At CoinSummit San Francisco on Tuesday, 25th March, CoinDesk founder Shakil Khan moderated a discussion with angel investors centered on investing in the digital currency ecosystem.
Panelists included Ben Davenport, creator of the software that became Facebook Messenger and a bitcoin angel investor; and Naval Ravikant, founder of AngelList and an accomplished writer who has called the untapped power of the Bitcoin protocol an Internet of money and a replacement for Wall Street.
In the digital space, it can be difficult for investors to decide whether to put money into a related company as an angel investor, or simply buy a stake in the currency.
The angels on CoinSummit's long white couch weighed the pros and cons of each approach, beginning with Ben Davenport, an angel investor who holds stakes in BitPay, Coinsetter, itBit and Yoyocard.
Said Davenport on the issue:
"As an angel it probably doesn't make sense to be investing exclusively in companies while not holding a position in the coins themselves. [...] For most of bitcoin's history, it was pretty clear that the lower risk/higher return bet was to buy bitcoins."
However, as bitcoin prices edge higher, it might now be possible to invest in a company that outperforms bitcoin itself, if you get in early enough, Davenport said.
But, there's more to the decision than simply comparing potential payoffs, he pointed out: "You can't think about those investments in isolation. You have to think about how they might affect your underlying bitcoin investments."
For example, if a company's technology improves the entire bitcoin ecosystem, it's bound to increase the value of all bitcoins, he said. But there's nothing wrong with simply buying and holding bitcoin as an investment, especially if one doesn't have the time or resources to evaluate startups, the angels agreed.
Said AngelList founder Naval Ravikant:
"Buying bitcoin is like buying a bet in the entire ecosystem."
More and more angel investors appear to be interested in buying into bitcoin startups; AngelList now has 1,500 investors looking for bitcoin opportunities, including at least two large syndicates, one run by Davenport, where multiple investors pool their money.
In fact, the first milliondollar bitcoin syndicate deal just happened on AngelList, Ravikant said. Though, details have not yet been publicly announced.
What kind of companies are all these investors looking for?
Right now, the most basic ideas are still being funded, with startups providing ways for users to store bitcoin and exchanges where they can buy and sell it.
Looking ahead, Ravikant said, "I'm more interested in non-obvious ones," such as those that apply the underlying technology of the block chain to new problems. The type of companies that get funded will evolve with the ecosystem, Davenport said.
"A lot of the opportunities don't open up until you have a number of businesses of a type in the space. Now that you have a number of exchanges, they all need KYC (know your customer diligence required by the US government)."
A company could seize that opportunity by providing an easy way to automate that, he said.
The panel wrapped up with an entreaty from Davenport to the entrepreneurs in the audience: "I'd love to see so much more collaboration," he said.
In a tightly woven ecosystem like bitcoin, startups are not competitors but are instead dependent on each other's success for survival, he said.
Ravikant agreed, saying that while Silicon Valley has always had a collaborative feel, the bitcoin world is even more so.
In fact, the ecosystem is so interdependent that it really does bring to mind other kinds of tight networks, he said.
"I have got to hand it to Satoshi Nakamoto for engineering the most brilliant pyramid scheme ever," he joked.
Images via CoinDesk
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InvestmentVenture CapitalBen DavenportAngelList
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