Investing in Blockchain technologies 2013–2016. A reflection

From 2013 to 2016 I invested $30m in companies in the Blockchain and Digital Currency space as a Partner at Pantera Capital.

My initial exploration of Digital Currencies began in Feb 2013 in a chance meeting with an old friend while I was working at Fortress Investment Group. Before Fortress I was part of a new fund focused on collateralizing IP assets to provide startups with additional capital. Our team joined Fortress in late 2012 and in additional to my role investing in IP, I had some side interests. Bitcoin became one of them and it was shared by a number of the key people at Fortress.

In June 2013 our small project at Fortress began to heat up after Dan Morehead joined our team. Dan had run a $1bn hedge fund, Pantera Capital in the mid 2000s and had been a successful currency trader and executive at Tiger Management. Our team spent the summer investigating the emergent companies in the Digital Currency space and also began buying Bitcoin. By October 2013, a mutual decision was made to spin the effort at Fortress out into a new version of Pantera Capital, solely focused on investing in Digital Currencies and the companies in that space. Shortly after, the space began to really heat up and Bitcoin price shot up from $100 to over $1000 in a very short period.

The Pantera Bitcoin fund grew rapidly and became the largest fund holding Bitcoin, and one of the largest single holders of Bitcoin overall.

The first Pantera Venture Fund, which close in early 2014, consisted of some of the key companies at the time: Bitstamp, Xapo, Circle, BitPagos and 21. Our initial focus was infrastructure: exchanges (Bitstamp), wallets and security (Xapo), on ramps (Circle, BitPagos) and mining (21). Most of our activity up to this point was stealth and no official announcements had been made, although some press leakage and research had occurred.

In late 2013 and the early part of 2014 as we prepared to launch Pantera with its new brand and announce our new funds, we were beset by shock waves in the Bitcoin world. First was the bust of the Silk Road in October 2013. Although the initial announcement had little effect on the price long term, the association with this entity would plague Bitcoin and our efforts for many years following. Second was arrest of Charlie Shrem, CEO of Bitinstant and a notable figure in the Bitcoin space in Jan 2014. the collapse of MtGox, the largest exchange for buying and selling Bitcoin in Feb 2014.

Despite the head winds and the falling Bitcoin price (all time high Nov 28 2013, fell to $400 in April 2014), we pushed ahead and launched the newly formed Pantera funds and company in May 2014, announcing partnerships with Fortress, Ribit Capital and Benchmark Capital.

During the next 2 years we invested in many notable companies in our second venture fund which closed in June 2016. Some of the deals I am most proud of include: Civic, Chain, Chronicled, Abra, Align Commerce, Filament and Zcoin. We were fortunate to have amazing deal flow and unrivaled access to great entrepreneurs and I am honored to have worked with so many amazing people over this period. Particular thanks to my partners Dan Morehead and Paul Veradittakit.

In July 2016 I decided to move on from Pantera Capital and pursue my own investing. I am grateful for the team at Pantera and the interesting times we shared together.

What’s next? I remain very bullish on Digital Currencies and Blockchain technologies in general and look forward to continuing to advise the companies in our portfolio and also find new and exciting entrepreneurs pushing the boundaries of this space. I am also broadening my focus to include more general decentralized architectures and I was particularly inspired by the recent Decentralized Web Conference organized by Brewster Kahle. I am also increasingly concerned about security — from secure free speech to wide spread global hacking and will be focusing some energies there. My third focus area will be a return to some of my original academic background in AI / deep learning (my PhD was in speech recognition using recurrent neural networks).

Representative talks and articles: