A16z blockchain world view and investment concept

A16z is one of the most prestigious investment institutions in the world. Not only did it invest in Airbnb, Lyft, Skype and other unicorns in the early days, but also invested in famous blockchain projects such as Coinbase, Ripple and Dfinity from 13 years ago. One of the most important heavyweight investment institutions to enter the encryption technology investment, the current total assets under management are more than 7 billion US dollars.

In this paper, the chain catcher sorts out a large amount of data, summarizes the investment logic of a16z, the blockchain world view, etc., and briefly analyzes the inspiration that a16z brings to the industry. I believe that readers can benefit a lot from it. .

"Software is swallowing the whole world." This is the classic phrase of a16z founder Mark Anderson. He was the founder of Netscape. The Mosaic browser he developed once occupied more than 80% of the browser market, JAVA, SSL. , cookies and other technologies are also important contributions to Netscape.

After Netscape sold to AOL, Mark Anderson founded the venture capital fund a16z in 2009, and another founding partner, Horowitz, was also a technology entrepreneur. They all brought a very high technology to the a16z. Sharp.

In the first few years of investment, a16z has invested in well-known companies such as Facebook, Twitter, Groupon, Skype, etc., and quickly became famous in the industry. Since then, a16z has continued to accelerate the frequency and quantity of investment. In the past 10 years, the total investment case has exceeded 400, and the investment amount has reached the level of 10 billion US dollars, ranking among the top investment institutions.

In June 18, a16z announced the launch of the $300 million fund a16z crypto, which operates as an independent legal entity, with a16z general partners Chris Dixon and Kathryn Haun as general partners of the fund. But before that, a16z has been involved in cryptocurrency investment for nearly 5 years, and invested in cryptocurrency projects such as Coinbase, Ripple and OpenBazaar.

In April 19, a16z announced the abandonment of VC exemptions and registered as a financial advisor to obtain a higher proportion of “high risk assets”. This means that a16z will continue to invest in cryptocurrency.

 

01

A16z blockchain world view

On the official website, a16z clearly stated its inherent logic of optimistic blockchain technology. Historically, new computing models often appear every 10 to 15 years: mainframes of the 1960s, PCs of the late 1970s, the Internet of the early 1990s, and smartphones of the late 21st century, each computing model will support A new category of apps with unique platform advantages.

The unique function of the blockchain is the trust between the user, the developer, and the platform itself, which comes from the mathematical and game theory of the blockchain system, without relying on the credibility of the independent network participants. Trust can also achieve new ways of governance, and community collectives will collectively make important decisions about how the network evolves, what behaviors are allowed, and how economic benefits are distributed.

A16z believes that "the next generation of computing platforms, AI and digital currency" will be mutually reinforcing like the three major trends of the previous era, "mobile phones, social and cloud."

On several occasions, several partners of a16z elaborated their cognition and views on the blockchain in more detail. A16z crypto general partner Chris Dixon said in his article for Wired magazine that his most recognized blockchain technology is that the blockchain has changed the principle of Internet governance from "doing no evil" to "not being evil."

In his view, Internet users' trust in public agreements has been replaced by trust in corporate management teams, and companies such as Google, Twitter and Facebook have created software and services that go beyond open protocols, and users are more sophisticated in their designs. On the platform, but the huge energy of these platforms has caused a wide range of social tensions, and the issue of fake news floods, water forces, privacy laws and algorithmic biases has sparked heated debates.

By introducing financial incentives in the open source model, it can be extended beyond the previous open source software model to the cloud service model. The currency or tokens issued on the blockchain network provide incentives for individuals and organizations involved in the maintenance and service of the blockchain to maintain a blockchain network and continue to provide services. In the long run, the Internet platform controlled by large companies will be replaced by network services owned by the community in the future.

A16z partner Chris Dixon also said that today's Internet is more like Disneyland. If I open a restaurant at Disneyland, the park thinks that I make too much money, it may raise the rent or change the rules, and now things like Facebook, Google and Apple make. They ruin those creative business models, and if they don't do anything to change the status quo, they will pay a huge price in the field and miss many opportunities.

"For me, the most interesting part of blockchain technology is that it provides a richer, more advanced protocol. They have the best features of Web 1.0 – decentralized governance: rules are fixed, people can On this basis, create and invest.” Chris Dixon goes on to say that the blockchain project is equivalent to a community-owned database, and developers can implement more powerful services based on this rich database.

A16z crypto partner Jesse Walden divides the evolution history of blockchain computing into four eras based on "composability composability". Combingability means that if a platform's existing resources can be used to build blocks, it can be coded into higher-order applications. This platform is called a platform with "combinability."

The first era is the "Calculator Age", which is mainly represented by Bitcoin. In addition to the simple functions of tracking account balances and currency movements, the Bitcoin blockchain provides coding languages ​​that can be used to build more complex functions, but due to its low composability, some projects attempt to extend the Bitcoin area further. The performance or functionality of a blockchain can be tied up because of the deliberate constraints of the Bitcoin scripting language.

The second era is the "mainframe era", which mainly represents the Ethereum. Ethereum has a Turing-complete virtual machine, which means that developers can deploy and run any program on a decentralized blockchain computer network. These programs act as dependable, neutral building blocks for developers to combine. To a higher order application.

Due to the combinability of the blockchain: security, user base, data, and running code, it brings some early network effects, but as users increase to approach the mainframe's throughput limit, marginal returns continue to decline, which At the same time, it continues to push the platform for the cost of each new user and developer.

The third era is the "server era". Some developers completely abandon the composability and shared network effects, and instead pursue the "customized blockchain for applications" architecture . The concept of projects like Polkadot and Cosmos is to create multiple articles. Mixing blockchains, each blockchain corresponds to an application.

