Bitcoins are to money what email is to communication.
Today, there are about 12,000,000 bitcoins—the unit of currency for the open source peer-to-peer electronic money and payment network created in 2008—in circulation. At $1,000/bitcoin on Coinbase or BitMe, that represents about $12 billion in value. Though tremendous at first glance, as a point of comparison, the total value of all gold reserves in the world is about $7 trillion. Bitcoins therefore really amount to but 0.2 percent of the value of gold, historically the world’s primary store of value.
In other words, all bitcoins in circulation today are worth less than 1/6 of Bill Gates’s total net worth of $76 billion. Through either comparison, they could be priced way too cheap.
The best way to think about bitcoin, as my friend Charlie Songhurst describes, is to ignore the urge to conceptualize bitcoin as a “currency replacement” or “money.” It really is the next generation of currency used within a digital ledger. Within this ledger, or virtual sandbox, the store of value is bitcoin; outside of this sandbox, the store of value can be converted back to whatever you want: USD, Euros, RMB, maybe even gold. But, within the theoretically seamless, borderless sandbox, there will be a huge reduction of transaction friction, especially across country lines: lower transaction fees– and subsequent enablement of micropayments, lower currency exchange fees, faster transaction times, and even greater trust in the bitcoin unit (particularly for developing markets, where there may be hyperinflation in Zimbabwe or an artificial currency peg in China). On top of this, bitcoins are a deflationary currency: as the demand rises, the price should rise, as there will only ever be a fixed amount in circulation (21,000,000 after all the bitcoin mining).
Why Bitcoins aren’t Tulips
The graphs of the meteoric rise in bitcoin price look eerily similar to the 1600′s Dutch tulip bubble…just without the crash (at least, so far). However, I posit that bitcoins differ from tulips for two very simple reasons:
- Tulips’ primary function is to look pretty.
- Bitcoins have hundreds of functions, from online gambling, money laundering, and other illicit activities to seamless cross-border transactions, international micropayments, and more. Even Shopify’s 75,000 merchants can now accept bitcoin payments, bitcoin ATMs are sprouting, and trips aboard the Virgin Galactic are being booked using bitcoin.
In a bull case, bitcoin could be the way we transact in the near future. In the base case, it is a hedge against inflation, quantitative easing, and rogue monetary policy. If you only believe the latter, and the total value of bitcoin could represent only 1 percent of gold, then that itself is worth north of $5,000/bitcoin (>$7,000 according to the table below from the Bitcoin Investment Trust, which was based on a higher gold to dollar exchange rate). If you believe it has a chance at the former, the sky is the limit.
So, is bitcoin a steal at $1,000/piece? Very possible.
UPDATE (12/1/13): Ever since I published the article, people have asked me whether they should buy BTC. My advice: don’t invest any more than you can afford to lose. There is a significant probability (i.e. the bear case) that bitcoin will unravel as a ponzi scheme and be worth zero. Here is a great article on that. I personally think it will be worth either zero or thousands of dollars more than it is today. On that risk/reward basis, it may make sense to put 1% or less of your net worth in it, but no more.
Disclaimer: I own some, but not nearly enough, bitcoin.
At NEA, I work actively with around 10 of our portfolio companies and passively with a few others. In every one of those cases, I’m the youngest guy in the room. Except in the case of Fiscalnote, where I very well may be the oldest.
When I first met founder Tim Hwang, I felt like I was looking in a mirror. He reminded me of an East Asian version of myself. He had the same tendencies and quirks I do: habit of trying to fit 2 minutes worth of information into 1 minute, avoiding the question of age until asked point blank, the occasional forgetfulness of when we had met certain people (in his case, he guaranteed he had met me at least 2 times before but I am willing to bet $ that we had never met), even the same thick glasses that signify way too much time in front of screens…
But that’s where the similarities end. For example:
- Tim, now 21 but then a teenager, was the youngest elected school board member for the largest school district in Maryland receiving 70,000 votes through via a voter targeting strategy he learned while working for the Obama Campaign.
