On the phone from his San Mateo office, Adam Draper, CEO of Boost VC and son of Skype and Tesla investor Tim Draper, is his usual energetic self, his voice evoking the same optimism as the orange high-tops he wears regardless of occasion.
Draper is fresh off demoing a new batch of startups – Tribe 6 – for the incubator he co-founded with former Xpert Financial collaborator Brayton Williams in 2012, and that in 2013 found success by backing an emerging financial technology called bitcoin, then best known for its volatile price and associations with cybercrime.
While potentially risky, the decision proved adept, winning Boost VC a slew of media coverage and its 2014 pledge to fund 100 “bitcoin companies” through 2017. So far, Boost is halfway there, having invested in 52 industry startups, including firms such as Align Commerce, Mirror and Reveal.
Today, however, he’s in the middle of recapping a recent trip to New York, unpacking his feelings about a revelation that financial institutions and investors “don’t like bitcoin”, but are interested in “blockchain”, the amorphous term that while technically referring to bitcoin’s distributed ledger, the blockchain, and derivatives that use its logic, has come to serve as a general stand-in for innovation in the way that YOLO was once used to punctuate hip conversations.
Draper told CoinDesk:
“We use the word blockchain now. I say bitcoin, and they think that’s the worst thing ever. It just feels like they put up a guard. Then, I switch to blockchain and they’re very attentive and they’re very interested.”
Draper seems ambivalent to the change, though he said he was initially against using it, mostly because he believes it’s superficial. After all, companies that use the blockchain as a payments rail, the argument goes, still need to interface with its digital currency, which is the mechanism for transactions on the bitcoin blockchain.
“When we talk about blockchain, I mean bitcoin,” Draper clarifies. “Bitcoin and the blockchain are so interspersed together, the incentive structure of blockchain is bitcoin.”
Draper believes it’s mostly a “vernacular change”, noting the ecosystem has been through several such transitions before. He rifles off the list of terms that have come and gone including cryptocurrency, digital currency and altcoin.
“It’s moved from bitcoin to blockchain, which makes sense, it’s the underlying tech of all these things,” he added. “I think in a lot of ways blockchain is FinTech, so it will become FinTech.”
Effect on Boost
In regards to the startups Boost VC is accepting, Draper said this colloquial change hasn’t influenced the businesses that are applying or the ones that gain entrance.
Boost VC’s most recent class included only five bitcoin startups – CoinUT, Epiphyte, Joystream, Unocoin and Wealthcoin, down from more than 20 in Tribe 5.
“All of them, in some way, are using the blockchain, some of them are still using bitcoin,” Draper explained. “A lot of them are using bitcoin as a way to get money from one place to another.”
In terms of the guidance startups receive, Draper says the shift to blockchain hasn’t resulted in any change in strategy, even on aspects of branding and positioning for growth.
“It’s really about what problem are you really solving and using this tool that we have that is the blockchain, and bitcoin on top of the blockchain, to solve problems that were once impossible to solve,” he said.
Regulatory burden
As for the low number of bitcoin companies in the most recent round, Draper attributed this to Boost VC’s excitement about virtual reality (VR) and to factors like regulation.
In the future, he said, he wants the incubator’s batches to be composed evenly of enterprises focusing on each emerging technology, but acknowledged that heightened regulatory burdens in the US are posing an issue.
Draper has been openly critical of the BitLicense, New York’s licensing regime for industry businesses, and of the approach lawmakers have taken toward the technology. Also of note is that Boost VC had backed Sand Hill Exchange, a platform shut down by the US Securities and Exchange Commission (SEC) in 2015 for acting as an unregistered securities exchange.
This regulatory pressure, Draper said, has put an onus on his team to start conversations about compliance earlier when seeking to enlist new candidates, though he said the shift in how the industry is described could alleviate issues here.
“Currency does need to be regulated, and this can tie into the blockchain vernacular. The blockchain doesn’t need to be, it can be about assets,” he said, adding:
“Everyone is moving toward blockchain because you don’t need to bear that regulatory burden.”
Blockchain building
When asked about the state of the blockchain infrastructure and its ability to serve as infrastructure for top-layer applications, Draper said he believes enough of the regulatory burden is already being shouldered for new businesses to flourish.
Noting firms in his Boost VC and personal portfolio that meet this definition, he said cited BitPagos, Coinbase, Unocoin and Volabit as examples of companies that could now be built on by other entrepreneurs.
On the subject of private blockchains, Draper was less positive, referring to the technology as a “private database”, and stating that he believes “bitcoin’s blockchain is the blockchain.”
He noted the launch of Liquid, a new sidechain developed by industry startup Blockstream as proof that the bitcoin blockchain is versatile enough to meet the demands of institutions that want to develop private blockchain networks, while still gaining access to the security and network effect of the bitcoin blockchain.
“I’m all in on bitcoin’s blockchain and still 100% positive,” he said.
Changing times
The most beneficial change that may come from the rebranding of industry activities under the term “blockchain”, Draper believes, is that financial institutions have the scale to market the technology to their already large number of users.
“Financial institutions will build products that people actually use to do all their transactions, and they have the marketing dollars to do that,” he said. “In some ways, we’re getting hamstrung by now being able to market to as large a market as we’d like.”
Still, he suggested that both Silicon Valley, the central hub of FinTech, and New York, the mecca of old finance, will likely be a bit awkward in their attempts to work together for some time.
Draper recalled a meeting with representatives from the banking community on his New York trip, in which he stood out for fashion choices that had nothing to do with his preference for orange footwear.
“I was in the middle of these bankers, and I was wearing my orange shoes. Everything else was really nice, suit, tie, everything else, and everyone was making fun of me because I was the only one wearing a tie,” he said adding:
“I was like what’s happened to New York?”
Image via TheProtocol.TV