Why Facebook Really, Really Wants Its Cryptocurrency Project Libra to Succeed
The most-read Term Sheet column of 2019 was our Q&A with PayPal CEO Dan Schulman. In it, Schulman divulges why he decided to withdraw from the association supporting Facebook’s cryptocurrency project Libra.
In the latest issue of Fortune, my colleague Robert Hackett has a deep dive on Facebook’s audacious digital payments proposal. The big question around Libra remains: Given the brutal reception around Libra’s rollout during the summer and fall, why on Earth does Facebook remain laser-focused on launching it in 2020?
Well, in a nutshell: Because there’s a lot at stake. From Hackett’s story:
In the technology sector, there’s a concept called “platform risk,” the danger that another company, or a newer, trendier technological innovation, could kneecap your business by wooing or coercing your users away.
If you want to understand what Zuckerberg might see in Libra, consider Facebook’s $2 billion 2014 acquisition of Oculus, says Hunter Horsley, a former Facebook product manager who runs Bitwise, a cryptocurrency investing startup. At the time, neither Oculus nor VR was anywhere near mainstream (they still aren’t). But the possibility that they could take off posed an existential threat to Facebook; if the world started chatting and “liking” via VR, Facebook’s dominance would evaporate.
Why not own the leader of a platform that could become the Next Big Thing? “Companies historically always die by not adapting to new paradigms quickly enough,” Horsley says.
In other words, blockchain became a space where Facebook just couldn’t afford not to play. And there are plenty other companies circling, waiting for Libra to give up. PayPal is reportedly eyeing digital currency partnerships. Banks such as JPMorgan Chase and Wells Fargo are already testing versions of dollar-pegged digital currencies. And there’s whispers about Google, Amazon, Microsoft, and other tech giants moving forward with digital currency proposals of their own.
It’s only a matter of time before someone takes the lead in this emerging industry. No one knows who that someone is yet, but one thing’s for sure: You better strike while the iron’s hot. “What Libra indicates is how quickly things are moving now,” said Gabriel Söderberg, a senior economist at Sweden’s Riksbank. “It really shows central banks that time isn’t waiting for anyone.”
25 BIG IDEAS FOR 2020: This morning, Fortune published a package titled, “25 Ideas That Will Shape the 2020s” in which the world’s thought leaders propose big ideas. Below are several of the most interesting:
— A ‘Gold Standard’ of Digital Currencies Will Emerge: “Over the next decade, there’s the potential for an entirely new form of money, ‘stablecoin.’ If achieved, it could help include the world’s unbanked population and ensure a more stable financial system for all. Experimentation with blockchain in financial services has already led to the development of digital currencies like Bitcoin and Ethereum …. Indeed, the real promise lies not in New York, London, Singapore, or Tokyo, where most people and businesses already have ample ways to conduct business and transfer money. It lies in helping those who are unbanked in countries like India, Indonesia, Ethiopia, or the DRC. A stablecoin could make financial inclusion real.” — Klaus Schwab, the founder and executive chairman of the World Economic Forum
— Women Will Alter the Workforce — Dramatically: “Women—and, more important, women of all backgrounds—will increasingly be the ones making decisions, control-ling resources, and shaping perspectives in all spheres of society. We’ll see this shift play out in homes, in workplaces, and across public life. It will lead to new narratives, products, and policies that reflect a much broader range of perspectives. And it will enable more women to fully participate in solving the challenges that will require our collective brainpower, like structural racism and rising inequality.” — Melinda Gates is co-chair of the Bill & Melinda Gates Foundation and founder of Pivotal Ventures
— Venture Capital Will Transcend the Valley: “For the first time in 2019, this became part of the conversation between venture capitalists and startup founders: Where are you thinking of being based? Will you have one headquarters or two? Are you planning to be a distributed workforce from the beginning? The fact is, those types of decisions change how you build your culture and processes from the get-go … I think you will see more regionally focused VC firms have success. And more Silicon Valley VCs will spend more time on airplanes. I think Zoom [the videocon-ferencing company] has something to do with this trend too. You can live—and work—anywhere.” — Aileen Lee is a venture capi-talist and founder of Cowboy Ventures. She coined the term “unicorn.”
NEW FUND ALERT: In September, it was announced that the founders of Aspect Ventures, a prominent female-led venture capital firm, would part ways to launch separate firms. Now, one of the co-founders, Theresia Gouw, has raised $250 million for her debut early-stage fund at her new venture Acrew Capital. Acrew will have a “flexible investment strategy” that emphasizes teamwork and diversity.
- Glovo, a Spain-based on-demand delivery platform, raised €150million ($167 million) in Series E funding. Mubadala led the round, and was joined by investors including Drake Enterprises, Idinvest and Lakestar.
- Telio, a Vietnam-based B2B e-commerce platform, raised $25 million in Series A funding. Tiger Global led the round, and was joined by investors including Sequoia India, GGV Capital and RTP Global.
- Jenzy, a Philadelphia-based app that makes it easier to size and purchase children's shoes, raised $1.25 million in seed funding. Morgan Stanley's Multicultural Innovation Lab led the round.
- Hanzo, a Brazil-based SaaS consumer engagement, payment and loyalty platform, raised Series A funding of an undisclosed amount. Dot Capital led the round.
HEALTH & LIFE SCIENCES DEALS
- Epirium Bio, Inc., a San Francisco-based clinical stage biopharmaceutical company, raised $85 million in Series A funding. Longitude Capital led the round, and was joined by investors including ARCH Venture Partners, Bluebird Ventures, Adams Street, Vertex Ventures HC, and Longevity Funds.
PRIVATE EQUITY DEALS
- Providence Equity Partners made a majority investment of €200 million ($222.5 million) in Smartly.io, a Finland-based creative and digital advertising platform.
- FDH, which is backed by Audax Private Equity, acquired BTC Electronic Components, a Wake Forest, N.C.-based supplier of connectors and connector accessories to the military, aerospace and commercial industries. Financial terms weren't disclosed.
- IZI Medical Products LLC, a portfolio company of Shore Capital Partners LLC, acquired RadioMed, a Los Angeles-based provider of imaging equipment.
- PayPal Holdings, Inc. (NASDAQ: PYPL) acquired a 70% equity interest in Guofubao Information Technology Co., Ltd. (GoPay), a China-based provider of third-party payment services.
- Palladium Equity Partners sold Raben Tire Company, an Evansville, Indiana-based provider of auto services, to The Goodyear Tire & Rubber Company. Financial terms weren't disclosed.
FIRMS + FUNDS
- AEA Investors LP, a New York-based alternative investment firm, raised $4.8 billion for its seventh flagship fund AEA Investors Fund VII and $877 million for its fourth small business fund.
- Värde Partners, a Minneapolis-based alternative investment firm, raised $2.47 billion for its 13th flagship vehicle, Värde Fund XIII.
- Kainos Capital promoted Jeff Moredock to principal and Julie Sanders to director.
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