- Tim founded the National Youth Association which represents 750,000 youth in the US and played a large role in helping those under the age of 26 stay on their parent’s health insurance plan in Obamacare.
Somehow, Tim also is the CEO of Fiscalnote, a real time government analysis platform. Fiscalnote aggregates and analyzes speeches, court cases, and existing government legislation at all levels: local, state, and federal. The talented, but young, team has built a number of algorithms to predict whether new legislation will pass and have back-tested it to over a 99% accuracy rate. Fortune 1000 companies all the way down to restaurant owners now have an easy way to figure out what legislation does or may affect their business. Effectively, they are trying to make a very important part of government transparent. We recently closed a round with Mark Cuban and a few others. Fiscalnote also happens to be the first startup I’ve heard of that is moving out of Silicon Valley and to DC!
I’m thrilled to be an investor and can’t wait to watch this unfold.
“In 2003, an 18 year old girl got very sick. Without any warning or apparent cause, she fell into a deep depression. She had to drop out of college. She would sleep 14 hours a day, too fatigued to do anything when awake but watch TV. She gained 50 pounds of weight and woke up several times a night with nightmares, soaked in cold sweat. Eventually suicidal thoughts entered her mind. She asked her mother to sleep in bed with her so she wouldn’t hurt herself. That girl is my sister, Carly.”
“Over the next several years, our parents brought Carly to 16 different medical specialists and racked up over $100,000 in medical bills, desperately seeking a diagnosis. Each doctor would treat her symptoms as best they could, but none could identify the root cause of her illness. We’d later discover that her disease affects just 1 in 15,000 females. Her doctors had never heard of it, much less seen it.”
This is the story that Jared Heymans, CEO of CrowdMed, months ago told me. There was so much wrong with Carly’s situation: the time it took to receive a correct diagnosis, the exorbitant costs of gratuitous visits, the damage from misdiagnosis and mistreatment. Parts of these issues are endemic to the American healthcare system (i.e. costs), but others can strike anywhere (i.e. the misdiagnosis, especially due to her rare condition). For example, rare diseases affect 25 million people in the US and 350 million people worldwide, yet they are often just as misdiagnosed as more common diseases because of medicine’s pronounced 80/20 rule.
At Bessemer, my colleagues invested in Crowdflower, a company that helps contributors complete microtasks via their crowd of people; and I have always been impressed with Mechanical Turk, LiveOps, and other crowdsourcing companies. So when Jared told me that “the wisdom of the crowd” might also be applied to rare diseases, I was intrigued. And when his vision became CrowdMed, I couldn’t wait to invest.
Jared and his team have built a platform that empowers patients struggling with their ailments—many of whom have “tried everything” but can’t get the right diagnosis—post their symptoms and history on CrowdMed for a small fee (~$199 for now). Then, a team of MDs (note: Medical Detectives, many of whom are NOT Medical Doctors) scours the web, literature, and other sources to derive probabilities for potential diagnoses.
So far, this model has worked pretty well. In fact, dozens of cases have been solved on the platform– some, in as early as three days.
These are cases, and stories, like Carly’s. Hers was the first case solved on CrowdMed, and it took 3 days.
I entered venture capital because I wanted help build businesses that, if they worked, changed people’s lives for the better. CrowdMed is the epitome of that promise. I’m thrilled to be both a personal investor as well as a professional partner through NEA’s recent investment.
A few weeks ago, a company in an industry known for it’s lack of innovation did something pretty innovative. British Airways took 130 innovators, entrepreneurs, and policymakers on a chartered 747 from San Francisco to London to hack solutions to “the global misalignment of talent“. We then presented our solutions at the G8 Innovation Summit in London.
