goods that have fairly immediate benefit that everyone can pretty quickly understand the value of – and not so much speculation occurring as to what that would all be..

    3. Matt A. Myers

      To add to my previous comment, sextech is more equal to blockchain in the unexplored opportunities and potential that exists.

      1. Cindy Gallop

        Thanks so much for your comments, Matt! Alas, these are the battles my team and I fight every day to build http://makelovenotporn.com/:http://www.fastcompany.com/http://www.thedailybeast.cohttp://techcrunch.com/2015/…which are why we’re extremely interested in bitcoin:http://cointelegraph.com/nehttp://www.bizjournals.com/…To your first comment, porn is no longer profitable – all the dynamics prevalent in every other industry where easily accessible free content has destroyed old world order business models, apply in the porn industry too – which is why the opportunity is as great for disruption there as it is everywhere else, per my open letter to David Cameron and Silicon Valley published by Wired two years ago – ‘Don’t Block Porn, Disrupt It’ :)http://www.wired.co.uk/news…

        1. Matt A. Myers

          Thanks for the links. Looking through them now. Any platform(s) I launch will be sex positive, sex-friendly; non-shaming, educational. ๐Ÿ™‚

          1. Cindy Gallop

            Soooo pleased to hear that Matt! You might find the #sextechbiz section of our blog useful too: http://talkabout.makeloveno…and one day I feel very motivated to do this :)http://venturebeat.com/2013…

          2. Cindy Gallop

            Also – I’m typing this at JFK on my way to Australia to do a week of speaking gigs. Australian publication Spook just published this interview with me that you might like given what you’ve just said:http://www.spookmagazine.co

        2. Matt A. Myers

          Re: Bitcoin – Please don’t confuse Bitcoin with the general concept of de-centralized digital currency. I truly believe there is a way to have a good-for-society de-centralized digital currency, however the way Bitcoin is structured is *not* it.

          1. Cindy Gallop

            I hear you – our ‘no adult content’ woes on MLNP have me ferociously monitoring the future of money every day. I’m talking to digital cash/pre-paid/all sorts of ventures, all the time, to find the right solution. Not there yet.

  4. Shalabh

    Dear AVC community, I wrote a small blogpost about why fredwilson is right in saying โ€œZero hands in a room full of VCs is the single best bullish indicatorโ€. Would love to hear your thoughts. Thanks! https://medium.com/@shalabh

    1. Dave Pinsen

      Impressively quick turnaround.

      1. Shalabh

        I had written it two days back after Fred had made the statement in response to my comment here. ๐Ÿ™‚

  5. William Mougayar

    Maybe Dan had the wrong type of VCs in that room: the ones that follow, not lead.I’m willing to bet if 1 hand was raised, others would have followed.I’m also seeing another type of reaction: “Oh yeah, we are looking at Bitcoin/Blockchain investments.” But many of these VCs don’t have a clue of what they are talking about. There is lip service being served, and there is fear of missing out. Bad investments will be made, and that’s the nature of the beast.I’ve made 3 Bitcoin/Blockchain investments in the past 15 months, and 1/3 of my deal flow is related to that segment.

    1. pointsnfigures

      Followers really don’t have a lot of business being in VC. No value add for their LPs, or [email protected] has really educated himself on what bitcoin/blockchain is. That way, it’s a calculated risk when you make an investment-not a chance on the roulette wheel.

      1. Donna Brewington White

        Funny you mention roulette because in the back of my mind as I’ve been reading along here I had the flash thought that if I was at a roulette table with Fred or William I’d piggyback my bets on theirs. But yes I know we’re talking calculated investment not gambling.

        1. sigmaalgebra

          At roulette, if making any bets at all, then likely there has to be someone working for the house but not loyal to the house. Why? One of the standard results in martingale theory, e.g., as in the classic J. Doob, Stochastic Processes, is that in expectation there is no way to win at roulette. That is, a bet has to be a function of the past, and there can be no such function that makes money.Of course, can still make money at roulette if the house gets in a hurry and lets people put bets down after the ball is released — do some fast, tricky calculations on the rotational speed of the wheel and how hard the ball tends to be thrown.Now, blackjack, that can be different, E. Thorpe, Beat the Dealer, although the casinos finally do believe that book and become unhappy if anyone appears to be doing card counting.If want to follow a successful player, then pick something other than standard casino gambling games!

          1. Donna Brewington White

            I never want to be a successful player except for maybe a little fun once in a great while. I’m too cheap to be a gambler and I also suspect that deep inside there is the fear of addiction. I’d rather stick with calculated risks.

          2. sigmaalgebra

            Wise.

    2. Girish Mehta

      Many thanks for your educating many of us here on this subject….and admiration for your conviction !

      1. Matt A. Myers

        He has bias, invested in the ecosystem, so be sure to understand the implications of all aspects – not just the good and “bad” that he or others may share who have vested interest.IMHO Bitcoin in its current form is very bad for people and society.

        1. SubstrateUndertow

          What specific attributes are “bad for society” could you expand on that ?

          1. Matt A. Myers

            I have a big draft blog post of thoughts gathering more text, compiling comments I have made on here. I simply don’t have time to put it together into a more orderly piece at the moment.There are many factors that are bad for society, including allowing individuals to amass large amounts of value/potential future currency for having done nothing – merely because of supply and demand impacting the value of Bitcoin; as a transaction layer it shouldn’t increase the currency value of anyone elses’ currency.Like email, if more people are using it then it has a increased utility value – and that is primarily where digital currency should gain its value. The main reason Bitcoin has gained traction and adoption is purely from its ability to be a gamble through speculation.How many Bitcoin companies that were started have had millions or $10s of millions of value of Bitcoin before they began, and how many of them have it in their business model to amass more Bitcoin and help increase adoption?Coinbase, where they immediately will convert Bitcoin to dollar is an easy way to realize the illusion that Bitcoin is being more widely accepted. They alone or a very few could perpetuate this, however it still isn’t fair or reasonable.If you look at the end of the cycle as well, say where 70% of people have adopted Bitcoin, what does the scenario look like for the last 30%? If you look at all of the pressures and friction and unfairness that is created by that point there is then a very big problem.

          2. Matt A. Myers

            To followup to my comment, I do eventually want to do projection models to show what happens – and to eventually write an article to publish in a magazine – though I’ll need help with the math as it’s not my specialty and could use the help – if interested ever.

        2. Girish Mehta

          I am a skeptic/questioner about Bitcoin’s adoption in the monetary/financial system Matt…have mentioned it here a few times in the past. But I am also possibly uninformed or, more dangerously, ill-informed. So when smart people like Fred and William speak about it, I lean in and listen hard. And I do admire William for his conviction even if I don’t share it and thank him for sharing what he knows !

    3. Danielle Morrill

      I was in that room, and I think you’re right.

