In late 1999, the online consumer fashion website Boo.com launched on the world wide web. Hampered by problems such as a bandwidth-heavy site trying to strike it big when internet-users had dial-up modems, exclusion of Mac users in general, and poor customer service, the website was liquidated by May 2000. So how much venture capital did the company blow through in that 6 month period?
Splurging on this level was achieved as the owners of Boo.com traveled by Concorde, indulged in expensive London offices, and employed over 300 staffers. Add the shortcomings of the website, and I could argue that backing from venture capitalists won’t always lead to success.
In an article published this week for MarketWatch, Saumya Vaishampayan rounded up figures of investments in Bitcoin by venture capitalists in 2013. Venture capitalists donated over $74.1 million across 39 deals in 2013. Already in the first quarter of 2014, Bitcoin investments are over $64 million, on track for a $200 million year.
For Vaishampayan, this growth is impressive only if you don’t compare it to data 20 years ago. In 1995, over $507 million dollars was invested into Internet-specific companies, eclipsing the 2013 Bitcoin investments by a long shot.
As Vishampayan put it, “These small-potatoes investments have flown in the face of expectations that the digital currency will bulldoze the way the world uses money, leaving old intermediaries like banks and credit card companies in their wake.”
Sounds like someone’s got a case of the “supposed-to’s.”
If people like Jeff Clavier, a managing partner of venture-capital firm SoftTech VC, agrees that investors “don’t need to rush and put all your chips on the table,” then what’s the fuss about the 90’s for?
One reddit user turned the tables around and pondered eBay and Yahoo!’s position in time were in the 1990’s. Citing the internet’s advent in the early 80’s, the writer was
“actually impressed that an amount almost equal to a third of the money invested into 1995 internet is invested into 2013 Bitcoin. I mean You've Got Mail is a 1998 movie (when email could be considered mainstream enough to feature a Tom Hanks-Meg Ryan movie). At this rate, we should expect a major Bitcoin-based movie within 10 years.”
So the issue is not the question posited in the article at hand. Yes, there are venture capitalists who are hesitant to invest money as bitcoin’s value fluxuates rapidly. The success of bitcoin may rely on their support in the future, though at this time it’s seen as a high risk investment. The issue is not even with the cherry-picking involved. We will all at some point cite past events to show how history repeats itself or predict how we are at the doorstep of a new technological era. I even did it at the beginning of this article to show why venture capital doesn’t equal slam dunk. I plan to do it again.
The issue lies within the looming feeling of inadequacy these numbers are molded into in order to fit an argument. For example, “The average bitcoin investment was $1.9 million last year. The average investment in biotech, on the other hand, was $9.6 million.” Citing arbitrary numbers is puzzling to readers and even misleading. Where does money go in biotech investments? Does Bitcoin need the types of labs that biotech does? In fact, where does money go in any investment?
I do not believe Bitcoin will sell itself, that’s alcohol’s duty. If bitcoin takes off like some predict it will, maybe it won’t “bulldoze” its way to the top like early projectionists declare. The technology adoption curve could tell you that. Or the fact that murals and graffiti of Steve Jobs’ face wasn’t found throughout the world within the first couple years of Apple’s inception. It will need to mold to new trends and technologies. People all across the spectrum, from tech experts to bitcoin advocates to curious first-timers will have to get the ball rolling. But there I am cherry-picking again.
In short, sometimes the best one to speak on behalf of figures is the money itself.