Only Bitcoin Will Rule Venture Capital – Bitcoin Magazine
“The smartest people in the world work on Bitcoin, they don’t work on another project,” Mike Jarmuz told Bitcoin Magazine. “They don’t work with altcoins or sell real estate in a meta-verse fantasyland. Your medical records don’t go into anything else masquerading as a blockchain. We see these as ridiculous and completely uninvestable ideas.”
Jarmuz is the managing partner of an investment fund called Lightning Ventures, the peculiarity of which is that it focuses its investments exclusively on companies that develop products and services on bitcoin and no other cryptocurrency.
“The 21st century digital economy is being built on Bitcoin-Nntive companies,” added Alex McShane, a venture partner in Lightning Ventures and employee of BTC Inc, which runs Bitcoin Magazine. “We invest in best-in-class Bitcoin entrepreneurs who deliver focused and differentiated value to humanity. We are determined to return a multiple to our investors through Bitcoin companies that strive to make a positive impact on the world.”
And Lightning Ventures is not alone, but rather part of a growing niche, that of Bitcoin-only venture capitalists (VCs).
The fall of crypto hedge funds
Last year, at the height of the bull market, it was the crypto VCs who dominated the headlines, pouring over $33 billion into crypto/blockchain/Web3 projects and startups. This golden age was very short-lived, as the year’s market crash also claimed acknowledged victims in the world of hedge funds: one in particular was Three Arrows Capital, which defaulted last June after being unable to repay a loan of over $670 million .
Such sudden gains and collapses are not very common for a venture capital fund, which traditionally approaches investments with a 10-year time horizon, not horizons of just a few months. But when the stake is in projects that issue tokens out of thin air, the moment these are valued on the wave of enthusiasm, the temptation to turn investment activity into speculation is very strong – with the risk of being burned when the markets reverse their course.
Preference for low time
The crypto hedge funds demonstrated the short-term mentality – the opposite of that shared by VCs who believe in Bitcoin’s long-term success, investing in those companies that, without issuing useless tokens invented on the spot, are trying to develop services that provide real value to the market .
“Bitcoin startup or early-stage angel investment is definitely a short-term choice,” Jarmuz specified. “Many ‘crypto’ projects choose to issue unlicensed, unregistered securities in exchange for equity, but you don’t end up with quality investors. What happens is investors dump these ‘tokens’ or equity as soon as they can. With Lightning Ventures’ thesis and Bitcoin-only investments, we are committed for the lifetime of the company and are not concerned with selling ‘tokens’ the moment we can. When we invest in a company, we support it and support it throughout its life cycle.”
On this same page is Christopher Calicott from Trammell Venture Partners, or TVP, who said that the idea of financing projects that attract customers by generating tokens is not only symptomatic of a short-term view, but is also inconsistent with the typical incentives of a venture capital fund.
“Investing in these tokens, Calicott said, is a fundamental misalignment of interest in truly growing the company and achieving maximum success. Investors actually become speculators trying to get out of their position at the best timing.”
Also, while in the past there was a feeling that it was difficult to build on Bitcoin – and so many moved to other cryptocurrencies – things are changing today:
“Bitcoin is becoming a platform and entrepreneurs are starting to realize that,” Calicott continued. “There is blood in the streets brought by the crypto industry, but despite this, there are now more entrepreneurs willing to build services on Bitcoin than ever before. We see ourselves as long-term investors. We try to bet smart on companies that we believe can usher in a whole new global monetary order on a solid standard: Bitcoin.
Overcoming an outdated system
A new money standard, a global store of value, a peer-to-peer payment method that makes the big traditional players obsolete. However you look at it, Bitcoin offers a vision of the future that completely overturns the paradigms we are used to: the idea of inflation as necessary for growth, that of macroeconomic control by states and central banks, the idea of having to entrust the management of savings and digital payments to intermediaries.
Is the old way of seeing things compatible with the Bitcoin future? According to Ego Death Capital’s website, it is not.
“For a new system to thrive, to provide abundance, opportunity and accessibility, the old system must self-destruct,” according to the website of the VC firm, whose CEO is Jeff Booth, author of “The Price of Tomorrow.” “For this to happen, it will require a phase of ‘surrender and transition’.”
Confirms the view is Nico Lechuga and Andy Pittboth general partners in Ego Death.
“The traditional system is already self-defeating,” they explained. “Banking systems are failing billions of people around the world – this is very evident in emerging markets, but even in Western countries. Meanwhile, the Visa and Mastercard duopoly is holding back innovation and opportunity, so that when competition arises – including through Lightning Network, which provides very fast and affordable transactions – they are already destroying themselves.”
The Lightning Network is also seen as a payment exchange for Oleg Mikhalsky of Fulgur Ventures, because, as he said, “near-instant settlement with very limited counterparty risk is a feature of Lightning that is well positioned to reduce traditional payment costs and lower counterparty risk that exists in fiat rails.”
“For the digital economy to grow,” Mikhalsky added, “we need a native digital currency that has two functions: speed and the ability to make microtransactions. We believe Bitcoin and Lightning will become the global money and payment standards. Some aspects of the Lightning Network adoption spectrum is yet to be explored: we see some adoption in video games, digital content monetization, but there are other use cases such as machine-to-machine payments and microtransactions for energy.”
More and more Bitcoin-only startups
Contrary to what one might think, in a year when the market collapsed dramatically, the world of Bitcoin-only startups has experienced a very indicative growth. As confirmed by all VCs surveyed for this article, the number of companies focused solely on Bitcoin has grown significantly over the past year. It is plausible to think that when the Pandora’s box of the crypto world was discovered, at that time, entrepreneurs realized that it was wiser to focus on the one technology whose fundamental elements have never stopped strengthening since the beginning.
Julian LinigerCEO of Relai – a Swiss startup that allows users to buy and sell bitcoin in a non-custodial way – emphasized the future growth.
“In the long run, investing in Bitcoin-only startups is less risky than in crypto startups: investors see Bitcoin-focused companies as more profitable and a more sustainable business model,” he explained. “With Bitcoin-only VCs, we’re 100% aligned. They see the future in 10 years, they understand where we’re going, they understand that all the experiments that happen on other blockchains will end up on Bitcoin.
This is a guest post by Federico Rivi. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