  6. Guy Lepage

    I feel blockchain is bitcoin’s sexy cousin. By promoting blockchain, this is how bitcoin ends up succeeding. (on a marketing communications level). The bitcoin word has a lot of negative connotations associated with it. If the question would have been posed “who here would invest in a Blockchain company?” I feel the results would have been much different.

    1. JLM

      .I wonder if Jabba the Hut had a sexy cousin?Sexy is in the eye of the beholder, no?JLMwww.themusingsofthebigredca…

      1. Guy Lepage

        Haha. I guess once one gets a glimpse of what the potential of blockchain technology can be, one becomes a bit bias. What is it that you don’t like about the technology and it’s potential?

        1. JLM

          .I have absolutely nothing against bitcoin or the blockchain. I actually think that blockchain will amount to something but that bitcoin may not.I see blockchain as being process.I am only skeptical, not an opponent.I do confess that there is a bit of emerging zealotry that is more than a little off putting. My little bit of legal training prejudices me toward hard fact based evidence rather than narrative or opinion.I am waiting for the killer app. I am just not holding my breath as I wait.I do think this — there are a lot of smart people, whose opinions I respect, who are high on it. As they say where I live — with that much horseshit lying around there has to be a pony somewhere.JLMwww.themusingsofthebigredca…

          1. Guy Lepage

            Great response. “with that much horseshit lying around there has to be a pony somewhere.” Or a horse with a horn on it’s head? Haha.But in all seriousness, I strongly feel that there will be not just one killer app utilizing the blockchain technology, but several. And I’m definitely willing to hold my breath and wait as I don’t see this being too far around the bend.

          2. JLM

            .Haha, Guy, unicorns don’t shit. If they did, their shit wouldn’t stink. That’s part of being a unicorn.BTW, they grill up nice and take smoke well.Once the first killer app appears, if it ever does, there will lots of apps.JLMwww.themusingsofthebigredca…

          3. Guy Lepage

            Haha. I believe I was talking about a horse with a horn on it’s head. I prefer pegasus to unicorn meat personally.

          4. JLM

            .I think unicorn is less fatty.JLMwww.themusingsofthebigredca…

          5. Matt A. Myers

            I really want FAKEGRIMLOCK to draw this..!

          6. facepalmfrank

            “I am waiting for the killer app. I am just not holding my breath as I wait.”Bitcoin is a transparent payment system which operates without middlemen, it’s not limited and you do not require permission to use it.That’s the first and most important “killer app” of bitcoin.

          7. JLM

            .Not something I want to debate on a Sunday morning but consider how this makes my life better when I can currently make all the payments I want with WellsFargo, USAA, Schwab.This is not even an “app” let alone a “killer app.”I have no aversion to middlemen. I like middlemen. I like their imprimatur in the middle of a deal.JLMwww.themusingsofthebigredca…

          8. facepalmfrank

            “I can currently make all the payments I want with WellsFargo, USAA, Schwab.”You can make payments to and where the banks allows you and they have significant charges and fees.”I have no aversion to middlemen.”Good that you have a choice.In my universe, middlemen cause friction, additional expenses and additional risks. Friction, additional expenses and risks are bad for you, mkay? ๐Ÿ™‚

          9. JLM

            .One man’s friction is another man’s imprimatur. I must be a very good boy because thus far, my boys have allowed me to do everything I can contemplate needing doing. What else do I want to do?I like Wells Fargo. I trust USAA. I adore Charlie Schwab. I like being able to talk to real people. [Sometimes, they take me out to lunch plus they will all loan me money.]As to fees, I pay nothing recognizing that may be a special situation for me and me alone. I get that. They also loan me money at absurdly low rates and give me credit cards with ridiculously high limits.My life is OK. I don’t think it can get much better.What is improved in my life by the blockchain?Additional expense?I don’t mind paying Dwolla or PayPal for convenience. I am willing to pay for convenience.JLMwww.themusingsofthebigredca…

          10. facepalmfrank

            Well, if you’re happy with “your boys” then you’re right. Stick with them.

          11. Guy Lepage

            I think we were talking more about the blockchain than the currency.

          12. facepalmfrank

            A blockchain without an unit of account(currency) is a fundamentally flawed idea.You cannot decouple the two.

          13. Guy Lepage

            True. But the convo JLM and I were discussing was more about the blockchain technology. And I also feel that once the majority of transactions on the blockchain are coming from transactions that are non-currency instigated, then that will change. But for now you are correct.

          14. William Mougayar

            “with that much horseshit lying around there has to be a pony somewhere.”OMG, I was in stitches reading that. I think that will take over “stronger than an acre of garlic” in the JLMisms dictionary. Where is that book btw?

          15. Donna Brewington White

            But not to be read before breakfast given the images he conjures.

          16. William Mougayar

            Smoke/fire analogy works too ;)But ponies are cute.

          17. Donna Brewington White

            It wasn’t the pony that killed my appetite. It was the manure.

          18. William Mougayar

            Well, have a look at this wonderful home made fig tart that I just had this morning with a cappuccino. That might change your frame of mind ๐Ÿ™‚

          19. pointsnfigures

            Might need to grow figs on a farm if I ever find one to buy.

          20. William Mougayar

            California figs, sun kissed.

          21. Donna Brewington White

            Oh my. Yes!

          22. sigmaalgebra

            Ah, a lot better than the old standard “Where there’s smoke, there’s fire.”.

  7. Mario Cantin

    A perfect case of the Peter Thiel contrarian question: “What do you know to be true that no one else believes?” Fred’s success in his own version of that question, if I’ve correctly read between the lines; and here the phenomena is occuring once again — and in plain sight…

    1. sigmaalgebra

      > “What do you know to be true that no one else believes?”Also good, how the heck to know it’s true? Some good methodology, please?E.g., Ike wanted some pictures, and the U-2 flew too low and slow. So, Kelly Johnson showed up with an armload of engineering drawings. The US DoD concluded that he was right. The result washttp://iliketowastemytime.c…Both Johnson and the DoD were right — lots of great pictures and never got shot down.How’d they know? Methodology!Nine years ago NASA sent a rocket. It just sent back some great pictures of Pluto. NASA knew they were right nine years ago. How’d they do that?

  8. Simone

    I found this title in businessinsider.com very inspired, it sums up my thoughts: ‘Bitcoin is the ‘Napster’ of finance โ€” and there’ll be an iTunes’

    1. William Mougayar

      Hmmm. Rather misleading title.I didn’t read the article, but the first part is wrong, and the second part is also wrong.

    2. facepalmfrank

      Bitcoin is the torrent of finance.

