What every start-up investor needs to know
August 2, 2021
You may not know the term metaverse, but if you’ve been a consumer of popular books, movies, and video games for the past 30 years, you are probably familiar with the concept.
Think about movies like The matrix or Loan Player One, located in vast virtual realities in which people live, work and play. In Neal Stephenson’s 1992 science fiction novel Snow accident, considered to be the first work to contain the word metaverse, dwellers online transact using digital currencies, as hyperinflation has all but destroyed fiat money. No, really, Stephenson wrote this in 1992.
The reason I’m raising this question now is that, like many of the best sci-fi ideas, the Metaverse may soon turn from the page to the reality.
If you listened to the Facebook earnings call last week, you know what I’m talking about. CEO Mark Zuckerberg must have mentioned the word at least 20 times in his effort to describe the social media company’s plans to begin developing an immersive 3D Internet-like experience.
Facebook, which posted a record quarterly revenue of $ 29 billion, is in a very good position to deliver such a high-tech and conceptual experience to consumers. In addition to having an impressive 2.9 billion monthly active users, the company already sells the Oculus virtual reality (VR) headset and Portal smart display screen. It will also launch smart glasses in partnership with Ray-Ban.
“It will be the successor to mobile Internet,” Zuckerberg told shareholders last Thursday. “You’re going to be able to access the metaverse from all the different devices and different levels of fidelity, from apps on phones and PCs to immersive virtual and augmented reality devices. “
If Web 1.0 describes the early days of the Internet with static one-way sites; and if Web 2.0 describes the Internet era that emphasizes interactivity and user-generated content; then what Zuckerberg and others envision can only be called Web 3.0.
Invest early in Web 3.0
A real metaverse, as seen in Loan Player One or Tron, maybe still in a few years. In the meantime, Facebook and other pioneers are busy laying the groundwork for a future that allows families, friends, colleagues and more to meet and interact in shared digital spaces that look and feel authentic.
I’m not just talking about VR headsets and video conferencing. Even in cyberspace, people will need real world services, from entertainment to finance. In the years to come, I imagine companies as diverse as Amazon, Netflix, DoorDash, and Robinhood all deploying their own contributions to a shared metaverse. Digital currencies will also be essential, which should benefit miners and crypto brokers.
With that in mind, I urge investors to keep an eye on this space.
Admittedly, this is often difficult to do, especially since ordinary investors generally do not have access to private capital at an early stage.
Take Robinhood, for example. Shares of the commission-free millennial trading app began trading on the Nasdaq last week after years of speculation. Previously, participation was restricted to angel investors, venture capital firms and other accredited investors who must meet certain capital requirements.
This includes rappers Snoop Dogg and Nas, both invested in Robinhood seven years ago, according to Jon Erlichman of BNN Bloomberg. At the time, the company was worth $ 62 million. Today, it is valued at $ 32 billion, an incredible increase of 516 times.
Think about it: only in America can a Bulgarian immigrant in his twenties (Robinhood founder Vlad Tenev) launch an app that disrupts the global brokerage industry. It is only in America that two men whose childhood was spent on the streets, with many run-ins with the law, can become fabulously prosperous and wealthy thanks not only to their musical talents, but also to decisions of the ‘investment.
2021 on track to be a banner year for IPOs
This brings me to a topic I’ve written about before: the dearth of new public listings.
The sad truth is that instead of having to deal with the (growing) mountain of rules and regulations that publicly traded companies must comply with, many companies have simply chosen to stay private longer. And by the time companies finally succeed in tapping into public markets, they may already have been through their period of strongest growth. Robinhood was around eight years old at the time of its initial public offering (IPO), which is slightly below the median age of 12 that most venture-backed tech companies were when they were listed.
It hurts retail investors and families more than anyone else. The returns on private equity can often be very high, but again, ordinary Americans usually don’t have access to them.
Fortunately, this trend seems to be reversing. As of July 29, there were 261 new listings so far in 2021, which is the highest number in a full year dating back to 2014, according to Renaissance Capital. Meanwhile, companies have raised a record $ 94.2 billion, an increase of more than 20% from 2020.
The reason? In my opinion, Jay Clayton deserves a lot of credit.
Clayton was one of former President Donald Trump’s best choices to head a federal agency. The chairman of the Securities and Exchange Commission (SEC), who resigned in December 2020, has made it his mission to encourage more companies to go public earlier in their lifecycle.
He must have done something right.
“It bothers me,” Clayton said in 2018, referring to the lack of market availability. “If this trend continues, a much more select group is participating in the growth of the economy. “
It’s not too late to be early
I think one of the more attractive startup investments is still cryptos, especially Bitcoin and Ether, which are still in their infancy with incredible upside potential.
Others have the same idea, apparently. The number of people who use cryptocurrency topped 220 million for the first time, according to research by Crypto.com. At the end of June, as many as 221 million people around the world were participating in the crypto ecosystem, including trading, investing, and transacting in Bitcoin, Ether, and other digital coins.
In addition, the rate of adoption appears to be accelerating. Crypto.com observes that it took only four months for the number of crypto users to double from 100 million to 200 million. For comparison, it took nine months to go from 65 million people to 100 million people.
And it’s not just individual investors who drive adoption. Many companies have reported holding Bitcoin on their balance sheets, among the largest being Michael Saylor’s MicroStrategy (holding over 105,000 BTC worth $ 4.1 billion), Tesla (43,200 BTC / 1.5 billion dollars) and Square (8,027 BTC / $ 220 million).
In the first half of 2021, in fact, Ether’s trading volume jumped 1,400%, largely due to exposure from institutions, according to CoinDesk. The Ether market grew three times faster than Bitcoin in the first six months. The world’s second largest crypto by market cap outperformed Bitcoin not only in volume growth but also in price performance, similarly outperforming the S&P 500 and gold in price performance.
Speaking of Michael Saylor…
I’m happy to share with you that the founder and CEO of MicroStrategy will be joining me on my next Gold and Bitcoin webcast. Many slots have already been taken! To get the link to reserve your spot for this exclusive conversation, email me at [email protected] with the subject line “Michael Saylor webcast”. The demand was higher than I expected, so don’t hesitate to sign up!
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