The Rise of the Private Dollar — USDC

The Rise of the Private Dollar — USDC


By Keith Teare • Issue #283 • View online

USDC is rapidly becoming an acceptable currency for investment firms. It is secure, stable and a ready-made bridge to every other cryptocurrency. Now its parent — Circle — has started a venture fund using it, Fred Wilson advises owning it and Wall Street hedge funds are earning up to 9% interest by holding it. So why is it important?

Contents

Editorial

There are three themes this week. Firstly, the rise of USDC.

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 is similar.

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

Video


The Rise of USDC, Crypto and Venture Capital

Circle Launches Venture Capital Fund for Early-Stage Blockchain Projects — CoinDesk

BOSTON, Nov. 9, 2021 /PRNewswire/ — Circle Internet Financial, LLC today announced the launch of Circle Ventures to invest in compelling, early-stage blockchain projects and companies that further Circle’s mission to raise global economic prosperity through the frictionless exchange of financial value. Leveling the playing field for entrepreneurs and individual investors is an important area of focus for the company.

In addition to providing internet-based payments and financial infrastructure to businesses of all sizes, Circle is also the principal operator of USDC, the fastest growing, regulated dollar digital currency and operator of SeedInvest, a leading startup fundraising platform in the United States. Circle Ventures portfolio companies will also have access to SeedInvest’s network of over 500,000 investors, and deep experience with compliant internet capital formation.

“Since our inception, Circle has envisioned how to help scale the greater blockchain and crypto ecosystem,” said Jeremy Fox-Geen, CFO at Circle. “Circle Ventures is another way to contribute, and we’re excited to support our industry’s innovators and entrepreneurs and identify compelling early-stage companies, technologies, projects and protocols to help realize our mission.”

Circle Ventures has already deployed initial capital and is looking to the community of entrepreneurs, developers and innovators in the blockchain ecosystem to help identify opportunities for future deployments. Early stage companies and projects interested in exploring an opportunity to partner with Circle Ventures should visit circle.com/en/circle-ventures.

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Venture funds poured over $6.5 billion into crypto in Q3 2021 — CryptoSlate

According to CB Insights, VC funding for crypto globally was up 384% from the same 9 month period last year. Global VC for this year alone reached an incredible $15 billion.

Coinbase Ventures was the most active crypto investor in the third quarter by a significant margin with 24 deals, while CMT Digital and Polychain Capital tied for second with nine deals each.

The average global deal in the blockchain sector reached $21 million for the third quarter. Amongst the top 10 equity deals were FTX, Sorare, Genesis Digital Assets, Fireblock and Bitpanda.

In terms of geography, the U.S. leads in VC funding, followed by Asia and Europe respectively. Funding from the US is up 11x year on year to a record high of $2.97 billion in the third quarter.

Reaching a record high crypto exchanges raised nearly $2 billion in venture capital this quarter. Q3 also saw the birth of 4 crypto exchange unicorns, bringing the total to 11 this year alone. The US also leads in the number of Unicorns so far this year with a total of 7.

It isn’t a surprise to hear that NFT funding has skyrocketed this year, up 6,523% from 2020 with 46 deals for NFT startups in the third quarter.

According to the report, the top investors by company count were Coinbase ventures, Jump Capital, B Capital Group, Polychain Capital and Lightspeed venture partners.

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$76 Billion a Day: How Binance Became the World’s Biggest Crypto Exchange — WSJ

The world’s fastest-growing major financial exchange has no head office or formal address, lacks licenses in countries where it operates and has a chief executive who until recently wouldn’t answer questions about his location.

Started just four years ago, Binance is the exchange giant that towers over the digital currency world, a crypto equivalent of the London, New York and Hong Kong stock exchanges combined. After a burst of growth, Binance processes more trades for cryptocurrencies such as bitcoin and ether each day, $76 billion worth, than its four largest competitors put together, according to data provider CryptoCompare.

The years of largely unfettered, unregulated growth for Binance in particular and the crypto industry broadly, however, are coming to an end.

Financial regulators increasingly worry that digital assets, until recently dismissed by some as a fad, have grown so quickly they now are systemically important. In an October speech, Bank of England official Jon Cunliffe brought up the 2008 subprime-mortgage-fueled crisis and said of crypto, “When something in the financial system is growing very fast, and growing in largely unregulated space, financial stability authorities have to sit up and take notice.”