    3. fredwilson

      There would not have been an iTunes if the music industry had not crushed Napster. The correct move, in my view, would have been to embrace Napster not crush it. But that’s water over the bridge and ancient history now. iTunes is even old news now as the music industry moves to streaming

      1. Simone

        To me the title says ‘this technology will make history, just not in its current iteration’. This is also my understanding of a sort of consensus of most of the comments on this blog. The debate here needs to explore some new avenues, ask new questions, get more creative and less emotional, as much as it became a guilty pleasure ๐Ÿ™‚ to see how easily William gets upset thinking it is him against the entire world who is not getting bitcoin’s potential (a false premise)

        1. William Mougayar

          Good point. Emotionally guilty as charged ๐Ÿ™‚

  9. William Mougayar

    Just because you wrote ” bitcoin and blockchain are joined at the hip.”, I feel compelled to continue educating people that “there are blockchains without bitcoin.”That original statement is true for Bitcoin, but you don’t need Bitcoin to deploy a blockchain if Bitcoin isn’t its currency.1/ Private (permissioned) blockchains are being worked on within large corporations, especially financial institutions. That’s where the distributed ledger and other cryptographically secured properties are used, without the need for Bitcoin or mining to secure the network. Think VPN or Intranet concepts as an analogy.2/ Ethereum is the most important (and exciting) blockchain development outside of the Bitcoin blockchain proper. It is a fully programmable and flexible blockchain that allows developers to create decentralized Apps without the burden of putting too many pieces together. I know of about 70 Ethereum Dapps being currently developped, and the list is growing http://dapps.ethercasts.com/.

    1. awaldstein

      OK professor– I get fully well how blockchains are going to impact me personally and my businesses. Pretty clear.Why should I or anyone outside of the walled off financial institutions themselves (and investors) care about permissioned blockchains as they are just one more tool to create a barrier between people and banks giving the advantage to the later?

      1. William Mougayar

        They aren’t creating barriers, but they are targeting internal processes. Think back end systems for the banks. They are starting there with permissioned blockchain applications to streamline & improve their work.

        1. awaldstein

          Understand that of course.For Fintech implementers and investors, get this. Obvious.But as a consumer and thinker and entrepreneur I associate the power of this distributed capability as a change agent for the world.Similar to how the idea of open source is filed in my thought process.In that respect what you refer to as permissioned blockchain is actually antithetical to that as banks are certainly–as defined today–not part of this. In fact, I am hopeful that other systems built on this will replace it.So to my question–why to a culture change is permissioned blockchain not the antithesis to the spirit of what is being enabled.What am i not getting?

          1. JLM

            .A birthday card from Wm?JLMwww.themusingsofthebigredca…

          2. William Mougayar

            Inside financial institutions, there are discrete applications where a permissioned blockchain app would make sense, eg in the post-trade segment which has inefficiencies. In reality, they will also need to touch the Bitcoin blockchain in some cases, as it’ll be interrelated as well. So it’s both.

          3. Twain Twain

            Discrete — this is why widespread adoption within the institutions hasn’t happened yet.Getting cross-silo agreement across the businesses, especially on a “Our clients in Equities, Fixed Income, IR-FX, Corp Fin, Private Wealth Mgmt, Private Equity would generate income and would pay to gain the cost-savings afforded by Bitcoin-Blockchain in settlement efficiencies” basis is what’s needed.Bitcoin-Blockchain CEOs haven’t yet made this value case.

          4. awaldstein

            You are a slippery conversationalist my friend.

          5. William Mougayar

            I’m working on a related blog post, which I hope would clarify a few items.

        2. pointsnfigures

          I think that blockchains could be married to supply chains inside of manufacturing firms-or across an industry to achieve better coordination since Bitcoin could provide a more transparent price than cost accounting.

          1. awaldstein

            Agree completely. Spent some years putting auction technology into supply chains so know this segment very well and agree and a smart investment sector. Not sexy but important.Not the same though as what William is implying about banks. I’m just not getting why this is a good thing for anyone but the banks themselves.

    2. Girish Mehta

      Bitcoin and Bitcoin Blockchain are joined at the hip. Thanks.

      1. William Mougayar

        I would vary it slightly and rather say:Bitcoin and its blockchain are joined at the hip.

    3. facepalmfrank

      Ethereum is only vapor at this stage. While they have nice goals I don’t think that they can deliver without crippling the project with compromises.A blockchain without a strong unit of account is a lame database.

      1. William Mougayar

        Via your 2nd statement, you’ve certainly proven your ignorance of how a blockchain works. And that adds to discrediting your first statement which has no basis of truth. I’m not interested in debating Ethereum here, but I will defend it if being attacked like you did.

        1. facepalmfrank

          I’m not attacking it.Ethereum is still pre-beta. That is a fact.Why do you come to social media if you are not prepared to debate? ๐Ÿ™‚

          1. William Mougayar

            “Ethereum is only vapor”- if that isn’t an attack (or insult) when it comes to software, not sure what is.”Ethereum is still pre-beta” – ah, that’s better than saying it’s vapor, so glad to see you softening it.If you know me, you know why I come to social. I don’t want to hog this thread with Ethereum. There are better forums like Reddit, their Wiki, Githubs and Ethereum Blog where educated debates can take place. If you have substance to your arguments, please feel free to take them there.I much prefer to take the high road and let projects complete their development cycles before judging.

          2. facepalmfrank

            You forgot to quote the “at this stage” part.If you are not prepared to debate about things, then try not bringing them up.

          3. William Mougayar

            Regardless, the word “vapor” is quite an extreme choice of word. An alternative could be “not completed” for e.g.I said I don’t want to debate it “here”, out of respect for this community.

          4. facepalmfrank

            As I said, then don’t bring it up here if you don’t want to talk about it “here”.

          5. JLM

            .You need a kerosene bath to toughen up your skin, Mr. Sensitivity.You know I’m kidding, right?JLMwww.themusingsofthebigredca…

          6. William Mougayar

            Thanks, coach ;)I have a tough skin on most days, but can’t stand arrogance wrapped in ignorance.I don’t mind stupidity, because that’s a limitation some people have, and I accept it. But when smart people don’t take the time to educate themselves, and they end-up saying stupid things, that can rub me the wrong way.

          7. JLM

            .OK, Wm, get a water bottle, take a drink and get back into the game.JLMwww.themusingsofthebigredca…

          8. William Mougayar

            I was reminded of this US soldier posting an amazing response to anti-trans Caitlyn Jenner trolls.http://www.rawstory.com/201

          9. pointsnfigures

            Must be the figs!

      2. Matt A. Myers

        If you actually listen to Vitalik (and not get caught up in the excitement) he even says himself it isn’t ready for mainstream – and it sounds like it may never be meant or ready for mainstream use cases, which is fine, just won’t feel good if you set your expectations too high.

        1. facepalmfrank

          Indeed. Ethereum is certainly an interesting project but hyping it on social media is just awfully premature.

