In 2018 we wrote about the unwavering growth of populism around the world (read here). We’ve received very positive feedback and believe it makes sense to now formalize it into an investment thesis for the decade of 2020.
Since writing the original overview, populism continues to fiercely emerge throughout the world from all sides of the political spectrum. Trust in institutions and governments, and even in each other, continues to drop to all-time lows. We are interested in the business models and technologies that will emerge in this new zeitgeist and how they paradoxically help build on the zeitgeist itself (Bitcoin being a perfect example of this). Or as we see it, honing in the zeitgeist and creating actual, lasting solutions in times of change.
We’ve continued to fund and support entrepreneurs, developers, and open-source communities around the world fulfilling the business and technology needs to re-establish a foundation for trust, realign incentives, and optimize security and accessibility — whether that means within existing systems, or finding completely new ways to decentralize trust, partially or completely. Open-source software is a major focus area of ours, as it hits at the heart of the increasing desire for transparency. If social media algorithms were voluntarily open-sourced for example, a consistent peer-review and self-regulation mechanism would be possible, which would add a layer of much needed trust. The same concept applies to holding institutions and governments accountable by making data and information more public and easily accessible to all. We firmly believe software will continue to be massively open-sourced in the decade of 2020, and perhaps even become the new gold standard and expectation from society at large.
This continues to lead us down the avenue of digital assets, cryptocurrencies, and smart contract networks, which we believe are still just getting started in redefining the global, digital economy. The fund’s focus is now less on investments into new network tokens, which blossomed in 2017/2018, and more into participating in upcoming network launches, supporting networks by staking and delegating, monitoring liquidity and listings of networks post-launch, actively acquiring select ‘live’ cryptocurrencies, as well as traditional seed investments. We’ve continued to allocate opted-in capital towards digital asset accumulation since January 2018 (when Bitcoin was ~$3,500), which has certainly paid off. We are still bullish with long term, liquid positions in Bitcoin, Ethereum and hold long term positions in a number of recently released, or soon to be released crypto projects (more below on that).
We are big supporters and investors in the Ethereum and DeFi (decentralized finance) ecosystem, but we also believe there is plenty of room for smart contract technologies such as Algorand to grow and provide a new approach to enterprise and financial use-cases (e.g. issuing jurisdiction-specific, compliant digital securities at scale). We continue to be very impressed by Algorand’s quality of development, staking ecosystem, user experience, and focus on real world use-cases.
This year, we will also be involved in a number of other big network and infrastructure launches from earlier investments such as Filecoin, SKALE, and TrustToken. Filecoin aims to build a decentralized storage fabric of the internet, SKALE is allowing blockchain applications to scale in the real world, and TrustToken is building an engine for asset tokenization.
As the space continues to mature, we are excited about the launch of new application layer tokens such as Orchid (OXT) and Origin (OGN). A decentralized VPN and a P2P marketplace respectively, these two projects have gotten off to excellent starts on both network effects and post-launch liquidity and we are long on both. Although layer 1 networks and staking will likely be the primary trends in 2020, we believe some value will begin to get captured at the application layer. As crypto infrastructure and wallets become easier to use and more robust and mobile-ready, we expect the application layer to see substantial adoption over the next 3–5 years.
Ocean Protocol is another previous investment that launched in 2019 that we are bullish on in the long run. The project is aiming to build an economy around data ownership and transfer — increasing trust and transparency among citizens, governments, and corporations. They have one of the best communities of users and open-source developers we have seen in quite some time, who truly believe in the mission.
From a recent deal perspective (Q4 2019/Q1 2020), we are very excited to follow on the next seed round of Coinmine — one of the fastest growing startups we’ve invested in. They are an example of an outstanding team building an ecosystem, both hardware and software, for financial sovereignty and participation in new and existing crypto networks. They are building the most user-friendly mining operating system that anyone can access. The CEO of Coinmine, Farbood Nivi describes it as “The Living Room Revolution”.
There has also been a heavy focus on FinTech, as this is often where first movers emerge during periods of change (e.g. we saw a big push towards democratizing mobile banking and investing for millennials and Gen-Z over the last 5+ years). In Q4 2019 alone, we made 4 investments into FinTech startups we are extremely excited about (Accern, AltoIRA, Good Money, and Liquidity Digital). These are focused on things like disintermediating the financial stack, opening up investment channels globally, social impact investing, and enabling deep insights into market data that was previously dark and opaque.
We are particularly interested in the disintermediation of financial services through the combination of automated trust, APIs, and a simplified user experience. We see this theme in companies like AltoIRA mentioned above, who want to do what TurboTax did for filing taxes, but for Investment Retirement Accounts (IRAs). They want to allow anyone, including non-accredited, to invest in alternative assets (e.g. startups, private equity, real estate) that have been prohibited to just a few groups for many decades. They are also the best place to buy cryptocurrencies for your IRA. The idea of opening up investments to anyone has always been a passion of ours, which is why we’re also investors in AltoIRA’s partner WeFunder. We hope to also see continued progress on Regulation Crowdfunding and Accreditation laws, which is another relevant trend in opening up finance.
The Remote Work movement is another big focus moving into the 2020 decade, which again falls into the overarching thesis of decentralizing organizations and software development. We were very excited to invest in Turing, who aside from having an amazing brand, have an extraordinarily sharp team building software for remote, distributed teams (the “AWS for talent”). We expect the percentage of remote workers to continue skyrocketing, as companies like Stripe and GitLab begin to formalize the process of building major remote teams and hubs, and actively factor that into reducing operational cost and improving financials.
Last but not least, we are cautiously in search of new consumer social applications. It will take time to substantially challenge the current social media incumbents, but we believe alternative approaches to social will rise that contain different incentives for users, baked-in data ownership, and better avenues for monetization and earning.
The decade of 2020 will be very polarizing. It looks like political systems around the world will be torn in two opposing directions— some towards central planning and control, and others towards balkanization and sovereignty. This tug of war has happened throughout history but always comes to a head eventually. This seems to be developing or coming to a tipping point in many countries (e.g. Hong Kong, China, Brazil, U.K., Italy, France, U.S., etc). There is an overarching global theme of questioning, challenging, voting against, or even revolting against long term incumbents and elites. We believe similar trends and concepts are occurring in technology and financial services, as centralization and subsequent fragility begin to peak.
We will see big tech and finance incumbents legitimately challenged by new ideas and new approaches. As mentioned in our last write-up, sociopolitical change is interdependent with business change. Builders and entrepreneurs often build not as a simple reaction to the world of zero-sum politics, but to shape the future of the world as they want to see it, which in turn becomes political and societal change in itself. We’re looking to invest in the best facets of this change — ones that contain the first principles of freedom, liberty, and inclusion.
The decade of 2020 will be about building new infrastructure and highly accessible apps for what we call the digital economy. Things like the ability to transfer value globally without intermediaries, programming trust into financial assets, digitizing financial assets, opening up previously illiquid markets, allowing more people to have skin in the game, connecting directly and aligning customer incentives, building privacy and data ownership directly into social platforms, disintermediating business models and industries that thrive on rent-seeking and bureaucracy, and much more that perhaps we cannot even fathom quite yet.
We wish you all a Happy New Year and we will strive to invest in deeply influential teams building technology for a better, freer, more inclusive global digital economy.