At 30,000 feet, and without much sleep, we were split into small teams that would tackle 4 separate problems:
1) Meeting US demand for talent globally
2) Expanding STEM
3) Growing STEM in emerging economies
4) Fostering Women in STEM
Some pretty amazing concepts were developed on the plane, and some are even being put into action (like AdvisHer, an online community that leverages the power of pipeline programs to advise, advocate, and accelerate women into STEM university programs and STEM companies.)
Yet, what I found most unique about this whole trip was the selflessness of it. It was unlike the majority of conferences where you network or learn on behalf of, and for the benefit of, the company or organization you represent. Instead, British Airways spent between 6 and 7 figures USD to advance solutions for a problem we face as a collective society. And, they invited 130 people who wouldn’t talk about their own backgrounds, but would use their experiences to solve a problem often far different than their organization’s.
A great trip, truly proving that the sky isn’t the limit.
Watch the Ungrounded highlights video here!
Exactly one week ago, I was sitting in the living room of Amitabh Bachchan‘s suite at his favorite New York City hotel. I had flown to NYC just for this meeting with the CEO of one of our portfolio companies that we just invested in (and will announce soon!).
“Hi, I’m Amitabh Bachchan,” he said, extending his warm hand to me. “What can I get you – tea, coffee, cookies…?”.
That was the first sign. For those of you who don’t know, Amitabh Bachchan is arguably the biggest star in the world. The true King of Bollywood, he is a god in India. He has won every award in Indian cinema and was in NYC for the premiere of The Great Gatsby. His wife is an actress, his son is a famous actor, and his daughter-in-law is an actress and dubbed “The Most Beautiful Woman in the World”. Yet, here he was introducing himself as if I shouldn’t know who he is and making sure we are comfortable.
A one hour meeting turned into 2.5 hours of gripping conversation focused on Indian media, technology, his father, his charitable work (and how he doesn’t want people to know what he does for reasons unique to fast growing emerging economies), and much more. I wish I could detail all that we talked about, but out of respect for his privacy I’ll just leave it at that.
Yet, what impressed me most about him was his utter genuineness and deep-rooted humility. He is not a man content with being the legend he is; he’s a philomath who listens intently to every word, probes gently but intelligently, and sucks in information like fresh air. Not once did he mention his fame or success–or that of his family–rather, he talked about his goals and areas for improvement: increasing his digital presence, building a brand in other parts of the world, and others. Not once did he mention his countless movie hits, but I can count on two hands the number of failures or shortcomings he brought up in himself. And not once did he exude any sense of superiority, which just put him on a higher pedestal in my eyes.
And I’ll never forget the way he walked us out. He looked me right in the eye, patted me on the back, and said, “I hope we can meet again soon. This was lovely.” And then he walked us out of the suite, pressed the elevator button, waited until we had gotten into the elevator, and then bowed his head slightly until the elevator door had closed, with us on the inside, and him on the outside.
An actor for the ages. But even more impressive, a gem of a person.
Almost four hundred years ago, 102 English Pilgrims set sail westward toward an unknown land. They didn’t know whether they would survive their harsh journey, but they believed so strongly in their pursuit of freedom, and in their hopes for economic prosperity, that they dared to do what very few had done before. They became one of the first sets of immigrants to arrive at a frontier that would soon become the United States of America. Over time, the United States became a nation of immigrants—an eclectic cultural collage, a melting pot of ethnic groups, and a vibrant microcosm of the world.
Today, America embraces a full spectrum of heritages, from those whose families have been here for centuries to those who just recently immigrated. All of us, at essence, are immigrants. And increasingly it has been immigrants who have empowered our country’s founding promise, and its perhaps most cherished ideal: entrepreneurialism. America has let them innovate, and in return they have innovated for America. In 1784, the second-generation immigrant Benjamin Franklin invented bifocals; and in 2003, first-generation immigrant Elon Musk, who himself was born in South Africa, founded Tesla, building on the shoulders of thousands—if not millions— of inventions and companies launched by immigrants in between. Today, more than 40 percent of the Fortune 500 are companies founded by immigrants or their children. And myriad of America’s most iconic brands are the brainchildren of foreign-born, first-generation Americans. Consider merely Pfizer, Google, and Procter & Gamble as a few examples.
