Last summer, while continuing to invest in early-stage seed Bitcoin-related companies, I wrote a post titled “The Bitcoin Crunch.” That post tried to encapsulate and summarize what I saw bubbling up when seeded Bitcoin companies tried to go for their next round of funding. Just like the broadly named Series A Crunch hammered the over-funded seeded companies, the verticalized crunch on Bitcoin companies was brutal but necessary.
Since then, things have stabilized. The price of Bitcoin has steadied, but more importantly, bigger companies building critical infrastructure in the ecosystem were rewarded with larger sums of downstream funding – Coinbase, Chain, BlockCypher, and many others — not to mention 21e6’s mega ambitious round to build mining chips for electronic devices.
About a year ago, I wrote this opening paragraph:
Remember “The Series A Crunch”? Well, I think an offshoot of this will manifest itself across what feels like almost 500 Bitcoin related companies. I, myself – I am a Bitcoin believer and Bitcoin junkie. Yet, despite that optimism, I am continuously floored by just how many Bitcoin startups are out there. I don’t know who is funding them or how they’re making money to survive the typical cycles needed to make Series A investing, which I’ve recently heard defined as “when pros invest and set the terms.”
Here’s a brief snapshot of what Bitcoin 2.0 is shaping up to be:
Valuations Relatively Cheaper – With unicorn hunting distorting all sorts of investor behavior, investment firms with smaller AUM and/or a deeper conviction in this ecosystem can bridge or extend funding for quality teams at very reasonable prices. One could argue it’s a better bet for real venture right now vs paying up into a red ocean category where their may be only 1-2 survivors.
Weekend Hacks Not Getting Funded – The quick-release “me too” Bitcoin companies are fizzling out and not getting funded. It is tough for some, indeed, but unfortunately necessary. I hope the emergent platforms consider some of those former founders for operational roles in their companies. The seed market has rationalized on Bitcoin.
Making It Easier To Build On The Blockchain – We all know the 101 awesome things that theoretically “could” be built on the blockchain, but those aren’t being built just yet to a level where we can openly interact with them. In the meantime, blockchain middleware is emerging as a category — people who build systems that make it easier for developers to build on the blockchain.
Core Platforms Getting Funded – Coinbase is now the leading platform, and no one is close (in my opinion). I’m starting to see experienced entrepreneurs build on top of Coinbase with applications that have real world use cases right off the shelf. In the same way Uber wasn’t possible before the iPhone and maps, a new breed of companies that wouldn’t have otherwise been possible without Coinbase will slowly emerge.