the currency and the infrastructure

the currency and the infrastructure

Good morning, All,

Our next Breakfast with An Investor will be Wednesday, May 20th and our guest investor is Nnamdi Okike, Co-founder & Partner at 645 Ventures, a seed and early-stage venture capital fund that invests in software and Internet companies. While they launched just over a year ago, they’ve already invested in 15+ companies – and are actively looking to invest in more!

Nnamdi is an experienced venture capital investor, having spent eight years at Insight Venture Partners, where he sourced and invested in several successful companies, including Folhamatic (acquired for $300 million), Astaro (acquired by Sophos), and Hitwise (acquired for $240 million). He served on the boards of Kabum, CSSN and Folhamatic. He currently works closely with 645 Ventures’ portfolio companies Keaton Row, Trendalytics, Hire an Esquire, and Poshly. He serves on the board of AbbeyPost and Rifiniti. He received a BA in Biology, MBA and JD degrees from Harvard.

Bonus Breakfast this month: We’re also co-hosting a Brunch and Q&A with Brian Cohen, Chairman of the New York Angels, on Sunday, May 17th.  It’ll be a small group, so get your tickets now, and when are you going to have another opportunity to have brunch with the Chairman of one of the most active angel investing groups in the country? Register here.

The big news of the week was that the Comcast/TimeWarner Cable merger is dead. At least for now, and as we know it. No one wanted one entity to be that powerful and to have that much control over the information onramp.

In the tech world, no matter how large the entity, we use the word ‘company,’ rather than ‘corporation’ and let’s be honest: given their size and reach, Google is corporation. So is Facebook, Yahoo, Amazon. We could go on. Google pretty much controls search, has a big presence in advertising, as does Facebook; they’ve also got a huge cloud presence, as does Amazon, and Google is laying fiber – and providing/becoming quite an information onramp, in case you missed it. Ah, but Google gives everything away for free, while we can’t trust big corporations like Comcast not to offer tiered service, what to speak of sweetheart deals to some companies, while potentially harming innovation by being too prohibitive for them to compete with, say, a Disney. Too subtle? What’s the difference between that and Google’s various shenanigans, skewing search results, having access to utility poles and other infrastructure owned by utilities – and being an onramp in multiple verticals? But we don’t define Google as a corporation, per se, and place so little value on our personal information and the intrusions into our privacy that as long as there isn’t an escalating dollar amount – in hard currency – attached to our access, we think of it as a free service. And yet Google is among the wealthiest companies on the planet and is someone out there paying any attention to the math?

We attended #StartupColumbia this past week, and there was an excellent panel on “FinTech: Currency, Investment, and Payments without Governments, Brokers, or Banks.” There hasn’t been all that much disruption in FinTech, by and large, according to the panelist (Matt Harris, Bain Capital; Maria Gotsch, Partnership for NYC; Barry Silbert, Digital Currency Group and Second Market) as banks are so heavily regulated, and startups, for the most part, treat it as if it’s like any other sector and believe that they can run their FinTech solutions from the cloud (“Not with our data,” is the reaction from the banks, according to Gotsch). We’ve seen the results of that in the retail space, and won’t go into the number of hacks in those quarters.

The conversation turned to Bitcoin – the currency and the infrastructure (and can we please ascribe different names to the different parts of bitcoin, which does contribute to a lot of the confusion?). Bitcoin may be perceived as volatile, but there is less and less resistance to it around the world at large, especially in countries where there isn’t a trusted central banking system, and especially given fairly recent events in Cypress, where the banks immediately and handily devalued the currency by half – just like that. Makes Bitcoin seem a bit less volatile, what, eh? But as Silbert said, the press turned on Bitcoin – which doesn’t mean it’s going to go away. Not totally. The banks may be powerful and while it may appear that the regulators have a chokehold, the world is seeing fewer and fewer sacred cows, and for those few that remain, their citadels may not hold for much longer. Not when companies like Oscar come along and challenge traditional insurance, and IEX, which is challenging The Street itself. These are cautionary tales, according to Silbert – the disruptors are coming, make no mistake about it. Bitcoin threatens many a sacred cow, from banking (“it takes three seconds to transfer money from NY to Hong Kong,” said Silbert – so why are there so many extra charges attached, from currency exchange to the transfer itself? Not so with Bitcoin) to advertising (no data capture) to tracking/surveillance – and not that the Patriot Act has been any sort of deterrent, so the giving up of freedom for security argument doesn’t hold, and thank you, Ben Franklin. If Bitcoin fails, something else will come along to take its place, said Silbert, and we agree.

And speaking of cautionary tales: Apple Won’t Always Rule. Just Look at IBM. ApplePay looks like a winner – for now – but meanwhile, the VCs are investing in Bitcoin. As always follow the money – and never underestimate the rebel nature of the online populous. We’re living in the days of the public internet – the first iteration, much like the party lines were the precursor to every household having its own private phone line. As Silbert said, VCs tend to pick the right space, but they don’t always bet on the right companies. Should be an interesting next few years, as we go onward and forward.

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