          1. Pete Griffiths

            I don’t think he was hyping it. It is a very interesting project and people should know about it. Relax…

    4. Ryan Shea

      I wrote up a few points related to your comments on Fred’s statement that “bitcoin and blockchain are joined at the hip”. Would love your input:http://avc.com/2015/07/the-

      1. William Mougayar

        I did ๐Ÿ˜‰

    5. fredwilson

      Network effects lead me to conclude that the Bitcoin blockchain will be where most (all?) of the action will beThat’s the way it has always been with protocols

      1. William Mougayar

        You’re correct when it comes to the apps that need that network effect on Bitcoin. And there is an inherent network effect of miners and users that the Bitcoin protocol needs in order to prosper.But we are finding out that the blockchain itself is a software paradigm that has applications outside of Bitcoin proper. So, what happens to those sorts of Apps that want to live in their own right without a straight linkage to Bitcoin users, but rather appeal to Internet users at large?There’s a new question here: protocol network effects vs. app network effects. Do you always need both, or one or the other is also sufficient? When a network (or protocol) is sufficiently propagated, then does the App become more where the value is?

        1. SubstrateUndertow

          Humans are a unique application-level cellular network-effect riding in on the protocol network-effect of cellular-recombinancy.So maybe thats right “App become more where the value is?”

    6. Hal Taylor

      I don’t see how your notion of a permissioned blockchain in 1/ is different than, let’s say, Wells Fargo storing all their customer’s checking accounts on Amazon EC2 servers. The ledger can be secured by encryption. Miners are out of the picture but there will be a need for something to replace them– a scheme to make all new entries immutable like in a permissionless blockchain.

      1. William Mougayar

        It is not the miners that are the value-add. It’s concepts like identity, ownership, title transfers, assets sales & post settlement transactions that can be streamlined via blockchain implementations where trust verification is automated.The blockchain can replace some intermediaries & intermediary processes.

  10. JimHirshfield

    I used to go to lots of conferences; it was entertaining. Nowadays, I get more work done by not going (has a lot to do with me knowing who my prospective clients are already, and how to reach them, and that they’re not at conferences).My point: conferences don’t always include the decision makers.

    1. William Mougayar

      I agree with you, and that applies mostly to conferences that have been running for years and years on the same topics and attracting the same old crowds.It’s the new breed of conferences that are a lot more specific in their topics that are more interesting from a quality point of view.

      1. JimHirshfield

        Examples?

        1. William Mougayar

          I knew you would ask him for that. OuiShare, Shift, Tech on Deck are quick ones, but in general I like conferences that have a single deep topic about them where you are sure to find the best experts and practitioners in it. Pick any emerging topic and it has a top conference for it. Eg: internet of things, home automation, bitcoin & finance, drones, etc.

    2. Donna Brewington White

      They make for good tweeting. ๐Ÿ˜‰

  11. sigmaalgebra

    So, broadly the question is,What startup projects to pursue?At AVC, elsewhere on the Internet, etc., there are lots of answers. Hmm ….Now we have a new answer (sufficient condition): When not one hand goes up in a room full of VCs, go there. It is going to be profitable. Amazing.I can see some advantages in some of the old sufficient conditions, e.g., “A large network of engaged users”, but this new answer surprises me.Let’s see: Suppose the VCs were asked if they would invest in, say, (1) front yard lemonade stands run by grade school entrepreneurs, (2) selling live lobsters and/or 5 pound boxes of frozen shrimp out of the back of a pickup truck on weekends along suburban roads, (3) suburban grass mowing, (4) a Web site for cat pictures, (5) a cartoon movie parody of Star Wars, or (6) four middle school students with a garage band.Maybe I can guess at some of the advantages of the new answer, but I have a tough time accepting it:Maybe the answer is the ultimate contrarian approach?Maybe each of the VCs (A) knows nothing about BitCoin/blockchain so won’t invest yet or (B) knows about BitCoin/blockchain, wants to invest, but doesn’t want to let other VCs know that yet. Maybe.

    1. Marissa_NYx

      They may all be focussing on one thing : a no brainer proven and repeatable business model – this would make the grass mowing the most attractive business from your list.

      1. sigmaalgebra

        Uber for grass mowing, right?Or, uh, we can be sure that the grass will keep growing, right?Or, self driving vehicles, using GPS, for grass mowing, and then sell out to Google, if only as an acqui-hire?Or, the guys who mow grass in my neighborhood show up with ballpark $50,000 in capex. If only to get the exercise, I mow my own grass, so I’ve never asked about their prices, but somehow they pulled together the $50,000.Ah, heck, pour concrete and paint it green for grass mowing!

    2. pointsnfigures

      no pattern recognition yet in Bitcoin for VCs that follow.

  12. Marissa_NYx

    Sounds like what it was like in 1996-98 for Web 1.0

  13. LIAD

    The real answer is that smart VCs dont spend their time on the endless conference/cocktail circuit

    1. fredwilson

      Correct

      1. Rick

        Another thing Fred is that some technology and various other products are just not viewed the same. Some are not viewed as something to invest in. Some are not viewed as something to purchase..People just thing they should be free or just something they get without thinking about it..Uh oh… Now you know I’m here!

    2. PhilipSugar

      You have great comments.

      1. fredwilson

        ^2

    3. William Mougayar

      they send their analysts instead ๐Ÿ˜‰

      1. p-air

        funny, with three VC partners I reached out to, they connected me with the associates or principals that were their “bitcoin experts”. sadly, there was little depth with at least two of them.

        1. William Mougayar

          Depth is scarce with VCs re: Bitcoin. Lip service is not.(feel free to email me if you have an opportunity to discuss wmougayar AT gmail)

  14. pointsnfigures

    There are two outcomes when you make an investment and someone says “You’re nuts.” or “I don’t get it.”. Incredible success, or failure. But, you can’t have success if you don’t take the risk.When I was trading, it was the absolute nuts trades that got you in trouble-or made you a lot of money. Usually when you put them on there weren’t too many people beside you. More often than not, everyone in the pit wanted the opposite side of what you were doing.Most people feel comfortable following the herd. It’s safe. Until the herd gets culled.

    1. sigmaalgebra

      Unicorns don’t form herds!Eagles don’t flock.Necessarily something that is the very best and much better than anything else doesn’t have a lot of company.It’s lonely at the top.If trying to see how to be an eagle, don’t draw lessons just from flocks of crows.

  15. Girish Mehta

    Regarding “When not one hand goes up in a room full of VCs, go there. It is going to be profitable”.This point works almost 100% in the reverse direction of course – looking backwards in time after the startup has been established. Expect there were none/almost none hands in the room re Twitter/Kickstarter/Airbnb in the very early days. Underlying premise on which venture operates.But I am not sure how well this works in the forward direction as a filtering/decision criterion. So, now, I am the one scratching my head :-).p.s. Bitcoin has been around a while now. Its seven years since Satoshi’s email. There are very strong (legendary even :-)) voices in support of Bitcoin in the venture community for a while.Maybe its at the stage to look into reasons for the skepticism about Bitcoin if/where it exists, rather than to the skepticism itself as a signal. Time may well prove that the early bitcoin supporters and investors were brilliant on this one. But I do wonder about looking at the skepticism itself as a signal at this stage. Thanks.

