Hi, everyone, happy Wednesday. It was fun seeing some of you yesterday at the jam-packed On-Demand conference in San Francisco. We moderated the last discussion, parts of which we’ll share with you here soon. (It was pretty interesting, thanks to some great VC panelists.)
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Pantera Capital’s Dan Morehead on the Future of Bitcoin
At a StrictlyVC event in San Francisco last week, Dan Morehead, founder of the San Francisco-based hedge fund Pantera Capital, sat down with seed investor and venture advisor Semil Shah to talk Bitcoin.
Morehead knows Bitcoin as well as anyone. After logging time at Deutsche Bank and Goldman Sachs, then joining Tiger Management, where he rose to the head of global macro trading, Morehead founded Pantera, a 12-year-old outfit that has more recently committed to investing exclusively in Bitcoin and other digital currencies. We wanted to know why — as did Shah — so Shah asked him. Parts of their discussion follow, edited for length.
SS: There was exuberance over Bitcoin, then not, and now it’s coming back. What’s going on?
DM: Every technology goes through a hype cycle, where there’s a kernel of truth or a kernel of genius, and once the media catches it, it [captures everyone’s imagination] for a while. Then there’s an awkward period. And Bitcoin went through that. [But] it was more extreme because it has one unique feature. It’s a technology protocol that has a real time price feed. And that’s really, really weird.
In 2011, no one really cared. By 2013, everyone had [that price feed] on their screens and the press was talking about it, and it led to extreme bubbles [including in Bitcoin mining]. At the end of 2013, the price of Bitcoin was 93 times higher than it was the year before. Bitcoin improves all the time, but it wasn’t 93 times better, so a bubble . . . had to deflate.
SS: Was it rational for Bitcoin’s price volatilty to affect venture investment in the technology?
DM: I think people did get over their skis in 2013, thinking it was going to change the world overnight. It’s going to change the world, but it’s going to take a couple decades to do it, as other Internet protocols [have taken].
One data point about Bitcoin: All the companies in the Bitcoin ecosystem are worth just over $3 billion today. All the Bitcoin that exist are about worth that right now. So you have a ration of about 1:1. Meanwhile, in talking about the U.S. equity market or the developed company space, the market cap of all the companies in the U.S. is worth five times the value of money supply. So I think you’re going to see a persistent trend of value venture in Bitcoin increasing at a faster pace than the underlying currency or protocol.
SS: Numerous traditional VCs have made bets on seed- and early-stage Bitcoin companies, but it seems like these bets will take longer [than expected] to play out. Will they have to continue supporting these companies, or will other investors come down the stack?
DM: It’s certainly taking longer than some people expected a few years ago. But you’re seeing [an influx] of investors. Last month, Circle [Internet Financial] did a round with Goldman Sachs, which was the first major international bank to invest. So not only are you getting the traditional venture investors, but you’re getting strategic investors like big banks and big exchanges trying to get invested in the Bitcoin space.
SS: You understand Wall Street. How does it perceive Bitcoin, both as a currency and as a technology platform?
DM: I think most of Wall Street realizes that the systems that move money are incredibly antiquated and incredibly inefficient. Most of them were designed in the 1950s. The main thing for wiring money – SWIFT – is basically sending messages and it’s very primitive and can be disrupted by Bitcoin very easily, and most banks would like to see that happen.
SS: How would that affect big banks’ fees and the way they make money?
DM: I think too much was made in the early days of [Bitcoin’s ability] to disrupt banks. A lot of banks now have retail stores – selling services to people. So they can still retain their relationship with the customer and then swap out the back end.
Also, there are a small number of banks that do cross-border money movement; they’re called correspondent banks, and there’s really only a dozen or so that control an entire market. An extreme example is Africa, where, if you want to move money into or out of the entire continent, there are only two banks that will do it and other banks need to use those two banks and it’s very expensive. So banks want a cheaper way to get money in and out of places like that.
SS: What is happening in Bitcoin in the rest of the world outside the West, especially where rule of law is weak?
DM: In mobile money, Kenya is actually the world leader. Southern Africa has weak institutions and currencies that deflate at a rapid rate; Zimbabwe is the world record holder with a 100 trillion dollar note now. So their citizens need a better solution to transact.
They also are unbanked [along with billions] of other people on earth that don’t have access to a bank but do have a cellphone, and going straight to some mobile money solution — bitcoin is a great solution for that. Already, 75 percent of adults in Kenya use a mobile system called M-Pesa. In fact, 45 percent of the entire GDP of the country is processed in M-Pesa. To me, that’s the future of bitcoin.
(If you’d like to hear more from this discussion, you can listen to it in its entirety here.)
