1Mby1M Virtual Accelerator Investor Forum: With Brock Pierce of Blockchain Capital (Part 4)

Sramana Mitra: What about infrastructure in the developing world?

Brock Pierce: Access to capital is one of the main challenges that governments have around the world. They have to use their balance sheets to basically sign guarantees. With those guarantees, there are people who will lend to the groups that are building the infrastructure on behalf of these nations. Infra tech is a new fund that’s forming right now. It’s in the business of providing infrastructure by using new means of accessing capital.

Capital formation is changing greatly right now. That is due to Blockchain enabling peer-to-peer financing both at the micro-level as well as themacro-level by bringing liquidity. Venture capital, as an industry, is somewhat broken. I tokenized the first security and tokenized the first fund in the world. The idea is that venture capital is only available to the financial elite. It’s only available to pensions, endowments, and high net worth family offices.

The problem is, when you invest in a venture fund, your money is tied up for 5 to 15 years. You can’t access your capital. Even if everyone had access to it and even if it were democratized, those people wouldn’t want their money locked up that long. As a result, valuations are usually very low because you, as the entrepreneur, have to make the deal very good. It’s a liquidity discount. Because the capital is not liquid, people want to pay 10 cents on the dollar versus what you would pay on the public market for example.

So we tokenized the first fund about two years ago. We locked in capital in 16 minutes. We raised our third fund in 16 minutes from 800 LPs from 80 countries. Any one that is a democratized limited partner in that vehicle can buy and sell their limited partner interest. Following that the venture capital is dead, there will be no venture capitalist in 10 years.

Sramana Mitra: I’m going to ask you a slightly different question. From an infrastructure perspective for developing countries, I’m thinking of the example of what India is doing with Aadhaar. How do you view that? What is your critique or observation about that effort?

Brock Pierce: Infrastructure in the developing world is critical. You’ve got needs for basic things like identity. India is leading the way in this area.

Sramana Mitra: It’s the same – financial inclusion and being able to distribute aid so that it gets to the people whom it’s designed for. It is the largest single accumulation of identities outside of Facebook owned by a government; not a private entity. However, it’s also extremely vulnerable to cyber security breaches. I don’t know if you have any comment on that.

Brock Pierce: It’s built on the internet, so it’s fundamentally flawed. It’s insecure from the foundation up. The internet is broken. The internet needs to be thrown away as it exists today. It needs to be upgraded to have a security protocol built in. As security and hacking continues its growth and as the tools of the trade to break and hack things  continue to improve, our infrastructure cannot. Our infrastructure is fundamentally broken. We’re just going to become more and more vulnerable.

Sramana Mitra: Is your primary investment thesis vis-à-vis infrastructure around security?

Brock Pierce: It’s one of the things. I probably overemphasize security. Let’s talk about one of the other most interesting aspects of what Blockchain does – transparency. You mentioned delivering aid and recipients receiving the aid that was intended for them. One of the main problems in the world of aid is that most of the aid doesn’t get to where it’s supposed to be going.

Sramana Mitra: That’s right.

Brock Pierce: It’s a very leaky boat. Some intentionally designed into it and some of it unintentionally. Transparency and the ability to see where one thing begins and where one thing ends, no matter how many hands it runs through, is a very interesting thing. When you shine light in the shadow, everything is seen. When everything is known, it encourages everyone to be good actors. That’s one of the things that Blockchain also provides. It shines light on transactions of all types.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Brock Pierce of Blockchain Capital
1 2 3 4 5