There is plenty of money to be made when projects succeed. The venture capital world can take some risks when it comes to investing since, when things go well, the payoff is huge.
Venture capitalists are often at odds with users. The situation always arises when they want to get paid. This is the reason, after all, why they are doing it. Venture Capitalists do not give the money away for free. They want their payout.
This means that monetization of the platform becomes crucial at some point. We see this story play out time and time again.
At times, the monetization really creates a situation since it alters the user experience Of course, this is what happened to the likes of Facebook and other social media companies.
In the world of crypto, we are at the point where, even though we have our own currencies, we are still dependent upon the VCs.
Today, we got a price example of it.
Coinbase went public in a highly anticipated move. The stock price went out at $381 per share, much higher than expected. This created a boatload of money for the early entrants.
Of course, we are not dealing with users. As we know, they got nothing. The early entrants here, in addition to the founders, were the venture capitalists.
How profitable can this be?
IN 2013, Garry Tan of Initialized capital put $300K into the project. He was one of the first investors into Coinbase. His angel investment helped the company to get going.
What is the value of that investment today?
Less than a decade later, and after today's highly anticipated Nasdaq listing for Coinbase's COIN stock, Tan's 2013 investment of $300,000 into Coinbase is now worth $2.4 billion.
From $300K to $2.4 billion in less than a decade. You do not need to many of then in your lifetime to really be set.
Unfortunately, we are witnessing the same thing these days. The amount of VC money flowing into the crypto space is enormous.
While this might sound like a good thing, it is not. Yes, it will allow for a lot of development to take place quickly. However, as stated, this will end up putting the users of the applications and the VCs at a crossroads. There will come a point in time that they want to get paid.
We also see the problem of the profits. The Coinbase situation shows how there is $2.1 billion that left the industry. It went to a firm most likely located in Silicon valley. Sure, the money might be reinvested in different crypto based projects but that does not change the fact that it is still feeding the same establishment.
This is what we need to change. Ultimately, we need to fund our projects so that the money stays within the crypto-sphere. We have the ability to do this, especially as the value of existing projects keeps growing.
We often talk about decentralization and here is an opportunity to do this with venture capital funding. Instead of being dependent upon the established firms, especially those located in the same geographic area, we can start to spread the wealth out.
Having a profit of $2.1 billion would go a long way to the industry funding a lot of other projects for itself. Of course, it is unlikely that was the only payout from Coinbase. There were a lot of angel investors involved meaning the money made today was a lot more for the early investors.
When we look at the multiplier effect, we can see how much of an impact this truly could have over a couple decades. The same $2.1 billion, to use that as an example, could be turned into 4 or 5 times that amount by going into other ventures. Rinse and repeat.
If we think about it, crypto projects should be easy to develop since we have the ability to fund ourselves. Naturally, the system is against us. Any self funding, the SEC wants to rule a security. This is how they protect the established system.
However, over time, we can start to move things in another direction. We should look for opportunities to get things developed on our own. This is how the early entrants can profit a great deal.
Funding is another way the industry can push the process of decentralization. We need to look at each opportunity to do that.
It is in our best interest.
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