These are the companies, the entrepreneurs, the ideas that make America what it is: a beacon of bold innovation for millions across the globe—a city upon a hill—an inviting shore. And this is the reason I am so thrilled to announce the launch of Innovate for America, a nonprofit aimed at educating Americans about the staggering impact of immigrant entrepreneurs, by measuring the number of jobs they have created. My co-founders Scott Sandell, Carmen Chang, Chetan Puttagunta, and I reached out to a little over 35 of our friends who are building transformative companies as immigrant founders. These companies are now sharing the number of active U.S. employees they have hired across multiple locations. And we are aggregating this data and packaging it into a shareable widget that blazons the total number of jobs enabled by all companies participating.
As the IFA network grows to more companies, and companies hire additional employees, the total number of jobs IFA immigrants have created will continue to rise. Many of the participating companies, as well as non-immigrant-founded entities, have already begun to place this widget on their homepage. Incidentally, the Innovate for America widget, as well as its website, workflow, and back-end, were designed by a hard-working team at another immigrant-founded company, Bloomreach.
With the public launch of our effort, today marks the beginning of Innovate for America. Yet already we have mustered 38 venture-backed private companies hailing from over 20 countries, fueling more than 3700 jobs. This ship has just set sail. And we cannot wait to see how far it goes.
You can read about the launch here in a story covered by The Economist.
It’s hard to believe the last time I wrote a post was 6 months ago, after I returned from my trip to India. There have been so many experiences about which I wanted to write, but I just haven’t had the time. I thought, therefore, I would offer a quick recap, compressing each of my experiences from intended points to bite-sized, informative bullet points.
- Visited the Downtown Project in Las Vegas and stayed at one of Tony Hsieh’s crash pads at the Ogden. The Downtown Project is on a mission to revitalize Las Vegas and make it a startup hub by accelerating collisions, community, and co-learning. Tony has invested hundreds of millions of dollars of his own money into this, has an exceptional team, and is trying to make it so that every person leaves Las Vegas more deeply inspired and fulfilled.
- Met amazing people at Techonomy in Arizona, many I am blessed to now call friends, from Steve & Jean Case, Padmasree Warrior, Matt Van Horn, and Alec Ross. My brother and I spoke on youth, employment, our upbringing, and our life goals.
- Here at NEA, we led deals in 42floors, DeveloperAuction, and a soon-to-be-announced third. 42floors is disrupting the world of commercial real estate, and DeveloperAuction (where Sujay is the COO) is revolutionizing the world of recruiting. Stoked for both.
- Was sitting in NEA’s conference room waiting for our partnership meeting to begin when I heard I was named to the Forbes 30 under 30 for finance. Was honored and blessed, but most of all excited to see many of my close friends be honored, too, like Sejal, Muthu, Alexis, Jeremy, and others (even Sujay!). Got to meet many of the other honorees in Austin, TX, at a party at the house of John Paul DeJoria, who reminded me a lot of the most interesting man in the world. A remarkably diverse group, from actors, producers, hedge fund managers, to big data analysts, all incredibly driven and talented.
- Attended the Indiaspora Inaugural ball on Inauguration Weekend in DC, and hung out with the Mayor of LA (and taught him bhangra!).
- Read that the flat I come home to every time I visit Mumbai, in Midtown Apartments, will soon be demolished for the misdeed and bribe of one misguided man 30 years ago. Families have been living in this complex for 25+ years and yet were deigned a mere 48 hours’ notice before their years-old properties were razed. This is absolutely ridiculous.
And so much more. I hope not to be taking this long a hiatus again.