Tuesday, February 27, 2018

Telegram's TON Presale As Venture Capital's Crypto Turning Point

The most interesting thing about the billion dollar Telegram TON token pre-sale is the degree to which venture capitalists with little prior crypto exposure invested[0,1]. TON is the starting gun for venture capital, and new LP capital (endowments, pension funds etc.) flooding into the crypto markets.

In order to invest in TON venture capitalists had to:
  • Agree as a partnership that investing in tokens made sense.
  • Go back to their limited partners and convince them that investing in tokens made sense[2].
  • Pull the trigger on the investment.
It will take a few years to know if TON turns out to be a good investment or not. For me the more important aspect of the TON sale is it is the starting gun for mainstream venture and LP participation in token sales. Since top tier VCs invested in TON, every other venture firm will be forced to ask themselves what their crypto strategy is. In parallel, all the participants in the TON sale were forced to have the internal conversation and commit to buying tokens.

The net effect of this will be:
  • More tech venture firms will start to buy tokens.
  • The already inflated prices of non-public cryptocurrencies will get even more inflated.
  • Later stage money will follow VCs into crypto (just as they follow VCs into new sectors like mobile or social).
  • LPs who back these venture firms will now believe crypto is real, and invest directly in dedicated crypto funds like Electric Capital, Metastable, and Polychain.
  • TON was the starting gun on a flood of new capital into the crypto markets.
2018 is about to turn into a big inflationary period for crypto. Put your seat belts on.

[0] For example, shouldn't you buy ETH or BTC first?

[1] Some of the VCs who participated, like Sequoia were already doing interesting things in crypto. Many of the other VCs may hold crypto themselves, or had invested in older companies like Xapo. But few had done much more recently until TON...

[2] Usually VC funds have a broad mandate to invest in private companies, but tokens are considered a different mandate. Hence the need for LP approval and the re-writing of many VC LP agreements.

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