Ive seen this statement a few times in the past week or so where people have been saying something along the lines of “Venture Capitalists would have just been better off investing in the bitcoin currency than investing in a business”. While the majority of the companies that did invest in bitcoin companies would have just been better off investing in the currency if we look at what we have today, we have to realize that the backend options and solutions might not have been there had they not invested.
Venture capital is a strange type of investing, basically you invest in 100 companies and you only expect one or two to pay off in the long run. However those one or two companies that ultimately succeed will have returns that are astronomical. So in many ways much of the early bitcoin investment was expected to fail. The real benefit of the investment was that many of the companies either brought experience to the industry and work that other companies could later build upon successfully.
With the internet we saw this happen all the time, most notably with web browsers. Netscape, which would ultimately disappear into obscurity, set the standard for many early web browsers options that we have to this day. They might not have benefitted financially , but that investment into netscape helped the industry as a whole. That is why any investment, even if it is under something stupid that we know wont work, does provide some sort of benefit to the space. How big the benefit is depends completely on the idea, but I would still say that marginally there is always a small benefit for the industry even if it just proves that the idea cant work.
So lets revisit the statement that I mentioned in the beginning. Perhaps if we look at things today and where we are in bitcoin/cryptocurrency land we could say they would have been better off buying the currency, but this misses one crucial point. The price that the currencies are at now, might have never gotten this high without investments into businesses that ultimately failed or succeeded. If there was no backend like payment processors, exchanges, storage solutions ect. many would have never entered the space just out of lack of ease.
The venture capitalists who have many failed projects probably wish they would have hedged their bets, but their financial sacrifice has helped all of us who don’t have millions of dollars to invest in fledgling companies. They probably didn’t know it at the time, but their investment that lost them money ended up benefitting everyone. That is why I think it is extremely important that bitcoin and crypto in general continues to keep getting venture capital funding.
I think in the short term we have seen venture capital slow down for decentralized solutions, with much of the companies getting funded being not true blockchains. Many of the companies now are using buzzwords like blockchain to get funding that isn’t going to help the crypto space because they either don’t plan on using crypto or their blockchains will be private. Hopefully this trend ends soon because I would like to see more companies come into the bitcoin space that offer niche markets.
So ultimately you could say that these companies would have been better off investing in the currency, but honestly Im glad they didn’t. I think we all benefitted from them funding companies that might have went defunct, but added something to the crypto space.