Binance is drawing the most regulatory attentionAuthorities in a dozen countries have cautioned users in recent months the exchange is unregistered or not authorized to provide various services.

The Securities and Exchange Commission is looking into how Binance conducts business in the U.S., where it has many state licenses, according to former executives. The SEC has asked for a list of information from Binance’s U.S. affiliate, including how it relates to the global organization, according to one of the executives. Meanwhile, the Department of Justice is examining whether Binance has abetted money laundering, one former executive said. Bloomberg News previously reported the DOJ investigation.

The SEC and the DOJ declined to comment.

The American market presents a major test for the crypto exchange, which has indicated it hopes to take its U.S. arm public in a few years. A former financial regulator hired to build out Binance’s American business, called Binance.US, resigned in August just three months into the job.

Some former executives said they were concerned that control of the U.S. exchange’s data sat with coders in China, where the company was founded. They said this created the potential for a TikTok-like problem, referring to efforts by the Trump administration to ban the social media platform over concerns its customer data was potentially accessible by the Chinese government, which TikTok denied.

Binance’s founder and chief executive, Changpeng Zhao, said in an interview that the exchange needs to fall into line with regulators. That includes getting proper licenses, he said.

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The Venture Stack

Introducing: AngelList Stack

Incorporate & launch a fundraising-ready startup. by Sumukh Sridhara

Founder Products Lead, Published, September 28, 2021

Our purpose at AngelList Venture is to increase the rate of innovation in the world. We believe founders are the core drivers of innovation, which is why we’re announcing a new product that provides everything founders need to incorporate, fund, and scale their startup: AngelList Stack.

Incorporate

Founders can incorporate their startup by providing basic information about their business during the application process. AngelList will handle all of the paperwork with Delaware and the IRS (including 83(b) filings).

The incorporation documents (created in collaboration with Goodwin Procter) feature founder and employee-friendly terms, including:

  • Founders Preferred Stock
  • Extended exercise windows for employees (optional)

Fund

Once incorporated, founders automatically receive business banking accounts that can be managed through AngelList Stack.

Banking includes:

  • FDIC insured interest-bearing accounts (0.15% APY)
  • Physical and virtual debit cards
  • Free incoming and outgoing wires
  • ATM fee reimbursement

Scale

AngelList Stack helps founders level up their startup as it grows.

  • Equity. An integrated cap table management product makes it easy to model scenarios, grant equity, and track it.
  • Investor Updates. Founders can send investor updates directly through Stack.
  • Hiring. Stack streamlines the hiring process by generating employee offer portals, stock option grants, and facilitating the hiring of international employees.
  • 409A Valuations. Founders on the AngelList Stack get access to discounted 409A valuations from an independent third-party appraiser.

External stakeholders benefit from Stack as well. Investors and employees get a dedicated dashboard to track their ownership stake, while customizable permissions allow founders to safeguard any sensitive information.

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AngelList Stack | Create a fundraising-ready startup

Create a fundraising-ready startup. Everything from incorporation, banking, and equity management tools in a single place.

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A Twitter Troll’s Take on the Future of Investing

Redpoint Ventures partner Logan Bartlett on VC in a world of ubiquitous capital

Redpoint Ventures managing director Logan Bartlett laid out the nightmare scenario for many venture capitalists in a series of private text messages: “There’s a whole world of firms with generational returns in the rear view mirror, but are dead looking forward.”

That is to say, a crop of old school venture firms could have amazing returns, propped up by the rise of Tiger Global, Coatue, SoftBank, and others. But those stellar returns could be the evidence that those VC firms are getting disrupted. The same forces that are marking up those old school VCs’ portfolios are going to make it nearly impossible for them to compete in future deals.

“The disconnect between what LPs want and what entrepreneurs want is so far apart,” Bartlett messaged me.

I asked Bartlett if he’d be willing to share this thesis on the record with my newsletter readers and warned him “if you take too long, I might write this thesis as my own thought.”

He came back with one better. Bartlett agreed to let me publish a PowerPoint presentation he shared with some of Redpoint’s limited partners, articulating the disruptive forces ripping through venture capital.

