The Weekend Read: Aug 15

[Ed. Note: Thanks to Jo and Sarah-the-Intern for posting on my behalf the last few weeks. The Weekend Read will be on hiatus for the last two weekends of summer. We will resume our regularly scheduled programming on Sep 4th]

1. Are we about to enter a Bitcoin Winter? Or is it Springtime for Blockchain? Or both???

About six months ago, we started to kick around a premise internally that many of the seed stage bitcoin-related startups would hit a Series A crunch. We thought that this could be especially acute for bitcoin companies due to the 'hotness' of the sector in late 2014 coupled with the low price and lower consumer adoption of bitcoin itself. It is easier to 'sell the dream' for a small seed round, but when you fast forward 6-9 months in a startup's life cycle, the A stage investors will start looking for more tangible signs of traction. So far we have not seen too many announcements of company wind downs, outside of Buttercoin earlier this year and now 37Coins earlier this week. But privately we have started to hear a few stories of startups talking about giving it 1-2 more months or moving to a skeleton staff as they prep for closure.

Yet our premise could turn out to be both right and wrong...William Mougayar highlights this conundrum very clearly in his post Warning: Unrealistic Valuations in the Bitcoin and Blockchain Space. I would urge you to read it in full. So we may be proven right by consumer-focused bitcoin startups hitting the wall, but proven wrong as blockchain-for-finance startups raise very healthy A rounds, due to a combination of existing startup capital pivoting to sell into traditional financial services markets and strategic investors having a massive FOMO episode:

Just because a space is hot (e.g. blockchain) doesn’t mean that your starting valuation should be higher, unless there are other valid reasons. If you haven’t built an MVP or team yet, your early risk is the same, whether the market is big, small, hot or not.

Yes, the blockchain is an amazing piece of technology that represents a unique and rare transformation opportunity, and the market is potentially huge, but it is not any different than the Internet’s advent in 1994. It needs to gradually grow and infiltrate the various nooks and crannies it can fill. Rushing its development will not necessarily rush its deployment.

2. Further Summer Reading/Watching


...and one last thing as we go to 'press': Bitcoin may have forked.

Enjoy the rest of the summer!