    1. facepalmfrank

      “Time may well prove that the early bitcoin supporters and investors were absolutely brilliant on this one.”Very good point.Bitcoin questions all the things we were conditioned to when it comes to money, so it’s a huge barrier of entry at this stage.Without questioning all the dogmas, one cannot appreciate the value of truly decentralized payment networks and systems built on top of them.

    2. Matt A. Myers

      What @fredwilson:disqus could revisit is the same question asked 1-3 years from now, when “everyone” has potentially invested in a Bitcoin company – whereas then they can say they did that “5 years ago.”

  16. JLM

    .A bad idea held by a majority is still a bad idea.A good idea held by one person is still a good idea.In the world there are:Fire starters — people who innovate, lead and who do things for the first time;Fire maintainers — people who are a quick #2, follow effectively or who build on the original idea; and,Fire pissers — people who specialize in pissing on one’s fire regardless of whether it is a good idea of not.Bitcoin and its attendant blockchain are something. The world is trying to find out what that something is and is hanging around looking for the killer consumer — not inside baseball fintech — app.The idea may be a good one or it may not be a good one. The pissers have already appeared.It will all change when, and if, the killer app appears. Wake me then.I liked Segway.JLMwww.themusingsofthebigredca…

  17. Ryan Shea

    A few points I’d like to present with regards to Bitcoin and blockchain tech being tied at the hip:1. As @wmoug:disqus pointed out Bitcoin and blockchains are not necessarily tied together. You can in fact have a blockchain without a unit of account, so long as you have a defined set of permissioned parties running the chain that trust each other in certain ways.2. As Fred alluded to in his post, permission-less blockchains and units of account ARE tied at the hip. This is because (a) you need a way to incentivize miners and (b) if you don’t have a unit of account, then you can’t have transaction fees, and so you can’t have a free market based spam control system.3. Permissioned blockchains are useful for certain things but they are limited in what they can do. Decentralized, permission-less, censorship-resistant applications CANNOT be built on them, which for many is a deal-breaker.4. It is extremely valuable to be building on the blockchain with the highest amount of security, aka the one with the highest cost of attack (COA). The Bitcoin blockchain is by far the most secure, with a cost of attack on the order of magnitude of $200M. No blockchain comes even close. In fact, I’d be surprised if there was another blockchain with a COA at even 1/10th of the COA of Bitcoin.5. If you agree with all of the above points, then it follows that *practical* blockchain use and Bitcoin are tied at the hip, at least for now.

    1. JLM

      .Very well reasoned and presented without any whiff of zealotry.Thank you and well played.JLMwww.themusingsofthebigredca…

    2. Ryan Shea

      6. Many investors say they are interested in blockchain tech, but not Bitcoin. At first, you may think this is silly, if you take it at face value that Bitcoin and the blockchain are tied at the hip.But I’d argue that this is not in fact silly. Consider this statement: “I’m interested in Internet tech, I’m just not interested in domains.” Domains are the fundamental unit of surfing the web, just as Bitcoins are the fundamental unit of the blockchain.The internet cannot function effectively without domains, just like the Bitcoin blockchain cannot function effectively without Bitcoins.So while people may recognize that Bitcoins are absolutely necessary for the blockchain to work well, they might just not get *excited* about them. And they may have the belief that most of the innovation on the blockchain won’t be tied to what is done with the currency itself, but rather the things that you can do on top of the blockchain, which does in fact need the currency.Some other points:- It’s perfectly reasonable to say “yeah it would be great if the value of Bitcoin would go up, most importantly because that would increase the security / cost of attack of the Bitcoin blockchain, but I’m still seeing this as a high-risk endeavor and so I’m not going to put my money (or much of my money) into Bitcoin.”- It’s perfectly reasonable to imagine a world in which the value of the applications built on top of the Bitcoin blockchain and the non-financial assets on the Bitcoin blockchain (think OpenAssets assets, Counterparty tokens, Blockstore names) exceed the value of the bitcoins themselves. Keep in mind that the value of all domains is still dwarfed by the value of all of the properties that use those domains. That said, if this does happen, this could result in some problems with the security of the blockchain, since it would make the blockchain more desirable to attack. That still doesn’t preclude this reality from happening.

      1. SubstrateUndertow

        So Bitcoins facilitate secured blockchain function proliferation just as Mitochondria facilitate secured cellular function proliferation????

      2. Tom Mornini

        I’m having a difficult time imagining why assets of greater value than sum of Bitcoin would be secured on THE Blockchain.You addressed the security concern, but what about transactions involving those assets? Your deed on the Blockchain, but no ability to sell your house with a simple, efficient smart contract?Seems unlikely to me.

        1. Ryan Shea

          Here’s how I would address this:1. Use an asset system built as a virtual blockchain on the Bitcoin blockchain (think OpenAssets or Counterparty).2. Work with a smart contracts sidechain.3. Write a contract that relies on oracles that tie into OpenAssets or Counterparty.

          1. Tom Mornini

            What’s the advantage of your method -vs- K.I.S.S.?From where I’m sitting, it looks a LOT simpler to:1) Sign Bitcoin smart contract.2) Sign and broadcast Bitcoin transaction, causing contract to transfer ownership.3. There is no step 3.I’m not anywhere near as confident in the ACID properties of your multi-protocol alternative.Your system more closely models the present. What’s the point?

          2. Ryan Shea

            Well, the Bitcoin blockchain does not support smart contracts natively. So you can’t do that.Also, this may be simpler at face value, but it doesn’t keep the blockchain simple.Two great things about contract systems built on the bitcoin blockchain:1. They don’t require either (a) for developers, miners, wallets, etc. to add support for new opcodes or (b) for the Bitcoin blockchain to add opcodes for turing completeness (which you don’t want to do for a variety of reasons, including security).2. The blockchain itself remains simple. Very little logic goes into the blockchain and so it can be reliable and can be easily updated. Logic is instead confined to specific systems built on the chain.

      3. Donna Brewington White

        You are helping this to make sense.(Speaking as one who is relatively uneducated on the subject.)

