Some rather clever folks proposed a while back that the 21st century may be rather different than its predecessor. That might seem strange to us, living now in 2017. We have not seen these differences just yet. But one of these changes is apparent. That change has to do with access to capital.
There was a time when only governments could afford to make large capital investments, like wars. But the amounts needed to fund transatlantictic exploration dwarfed what governments could offer. New legal tools enabled private capital to enter the market and the world took a turn that shocked many. Still, access to capital was limited. Investing was a game for the rich and powerful. The rest of us relied on salaries to find the good life.
But in the late 20th century things started to change. In the digital world, it costs a lot less to starup a new venture that might scale. And while the risks of investing in these starups are huge, the potential gains are as well. I am reminded of the story of an early internet investor who put money into 100 firms. 99 went bust. The 100th was Google. Enough said. Welcome to the wonderful world of venture cpaital and angel investing.
It was not so obvious back in the 1990’s that this was just a starting point. Expectations that clever folks can come up with new ideas to add enormous value are rising faster than a Dubai high-rise overloaded with Pakistani construction workers. And so, folks are expanding access to capital to encourage those explorations. Google, Microsoft, IBM, and Amazon all have established investment funds to do so.
And this is not the end point either. We are about to see yet another extension of this access to capital. E tokens make it possible for just about anyone to set up markets for new ideas You might think of each token as a tradable share in a concept.
Since the beginning of the year, 65 projects have raised $522 million in these offerings, according to Smith & Crown, a research firm focused on the new industry.
It is, as they say, a “frothy” market. That means you can easily loose your shirt by putting your money in these vehicles and many will. If this interests you, check out this podcast where William Mougayar offers his thoughts on where things are headed.
BTW, the same cautionary tales were told about web IPO’s, Kickstarter and AirBnB. There were and are scams galore in each. But they thrive despite them.
So where is this headed? My guess is that the real innovatoin here will be far better platforms where ideas are discussed and shared so that they can be turned into inventions that add value. These new platforms — that don’t yet exist — will enable high value conversations to instantly generate investment funds.
And where will that lead us? Instead of kids fighting over wheter they can get a high paying job at a bank, kids will be fighting over whether they can elbow their way into these high value added conversations.
Over time, this will reduce the risk of early stage investing. That means we will once more dramatically reduce the cost of innovation. And in turn, the 21st century will generate value added that we can only dream about now in 2017.
Hold onto your hat! Things are going to speed up!