Forget Cryptocurrencies. The Real Opportunities are in Entrepreneurship

It seems like everyone is pitching a new cryptocurrency “investment” these days.

Telegram raised more than $1.5 billion in an Initial Coin Offering (ICO) this year, and startups like Dragon, Filecoin and Tezos have all raised 9-figure sums this way.

Even as prices of bitcoin and other cryptocurrencies crashed early this year, investors still put some $6.6 billion in various ICOs in 2017 and have raised more than $7 billion so far in 2018 alone.

And then there’s block.one, which is currently putting up the largest ICO of all time, dwarfing all of the competition this year and even most recent IPOs. Per the Wall Street Journal:

“A start-up company based in the Cayman Islands is on track to raise more than $4 billion through a yearlong sale of digital tokens—the largest fundraising of its kind. What buyers of the tokens still don’t know: how the company, block.one, will use the bulk of the windfall from its so-called initial coin offering.

If the company ends up raising that much by the offering’s expected closing date, this coming Friday, it would be more than twice the size of the next largest coin offering— Telegram Group Inc. raised $1.7 billion—and would be larger than all but one or two of the world’s initial public offerings on stock exchanges so far in 2018.

That a little known startup could raise so much money without a concrete plan for it speaks to trends in the topsy-turvy world of cryptocurrencies and views of the future of the online world.”

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If that sounds less like investing and more like gambling, that’s because it is. These coins are worth what they’re worth not because the underlying company has some grand plan to put the funds to use to drive new revenue, but because there is demand from others to get in early. No one is thinking about the true value of these things. That’s besides the point.

But valuations matter.

Valuations drive value, and value drives returns.

If investors are willing to bet billions on cryptocurrencies and alt coins like what block.one is working on, think about what that money could do if they instead invested it — even just some of it — into innovation. Into supporting entrepreneurs. The gains would be exponential, and they would benefit all of us.

We hear so much talk about 4% GDP growth and how important that goal is for the U.S. economy. But the fact is, startup companies are responsible for all net job creation in the last 50 years. Look it up. Entrepreneurs drive economic growth.

But we’re not supporting them like we need to. The rate of startup creation has been going down for decades, and there is still far less investment in entrepreneurship — whether its Silicon Valley tech, St. Louis agtech, Boston healthcare, or anywhere USA small business — than is needed for these companies to growth.

That’s what’s holding back GDP growth. It’s not that we aren’t investing, but that we’re investing in the wrong things.

We’re living in a world now where investors are more than happy to bet their money on the next shiny cryptocurrency and the promise of quick riches, but what about entrepreneurs? A bet on the U.S. entrepreneur is all but guaranteed to have a greater impact and do more good than whatever the latest ICO is promising.

Agree? iSelect is working to support all innovators. Join us.

Consideration

With 2021 well underway and with public markets still strong, we think it is an important time to highlight some of the key private market, venture investment themes that iSelect fund has identified for the year. We believe technologies transforming the Agriculture, Food and Wellness markets will flourish, with a focus on four areas: technologies that enable better food choices to drive better health outcomes, technologies that drive better, more profitable farm operations, technologies that drive the Consumerization of Healthcare, and biome-based treatment technologies. At iSelect, we invest for impact AND performance. We offer qualified investors access to emerging growth companies through our national venture capital strategy. Our unique structure allows our investors to continue to invest in these companies as they develop.

Timing

Why is now the right time for venture? The answer is that now is not explicitly the right time. Venture is something we need in our economy at all times. Now is not better than any other particular time. The question is, why ever stop? When we look at the challenges we’re facing in food and healthcare the reality is there is someone, somewhere who has an insight about how to build a product that will solve those problems. And if they put the right resources to it, they will succeed. As long as we need new technology to make life better or make our lives more enjoyable, we need venture capital to help fuel those entrepreneurs.

What is iSelect as a product?

iSelect is a very unique product, but when you break it into its parts it’s fairly easy to understand. On the front end we’re a traditional venture capital fund. We have a diligence process. We have an investment process. We have categories of industries where we have focus and real expertise, and we invest in companies in those areas that meet requirements for the fund. On the back end we’re unique in that we don’t raise a large amount of capital at one time and deploy it over the life of our fund. Each deal that we bring onto the fund, our investors have to prove and determine to invest in that deal. We have to constantly prove our diligence standards. It’s accessible, transparent and easy for investors to come in and see our comprehensive process.

What is the ideal iSelect company?

We are looking for founders that are passionate and we want the problem they’re trying to solve to be big, real, and painful. We want the solution to be revolutionary and we want our capital to be able to help them solve that problem. We want to know that they have customers involved and that the solution they’ve come up with actually meets those customers’ and market needs. And we want the team to be capital efficient with the money they’re spending.

What does the ideal iSelect company look like?

We’re looking for a company that has an opportunity to have a 10x return to our investment or greater in a period of three to seven years. What excites us at iSelect are companies that are solving big problems. We want companies that are going to be the Monsantos of the future. Not just in the size and the scope, but the impact they have on people’s lives. We want to create positive impacts on people’s lives, so we invest in areas like agricultural production and areas like producing healthy foods for our kids. They are problems that impact real people’s lives on a daily basis. That’s what we’re trying to do at iSelect. We’re trying to solve the big problems out there. Find ways to bring capital to the entrepreneurs who are the real heroes out there getting up every morning, beating away at these things that are problems that you and me and everyone else faces in their everyday lives.

What is iSelect?

iSelect is a venture capital firm. What that means is we look at hundreds and hundreds of different companies and we apply tough diligence standards to each of them, looking at whether the team has a good plan for growing the business, whether the team is qualified and credible, and more. We do that to resolve the few who provide the best opportunities for investors. And then iSelect takes that smaller set of investments and goes to investors who are interested in venture capital and provides a way for them to invest in these companies, either individually or all at once. We co-invest alongside other venture capitalists. We source transactions through to an exit where the company would become public or get bought. And we manage that whole investment process on behalf of our investors.