YC
A Conversation About Crypto-currencies and ICOs with Andy Bromberg
@ Y Combinator
09/15/18
Takeaways
AB
Andy Bromberg
09/15/18
@ Y Combinator
I started my entrepreneurial journey in high school by creating web design and marketing businesses, which provided valuable experience in building and managing a team.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Initially, I wasn't driven by a desire to be an entrepreneur; I simply wanted to avoid traditional jobs like working at a supermarket or scooping ice cream.
AB
Andy Bromberg
09/15/18
@ Y Combinator
I noticed that many local businesses had poor websites, so I decided to leverage my skills and help them improve their online presence while making some money in high school.
AB
Andy Bromberg
09/15/18
@ Y Combinator
My early ventures were more about enjoying what I was doing with friends rather than analyzing market opportunities; we built websites around our passions, like soccer and technology.
AB
Andy Bromberg
09/15/18
@ Y Combinator
While at Stanford, I took a class called Startup Engineering, which emphasized practical skills needed to start a business, rather than just high-level theories.
AB
Andy Bromberg
09/15/18
@ Y Combinator
The Stanford Bitcoin group, which I co-founded in 2012-2013, was a response to the skepticism around Bitcoin at the time, and we engaged in research and education about cryptocurrency.
AB
Andy Bromberg
09/15/18
@ Y Combinator
I left Stanford in 2014 to co-found Sidewire, a platform for political experts to discuss news, aiming to create a focused conversation without the noise of social media.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Despite having a great set of investors, we struggled to retain users on Sidewire, even with high-quality content, indicating a challenge in engaging audiences with serious discussions.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Ultimately, we decided to wind down Sidewire after realizing that the business model we envisioned wouldn't achieve the venture-scale returns our investors expected.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Creating a habit around consuming news is difficult; people often prefer sensational, bite-sized content over in-depth discussions, which complicates engagement with serious topics. Building habits is crucial, and it's easiest to start with something very small that can eventually expand into something bigger.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Many people spend a lot of time on Facebook, but it often starts with something really small to build that habit.
AB
Andy Bromberg
09/15/18
@ Y Combinator
When I left school in 2014, I was very interested in cryptocurrency but hesitant to engage due to uncertainty about its future.
AB
Andy Bromberg
09/15/18
@ Y Combinator
In 2017, I became a believer that there would be more than one successful cryptocurrency in the long run.
AB
Andy Bromberg
09/15/18
@ Y Combinator
CoinList was started as a collaboration between Protocol Labs and AngelList to run the token sale for Filecoin.
AB
Andy Bromberg
09/15/18
@ Y Combinator
A token is a scarce digital asset that represents ownership, most commonly of a token network, and is launched without any single entity controlling it.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Bitcoin was created by the pseudonym Satoshi Nakamoto, and no one knows who that is, which highlights the decentralized nature of cryptocurrencies.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Tokens and blockchain technology serve as infrastructure for exchanging and transacting value, allowing for programmatic value exchange.
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Andy Bromberg
09/15/18
@ Y Combinator
The ultimate goal of blockchain and tokens is to create a trustless system where no party has to trust another, achieved through proper incentives.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Today, token sales are a good idea for an incredibly small number of companies, and many proposed token sales are not a good fit for us.
AB
Andy Bromberg
09/15/18
@ Y Combinator
More money has been raised in ICOs than has been delivered in venture capital to companies in 2018 thus far, which raises concerns about the ICO industry. The ICO industry has developed norms and standards over the last four years, but the rapid growth in this space is concerning rather than positive.
AB
Andy Bromberg
09/15/18
@ Y Combinator
The demand for ICOs indicates a strong interest in investing in startups, but it also reflects a tendency for investors to believe in ideas that may not be sound.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Investors struggle to conduct due diligence in the ICO space due to a lack of established norms and data on token success rates, making it difficult to assess which tokens are viable.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Unlike penny stocks, many ICO tokens lack a concrete basis for their value, making it challenging for investors to understand what they represent.
AB
Andy Bromberg
09/15/18
@ Y Combinator
The YC process for evaluating startups provides valuable data on success signals, but such a framework does not currently exist for ICO tokens, leading to aggressive investment mentalities.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Investors often rush into ICOs with the hope of quick returns, which can inflate the amount of capital flowing into the space beyond reasonable limits.
AB
Andy Bromberg
09/15/18
@ Y Combinator
An ICO, or Initial Coin Offering, is a fundraising method where a company issues tokens to raise money for the development of a new network and to ensure early distribution of those tokens.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Tokens are essential for the functionality of certain networks, as they incentivize users to participate in the ecosystem, such as storing and sharing files.
AB
Andy Bromberg
09/15/18
@ Y Combinator
CoinList supports token sales by handling compliance, transaction processing, and marketing, ensuring that companies can navigate the regulatory landscape effectively.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Airdrops are a method of distributing tokens to users without fundraising, often used to encourage initial participation in a network.
AB
Andy Bromberg
09/15/18
@ Y Combinator
The most valuable applications of blockchain technology are those where parties do not trust each other and seek to create a trustless system, which is not applicable to many traditional businesses.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Airbnb is not a suitable candidate for a token model because it relies on trust in a central intermediary, which contradicts the need for a decentralized trustless system.
AB
Andy Bromberg
09/15/18
@ Y Combinator
As the ICO market matures, we are seeing a convergence towards traditional venture capital practices, including vesting schedules and lockups for investors to align incentives better.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Due diligence and reference checks on investors are crucial yet often overlooked aspects of fundraising that can significantly impact the success of a startup's investor relationships.
AB
Andy Bromberg
09/15/18
@ Y Combinator
We're looking to support offerings of security tokens, but we don't see this as a pivot; we see ourselves as infrastructure to support sales of tokens.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Most tokens are some sort of object that fits into the category of currency, but not all tokens are designed for that purpose.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Bitcoin is often referred to as digital gold, which means it's more of a store of value rather than a currency used for everyday transactions.
AB
Andy Bromberg
09/15/18
@ Y Combinator
Not every startup will need to issue a token; traditional trust-based relationships will always exist alongside tokenized systems.
AB
Andy Bromberg
09/15/18
@ Y Combinator
As infrastructure for asset-backed tokens develops, it may make sense for companies to raise equity through tokens that represent that equity.
AB
Andy Bromberg
09/15/18
@ Y Combinator
In the future, I expect a relatively small number of blockchains but a high number of tokens, as many token networks allow for other tokens to be issued on top of them.
AB
Andy Bromberg
09/15/18
@ Y Combinator
We're still in the early days of crypto and tokens, and any predictions made now have a low chance of being accurate due to the rapid evolution of the ecosystem.