Algolia, a three-year-old, San Francisco-based company whose hosted search API allows websites and mobile applications to deliver search without having to build it out, has raised $18.3 million in funding led by Accel Partners, with participation from Lead Edge Capital and earlier backers Alven Capital, Point Nine Capital and Storm Ventures. Individual investors, including Ilya Sukhar of Parse and Solomon Hykes of Docker, also joined the round. The company has now raised $21.1 million altogether. TechCrunch has more here.
AlphaDraft, a year-old, San Diego, Ca.-based e-sports startup, has raised $5 million in seed funding from investors, including Metamorphic Ventures, William Morris Endeavor Entertainment, Melo7 Tech Partners, former NBA Commissioner David Stern, Upfront Ventures, IDG Ventures, KEC Ventures, Freestyle Capital, SK Ventures, Basset Investment Group, Gokul Rajaram, and Amplify.LA, which furnished the company with its first check earlier this year. The L.A. Times has more here.
Blade, a year-old, New York-based app and logistics company centered around helicopter use (think Uber for choppers), has raised $6 million at a $25 million valuation from some big names, including Google chairman Eric Schmidt, Discover Communications CEO David Zaslav, IAC’s Barry Diller, Alex von Furstenberg, Raine Ventures, and iHeart Media chairman Bob Pittman. Both Pittman and Schmidt have licenses to fly helicopters and jets, notes Business Insider, which has the story here.
BookBub, a three-year-old, Cambridge, Ma.-based daily newsletter providing millions of readers deals on e-books, has raised $7 million in new equity and debt financing from undisclosed sources. The company had raised $3.8 million in Series A funding last year from NextView Ventures, Founder Collective,Avalon Ventures, and Bloomberg Beta. BetaBoston has the skinny here.
Coho Data, a 3.5-year-old, Palo Alto, Ca.-based company that makes software-defined networking integrated storage appliances for private clouds, has raised $30 million in funding led by March Capital Partners, with participation from Hewlett Packard Ventures, Intel Capital and earlier investors Andreessen Horowitz and Ignition Partners. The company has now raised $67 million altogether.
Farmers Business Network, a 1.5-year-old, San Francisco-based company whose computer systems evaluate public and private data on crop yields, weather patterns and planting practices, has raised $15 million in funding led by Google Ventures. Venture Capital Dispatch has more here.
FlyOnWall, a two-year-old, New York-based live-streaming company formerly known as LiveLens, has raised $3 million in Series B funding from private investors. The company had previously raised $2.5 million from investors (also unnamed). More here.Little Labs, a year-old, L.A.-based smartwatch app studio, has raised $3 milion in funding led by New Enterprise Associates, with participation from Lightspeed Ventures, Lowercase Capital, and earlier backers Crosscut Ventures and Amplify.LA. More here.
Mobcrush, a 10-month-old, Santa Monica, Ca.-based live streaming platform for mobile games, has raised $4.9 million in seed funding from a long list of investors, including Raine Ventures, First Round Capital, Lowercase Capital, CrunchFund, Rincon Venture Partners, Crosscut Ventures, Lionsgate, Advancit Capital, CAA Ventures, BAM Ventures, MTGx Ventures, and numerous individual investors.
Oradian, a three-year-old, Zagreb, Croatia-based startup that makes cloud-based software for micro finance institutions in developing markets, has raised an undisclosed amount of seed funding from Credo Ventures, Playfair Capital, Day One Capital, Esther Dyson, Moaffak Ahmed and Pule Taukobong (Africa Angels Network). TechCrunch has more here.
Shelvspace, a three-year-old, Scottsdale, Az.-based SaaS company targeting the consumer packaging goods industry, has raised $1 million led by Tallwave Capital, with participation from numerous individual investors.Stride Health, a two-year-old, San Francisco-based health insurance recommendation engine, has raised $13 million in Series A funding led by Venrock, with participation from Fidelity Biosciences and earlier investor New Enterprise Associates. The round brings Stride’s total to $17.5 million,reports TechCrunch.
Tilt, a three-year-old, San Francisco-based crowdfunding platform, has raised a new round of funding that values the company at $400 million. TechCrunch has the story here. Tilt had previously raised roughly $37 million from investors, including Y Combinator, Andreessen Horowitz, QueensBridge Venture Partners, SV Angel, Sean Parker, Naval Ravikant, Silicon Valley Bank, Alexis Ohanian, and Felicis Ventures.
WePay, a seven-year-old, Palo Alto, Ca.-based payments companies built to serve the needs of online marketplaces, has raised $40 million in Series D funding from the growth equity firm FTV Capital. The company has now raised roughly $74 million altogether, shows Crunchbase. Fortune has more here.