      4. ozlanthos

        The only people who talk seriously about “Blockchains without Bitcoins” are banks and other legacy financial moguls. Do you know why? It’s because they do not want to make a blockchain, like one you and I know. I call what they intend to create “trustchains”. A trustchain has no independent miners, ( so no need to incentivize the miners on the network to play by the rules) no publicly accessible blockchain explorer, and can be edited after the fact. Due to these facts, it will be about as secure as an Excel spreadsheet, and (despite the fact that banks and legacy financial companies “intend” to be the only ones accessing it) will be repeatedly hacked until all players using it go insolvent and eventually bankrupt. Thus the term “trustchain”, because if you are banking or investing with one of these players, you will have to “trust” that your funds are still in your account.-Oz

        1. Luke Parker

          The USD is basically a trustchain too for that matter; and it’s the one that led Satoshi to create a blockchain.It’s a really bad century to be a bank in.

    3. William Mougayar

      Ryan, you’re making some good points, but your conclusion isn’t 100% correct because there are 2 flaws in building your case.Re: #3. That is not the realm or scope of permissioned blockchains within organizations. So, it’s kind of a moot point.Re: #4. The concept of security is different in permissioned blockchains (there is no mining), and how you measure security is not entirely based on “cost of attacks”. One can certainly have a poorly written Bitcoin app that has security vulnerabilities (e.g. exchanges that get hacked, or other wallets flaws), and in the case where the currency is just fuel to run a smart contract, and the consensus is based on proof of stake, not proof-of-work (e.g Ethereum), then the security paradigm changes entirely. That said. My position is known. I’m a big supporters of the 3 types of blockchains we will see in the future, and I don’t agree when a single camp says that the other 2 are not viable:1. The Bitcoin Blockchain2. Non-bitcoin Blockchains (eg Ethereum)3. Permissioned/private Blockchains (some of which might be based on/forked from #2 or #1, eg Eris)When each segment succeeds and goes forward, the whole field (crypto-based software) succeeds and goes forward. #2 and #3 are NOT distractions to #1. They are additions and evolutions. We didn’t stop at Fortran in 1956 just because it was the most successful and widely used development language.

      1. Ryan Shea

        Thanks William.Note that permissioned blockchains don’t have to be confined to a single organization. Some people have proposed building “decentralized” applications on top of permissioned blockchains (really just semi-decentralized applications). For example, you could have a blockchain that’s run by “the big four” audit firms or “the big five” banks. So I would say that this *has* been proposed and is in fact in scope, at least somewhat.That said, while I think these applications can work, they forfeit quite a few properties that we hold dear, like permission-less-ness and censorship-resistance.Also please keep in mind that I don’t have a position against people building other blockchains, and I don’t have a position against people building permissioned blockchains. I support both. Innovation and experimentation is good.That said, I do think that when decentralized application developers build on top of blockchain tech, they should keep two things in mind:1. They should build their application in a way that is blockchain-agnostic. That means writing it in a way that it can be easily ported from one blockchain to another if the necessity arises.2. They should decide at any given time to work on the blockchain that has the highest cost of attack.(this doesn’t apply to those building on completely private permissioned blockchains, as the properties here are quite different)

        1. William Mougayar

          Thanks for your work, Ryan. You guys are doing the hard work. I’m just an analyst, analyzing and asking questions.I’m with you in questioning the reasoning behind these big 4/5 semi-private scenarios, as it’s not making sense to me either.But I’d like to learn more- how can one write (today) decentralized Apps that are blockchain agnostic & that can be ported to another one? Is this a wish for the future or a current possibility?

          1. Ryan Shea

            And thank you William, of course you know I respect your views on this and everything you’ve said thus far and I think we’re in agreement on most points – there are just a few that we have somewhat different perspectives on.As far as blockchain-agnostic apps that can be “forked” and moved across blockchains at any point in time, here’s my perspective on how you would do this:1. have the operation data be embedded in the blockchain you’re using at the time2. avoid having the operation logic baked directly in the chain – that means counterparty/openassets/blockstore over sidechains or ethereum3. have separate nodes that interpret the sequence of events and build the state from that interpreted sequence (just like the nodes of counterparty, openassets and blockstore)This isn’t necessarily the right way to build decentralized apps. Some think that it’s best to have logic baked into the chain, like Ethereum and Sidechains. Maybe that’s the way to go, we’ll see. It’s just my perspective that we should be separating the details of the blockchain from the application logic.

          2. Greg Slepak

            > “how can one write (today) decentralized Apps that are blockchain agnostic & that can be ported to another one?Blockchain agnostic protocols are critical to that.Example: https://github.com/blocksta

      2. Hal Taylor

        With its โ€œciticoinโ€ currency project Citibank implies that it may be looking at ways to shift costs of securing bank ledgers from expensive data centers to less expensive miners. Their private permissioned blockchain will probably use citicoin as a unit of account but because of limited miner membership it will still need to be linked through a sidechain to a permissionless blockchain like Bitcoin to enforce good behavior on its captive miners.

        1. William Mougayar

          But why the need for a citicoin to do that? Is it a lazy way to replicate a bitcoin blockchain or does the citicoin itself have a real benefit? They could do what they want without an alt-coin. Alt-currencies are a distraction. Alt-blockchains are not.

          1. kidmercury

            citi will be able to more closely control the value of the coin by issuing their own coin rather than relying on btc. this will yield greater stability, certainty, and security for all parties involved.

          2. JLM

            .This is an odd and funny development as banks issued their own currency at the beginning of our Republic.Full freakin’ circle.JLMwww.themusingsofthebigredca…

