New Inevitable Paradigm: A Strategic Blockchain Inflection Point
New Inevitable Paradigm: A Strategic Blockchain Inflection Point
As we prepare for the first closing of our latest fund of funds (contact our investor relations team at ir@blockchaincoinvestors.com for details), a host of news indicates we are now entering the new paradigm of digital finance and commerce globally. The launches of new digital monies, commodities, and assets and their supporting infrastructure, increasing institutional adoption, rising use of decentralized protocols, Web3 tokenized platform launches, increasing investor activity, additional legislative and regulatory support, and more, it is clear the world is now moving ever more rapidly towards the future that we described over ten years ago.
In this newsletter, we provide an overview of why a strategic inflection point is a critical moment for investors. And how best to take advantage of it.
Paradigm Shifts
In 1962, the physicist and philosopher Thomas Kuhn provided a model of how scientific revolutions take place. Kuhn's model of 'paradigm shifts' is now widely accepted, and while crafted for natural science, is loosely applied to other areas of human activity including business and investing. In summary, the theory states we work within the rules of an existing paradigm until another rises to take its place. The reason for moving from an old paradigm to a new paradigm is the latter does a better job of explaining observed phenomena (in natural sciences) or does a better job at meeting our needs (in business) than the old. However, we don't all embrace the new paradigm together. Rather there is a 'diffusion curve' of adoption in which a few pioneers get on board first, then as the superiority of the new paradigm becomes better understood, more and more supporters surface. Eventually we get to a strategic inflection point, or tipping point, at which the adoption of the new paradigm is assured, and the old is rapidly abandoned.
In business, there are many reasons why established players fight to avoid a new paradigm, not least being that their very existence comes from their success in operating within the old paradigm. New paradigms in business bring new capability requirements, and new success factors, which old players often fail to secure. Disruptive new players, born into the new paradigm and masters of its rules and requirements, often win the game.
So watching for a strategic inflection point is important. It marks the moment when an inevitable shift to the new paradigm is assured. It also tends to mark the moment when exponential growth begins, which in investing is often accompanied by superior returns.
Blockchain has been powering the arrival of a new digital commerce paradigm, and the inflection point has now arrived.
Blockchain and the New Digital Commerce Paradigm
We won't go through all the specifics of the new paradigm of digitized monies, commodities, and assets that is now upon us here.
We wrote our book Blockchain Competitive Advantage about this and you can listen to our Blockchain Coinvestors Investment Thesis webinar, if you want a condensed version.
The exhibit below is our investment thesis distilled to the essentials.
What is very exciting for anyone investing into our investment thesis is just how much it is now embraced by the leaders of the world's largest financial companies and investors.
Take a look at the next two exhibits which are examples of how much the story is now being evangelized by those who once resisted it.
Our biannual reports on Blockchain Institutional Adoption and Blockchain Regulatory Readiness summarize the worldwide sentiment - which is almost all positive now.
Strategic Inflection Point
Distilled to its essence, the narrative has shifted to digital commerce being the paradigm of the future. The reason being is that everyone can now see that digital monies, commodities, and assets bring enormous increases in end user benefits. They are faster, cheaper, easier, more secure, and more fit for purpose for our futures.
This is exactly how Kuhn described it. Once the new paradigm is widely seen to be fitting the case better than the old, then the diffusion curve of adoption steepens and an inflection point is reached.
Very fast growth results.
Indicators that move this from concept to reality are shown on the page below in a summarized way.
We are now completing the technological development of the infrastructure, seeing broader adoption and the rise of killer apps at scale, and the public markets are getting increasingly excited pushing up the returns of the most accessible public market investment opportunities.
Past is Prologue
For a better understanding of this, go back to the Internet and how that rolled out and the rise of the FANGS that followed in the next exhibit.
You can see the pace is faster this time around. Central to our investment thesis is that the value creation will also be much larger this time, because global commerce and finance are so much bigger than global communications and content which were the focus of the Internet to date. We think the value so far unlocked by blockchain is tiny compared to what will probably happen next.
What Comes Next
The early stage blockchain venture funds we back are investing heavily right now into a new wave of innovation, some of which is described in the next exhibit. Innovation never sleeps, and we know that it would be unwise to believe that all the innovation will be driven by those companies and projects that already exist. This is also a key learning from the Internet years where many of the most valuable companies emerged twenty and thirty years after the pioneers got started.
What does all of this imply for investors?
Fund VII Open to Commitments
At Blockchain Coinvestors our takeaways are the following:
We now know our investment thesis is on point, and it is now inevitable.
We believe we are at the strategic inflection point, and the growth curves will steepen going forward.
This also implies the value creation in digital commerce and finance is only just beginning.
A new wave of innovation will open up more and more early stage investment opportunities.
Once again, the early stage will get the best returns, but only if you invest with the best investors.
You also need to be highly diversified given the power returns dynamics of innovation investing.
This is also a global opportunity, so you should have global exposure within the investment themes.
We created our Blockchain fund of funds strategy specifically to solve for these priorities. We are now in the middle of the first closing process for Fund VII. The Fund VII value proposition is:
A SINGLE INVESTMENT ACCESSES GLOBAL, DIVERSIFIED EXPOSURE TO LEADING EARLY STAGE BLOCKCHAIN VENTURE INVESTMENTS ON AN INSTITUTIONAL PLATFORM
Contact our investor relations team at ir@blockchaincoinvestors.com for details.
Thank for reading
The Blockchain Coinvestors Partners
About Blockchain Coinvestors
Blockchain Coinvestors is the best way to invest in blockchain businesses. Our vision is that digital monies, commodities, and assets are inevitable and all of the world’s financial infrastructure must be upgraded. Our mission is to provide broad coverage of early stage blockchain investments and access to emerging blockchain unicorns. Blockchain Coinvestors’ investment strategies are now in their 10th year and are backed by 400+ investors globally. To date we have invested in 40+ pure play blockchain venture capital funds in the Americas, Asia, and Europe and in a combined portfolio of 1,250+ blockchain companies and projects including 95 blockchain unicorns. Blockchain Coinvestors’ first fund of funds ranks in the top decile amongst all funds in its category on both Pitchbook and Preqin. Headquartered in San Francisco with a presence in London, New York, Grand Cayman, Zug and Zurich, the alternative investment management firm was co-founded by Alison Davis and Matthew Le Merle.
“The best way to invest in blockchain businesses”