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Draper Esprit cuts the legacy name apron strings to rebrand as Molten Ventures — TechCrunch

Draper Esprit, Europe’s only stock market-listed tech VC firm, is changing its name to Molten Ventures after a change in senior personnel and an increasingly distant relationship with the U.S. VC network from which it inherited its name.

With former co-founder and CEO Simon Cook amicably departed to new pastures and the European listing powering to the fund in new directions, Molten is as good a new name as any with which to plow a new furlough.

Molten’s team says the name conjures up images of transformation, “matter being transformed via the injection of energy — the first transformation is from solid to molten form.” OK… But behind the marketing speak is a solid VC fund with a very experienced team, so there are no concerns there.

In terms of an update on the fund, Molten Ventures now has a portfolio of investments boasting 67 companies, including early-stage companies like Irish drone delivery company Manna Aero, Cambridge-based quantum computing software company Riverlane, London-based climate intelligence company Cervest and Finnish satellite company ICEYE.

Its portfolio also includes European unicorns such as Trustpilot, UiPath, Graphcore, Revolut, Cazoo, Ledger and Aircall. Between them, Molten’s portfolio companies have a combined valuation of well over £1.4 billion.

It’s also an investor in seed venture capital funds. Its Fund of Funds program comprises 42 European funds, including Seedcamp, Earlybird, IcebreakerVC and Future Positive Capital. Funds invested in the last three years total £75 million, with the same amount committed for the next three years.

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Unicorns

The 100x ARR Multiple by @ttunguz

The 100x ARR multiple might be the fundraising meme of 2021. Before, most investors used forward ARR multiples to value companies, but recently, the 100x multiple seems to be a benchmark for SaaS companies raising rounds. Where did this figure originate? How does it compare to the public markets’ valuation of companies?

Let’s look at the data. Here are the estimated ARR multiples for public SaaS companies. I estimated ARR as the annualized revenue of the most recent fiscal quarter.

tomtunguz.com • Share

5 Interesting Learnings from Datadog at $1.2 Billion in ARR

Datadog IPO’d at $330m ARR, and when we last caught up with them they were already at $700m ARR — and it has done nothing but accelerate since then. Closing out with a $270m Q3’21 (!) and on to a $1.2B+ run-rate today, Datadog is accelerating at over $1B ARR. To 75% growth. Goodness.

We just haven’t seen the type of acceleration at scale we’re seeing in SaaS leaders before.

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Rivian Charges On To Wall Street As Largest IPO Of The Year — Crunchbase News

Electric vehicle maker Rivian closed out its first day of trading at 29 percent above its initial public offering price, after an upsized IPO. The company raised around $12 billion through its IPO after pricing its shares at $78 apiece, above its previously stated range of between $72 and $74.

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Rivian’s IPO is the largest of the year — no small feat for a basically pre-revenue company going public in a busy market. But Rivian’s deal with Amazon gives it a boost, as the e-commerce giant not only invested capital in Rivian, but pre-ordered 100,000 Rivian trucks.

Rivian’s partnership with Amazon likely fueled investor enthusiasm for the IPO, according to Patrick Healey, founder and president of Caliber Financial Partners.

Amazon, “can have an outsized impact on their success just based on orders they make on their fleet,” Healey said in an interview.

Rivian’s stock opened at $106.75 on Wednesday — about 37 percent above its IPO price — trading on the Nasdaq under the ticker symbol RIVN. The company initially set an IPO price range of between $57 and $62.

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UK buy now, pay later start-up quadruples valuation to $2 billion, plans U.S. expansion — CNBC

KEY POINTS

  • London-based start-up Zilch has raised $110 million in a round of funding that values it at $2 billion, four times the $500 million it was worth eight months ago.
  • Zilch plans to use the fresh cash to launch into the United States. It has set up an office in Miami with about 10 employees working on its U.S. expansion.
  • The firm has experienced massive growth amid surging demand for buy now, pay later services like Klarna, Afterpay and Affirm.

LONDON — British start-up Zilch is riding the “buy now, pay later” wave to America.

The London-based company said Wednesday it has raised $110 million in a fresh round of funding which values it at $2 billion — four times the $500 million Zilch was worth in its last private investment round eight months ago.

The investment was led by Ventura Capital, a pre-IPO investor that has previously backed Alibaba and Spotify, and Gauss Ventures, an investor in London fintech firm Curve.

