Earlier in the week, listening to CNBC, I heard one money-manager complaining that he was over 30% in cash and could only find a yield by buying USDC. Circle will pay you 7.85% a year
for sitting in USDC. The US government pays just over 1% for 10-year bonds. Inflation is at or around 4%. Clearly, USDC wins for institutions. Individuals can do even better. BlockFi will pay 9% APR
on up to $40,000 and 8% over that amount. Celsius
The fact that USDC is dollar-backed and also stable means that it can be treated as a currency akin to the US$ but with a better interest rate. It is also a bridge to other crypto assets, so it can easily be transferred into an exchange like Coinbase or Binance and used to buy BTC or ETH or others. It can also be used when you sell other assets and then deposited with a company like BlockFi, to earn interest.
However, things are now moving to the next stage. Circle, the company behind USDC, announced a venture fund denominated in USDC this week. It isn’t the first crypto venture fund. But it is significant in that it uses a stable coin.
There is no upper limit to the size of the fund, and it will partner with its subsidiary, SeedInvest, to deploy capital.
From the point of view of an investee company receiving USDC as opposed to US$ should make virtually no difference so long as it has a digital wallet and can move freely between the two. But if it holds USDC and maintains its treasury account at Circle it will earn 7.85% on unused capital.
Traditional Venture investors are also accelerating their allocation to web 3 and crypto in particular.
Angellist announced its Angellist stack this week. It is a saas product that automates the entire process of forming a company, allocating founder shares, opening a bank account and raising capital, and then managing a cap table. It clearly competes with Carta while adding many features. It is a very good first effort in this space. Carta is valued at over $7 billion. Angellist may soon be in that zone.
And the production of unicorns continues unabated. It is worth saying out loud what is now becoming evident. Building a unicorn can now happen in a single product category, and can happen anywhere on earth. The UK’s competitor to Affirm (see below) is a case in point. This fact is driven by the pervasiveness of mobile computing and the scale that can be achieved in a single category.
Valuations are reflecting this opportunity. This is not a bubble, despite Rivians IPO that values it over $100 billion. The fact that a company can be built so big so fast is real. Tomasz Tunguz records that investors are paying between 100x and 400x ARR to invest in fast-growing startups. $7m in ARR can produce valuations between $700m and $2.8bn. His article is worth reading for an explanation of why that may be rational.
And Draper-Espirit in the UK has changed its name to Molten and is one of the few VCs that trade on a public market, at roughly 2x net asset value (NAV).
Venture Capital is not standing still and the opportunity is getting bigger, faster. More in this week’s video