“Show me one good application built on the blockchain” and other such challenges
“Show me the newly enabled applications that provide unique user value, and that aren’t being sold on novelty of the blockchain.” – Sam Gertzenstang, ex-Andreesen Horowitz, Imgur, Lerer Ventures, Sidewalk labs)
“It was a great way to make money, and that’s all. No startup was made. The world does not have a new wonderful thing created in it. Just $.” – Nabeel Hyatt, General Partner at Spark Capital, on Etherium
This challenge is not unique to Sam or Nabeel (both of whom i truly respect). It’s the elephant in the room when looking to the blockchain space from far away. All this money is coming in, people are getting rich, they’re talking about it all the time, but what does the world have to show for it? What applications have been built? Decentralized or otherwise? There are the believers who are building out the low level infrastructure to make this space viable, and then there are the impatient who refuse to accept this investment of time and money without an easily understandable, clearly visible real world application that they can wrap their heads around.
Investors…especially venture capital investors, like to understand opportunities in reference to things they have already learned and understood in the past. It’s a shortcut…rather than relearning the fundamentals and mechanics of every new business from the ground up, they just match the dynamics of one market or product or approach they deeply understand to a new thing they have just come across, and then tend to ask questions around potential incongruences or congruences to calibrate their analysis. There is absolutely nothing wrong with this approach.
When faced with new technologies or opportunities without clear reference points or prior understanding, I have found myself forced to choose whether or not to invest time and energy in understanding the fundamentals of that thing from the ground up. Personally, I get bored by things that are easily referenceable and understandable (even if valuable) and tend to gravitate toward the new. I look for opportunities to think and create on first principles, and the blockchain is ripe in this regard. The upfront investment to get to first principles thinking in this space is incredibly high. Higher than most other markets or technologies that I have learned in the past…and for those not willing or interested in putting in the time, it is easy to throw your hands up and say “show me the application so i can easily reference this new thing with other applications I understand already.” We are not yet in the stage of development in the ecosystem where investors can shortcut their way to understanding this space, and as a result you either have a choice whether you want to work toward building a thesis and understanding from messy, not perfectly articulated (let alone built) product and business articulations, or you can wait for those messy building blocks to be synthesized and expressed in a neater format…and both are totally reasonable approaches. What is less reasonable, is thinking that the ecosystem and it’s participants somehow owe you a clear product expression…on your timeline…simply because they are excited about it and have chosen to invest their time and potentially money in the messiness.
Personally, I have the luxury of time, I’m not sitting on a $700M fund that needs to be deployed today, and I’ve chosen not only to embrace the messiness, but to try to clarify and even design upstack protocols and applications to push my understanding and also help the ecosystem to build on whatever synthesis I can contribute. I feel good about that. It’s not vapid profit seeking. I’m not talking about all the money i’ve made in the space, and I am deeply confident that the building blocks that I am understanding can and will be assembled into things that satisfy the hand-throwers on Twitter and otherwise…
It’s not my job to defend this space, although recently I have been feeling like I am put in that position sometimes because of my time investment in it. I don’t have a blockchain company, I don’t stand to profit from other’s believing in the applications that are on the horizon, but I do care about it, and irrationally feel a bit attacked when the hand-throwers burst out. I guess that means I am a part of the community.
P.S. I started out writing this post to bullet point the unique properties of blockchain projects that unlock applications that previously could not exist (which is an ongoing and messy but improving framework that I have been building over the past few months), but I guess I’ll save that for future post(s).
Jordan Cooper's Blog: startups, venture capital, etc... 
Hmm– I’m not sure I agree with this framework. It’s not as simple as “investors are lazy; they use shortcuts and aren’t willing to put in the work.” To be a successful early stage investor is trying to recognize the pattern of what new things tend to look like early on, and by definition these things look pretty different in the particulars than the ‘old new’. It’s a tremendous amount of work to do this well, but providing value for customers isn’t a pattern that will ever retire. The question is are we too early or will it never happen?
I’m personally spending a fair amount of time understanding what is going on cryptocurrencies. My personal view today is we’ll see the value captured elsewhere ( https://medium.com/@gerstenzang/blockchain-dreams-7a93cc5456d8 ), but I’m actively looking to prove myself wrong.
Sam Gerstenzang
June 8, 2017
Just to respond here because I think you are taking my comment slightly out of context.. My quote above was in response to Naval’s tweet:
“The best venture investment of the last three years wasn’t a venture deal. Ethereum – 750x, liquid, and open to all.”
What I have an issue with in this tweet is the laudatory nature of it, as if Ethereum and Bitcoin were in the midst of a victory lap, versus being a very interesting building block that may lead to interesting new applications, but none of which have really manifested themselves.
Investing in Ethereum was not a “venture investment” and to try and pretend it is, is kind of missing a huge point around startups and why they exist. What he is discussing as success is not the new amazing applications of blockchain, but simply how much money has been made in a speculative financial market. Similar to touting the latest penny stock, crazy hedge fund idea, forex trading tip, etc etc. I don’t think as founders and investors who care about actually building things in the world we should hold that up on equal footing to building a new product in the world.
I’m hopeful that blockchain will develop into something meaningful, I am excited about its potential, but I tend to agree with you in your post about how early it really is. It’s hardly time for a victory lap. I take umbrage with the idea that it already has succeeded, and that the only outcome of a “venture deal” that matters is a financial return.
We are not wall street, and I’m glad we aren’t.
Nabeel Hyatt
June 26, 2017