Gravity wells and the case for Polymath
Since joining Polymath, I’ve received a few messages asking why I agreed to work for a magic money ICO startup. Replying with “this one is different” seems weak, so mostly I’ve answered with something about the quality of the team and how interesting the project is. All true, but not much better in terms of a response.
Then I saw an article about what the New York Times is calling (somewhat awkwardly) the “Frightful Five”, and the full answer to “why Polymath” came into focus. The deeper reason I joined Polymath? Because the pathway to success for new disruptive technologies is narrowing quickly, and Polymath may just be the last best hope to keep it open for future companies.
Maybe that sounds overly dramatic. Let’s start with those Frightful Five: Google, Amazon, Facebook, Microsoft, Apple. Collectively, they account for about half a trillion dollars in revenue per year. Whether good or bad (if such an evaluation even makes sense for such giant companies), their effect on the startup market is clear. Unless you are in the blockchain space, no conversation with potential investors can last for more than 30 minutes before someone asks “What if Facebook decides to build that feature” or “Are you building this to sell to Google?”
By co-opting features of the competition or buying them up (under implied threat of competition if they don’t sell), these five firms are putting a cap on home much innovation and fundraising new startups can do. The majority of the startup scene has now been turned into an incubator for tech and business ideas that can gobbled up if they show promise.
In this kind of an environment, tech startups have a very small window of time to grow before they face one of those two options. VC firms rarely provide the kind of funding needed to escape the Fearful Five’s gravity wells, and given the headwinds generated by Dodd Frank and SarBox, the road to IPO is now so treacherous we have billion dollar unicorns steering clear of the NASDAQ.
Can ICOs save our souls?
If you want a chance at a large funding windfall for your radical new idea there’s only one option right now: the ICO. The ICO market, however imperfect, however bubbly, is the last stand for finance outside the traditional Silicon Valley sphere. There’s just one small problem: most ICOs are most likely illegal in most jurisdictions.
Enter Polymath. For those who didn’t follow the link at the beginning of this piece (and btw if you did, and still managed to find your way back here, congrats!), Polymath is a platform for issuing legally compliant security tokens on the blockchain. It brings all the benefits of blockchain (instant clearing, high liquidity, low-cost transactions) to tokens which are limited to people who have gone through the accreditation process and meet an issuer’s requirements. By creating a set of marketplaces where companies have access to crypto-friendly lawyers using pre-made legal templates for every common jurisdiction and security type, Polymath streamlines the often long, always expensive process of navigating the legal requirements of a complaint offering.
Pitch idea: twitter for tokens (uh, maybe not)
It would be hard to overstate how big an impact a robust security token market could have. What twitter did for celebrities who wanted a direct channel of communication with their fans, Polymath could do for startups who need a direct connection to a broad group of investors.
Can you picture it? Imagine a world where startups can offer early employees a much better chance at exercising their options, and much sooner. Imagine the benefits to VC investors of high levels liquidity, from ease of moving money around to better price discovery. Imagine you could go out to a restaurant, and if you were wowed by the dining experience, you could go home and invest a couple hundred dollars in that business. Imagine if an investor with ten thousand dollars could build a diverse portfolio that exposed them to multiple high-growth industries in multiple countries and balanced out their conservative 401k with a handful of carefully chosen moonshots.
Finally, imagine that instead of trying to woo a small set of Silicon Valley dwelling VCs, founders could take their case directly to a hundred million, or maybe even a billion potential investors all over the world. Can you see how that might tip the scales back in favor of a couple geeks with a great idea and a g̶a̶r̶a̶g̶e̶ membership at a co-working space?
