Name: Balancing The Ledger: Venrock Announces Partnership With Crypto Investment Team CoinFund
Uploaded: 2018-04-06
Duration: 10 min 8 s
Description: Other topics in today’s episode include Centra fraud charges, John McAfee, Google, Facebook, and Ripple.

[ MUSIC ] Welcome to Balancing the Ledger, where we'll be talking about the latest news in fin- tech, cryptocurrency, and blockchain technology. I'm Jen Viechner. I'm Robert Hackett And today we're here with David Pakman a partner at venture capital firm Venrock. Thank you so much for being here David. Thanks for having me here. So I wanted to start off by talking this on going SEC crack on initial coin offerings. There was teh big news this week, they made two arrests. Of the cofounders of an ICO called Centra that was backed and promoted by people like Floyd Mayweather, DJ Khaled. David, you've invested in companies that have done ICOs, what do you make of all this? Well, crypto's a wild space, up and down the whole stack and certainly one of the most wild spaces of it all is initial coin offerings Very little information given to buyers, not a lot of regulation, really none in the U. S. up till now, investors aren't protected, not a lot of disclosure. So its kind of a messy space. It was inevitable that a bunch of different U. S. regulatory authorities were going to put some rules and regulations around this and And hopefully go after bad actors. There have been a number of bad actors in the crypto space, so this is good. The space should be cleaned up, but a lot of times we lose sight of the fact that there is incredible innovation happening in the space, that the notion of pre- selling coins can serve a really interesting purpose to diversify access or democratize access. To technology and allow other people to participate in wealth creation that they wouldn't get to participate in. So we hope that you don't throw out the baby with the bath water here, but it's important to get some regulation around this stuff. I mean, I've gotta say, we've seen some of these celebrities posting to Instagram, to SnapChat. They've got champagne bottles they're popping off, fat stacks of cash on private jets It's crazy, and it's really not a good look, I think, because they're duping consumers, people who don't know any better, who think, look, my favorite star's getting rich. I'm gonna get rich too if I invest in this thing. And it's not just celebrities either. I mean, we saw John McAfee from the antivirus software. Debatably a celebrity. Yes, well, he's actually getting paid $ 105, 000 Per tweet to promote an ICO. So can you really trust somebody's opinion who is really just making money to promote it to other people? Yeah, pump and dump schemes for stocks particularly penny stocks have been around as long as stockes have been around, I remember during the dotcom days 1999 and 1998, there were all sorts of Unseemy IPO's and companies that were pursuing reverse mergers to become publicly listed and then pump up stock prices and they really had no business being public nor did they have a business. So this behavior happens whenever there's wealth creation and easy money and it also paints the entire space negatively. But so we wanna Find ways to get this bad behavior away from the ecosystem as quickly as possible. And it's not just the regulars who are stepping in. We've also seen big tech companies, Google and Twitter have said they're going to block cryptocurrency ads. Actually, Google said this week that Chrome extensions will no longer be able to mine cryptocurrency. Even MailChimp has blocked all cryptocurrency news letters You know, I think there are bad actors in the space, and so as a platform, like if you're a Google or an email platform like MailChimp, you want to keep your platform clean and get the bac actors off of it. Sometimes that take some work It's just a little too bit convenient for my tastes to see a platform ban out an entire ecosystem an entire market segment. Just because they're having -, don't want to spend the time who the bad actors are. We're talking about Highly centralized platforms who in theory have the most to lose from the advent of decentralized technologies and platforms That's entirely what block chains and cryptocurrencies are for to route around big centralized entities Sure so it kind of underlies why Alternative structures for platforms are needed because, in a whim, a single platform can ban an entire market. Let's talk about Ripple as well. There are some reports this week that Ripple has attempted to kind of buy its way onto cryptocurrency exchanges like Coinbase and like Gemini. Sure, there's a lot of pay to play going on in this space right now it seems. Exactly. What do you make of that? Well, first, I think it's important to say that Ripple is a legitimate company with legitimate investors, a really experienced management team, and is trying to solve some legitimately hard problems and bring change to a regulated industry. So hats off to them, they've made a lot of progress. I think the truth is, that there's more western users on Coinbase than any other exchange in the world. And so, liquidity is favored by folks who operate a currency. So you can see why XRP would want to be traded on coin base. I don't know anything about how the pay to play came to be, whose idea was it, and has it been effective before, I don't know. Works out well for the cryptocurrency exchanges. Right, and so, and maybe to other exchanges. Yes, it's worth pointing out that, you know, many of the exchanges, Exchanges at least not in the US are taking a minimum of one million dollars just to list. I have heard it can be as high as five million or more. Absolutely and being on a cripto currancy exchange it is make or break for all these cripto currencies. They are the king makers and they are the gate keepers here They are what allow the broader community