Venture capital report highlights investment misallocation for bitcoin startups


by Landon Manning

Trammell Venture Partners, a venture capital firm based in Austin, Texas, just released critical research on the relationship between venture capital and the bitcoin community, and how dreams of short-term profits have hurt long-term gains for the industry.

It’s no secret that bitcoin is a massive industry, based on a technology that has become a household name with billions of people dreaming of revolutionizing the future. Trustless and decentralized, bitcoin relies on a global community of innovators and startup companies to optimize its network and expand the possibilities for bitcoin’s use. Gone are the days when 10,000 bitcoins were needed to buy one solo pizza, and buying that same pizza using one ten-thousandth of a bitcoin would not be possible today without the tools developed to manage such small transactions. It’s already a huge win that bitcoin’s value has risen so much, but a dynamic community of bitcoin startups is essential to its real future.

With an aim to highlight this dynamic, Trammell Ventures organized a flagship Study On the world of bitcoin, specifically trying to analyze the role of venture capital and where that money goes. As a venture capital firm, Trammell is well-positioned to conduct this type of research, and noted how much data there is to examine: despite “broad crypto market decline in 2022”, the firm indicated“The bitcoin sector has emerged as a growth category in venture capital, seeing a 52.9% increase in deal activity year-on-year.”

And yet, despite the tens of billions of dollars that are flowing into the crypto industry, “venture capital for founders focused on the bitcoin tech stack and ecosystem” represents only a little over 1% of the capital invested in the entire crypto world. , per Trammell Venture.

This dynamic is actually one that has interested Trammell Venture Partners for some time now. The co-founder was Christopher Callicott Quoted 2022, saying that the token’s strategy to attract investors is a “fundamental misalignment of interests” and that “investors actually become speculators trying to exit their positions at the best possible moment.” “

Such behavior can indeed lead to lucrative profits, but it is not the basis for a successful venture in the long term. This dynamic is particularly puzzling for Calicut because bitcoin has consistently remained as the number one cryptocurrency throughout its long history.

“We have known for years that there was a misallocation of capital to bitcoin startups and now we have the data to support that claim,” Callicott Claimed about the latest report of his teamStating that bitcoin is “becoming a platform at a rapid pace.”

The survey kicked off 2021 with a fund series that broke new ground in its focus on the role of bitcoin, and its release will mark the beginning of a new phase for Trammell’s strategy. Planning to conduct further research into the world of bitcoin startups, the firm will support the growth of venture capital investments in this specific area.

It should be noted, at the very least, that bitcoiners still make a very impressive product, while the vast majority of “crypto investments” are either in completely unrelated altcoins or weakly-related projects with no real impact on bitcoin’s development. There is no effect. Nevertheless, there are many examples of fundamental changes to the platform that were actually made possible by companies working on the bitcoin infrastructure, and these developers are essential to continued usability and growth. Efforts to expose this funding disparity and give more money to bitcoin developers could provide incredible benefits for the flourishing international crypto community, and would benefit investors everywhere.

The views and opinions expressed here are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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