How Blockchain Technology can help the Venture Capitalists

• Toshendra Kumar Sharma
• November 13, 2018

The technological revolution has influenced millions of lives around us. It has not only given us some innovative products but has also transformed our lives. One such technological revolution that the world is talking about is Blockchain. It is one technology that can form the underpinning of most of the businesses. The world got to know about Blockchain from Bitcoin, a cryptocurrency that came into existence in 2009. Over a period Blockchain outgrew its conventional application and found usage in various other fields. Some of these applications were unconventional like healthcare, documentation, charity and donation, real estate and now Blockchain can prove beneficial even for the venture capitalists and entrepreneurs.

Entrepreneurship has become a buzzword nowadays. People are now inclined to become job giver rather than settling down as the job seeker. One thing which has aided entrepreneurship is Venture Capitalist.

Venture Capitalists are not left untouched from the effect of Blockchain Technology. These individuals are always looking for new ideas and trends and monetise them. The VCs or Venture Capitalists earn their revenue by backing new ideas and companies. They help in shaping new industries.

Since Blockchain is one such new technology that further affects other businesses, it is one of the areas which has the attention of the venture capitalists.

Let us see how Blockchain technology is enticing the venture capitalists-

• The Blockchain is shaping a new ecosystem of startups- It’s an undeniable fact that Blockchain is shaping up the ecosystem of new startups. Most of the entrepreneurs are now coming up with their products and services based on Blockchain Technology and its applications. Each of these new startups represents a potential new investment to the venture capitalists. However, merely coming up with an idea about Blockchain Technology won’t work, it’s essential that one must have a thorough understanding about this technology because a wise VC would always invest in an idea where they can see growth and ROI potential.
• ICO- Or the Initial Coin Offering as we know is an excellent way for the investors to put in their money in potential projects. This has come as a massive transformation for the investors. ICO is now being called the democratisation of venture capitalism.
• Opening up new avenues of operations for the current way of investment- Blockchain has not only opened up new avenues of investment for investors but at the same time it has also paved the way for the existing businesses to merge their current products and services with Blockchain. For example, the gaming companies pay their users for the new games that they download. This payment is made by matching the advertisers to users and taking a cut of the profits. But, they can start doing this by rewarding their users with cryptocurrencies.

• VCs can act as Sheriff- Well, we talk about Blockchain Technology then one and the important point of consideration is that the Blockchain Technology lacks regulation and control. It might come as a blessing in disguise for some, but the fact of the matter remains that this lack of regulation may pose as a threat to many.

One of the challenges that most of the VCs face while dealing with ICO is that they rely on open source software which has earlier not proven useful for the investors. With so many ICOs flooding the market having no IP rights, it becomes difficult to analyse which are the legitimate ideas and which are short-lived. Here VCs can act as sheriffs who can keep a check on promotion and funding of such ideas. However, this requires thorough knowledge about Blockchain and its operations so that the Venture Capitalists can thoroughly screen the ideas before promoting them.

• Tokenization- An important feature of Blockchain is that it allows Tokenization which means that the tokens represent projects or product or start-up to be decentralised. It means that the investors don’t have to be dependent on a central financial service provider to ensure that they are selling company shares or assets. Moreover, tokenization allows the investors to hold the assets more freely.

Conclusion-

Well, Blockchain is a new technology, and it is here to stay and bring some revolutionary changes. When it comes to its usefulness for the venture capitalists, it may turn out to be profitable or a disaster based on how much they are aware of the Blockchain. Since it is a new technology, it is important that the VCs must have a complete insight into the project they are investing.