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There's another issue that I don't see mentioned much here. I was contemplating writing a blog post about it. Over the past year I've seen a serious decline in

by api 9y ago

There's another issue that I don't see mentioned much here. I was contemplating writing a blog post about it. Over the past year I've seen a serious decline in early stage angel investment. I've talked to a lot of people who have said similar things. What I've heard and in some cases observed is that it's all going to crypto. All the people who would be making speculative angel investments are now buying into cryptocurrency coins and ICOs in the hopes of riding the bubble. This is really awful for two reasons: (1) Few if any of these ICO systems have any utility at all, while many early stage startups end up creating things of actual value. It represents a shift in investment from value creation to pure speculation. (2) When -- not if, but when -- this bubble pops, a lot of that wealth that could have been used to fund angel investment will be vaporized. Yes most startups fail but at least angel funding tends to support attempts at value creation. In this case we're losing tons of money to support nothing but the burning of coal to heat the atmosphere. Everything else this article says is spot on-- any value that could be present in cryptocurrency is being harmed by its relentless appreciation. Hyper-deflation is not a desirable characteristic in a currency. I lived through the dot.com bubble and that one was much less vapid. Even though many startups were over-funded and speculation ran the stock market into crazy land, a lot of actual value did get created. In this case I see almost none. This whole thing feel like a reductio ad absurdium of financial capitalism, which ironically is the system Bitcoin was created to replace.

adventured 9y ago
If history is any guide, and it usually is within reason, the crypto bubble is nearly over. When you start seeing people like the Ripple CEO showing up near the top of the global rich list overnight (for something that currently has almost no economic utilization), the zenith of the mania is approaching. The dotcom bubble only lasted 2.5-3 years. Most of the housing bubble's value inflation happened in 3-4 years.
jboggan 9y ago
This is what I thought the article would be about. There are people in my circle who would be angel investors but all they want to talk about instead are which altcoins are likely to moon in the next month. It's a difficult early stage environment because even a "sure thing" in the next Google doesn't offer the return that a pumped cryptocoin can offer, and immediately! I hope this bubble unwinds itself sooner rather than later, before too much damage is done.
charlesdm 9y ago
> Over the past year I've seen a serious decline in early stage angel investment. Awful? Yes, the bubble will probably pop at some point.. however, from a risk reward PoV, over the last few years it seemed more likely to be able to 10x your money in crypto than it was to make a successful angel investment. Getting into the good deals is hard without a proper network in place and most angel investments fail. I think it's normal people reallocate to the more interesting opportunity available at a certain point in time. No point in throwing money at bad ideas if you can't get into the interesting deals. Once most of the crypto gains have been made, this will shift again. If the fed sets up another QE programme, more money will flow into the stock market, etc.
pyb 9y ago
Furthermore, we're starting to see that all those crypto startups have made so much money from their ICOs that they're starting to distort the job market as well. The kind of engineers who'd be naturally drawn to smaller startups and didn't want to work for Google or Facebook, are now being attracted to the crypto space in ever greater numbers. For that reason, it will become even harder to start a non-crypto startup in the near future. I think this will become more and more obvious throught 2018 and 2019.
- api 9y ago
  Yet what have any of these startups delivered other than tools for the crypto world? The whole thing seems almost 100% self-referential. It's like a financial MMORPG. Does the crypto world have anything to offer the real world? Personally I've only seen one common use case: currency and wire transfer. As the OA correctly points out this use case is being harmed by currency hyper-deflation and fee inflation. Even the black market use case is faltering for these reasons. Few ICO projects are even usable. Most don't even exist. Of those that are usable I can off the top of my head think of only one that seems to have any utility that doesn't recurse into crypto: Siacoin. Siacoin apparently works but it's not a compelling alternative to Amazon S3 or Backblaze, so its utility is minimal at best.
  - pyb 9y ago
    I am not saying these crypto startups are doing anything useful ! 90% + of them aren't. Which is why their increasing hiring power is getting to be a problem.

by api 9y ago

adventured 9y ago

If history is any guide, and it usually is within reason, the crypto bubble is nearly over. When you start seeing people like the Ripple CEO showing up near the top of the global rich list overnight (for something that currently has almost no economic utilization), the zenith of the mania is approaching. The dotcom bubble only lasted 2.5-3 years. Most of the housing bubble's value inflation happened in 3-4 years.

jboggan 9y ago

This is what I thought the article would be about. There are people in my circle who would be angel investors but all they want to talk about instead are which altcoins are likely to moon in the next month. It's a difficult early stage environment because even a "sure thing" in the next Google doesn't offer the return that a pumped cryptocoin can offer, and immediately! I hope this bubble unwinds itself sooner rather than later, before too much damage is done.

charlesdm 9y ago

> Over the past year I've seen a serious decline in early stage angel investment. Awful? Yes, the bubble will probably pop at some point.. however, from a risk reward PoV, over the last few years it seemed more likely to be able to 10x your money in crypto than it was to make a successful angel investment. Getting into the good deals is hard without a proper network in place and most angel investments fail. I think it's normal people reallocate to the more interesting opportunity available at a certain point in time. No point in throwing money at bad ideas if you can't get into the interesting deals. Once most of the crypto gains have been made, this will shift again. If the fed sets up another QE programme, more money will flow into the stock market, etc.

pyb 9y ago

Furthermore, we're starting to see that all those crypto startups have made so much money from their ICOs that they're starting to distort the job market as well. The kind of engineers who'd be naturally drawn to smaller startups and didn't want to work for Google or Facebook, are now being attracted to the crypto space in ever greater numbers. For that reason, it will become even harder to start a non-crypto startup in the near future. I think this will become more and more obvious throught 2018 and 2019.

api 9y ago
Yet what have any of these startups delivered other than tools for the crypto world? The whole thing seems almost 100% self-referential. It's like a financial MMORPG. Does the crypto world have anything to offer the real world? Personally I've only seen one common use case: currency and wire transfer. As the OA correctly points out this use case is being harmed by currency hyper-deflation and fee inflation. Even the black market use case is faltering for these reasons. Few ICO projects are even usable. Most don't even exist. Of those that are usable I can off the top of my head think of only one that seems to have any utility that doesn't recurse into crypto: Siacoin. Siacoin apparently works but it's not a compelling alternative to Amazon S3 or Backblaze, so its utility is minimal at best.
- pyb 9y ago
  I am not saying these crypto startups are doing anything useful ! 90% + of them aren't. Which is why their increasing hiring power is getting to be a problem.