Zilch plans to use the fresh cash to launch into the United States. It has set up an office in Miami with about 10 employees working on its U.S. expansion.

Buy now, pay later, or BNPL, services have attracted swelling demand amid an acceleration of e-commerce during the coronavirus pandemic. Such products let shoppers split the cost of purchases over a period of months, often interest-free.

BNPL accounted for 2.1% of all global e-commerce transactions — about $97 billion — in 2020, according to Worldpay data.

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Amazon-backed D2C beauty brand MyGlamm becomes unicorn with $150 million funding — TechCrunch

The Good Glamm Group, the parent firm of direct-to-consumer beauty brand MyGlamm, is the latest Indian startup to join the unicorn club.

The Mumbai-headquartered startup has raised $150 million in its Series D financing round from Prosus Ventures and Warburg Pincus. The new round, which also saw participation from Alteria Capital and existing investors L’Occitane, Bessemer Venture Partners, Amazon, Ascent Capital and the Mankekar Family Office, values the four-year-old startup at $1.2 billion post-money.

That’s a 12x surge in its valuation from $100 million in March this year. MyGlamm was valued at $300 million in July, when it extended and closed its Series C financing round.

MyGlamm’s parent firm operates as a house of brands in the beauty and personal care spaces. It sells the vast majority of its products from its own website, app and more than 30,000 retail touch points.

The firm is one of the earliest startups in India that has demonstrated success with blending content and commerce to drive sales. Its content offering, coupled with an army of over 220,000 influencers, helps customers spot new products and spur engagement.

Tuesday’s announcement comes at a time when MyGlamm is aggressively acquiring brands to broaden its offerings. In an interview with TechCrunch, MyGlamm co-founder and chief executive Darpan Sanghvi said the startup has spent about $270 million in equity and cash in recent months to buy a number of firms that fit with the startup’s vision.

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Announcing Our $175M Series D Funding Co-Led by Elad Gil, Addition, and Coatue Management

Applied raises $175M co-led by Elad Gil, Addition (Lee Fixel), and Coatue Management (Thomas Laffont) with significant participation from existing investors, and announces the formation of an automotive advisory board.

We founded Applied Intuition nearly five years ago to accelerate the commercialization and production deployment of safe autonomous vehicles (AVs). Today, the majority of the top ten global automotive OEMs (among other innovative AV programs across industries) rely on our category-leading software tools for AV development.

We’re thrilled to announce that we’ve raised $175 million in a Series D financing round co-led by Elad Gil, Addition, and Coatue Management at a $3.6 billion valuation to continue our mission of accelerating global autonomy.

Building on momentum: Historical financing rounds.

Existing investors, including Semil Shah, Andreessen Horowitz, General Catalyst, and Lux Capital, have significantly contributed to the round, bringing our total capital raised to over $350 million.

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Creator Economy

Twitter Blue

A few months ago, when Twitter acquired Scroll, a New York-based startup, the only question that remained was how they would integrate the service into the primary Twitter offering. That question got answered yesterday when the company introduced Twitter Blue, a premium offering in its major markets, including the United States. (Twitter Blue was available in Canada and Australia as part of its iOS app.)

For $2.99 a month, you get access to ad-free and paywalled content. You can undo tweets and get access to many beta features, such as uploading longer-length videos. You can pin some private direct message conversations to the top of the “messages folder.” There are some other customization options as well on Twitter’s iOS app. However, it is the reading part that is the main show of this premium offering.

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Chairman Xi and Big Tech

Xi Jinping ensures his future with a resolution that rewrites China’s past — Los Angeles Times

Before Thursday, only two Communist Party leaders have been powerful enough to rewrite China’s history. Xi Jinping is now the third.

BEIJING — Only two leaders of China’s ruling Communist Party leaders have been powerful enough to rewrite the nation’s history. On Thursday, President Xi Jinping became the third.

His version of Chinese history is simple: The party is great, glorious and always correct. As long as people follow the party, China will rise to inevitable greatness. It stands on the cusp of greatness now, and one leader will soon make that greatness a reality: him.

Such are the contents of a new historical resolution “on major achievements and historical experiences in the Party’s hundred years of struggle” passed in Beijing on Thursday by the Communist Party’s Central Committee.