The "Server Age" blockchain explicitly exchanges controllability for control, which is presented in two dimensions: control of the user experience and more precise control of the economics of the resources on the supply side of the network. At the same time, unlike the single-machine virtual machine in the "mainframe era" blockchain, the "server age" blockchain computers need new standards for communication with each other to achieve cross-application combinations.

The fourth era is the "cloud era," which means that there is no need for trust computing that is scalable and universally applicable. At that time, the combined work is limited only by creativity, not by the limitations of scalability or communication complexity. There are currently no clear answers to the scene.

Developers see this as a world with many "mainframes" that share a single security pool but separate state and compute between homogeneous virtual machines. In addition, there are many developers working on new architectures that move computing to the chain.

02

A16z's investment strategy and philosophy

After entering the encryption asset investment industry for nearly 6 years, a16z has invested in no less than 40 blockchain projects. The investment phase includes pre-release projects from seed stage to fully developed post-network, covering public chains, stable currencies, exchanges, In the fields of payment, etc., most of these projects have high visibility, and some investment styles and strategies of a16z can also be reflected from these investments.

Part of the investment case for a16z comes from the website theblockcrypto

The most notable features of the investment projects of a16z are the “hardcore” projects, such as DFINITY, Oasis labs and Ripple, which are mostly technical flows. They all have excellent technical teams and relatively new technical concepts, which are mainly due to their The core team has a keen insight into technology, especially the founder Mark Anderson and others have been infiltrating in the field of technology entrepreneurship for many years before entering the venture capital industry, making the a16z particularly attractive for technology flow projects.

At the same time, a16z's investment targets are almost all infrastructure projects, especially those that are positioned in the "server era" and "cloud era", and there is almost no direct investment in application projects. However, this does not mean that the a16z does not involve application areas at all. A16z has also invested in Dapper Labs, the development company of the famous DApp CryptoKitties, to reduce the investment risk in the DApp field by investing in DApp developers.

A16z is particularly happy to make heavy bets on projects that he is optimistic about. Over 50% of investment cases in recent years are additional investments. Taking DFINITY as an example, a16z participated in the financing of US$61 million and US$102 million respectively in February 18 and August.

A16z is also actively providing post-investment services for the projects being invested, and has done its utmost to "provide added value beyond the money for entrepreneurs." It is understood that the single a16z crypto fund has an operational team of more than 80 people, with deep expertise in transaction execution, technical recruitment, regulatory affairs, communications, marketing and entrepreneurship management, and will provide necessary assistance for the projects being invested. According to the statement of a16z, they will be "responsible participants in corporate governance and network governance."

It is worth mentioning that a16z insists that each employee is called a partner, including the youngest talent or accounting manager. This team culture can greatly enhance the sense of honor and struggle of employees and encourage employees. Working wholeheartedly, but there are voices that point out that this title will limit the prospects for employee promotion and career development.

A16z also believes in the power of long-term value investment. According to the official statement of the a16z, it has never sold any of its investments in the past five years of investing in encrypted assets, and said that there will be no sales plans in the short term, and they hope to hold investments for more than 10 years. If a16z did this, they missed the high point of the 17th and early 18th, and most of the mainstream currencies of Bitcoin, Ethereum and Ripple have been several times or even dozens of times higher than the high point. For those who have gains and losses, the benevolent sees the wise and sees wisdom.

Of course, due to early entry and mostly mainstream currencies, the return on investment of a16z's encrypted assets will still be considerable. At the same time, most of the cryptocurrency assets invested by a16z have not yet entered the exchange, such as Chia, Celo, DEFINITY, etc., which are highly anticipated projects with considerable prospects. In addition, a16z invested in multiple blockchain equity projects also have very good growth, such as Coinbase, OpenBazaar, etc., of which Coinbase18 valuation has reached 8 billion US dollars at the end of the year.

Without exception, the a16z also has some cases of eye-catching. For example, Basi, the investment stable currency project, announced that it would stop developing operations and return funds at the end of 18, but it does not hide the impact on the a16z itself.

03

A16z brings inspiration to the industry

Compared with many domestic cryptocurrency investment institutions, a16z is far from the same level in terms of team background, historical performance and resource network.

In any professional field, the player's hierarchy is a natural phenomenon, some players will become the industry benchmark, and more players are fighting for survival. However, the field of cryptocurrency investment has its own particularity. The role of investment institutions in the blockchain industry is more complicated and important than most other industries. They largely determine which types of projects can receive more support and The trend of cryptocurrency prices is quite responsible for the development of the industry.

However, for these domestic cryptocurrency investment institutions, a large number of institutions play a negative role in the development of the industry. Together with the project side, they are jointly harvesting leeks and deteriorating the cryptocurrency ecology through a large number of speculations. At the same time, many institutions lack investment in technology and investment, resulting in investment. The quality of the project is uneven, driving some inferior projects into the industry.

In this case, a16z's blockchain view and investment philosophy may bring inspiration and experience to more investment institutions. The cryptocurrency field will certainly have the rich value of long-term investment, instead of extracting short-term value through speculation, insisting on long-term value investment. Perhaps it will have higher returns and industry significance. At the same time, in terms of technical sensitivity, post-investment services, team culture, etc., most cryptocurrency investment institutions still have a lot of homework to fill.

Chris Dixon, a partner at a16z, described the blockchain as a pirate flag that was once again raised in Silicon Valley, leading you to engage in interesting, slightly dangerous and disruptive activities. Today, the a16z and its investment projects are leading the pirate ship's rudder to a greater distance, and a new era may be slowly unfolding.

(Source: Chain Catcher)