Some of Silicon Valley's most innovative investors gathered at CoinSummit San Francisco to discuss where the smart money will go next in the digital currency space, including Meyer “Micky” Malka, founder of Ribbit Capital; Jeremy Liew, a partner at Lightspeed Venture Partners; Hemant Taneja, a partner at General Catalyst Partners; and Jean-Francois "Jeff" Clavier, founder and managing partner of SoftTech VC.
The venture capitalists assembled for CoinSummit's Tuesday, 25th March, panel on investment opportunities in the bitcoin space are ready to invest more money in bitcoin ventures. The catch is, they're looking for "killer apps" that solve real problems.
This sentiment was best laid forth by Ribbit Capital's Micky Malka, who said:
"We're looking for people who are building useful cases around the [Bitcoin] protocol. There are good companies out there trying to get people into bitcoin, but there aren't useful cases. We haven't seen the killer useful app come out."
There are plenty of financial pain points in the world just waiting for bitcoin startups to solve them, the panelists said.
Malka, who was born in Venezuela, noted that currency exchange in his home country is difficult because there are about five different exchange rates, running from the black-market bargain basement to the official rate.
In China, Lightspeed Venture Partner's Jeremy Liew said 65% of e-commerce transactions are paid for in cash.
"A guy puts your package on a bicycle, he rides to your house and delivers your package, and then you decide whether or not you're going to pay him. The return rates and logistics costs for that are much higher in that sort of environment."
Access to a low-cost, bitcoin-enabled digital payment method could change all that and lower costs for e-commerce businesses in China and other developing countries substantially, he said.
It's no coincidence that both examples highlight overseas opportunities. Americans enjoy reasonably affordable and easy to access banking services, and most Americans have adequate faith in the value of the US dollar, Liew said.
"When you leave the shores of the United States, you don't have to go very far to find places where neither of those things are true. Just in the same way the developing world has leapfrogged to wireless, I think there's an opportunity for the developing world to leap over credit cards and go directly to digital currency."
Emphasis on infrastructure
Echoing Marc Andreessen's statements in one of the day's earlier sessions, Taneja, of General Catalyst Partners, said he wants to invest in infrastructure companies that will make some of these consumer applications practical.
Like Andreessen, Taneja would like to see a bitcoin equivalent to Red Hat. Also on the investor's wish list is a Verisign-like company that would handle verification. Said Taneja:
"These kinds of fundamental infrastructure components need to exist before some of these apps can truly thrive."
Taneja acknowledged that this kind of infrastructure build-out does not happen overnight.
"We have a long view on this," he said, explaining that he is looking for return on investment in the 10-year range.
Part of laying the groundwork is bringing the establishment on board, Malka said.
"We need more banks participating in this. We need regulators. I'm part of the Bitcoin Foundation – we are out there trying to educate regulators."
Getting regulators on board will help get the banks to come along, Liew predicted.
"If the regulators explicitly set forth rules that say, 'Bright line, do this, you will find a bank that is willing to take on bitcoin customers,'" Liew said.
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