          3. William Mougayar

            we shall see

    4. fredwilson

      That’s where my head is at right now too Ryan

    5. iamronen

      Thank you for this comment Ryan. To me this whittles down my doubts about Bitcoin (vs Blockchain) to incentives and trust.I believe that many situations that will drive potential adoption momentum to Bitcoin may represent a need to move to a different system of incentives – a good and relevant example may be Greece.If (as I believe) the Greek economy collapse is rooted in “free market forces” then it is those very motivations that need to be re-examined. If for example “social good” and “free market forces” are not aligned, then Bitcoin, as it embodies the same underlying “free market” values, may not be able serve as a (reliable / sustainable) foundation for an alternative currency in Greece.What if blockchain miners were vested primarily in the tier of services and application built on top of the blockchain instead of primarily in the profitability of mining? Couldn’t they contribute mining to the ecosystem without making a profit from the mining itself?To me this question echoes a shift that is just beginning to appear between the established paradigm of share-holder-value first (even at the expense long term business health and / or customer value) to paradigms that tru to balance social-good with share-holder value (B-corporations and the like). Miners profiteering from mining may be at the expense of the things that can (and should, otherwise what’s the point of Bitcoin?) built on top of mining itself.If the system requires transactional fees for security, fine, couldn’t miners systemically re-invest (=donate) those fees back into the ecosystem? Couldn’t an ecosystem built on top of a blockchain limit bitcoin as a transactional currency to only the workings of the blockchain itself (so that it can’t be converted used for any other trading)?What if social institutions (be it a town, municipality, country, NGO, etc.) who are vested in the applications built on top of the blockchain could decide to invest in mining as a social commons (not seeking financial returns)?What if mining was devised in such a way that it could harness computing resources that are already in existence but idling (personal computers, web servers, mobile devices) … in a way that they could pool resources towards mining … again … not for personal gain but for creating a social commons?Bitcoin, at its heart IS an agreement (more likely a collection of agreements): it is an agreement between a small group of people (programmers / mathematicians / engineers … and soon it seems venture capitalists). This agreement has some new elements which are consciously being introduced into it. However it also has some old elements which are unconsciously beign included in it. What more, this small group of people are (consciously and unconsciously) introducing their values into the larger population of people who (consciously but mostly unconsciously) adapt the technology.Many of the challenges we are facing as communities, countries and as a global society are rooted in unconscious agreements. Change requires recognition and re-examination of unconscious agreements so that new agreements can be made with more understanding / awareness / consciousness. I have a feeling that Bitcoin, though a new technology, is allowing some deeply rooted unsconscious agreements to undermine its potential for change.I see bitcoin being hailed as a technology that resolves trust-issues. But it doesn’t really do that, instead it bypasses trust – that is not the same as building trust. In that context I view bitcoin as a technology that undermines society … you don’t need to care about who is on the other end of a transaction or who is mining. Just like you don’t need to care about who makes your smartphone, grows your food, or stocks your shelves or the cashier at the checkout. As long as you have dollars and everyone accepts dollars for payment no-one needs to know of or care about anyone else. That is an example of how technology is (under)mining and destroying social fabric. It seems that care (and ironically debt, but thats a whole different conversation) are needed for there to be a sense of community.Does bitcoin it have to be that way? Can’t we shape technology to support and nourish social fabric?Do we want to live in a world where “free market” incentives for personal gain take precedence over social / ecological incentives? Do we want to live in a world where we don’t (and don’t need to) trust each other? Is such a world even possible?

    6. p-air

      We need to address the semantic notion of “blockchain”. It is not helpful to discuss the separation of bitcoin from blockchain, by saying that there are other blockchains. Yes, there are others, but when referring to the bitcoin blockchain, we may want to use a more emphatic capital ‘B’ for Blockchain or saying something like “the blockchain”. Other blockchains operate and are secured differently so let’s not pretend that VCs alluding to their desire to explore blockchain-sans-bitcoin are talking literally about The Blockchain. Ripple and Eris may offer blockchains, where Clearmatics and Hyperledger (now part of Digital Asset Holdings) offer distributed ledgers. None of these have anything to do w/bitcoin currently. They are however, noteworthy technological innovations.

  18. WA

    So a room full of VCs being polled – the new contrarian indicator?

    1. pointsnfigures

      Did they ask them if they thought there was a bubble with respect to their own portfolio companies? : )

      1. WA

        That’s funny. Very.

  19. Donna Brewington White

    I wonder if any of them winked?

  20. Matt A. Myers

    Pyramid-like schemes also grow pretty quickly (of course when you have the potential buy-in of the whole globe you have a lot of people you can lure in – mind you there are more and more people with incentive [owning Bitcoin or have invested $100s of millions into the ecosystem] to keep trying to get people to adopt.Black markets (for drugs, etc) are pretty successful too when they popup.”When not one hand goes up in a room full of VCs, go there. [-] It is going to be profitable.”Using that kind of equation to convince yourself feels like a trap to me. Bitcoin is a completely different beast than any other portfolio company that USV has invested in – and in reality a different than anything any VC firm would have ever seen before.E.g. Applying the “no hands in the air = will be profitable” between apples and oranges seems to be a very weak connection.

  21. Ryan J Negri

    You know if one of them would have raised their hand, the rest would have followed.

    1. Matt A. Myers

      LOL.

  22. Donna Brewington White

    Ha! I clicked on the link to this post ready to share how I haven’t held a phone to my ear in years and how dependent I’ve become on voice activation. But here once again it’s about bitcoin!A few years ago you were going on about social and mobile.As someone on the outside looking in (with the intention of someday jumping in at some level) it seems there are the visionary venture investors and the ones who are catching up.

    1. FAKE GRIMLOCK

      TO FOLLOWER, EVERYONE RIGHT BEHIND LEADER LOOKS LIKE LEADER TOO.

  23. Ryan J Negri

    Every comment is about the issues with Bitcoin rather than the issues with the VCs in the room. Bitcoin isn’t the problem.

  24. Semil Shah

    I believe this happened for 2 reasons:(1) Most larger VCs now, in such a competitive market with bigger funds, are forced to be “inflection” investors, investing on the cusp of momentum. To many, right or wrong, Bitcoin/blockchain went through hype and now slumps a bit.(2) Most larger VCs haven’t yet grappled to understand the interplay between Bitcoin and the capabilities of the blockchain.

    1. Donna Brewington White

      Very plausible. But I also wonder how many VCs just aren’t the hand raising type. Sometimes it feels a little silly to raise my hand in some settings.

      1. Semil Shah

        I’d agree with that.

      2. JLM

        .Haha, the best advice I ever received from my father as I went into the Army:”Never raise your hand. Never volunteer for anything.”He told me the story of refusing a battlefield commission in the Second World War. He was asked if he wanted to be an officer by his battalion commander and he said “no.” The battalion commander was angry with him.My Dad asked why the job was available and the battalion commander said because his predecessor had gotten killed.My father said: “That’s why I don’t want the job.”They made him take it and he ended up getting promoted several times during the war.He told me: “Never put up your hand. Never volunteer for anything. It can get you killed.”JLMwww.themusingsofthebigredca…

        1. Donna Brewington White

          “Never write if you can speak; never speak if you can nod; never nod if you can wink.” –Martin Lomasney

      3. Kirsten Lambertsen

        Not only that, I was thinking maybe they don’t want to *tip* their hand (poker metaphor, there, heh).

  25. Jokebot300

    Bitcoin feels like the new QR code to me.

  26. Robert Hacker

    Actually when one observes all the categories, the only interesting one is Bitcoin. All the others, with the exception of HR, look like add-on investments for companies (industries) that have already done well in the market. No real mention of AI, Big Data or curation, all areas of tremendous potential

  27. bfeld

    Rule #593: Go where the other VCs aren’t.

    1. Guy Lepage

      Touchรฉ

    2. fredwilson

      593? ๐Ÿ™‚

      1. bfeld

        Eh – ok – maybe I should move it up in the list of absolute rules … But there are many of them that are tied …

    3. FAKE GRIMLOCK

      WHERE OTHERS FEAR TO TREAD… OFTEN PAY REALLY WELL.

  28. Twain Twain

    We need to have a SWOT, Where They are on the Hype Cycle and Innovation matrix on VCs to enable founders to do pattern recognition too and better identify which investors fit well — not just with values, product strategy and capital deployment but also with their “audacity of investor innovation” (coining this).For example, investors leading in Bitcoin-Blockchain would rate around 8-9 on the audacity of investor innovation.As would the investors investing in Elon Musk’s Hyperloop.

