Web3 opens venture capital


In 1968, a relatively unknown private company made its public market debut with the help of the first generation of venture capitalists…

Source: Shutterstock

The company and the investors have made a lot of money…

The company was called Digital Equipment Corporation (DEC). It was originally supported by a $70,000 investment from the American Research and Development Corporation (ARDC).

That initial investment turned into over $35 million, a 500x return!

Although the return on investment was outstanding, the company and early stage investors were wandering in uncharted waters. Growing a small company into a publicly traded giant, while making huge profits along the way, was a relatively unknown strategy.

In today’s venture capital world, this strategy is the bread and butter technique.

Here’s what the process looks like:

  • Find a great team of entrepreneurs with a great idea.
  • Funds this team to execute its objectives.
  • To help the team along the way as they encounter various challenges.
  • To guide the team to a public market launch or a major acquisition.

Of course, the process can vary depending on who is involved. But the ultimate goal of venture capital is to build companies that create great products or services…and make huge amounts of money in the process.

That being said, a lot has changed since the early days of venture capital…

Times change, but the goal remains the same

Originally, the ARDC was founded to help veterans returning from World War II to establish businesses and succeed in life in the private sector.

This process really came down to personal relationships, in-camera meetings and strategic business relationships. Investing in the old days of the VC was like belonging to a secret society.

Yes, it was about good ideas, hard working people and strategic decisions…

But it was also about who you knew and what you had access to.

Over the past decades, the world of venture capital has evolved enormously.

In 2020, there were nearly 2,000 venture capital firms in the United States alone that deployed capital into more than 10,000 companies. Of these companies, an estimated 2.5 million people are employed.

The introduction and growth of the Internet is one of the main drivers of this growth in the world of venture capital. Of course, many of the best technology companies in the world are succeeding thanks to the Internet…but the Internet has also made it possible for investors to participate in the financing of these companies for the first time.

And this trend of creating access for investors is about to accelerate even more.

Web3 will disrupt the VC world

Regular readers of Venture Capital Digest are familiar with the Web3 trend that is sweeping the internet. It’s best to just think of Web3 as the next phase of the Internet…a phase that will change the way people interact with other individuals and businesses.

Web3 is the convergence of several new technologies. Blockchain technology and the token-based economy are the main drivers of Web3. Both aim to give internet users much more control over how they use the internet.

For the venture capital world, Web3 could be the biggest disruptor the industry has ever seen…and that’s hugely positive for individual private investors.

For example, let’s look Blockzero.

“Blockzero is a decentralized autonomous organization whose mission is to create, launch and scale the next generation of Web3 startups.”

When you break it down, Blockzero is the combination of a set of existing platforms and technologies that venture capitalists and entrepreneurs previously used independently.

From the pitch deck of the organization:

A slide from Blockzero's pitch deck.  It shows a Venn diagram with the company logo in the center of circles labeled community, capital, and connections.

Source: Blockzero

By using blockchain technology, Blockzero is able to facilitate a community that can collaborate, fund, and create the world’s next big ideas. This concept is nothing new, as traditional startup accelerators have been successfully executing this strategy for years.

One of the most successful accelerators, Y Combinator, has been leading the way since 2005. They’ve helped launch over 3,000 companies that now have a combined valuation of over $400 billion.

To say their model is a success would be a huge understatement. Their list of well-known companies is staggering and they have helped create over 70,000 jobs.

However, with the introduction of Web3 technologies and organizations like Blockzero, traditional venture capital investment and business acceleration could be at risk.

But it could mean huge opportunities for individual venture capitalists.

The new “VC” fund

Blockzero allows anyone to participate by purchasing their native token, XIO (CCC:XIO-USD). This gives someone the opportunity to participate in the Blockzero Labs ecosystem as a true stakeholder in all projects that are built within the community.

An image comparing and contrasting the qualities of Y Combinator versus Blockzero.

Source: blockzerolabs.io

Again, Blockzero Lab’s business model isn’t exactly new, in terms of concept. It’s just that the technology infrastructure has finally caught up to facilitate this idea.

Personally, I think we will have several more years before investors understand what all of this means. The traditional model of companies going out and raising capital from investors will likely be around for the next decade.

But things are changing fast, and I predict that some of the most influential companies of the future will likely emerge from community-built incubators and accelerators, like Blockzero Labs.

I’ve said it before, and I’ll say it again. Start to familiarize yourself with cryptocurrencies and blockchain technologies. You don’t have to become a leading expert. Just familiarize yourself.

I think it’s highly likely that some of the best investment opportunities we’ll see in the next two years will require investors to participate via blockchain-based cryptocurrencies and tokens…and we’ll want to be ready when the time comes. .

As of the date of publication, Cody Shirk had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Focusing on megatrends that will shape the future, Cody Shirk uncovers generational wealth in the private investment space. To make sure you never miss Venture Capital Digest, click here to subscribe.


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