Zaption, a three-year-old, San Francisco-based video learning company, has raised $1.5 million in seed funding from investors, including NewSchools Venture Fund, Redcrest Enterprises, Scion Capital and Telegraph Hill Capital. More here.
Enmi Kendall and Anya Schiess met more than 10 years ago at business school; now, the two have reunited to form Healthy Ventures, a new seed-stage venture capital firm that’s attempting to get digital health ventures off the ground. Geekwire has the story here.Norwegian state-owned utility Statkraft AS has set up a venture capital unit, which will invest up to $11 million per year in clean energy-related start-ups in Europe. More here.
Booxmedia, a six-year-old, Helsinki-based cloud-TV platform, has been acquired by the Cambridge, U.K.-based, AIM-listed company Amino for €7.9 million ($8.8 million). According to Crunchbase, Booxmedia had raised roughly $580,000 in seed funding from individual investors. TechCrunch has more here.
Next Big Sound, a seven-year-old, New York-based online music analytics platform, has been acquired by the streaming music service Pandora for undisclosed terms. According to Crunchbase, the company had raised roughly $8 million from investors, including Alsop-Louie Partners, Foundry Group, IA Ventures, and SoftTech VC. VentureBeat has more here.
Predilytics, a four-year-old, Burlington, Ma.-based predictive analytics company, has been acquired for undisclosed terms by the health management company WellTok, based in Denver. Predilytics had raised $20.5 million from investors, including Highland Capital Partners, Flare Capital Partners, Flybridge Capital Partners, Qualcomm Ventures, and Google Ventures. More here.
Weathermob, a four-year-old, Boston-based company that uses crowdsourcing to provide an alternative to data from traditional weather stations, has been acquired by Weathernews, a nearly 30-year-old weather prediction technology company based in Chiba-shi, Japan. TechCrunch has more here.
WooCommerce, an e-commerce tools company based in Cape Town, South Africa, has reportedly sold to WordPress parent company Automattic for roughly $30 million in cash and stock. Automattic CEO Matt Mullenweg wouldn’t comment on the price, but he told Recode yesterday that the acquisition is the largest his company has made “by about 6x.”
Feroz Dewan, who has long run the hedge fund operations of Tiger Global Management — and helped steer it into numerous bets on privately held tech companies — is leaving next month to start his own business. Reuters has more here.
Ilya Fushman, head of product at Dropbox, has left the company to become a general partner at Index Ventures, joining partners Danny Rimer and Mike Volpi at the venture firm’s San Francisco office. Index Ventures had led Dropbox’s $250 million Series B round in 2011, so the two sides know each other well. Fushman is no stranger to venture capital, either. Before joining Dropbox, he spent a roughly 1.5 years at Khosla Ventures as a principal. Business Insider has the scoop here.
Mike Kail, CIO and SVP of infrastructure at Yahoo, has left the company after less than a year, reports the WSJ. Kail “has chosen to leave the company in order to pursue other opportunities,” Yahoo told the outlet. Presumably, he’s also busily battling a lawsuit filed against him by Netflix, his former employer, which has accused Kail of fraud, breach of fiduciary duties and other improper actions.
David Lee has left the venture firm SV Angel after numerous years as its managing partner, according to a letter sent to its limited partners and companies. Recode has that letter here. Lee says (for now) that he’s leaving to spend more time with his family. In the meantime, Topher Conway will be moving up to the co-managing role alongside his father, SV Angel founder Ron Conway, notes TechCrunch.
On Monday night, at a Fortune dinner in New York, Yahoo CEO Marissa Mayer said the best advice she has ever received came from Google cofounder Sergey Brin, who told her on her last day at Google: “Don’t forget to be bold.” More here.
Every two years, Amazon founder Jeff Bezos annoints a new “shadow,” a person who acts as his advisor, sits by his side in meetings, and serves as a sounding board before being sent back into another role at the company. This time, it’s Maria Renz, who was most recently CEO of Quidsi, the parent company of Diapers.com that Amazon acquired in 2011. Recode has the story.
Alexia Tsotsis, co-editor of TechCrunch, is stepping down to attend graduate school at Stanford. “I may never have another job I’ll love as much as this one, but I need to click on to the next gallery slide of my life,” she explained in a post this morning. More here.
Yelp is hiring a senior manager of corporate development. The job is in San Francisco.
Six Chinese men have been indicted for the theft of code from Silicon Valley companies. The New York Times has more here.
Don Draper’s complicated relationship history in one chart.
SaloonBox, because not everyone can mix a drink like Tom Cruise in “Cocktail.” (Not that we ever sat through all two and a half hours of “Cocktail.” Ahem.)