  29. FAKE GRIMLOCK

    NOTHING GREAT OBVIOUS UNTIL AFTER IT WIN EVERYTHING.

  30. Kirsten Lambertsen

    Some really informative and enlightening stuff in the comments here today. Thanks to @ryaneshea:disqus @wmoug:disqus I learned lots!Not to give that roomful of VC’s any undue credit, but maybe they’re just paranoid and don’t want to tip their hand by raising it. Just a possibility.

  31. Sandy

    I think the honest answer is that the VCs in the room didn’t understand the question.Bitcoin is very popular as a concept, even to laypeople like me.But I don’t know the difference between bitcoin and blockchain startups.That’s fine for me to ask about it. But VCs should know this, so they can’t ask what the difference is. So no hands go up. If Dan asked their opinion on bitcoin, I bet most VCs would have been in support.

  32. creative group

    The reason why a smart VC would even need to inform the herd where his money is going before favorable terms are reach is silly. Unless it is a me too crowd. (Then run the other way)

  33. rafer

    Sound like AdTech.

  34. Mike Loukides

    I wonder more about the other 14 lines of your chart. Photo sharing? Really? Who needs another photo sharing app (or thinks them can make money on one)? Transportation and hospitality? It’s been done, folks. And so on.I can totally see investing in blockchain-based startups (if not in bitcoin itself). That’s wide open. And I can certainly see investors in blockchain startups (or would-be investors) playing their cards close to their chests. But “I’m betting big on a company that will be the next Uber”? That mystifies me.

  35. Gideon Greenspan

    Regarding blockchains without bitcoin… blockchains are a useful technology in and of themselves, because they enable database multiversion concurrency control (MVCC for short) to be applied to distributed databases in which writes are permitted on any node. I flesh out this argument in detail here: http://www.multichain.com/b

  36. William Mougayar

    Interesting that this article was just published, following this post:”10 VC Firms Betting Big on Bitcoin and the Blockchain”http://www.coindesk.com/10-…

  37. Preston Byrne

    Getting one point out of the way: blockchains can, and already do, work without having coins involved. Many household names in finance are experimenting with such chains already.I agree with you – the distinction between Bitcoin on the one hand and ‘blockchain’ on the other is a false one. But it isn’t because “bitcoin” and “blockchain” is inseparable – it’s because they’re different tools aiming to solve different problems using similar tech, just as the Uber and Tinder apps are different tools for different problems using similar tech.If the industry can get over the idea of separation/division between these two approaches, there is a great deal of richness in combining the two flavours of database – cryptocurrency on the one hand, permissioned blockchains on the other – to rapidly out-innovate and destroy incumbents across a range of industry verticals, not just banking (think how many different kinds of apps people have on their phones).What’s a blockchain, then? It’s a mathematically-governed, distributed robot for managing data – it works like a single computer, but runs itself across many machines. In this capacity a blockchain is an extremely powerful, highly secure coordination engine that runs itself on really simple hardware (i.e., a laptop, Raspberry Pi, or mobile phone) instead of a server cluster.Distributed databases are nothing new. The magic of the blockchain is that it makes running such a distributed system extremely *easy* to do: the blockchain runs itself, automatically, without human supervision, on the public internet, at nearly nil cost. You can run a global application with only two computers if you want to.But why use a permissioned chain instead of a decentralised one? It has been said that Bitcoin, by automating a clearing system, disintermediates *banks*; I’d go a little more basic than that and say that Bitcoin disintermediates *bank IT*.It’s not about title transfer, but about managing data. Our demonstrator app is a distributed YouTube to show the world the kind of functions that these DBs are capable of.The “blockchain 2.0” set, then, isn’t trying to replace Bitcoin – that would make zero sense. The value of 1 BTC has nothing to do with Bitcoin’s code and everything to do with its community of users (see the millions of line-for-line altcoin clones which have gone nowhere). What we’re trying to do with permissioned chains is to build secure distributed systems that run without the centralised machinery. See Everledger.io, microwork.io or ascribe.io for examples of startups using distributed blockchain architectures to provide distributed services at effectively nil cost.Viewed this way we see that “blockchain” is just a low-hardware, low-cost distributed computing backbone. They no more require a cryptocurrency token than a PostgreSQL cluster. This isn’t as edgy as an interpretation as “the future of money,” but it is more practical: it’s the view that blockchains’ cryptographic primitives will be useful to developers in coordinating human action without spending a ton of money on hardware.Bitcoin’s the first piece here of what will be a very, very big distributed computing world in the 21st century – one where people take responsibility for (and take back control over) the management of their own data from the current data processing giants like Google and Facebook. If anything, the wider “blockchain” vision sees *more* of a role for Bitcoin to play going forward – a distributed currency suited for a distributed internet – and not less.

  38. p-air

    “But I do know one thing. When not one hand goes up in a room full of VCs, go there. It is going to be profitable.” You got that right Fred. Am spending tons of time with bitcoin startups and the pace at which they’re innovating up and filling out the needed infrastructure components and moving up the value chain is amazing. It’s also interesting that this is a global phenomena, and much of the U.S. regulatory posturing is simply slowing progress here while it continues to accelerate in other geographies. The least interesting aspect is watching the roles financial institutions are trying to play here. Distributed ledgers may offer some worthwhile incremental tech advancements for that industry, but they can do w/o much of the innovation bitcoin is bringing about. It’s surprising me to see how few VCs understand what’s happening in this space, and I’ve been meeting w/lots of them.

  39. p-air

    After all our posts about VCs not being interested in funding bitcoin companies, it appears that perhaps Dan’s experience was more of an aberration than the reality of the space. Yesterday, CoinDesk had an article titled “10 VC Firms Betting Big on Bitcoin and the Blockchain” (http://www.coindesk.com/10-…. One interesting stat they reference from the Coindesk’s Bitcoin Venture Capital data is the fact that “nearly 200 VC firms have invested in bitcoin companies”. D’op! ๐Ÿ™‚

  40. CB Insights

    Deal activity & funding to bitcoin is, in fact, actually climbing. This year’s funding tally already exceeds all of 2014. VCs clearly aren’t shying away from bitcoin.The full data brief here.https://www.cbinsights.com/…Anand

  41. Girish Mehta

    Or Not Charlie.There may be great reasons to invest in Bitcoin. But I am not sure if this is what you want to use as a signal.

  42. Donna Brewington White

    Wouldn’t it depend on who is in the room?

  43. Girish Mehta

    To limited extent – maybe the 90 is a signal to run in the opposite direction (depends on which stage of investing it is at). Not sure what the reverse is telling you…

  44. Donna Brewington White

    Not all VCs are created equal.Which is why we are here on a Sunday morning.