The communique says the Communist Party has “walked through 100 years of glorious history” and “written the most magnificent epic in the Chinese nation’s thousands of years of history.” But the declaration is, crucially, also about the future: It lays the groundwork for Xi to serve an unprecedented third term as president, underlining a political supremacy not seen in China in at least a generation.

“The party’s establishment of Comrade Xi Jinping’s position as the core of the entire party and party center reflects the common wishes of the entire party, military, state and peoples of all ethnicities,“ the communique says. “It has decisive meaning for the development of party and state affairs in the new era and the historical progress of the Chinese nation’s great rejuvenation.”

Only two former leaders of the Communist Party, revolutionary founder Mao Zedong and economic reformer Deng Xiaoping, have issued historical resolutions before, in 1945 and 1981 respectively. Both resolutions consolidated the power of a single man who then steered the country through transformational decades that followed.

Dreams of a Red Emperor: The relentless rise of Xi Jinping

Xi’s resolution does the same, analysts say. It underscores his frequent proclamations that China has entered a “new era” of rejuvenation under his rule. Despite a slowing economy and growing tensions with the United States, it’s a statement of confidence and party unity ahead of the 20th Party Congress next year, when Xi is expected to be given a third term.

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Escaping China’s silicon straightjacket

Good morning. In this week’s Protocol | China: Beijing seeks to leapfrog foreign chipmakers, online brokerages look like the next tech crackdown target, and a metaverse influencer “born” last month takes center stage.

Swap out your silicon?

China has a plan to leapfrog foreign chipmakers: waving “zai jian” to silicon.

There’s a natural opening for China. Moore’s Law — which observes that silicon chips’ computing power doubles roughly every two years — won’t hold forever. That’s just fine with Beijing, which is leaning into the “post-Moore’s law era,” to borrow a phrase first used by Vice Premier Liu He in May. To technology leaders and government, it means the seemingly decades-long lead that foreign chipmakers have over China could be leapfrogged with new materials, reported Dave Yin in Protocol. They’re leaning into it.

  • In August, China’s Ministry of Industry and Information Technology unveiled plans to include “carbon-based materials” in its plan to achieve “breakthrough” technologies.
  • “We need more breakthroughs in theoretical research, especially in the fields of compound semiconductor and material science, which are led by the U.S. and Japan,” Huawei founder Ren Zhengfei said during a private speechat an August innovation summit.

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Startup of the Week

AI-driven search engine You.com takes on Google with $20M — VentureBeat

You.com, which bills itself as the world’s first open search engine, today announced its public beta launch along with $20 million in funding led by Salesforce CEO Marc Benioff with participation from Breyer Capital, Sound Ventures, Day One Ventures, and others. The company says that the funds, will be put toward user growth, product, and technology as You.com scales its platform to new users on the public web.

As the economy moves online, it’s You.com’s assertion that the internet is becoming more centralized and controlled by a few powerful, ill-meaning tech corporations. By contrast, You.com cofounder and CEO, Richard Socher, claims that the company uses technology to help people “live better and more productive lives.”

“I had the original idea [for You.com] eight and a half years ago,” Socher told VentureBeat via email. “Today, there’s too much information, and no one has time to read it, process it, or know what to trust. [A] single gatekeeper controls the vast majority of the search market, dictating what you see: too many advertisements and a flood of search-engine-optimized pages … On top of that, 65% of search queries end without a click on another site, which means traffic stays within the Google ecosystem.”

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Tweet of the Week

Buying Crypto Assets

A number of friends have been asking us how to buy crypto assets. This is not the first time we’ve gotten this question and it won’t be the last.

When I first started getting this question, my answer was “open a Coinbase account and buy Bitcoin.”

Then there was a period when my answer was “open a Coinbase account and buy Bitcoin and Ethereum.”

Today, my answer is “open a Coinbase account and buy a diverse set of crypto assets.”

A diverse set of crypto assets would include Bitcoin, Ethereum, the other major layer one blockchains (Solana, Flow, Avalanche, Polkadot, Algorand, etc), the major Defi protocols (Uniswap, Aave, Compound, etc), storage protocols (Filecoin, Arweave, etc), telecommunications protocols (like Helium), some layer two protocols (like Stacks, Polygon, etc), some gaming assets (like Axie, Decentraland, etc), a maybe some NFTs.

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