to access these assets. Yeah, these companies can probably make that money back. For them it's a good investment because once they sell their coins to the general public on that exchange then really it's a huge profit opportunity for them. Nikki pointed out, used the magic word, they're gate keepers today and gate keepers tend to charge rent. or a toll on users. So benefits of the advent of Krypto is that we have fewer gatekeepers. In fact, the long term threat to centralized exchanges are decentralized exchanges where anyone can trade with anyone else without some gatekeeper in the middle. So, I don't have any problem with the fact that centralized exchanges take advantage of their market position and charge. Quinbase doesn't, but other exchanges who charge To be on the exchange that is fine but I think this yet another reason why we want decentralized tech and decentralized exchanges So let's switch gears a little a bit and talk about VenRock. You guys have some news you are announcing, you are partnering with an investment group that focuses on crytocurrencies and tokens named CoinFund. Tell us about that. Yes we've been spending a lot of time in the crypto ecosystem for some time. And wanted to partner with this team that have been making investments and actually helping architect a number of different crypto economies and crypto token based projects. That's called CoinFund. And we've made a strategic partnership with them. There are a lot of crypto traders in the market. There are a lot of cryptocurrency hedge funds. This is different, and in fact to us it looks a little bit more like venture capital, because these guys are a team of well respected crypto enthusiasts who have really helped architect a number of different projects over time. and their long term focus is I think aligns them a little bit more with venture capital. Venture capital is often called patient capital because we work in early stage investor that takes 8 to 10 years for companies we have invest in to hit maturation or exit. And that's a lot different than some of the activity that we have seen around ICO's and crypto. Very liquid. You can get in and out whenever you want. is more aligned to the kind of stuff we do and we're using to partnership to learn more about really quality companies that are building important decentralized platforms. We talked earlier about how there are a lot of projects out there, plenty of scams and plenty of letimate very interesting projects. How do you go about deciding what you are going to invest in? How do you place your bets and where are you looking to place them? Well, I think it's sort of what do you bet on when? So what will be the sequence? I think traditionally, whenever there is an opportunity this large, that is as complex or multi- layer as cryptocurrency and decentralized systems are, the first place you look is at the infrastructure layer. You need to build out the infrastructure first, before things at the application or service layer can exist. So we spent a lot of time looking at Protocols around decentralized compute, decentralized security, decentralized bandwidth. Look, in this country we have the FCC deciding to negate net neutrality, that's an example of centralized authority making decisions at almost the protocol level of what people can Have to pay for and dont have to pay for. We dont like that. We'd rather see the internet not have those types of roadblocks. So- That could be prettty troubling for some of these projects thata re trying to get off the ground. Yeah. For sure. If you'd banish the big guys and dont allow the small guys to enter markets. That's again the king maker. You pointed out that venture capital tself is effectively a gatekeeper industry. And I completely agree with that. And I'd actua;; y like to see that undone. I dont believe that A small group of people should make the decisions about which projects can raise some money and get off the ground. That's what we saw last year there was more money raised through ICOs I think than even in fin- tech venture capital, traditional venture capital that is. And I think that's exciting that as long as the scams aren't there, as long as it's legitimate teams going after legitimate problems then Sink or swim, let's see who succeeds. I'd like to see a world like that, so we are making investments that are supportive of that. Certainly the vaule oportunity is there, if they can succeed. Unfortuneatly we haven't actually seen that lately. This week the bitcoin price for about a week now has been struggling to break $ 7000. Does that worry you are at all? As I mentioned before, we're really patient long- term investors. I'm not worried bout the price of a single cryptocurrency over the next day, week, month, year. We're wondering what happens over the next five to ten years. Can we have fundamental change to a number of different markets because of a distributed ledger, a token economy that All participants can take part in. Those are pretty transformative and exciting. I just, I dont know if they'll work out. I dont know which teams will succeed. Our job is to make some bets and backs some teams that hopefully could navigate it but I'm not too worried about short term price changes. Well now all you've gotta do is get DJ Khaled on board and you get John McAffee for the low price of one hundren and five thousand dollars per tweet That's great Well that's all we've got time for today thank you David so much for being here, i'm Jen [ UNKNOWN ] I'm Robert Hacket and for more balancing the ledger please come to fortune dot com, we'll see you next time. [ MUSIC ]

Other topics in today’s episode include Centra fraud charges, John McAfee, Google, Facebook, and Ripple.

Balancing The Ledger: Venrock Announces Partnership With Crypto Investment Team CoinFund

Finance

Topics include Centra fraud charges, John McAfee and Ripple.