We are on the precipice of a funding revolution. As currency continues to decentralize, so too will funding sources. Soon, the proverbial funding king (banks) will become one of the people, moving towards a relational model based on experience and connection. Finally, mass automation will increase production, moving us away from scarcity economics (capitalism) towards a model of shared abundance (post-capitalism).
In the end, the people will flourish, and we should be excited about that.
Blockchain, P2P, and the dawn of decentralized funding
Blockchain technology is revolutionizing the flow of investment into new companies and products. Initial coin offerings (ICOs) are popping up left and right, granting founders access to a distributed network of investors instead of relying on a centralized firm. Atlanta-based Storj raised $20M in less than six hours. Blockstack is on a mission to build a decentralized internet. Even Dennis Rodman is jumping on the bandwagon with marijuana-focused cryptocurrency PotCoin.
Elsewhere, the P2P payment sector is exploding. Apple introduced Apple Pay Cash, a Venmo competitor built directly into iMessage. PayPal is testing an instant-cash feature in select markets. More than 30 banks have joined forces to launch instant money-moving platform Zelle.
This is a big deal. Historically, our money has been tied to one or more centralized systems of control. Want to save money? Find a bank. Want to earn money? Get a job. Now you can save, earn, and receive money within a distributed, private, and secure network.
We’ve seen this kind of disruption in other industries. For decades, aspiring writers submitted stories to major publications like Forbes or Inc Magazine, hoping to get published. Now we have Medium. Up until now, entrepreneurs have hustled their way into pitch meetings with major investment firms like Andreessen Horowitz, hoping to get funded. Now we have Blockchain.
The dawn of relational VC
Facing competition and obsolescence, centralized venture capital firms will gradually move to a relational model, just as banks and financial advisors are doing today in the face of automation. Soon we will see a mass exodus of investors from large firms heading towards the new promised land of one-to-one relationships built on trust and personalization.
We’ll see the literal terms of investment deals changing as well. Contracts and term sheets will simplify to favor the entrepreneur, removing outdated paradigms like guaranteed board seats and the expectations of a 10x return.
Entrepreneurs are thinking differently about investment, as shown in the movement towards Zebra companies — which buck the unicorn trend of “disruption” in favor of repairing, cultivating, and connecting. Relational firms like Indie.vc are also offering an alternative to the typical VC “rocketship ride”.
In this first phase, relational investors will leverage advantages like domain expertise and peer networks. Their small size will allow them to move quickly, capitalizing on new opportunities faster. Eventually, firms and individuals will also start to utilize blockchain to form and organize venture firms literally based in the cloud.
Increasingly, the economy itself will transform from a centralized entity grounded in the physical world into a digital, decentralized framework. This isn’t some grandiose, futuristic vision of a Star Trek economy. It’s already here, just not in full form.
Welcome to post-capitalism
Investment today is closely married to scarcity economics, also known as capitalism. Investors succeed because their resources (money, a big network, etc.) are perceived as scarce. Entrepreneurs are willing to exchange their assets (equity, time, etc.) for access to that capital.
This works in our current economy governed by laws of supply and demand. But what happens when resources are no longer scarce? What becomes of investors when entrepreneurs no longer need millions of dollars to grow a new business?
This will be a very good thing.
An economy built on abundance will empower choice and control over our time. We’ll transcend a zero-sum economy where my loss is your gain.
Back to funding: a post-capitalistic economy will bring an end to the reliance on external funders to fulfill our creative endeavors.
Where do we go from here?
Sooner than later, VC and traditional funding will be unrecognizable. If you’re an entrepreneur building a new product right now, don’t lose sight of this fact. Traditional investment still makes sense for research-driven, highly-technical companies. But for the rest of us, we’re better off setting funding concerns aside and focus on nailing the three P’s: people, product, and profitability.
With production costs declining and access to tech resources on the rise, it’s easier than ever to build an amazing product and sell it for profit.
Power to the people.
Chris Turner is a co-founder of Tenrocket, a company building full-stack web and mobile applications for startups in 10 business days. Want to become a Hype Contributor? Email us to get the ball rolling!