How cryptocurrency can help startups get investment capital Ashwini Anburajan
When I was raising investment
for my startup,
a venture capitalist said to me,
“Ashwini, I think you’re going to raise
a few million dollars.
And your company –
it’s going to sell for 50 to 70 million.
You’re going to be really excited.
Your early investors
are going to be really excited.
And I’m going to be really upset.
So I’m not going to invest in this deal.”
I remember just being dumbstruck.
Who would be unhappy
with putting four or five
million dollars into a company
and having it sell for 50 to 70 million?
I was a first-time founder.
I didn’t have a wealthy network
of individuals to turn to for investment,
so I went to venture capitalists
the most common form of investor
in a technology company.
But I’d never taken the time to understand
what was motivating that VC to invest.
I believe we’re living
in a golden era of entrepreneurship.
There is more opportunity
to build companies than ever before.
But the financial systems
designed to fund that innovation,
venture capital,
they haven’t evolved
in the past 20 to 30 years.
Venture capital was designed
to pour large sums of money
into a small number of companies
that can sell for over a billion dollars.
It was not designed to sprinkle capital
across many companies
that have the potential to succeed
but for less, like my own.
That limits the number
of ideas that get funded,
the number of companies that are created
and who can actually receive
that funding to grow.
And I think it inspires a tough question:
What’s our goal with entrepreneurship?
If our goal is to create a tiny number
of billion-dollar companies,
let’s stick with venture
capital, it’s working.
But if our goal is to inspire innovation
and empower more people
to build companies of all sizes,
we need a new way to fund those ideas.
We need a more flexible system
that doesn’t squeeze
entrepreneurs and investors
into one rigid financial outcome.
We need to democratize access to capital.
In the summer of 2017,
I went out to San Francisco,
to join a tech accelerator
with 30 other companies.
The accelerator was supposed to teach us
how to raise venture capital.
But when I got out there,
the startup community was buzzing
about ICOs, or Initial Coin Offerings.
For the first time, ICOs had raised
more money for young startups
than venture capital had.
It was the first week of the program.
Tequila Friday.
And the founders couldn’t stop talking.
“I’m going to raise an ICO.”
“I’m going to raise an ICO.”
Until one guy goes,
“How cool if we did this all together?
We should do an ICO that combines
the value of all of our companies
and raise money as a group.”
At that point, I had to ask
the obvious question,
“Guys, what’s an ICO?”
ICOs were a way for young
companies to raise money
by issuing a digital currency
tied to the value and services
that the company provides.
The currency acts similar
to shares in a company,
like on the public stock market,
increasing in value as it’s traded online.
Most important,
ICOs expanded the investor pool,
from a few hundred venture capital firms
to millions of everyday people,
excited to invest.
This market represented more money.
It represented more investors.
Which meant a greater
likelihood to get funded.
I was sold.
The idea, though, of doing it together
still seemed a little crazy.
Startups compete
with each other for investment,
it takes hundreds of meetings
to get a check.
That I would spend my precious 15 minutes
in front of an investor
talking not just about my own company,
but all the companies in the batch,
was unprecedented.
But the idea caught on.
And we decided to cooperate,
rather than compete.
Every company put 10 percent
of their equity into a communal pool
that we then split
into tradable cryptocurrency
that investors could buy and sell.
Six months and four law firms later –
(Laughter)
in January 2018,
we launched the very first ICO
that represented the value
of nearly 30 companies
and an entirely new way to raise capital.
We got a lot of press.
My favorite headline about us read,
“VCs, read this and weep.”
(Laughter)
Our fund was naturally more diverse.
Twenty percent of the founders were women.
Fifty percent were international.
The investors were more excited, too.
They had a chance to get better returns,
because we took out
the middleman fees of venture capital.
And they could take their money
and reinvest it,
potentially funding more new ideas faster.
I believe this creates
a virtuous cycle of capital
that allows many more
entrepreneurs to succeed.
Because access to capital
is access to opportunity.
And we have only just begun to imagine
what democratizing
access to capital will do.
I would have never thought
that my own search for funding
would lead me to this stage,
having helped nearly
30 companies get investment.
Imagine if other entrepreneurs tried
to invent new ways to access capital
rather than following
the traditional route.
It would change
what gets built, who builds it
and the long-term impact on the economy.
And I believe that’s way more exciting
than just trying to invest
in the next billion-dollar startup.
Thank you.
(Applause)