IBS Journal June 2018
41
THE PANELLISTS
Cack Wilhelm is a partner at Accomplice, a seed-stage $200 million venture capital firm. Accomplice does frontier tech, crypto, consumer and B2B.
Victor Chen is an associate at CapitalG. CapitalG is a growth equity fund of Alphabet and makes investments purely for a financial return on behalf of Alphabet. It is mostly focused across technology in both consumer and enterprise in three geographies, the US, China and India.
Hiro Rio Maeda is general partner at Draper Nexus. Draper Nexus is a San Mateo and Tokyo based venture capital outfit which has two funds under management, totalling $230 million. It invests globally in early companies in the C to A to B kind of range. Japan and US are the main geography; the company invests across Finland, Israel, and within the US.
crypto currencies are the emergence of the really decentralised web, Web3. This is all a reaction to Facebook owning all of our data and the fact that we don’t feel comfortable with that anymore. Ethereum is really just a public database that’s permanently storing all digitally recorded transactions. I looked. I wanted to make sure. The way that they describe it is it’s cryptic graphically secure so really that just means it’s using mathematical algorithms. It is a transaction singleton machine and that means there’s a single machine, a single source of truth, a single global state and that is the truth; it can’t be messed with. So Facebook can’t go in, as they were earlier discussing and change something. Then lastly, shared state, so everyone has access to that same state at any given time. That is the antithesis of Facebook. You’re going to see things like Ethereum and all these distributed blockchains. Lots of people think these are the answer to the question ‘what access do we have to our data?’. Well, in this particular case, everyone has access to the data.”
MD: “We are obviously in the heart of Silicon Valley here, but it’s not the only place in the world where investment happens. How are you seeing that unfolding?”
CW: “China is going to be a very large market over the next five or 10 years. The first reason is the amount of capital that’s being deployed today and that’s going to compound over time. China led the world with $16 billion [of venture cash] deployed in just one recent month, which is something that’s really amazing. There are several dynamics that are different from what we see in the US. In China you see the three large companies – Baidu, Alibaba and Tencent – all actively participating in investments, and you have the TMD, or Toutiao, Meituan and DiDi coming right up after them and making investments of their own, which is something you don’t see as much in US large strategic players.
“The Chinese government is very, very forward-leaning on this topic in the sense that AI is now sort of a national initiative for them and
they’re changing regulations to give start-up companies an easier way to grow. Lastly, what’s really exciting about China is that they’re not really encumbered by legacy infrastructure in the same way that the US is. A big example of this is mobile payments. If you go to China today, nobody’s paying with a credit card, they’re all paying with their phones through either WeChat or Alipay. There’s other ways that China is leapfrogging. For example, China doesn’t have a FICO score system and so there’s a bunch of companies that are popping up to help China solve that issue by gathering consumer data to establish some creditworthiness. There’s no MLS system in China, so there are companies trying to build real estate inventory to become the MLS.”
MD: “What do you think of the threat of crowdfunding and ICOs to the traditional venture model? It seems like this whole distributed approach has now crept into the investment space and offers a big challenge.”
CW: “What you’re seeing is even – there are ICOs that are legitimate and those that are illegitimate, for lack of better nomenclature. For those that are legitimate in that these are companies that probably could raise venture funding if they didn’t do so through an ICO, you are finding that what they actually want is they want equity and an equity presale, and they want to get that equity from a conventional VC. Lots of the big names, such as Marc Andreesen, have been outspoken about doing crypto. Having Andreesen or Polychain or MetaStable or some of the crypto-focused investors on your pre-equity cap table in advance of doing your token sale means that your token sale will just go that much more successfully.”
VC: “As we look at ICOs and look at blockchain and crypto, a lot of what we see is ICOs raising off a white paper without any proven management team. A lot of it is for nefarious purposes and so from that perspective we don’t really feel like it’s necessarily that competitive. We are focused on companies that are doing ICOs that are legitimate because those can eventually be opportunities for us down the road.”
www.ibsintelligence.com
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