Fred Wilson Shies Away From Funding Google, Facebook Competitors, ICOs to the Rescue?October 25, 2018
One of the biggest venture capitalist (VC) in Silicon Valley has admitted they do not fund start-ups which plan to challenge the big tech giants.
“We shy away from funding startups that are going up directly against the large tech incumbents,” Wilson said.
So confirming what some have speculated. That VCs act as sort of gatekeepers and intentionally or otherwise effectively protect monopoly like big tech companies from disruption or competition.
The reasons for it are many, but one reason might be that VCs are interested in start-ups that can themselves grow into becoming a monopoly like Google or Facebook.
Such as Coinbase, for example. The crypto broker is now moving into almost all areas related to cryptocurrency with it effectively dominating the crypto space in US. Any start-up that tries to copy clone them would probably get no funding, not least because many Silicon Valley VCs are invested in Coinbase.
Thus we get a command economy, where there is just one social network and just one dominant search engine or where the high-street is uniform in whatever town you go with the same chain of shops one after the other.
We also get a sort of groupthink, a kind of self-censorship but in entrepreneurship. The VC gatekeepers think it can’t be done, so entrepreneurs don’t even try.
“Big tech is increasingly vulnerable to a number of attack vectors, many of them self-induced, which should be attracting entrepreneurs to more directly go after the core franchises of big tech,” Wilson says before adding:
“Whether those courageous entrepreneurs will attract the capital they need to launch those attacks is an open question.”
They might be able to in Europe, which has now become far more friendly to Initial Coin Offerings (ICOs), a fundraising method open to the public.
US has effectively banned new ICOs because they claim the public is too stupid to know what they should spend their money on, so they need “protection.”
Technically you can still have an ICO in US, but you have to spend some $20 million to comply with all the regulations to get approval from SEC.
Meaning practically they are banned for a start-up because the whole point of an ICO is to raise that $20 million.
In Europe, however, UK does not regulate ICOs. In France they’re setting up an accommodative voluntarily licensing framework just for ICOs. Switzerland and Estonia too have a pretty progressive legal framework as far as ICOs are concerned.
Europe therefore has recently overtaken US with europeans raising more than double the amount in ICOs than Americans.
Meaning you don’t need a VC if you’re a smart man or woman with a good business plan and a clear vision of how to implement it.
Whether anyone buys into that vision is a different story. With many successful ICOs making headlines, but plenty not raising a penny.
Still, if you think you can take on Google or Facebook, then perhaps the masses will chuck a penny. Plenty of them spend $70 billion on lotteries every year, so if a tenner is burned in a start-up dream, what’s the bother.
While VCs, obviously, have different parameters. As methods of fundraising are limited, then VCs can pick and choose.
Especially in US, where VCs are now back to being the only point of entry for start-ups. So they probably receive far too many applications, thus can focus on the easy pickings, like the ones that have a chance of becoming a monopoly.
While if it is the public that is funding it, there might be a niche that wants to use the product and doesn’t care about the profits, there might be a crowd that invests altruistically with the profits more of a bonus, there might be speculators that chuck a penny into everything in the hope one has 100x returns on all of it, and so on.
Meaning the market is far bigger, and the feedback from the market is far quicker, but competition is always intense in the matter of money. So just because you add a blockchain to Facebook you might not get very far, but if you have an innovative idea you might perhaps get somewhere in Europe now more than in US.
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