Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Adam Draper: Accelerating 100 Bitcoin Startups with Boost VC

Episode Date: June 29, 2015

Revolutionary progress doesn’t happen without lots of work and in the case of Bitcoin that requires many different startups building technology. Few have contributed to this as much as Silicon Valley based startup accelerator Boost VC, which has been focusing on Bitcoin and cryptocurrency startups since 2013. Focusing exclusively on Bitcoin for an extended time, they’ve invested in companies such as Blockcypher, Coinprism, Coinjar, Mirror, Snapcard, Zapchain and many others. Boost VC Founder Adam Draper joined us to discuss running an accelerator, their investment thesis and why they’ve chosen to add Virtual / Augmented Reality startups to the program. NOTE: Applications to join the next tribe of Boost startups can be submitted until Wednesday July 1. If you’re interested in applying go here: Topics covered in this episode: The qualities they look for in companies (8:50) What the overarching Boost VC investement thesis is (14:40) His view on the BitLicense rules and how they affect cryptocurrency startups (38:14) How regulatory concerns have risen among their startups (41:40) Why they chose to add Virtual / Augmented Reality to the program (47:50) Episode links: Boost VC Adam Draper: New York's BitLicense Will Hurt Startup Incubators William H. Draper III: The Startup Game But with bitcoins... AB 129 California Cryptocurrency Law This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/085

This episode of Epicenter Bitcoin is brought you by Ledger, makers of the Ledger Nano Hardware Wallet. Half piece of mind and knowing your private keys are protected by industry standard, physical security. Go to ledgerWallet.com to learn more and use the offer code EB09 at checkout to get 10% off your first order. And by CoinCap.io. With over 500 all-coin exchange rates updated in real time, CoinCap is the authority, for cryptocurrency market information. Hi, welcome to Epicenter Bitcoin.

The show which talks about the technologies, projects, and startups driving decentralization and the global cryptocurrency revolution. My name is Sebastian Kutu. And my name is Brian Krabi Annik Phrin. We're here today with Adam Draper. Adam is the founder of BoostVC. Probably many of you have heard of BoostVC.

It was the first accelerator just focused on Bitcoin startup and it has sort of taken on an important role role in the Bitcoin ecosystem. So thanks very much for joining us today. Thanks for having me. I'm really excited to be here. This is a really, really great thing you guys are doing. Yeah, thanks. I mean, we've actually had some people before on who were in the accelerator, although maybe Flavian is the only one. But I'm sure there's going to be some more in the future. Anytime you want an intro, let me know. We have 47 others who could be a part of it. Actually, no, before we get into topics, we did the one in the lightning episode, right?

So there's the mirror guys. Oh, great. They were part of there, too. Yeah. So Adam, well, tell us a bit. How did you get into Bitcoin originally and how did you end up deciding to start an accelerator? Yeah. So first, I'll just say hi.

I'm Adam Draper. founder and managing director of BoostVC. And our first, BoostVC, it's an accelerator, it's a three-month program where we provide housing, office space, and we invest in startups that are focused around the Bitcoin industry. And we've had that focus for about two and a half years. We've recently added an additional focus

of virtual reality this session. And we bring everyone to Silicon Valley and we really just build a network in a community of investors and entrepreneurs around them over the course of three months program builds towards a demo day on demo day they get to present

in front of a large amount of investors 150, 200 investors to ideally attain funding. So my story about Bitcoin is unique in a couple ways. One is the first time I ever heard about Bitcoin was actually from the CEO of Coinbase three years ago

almost to the day probably. It was like, it would have been early August three years ago. And I met with him at a coffee shop because I had read this summary of what his company did, and it said digital currency marketplace. And that was like how he was defining his company. And so I met up with him, and he pitched this great story about how this digital currency concept, which is called Bitcoin, is going to help revolutionize the world. And what I really pulled from that was the idea that there would be this meta currency

or a currency that lies on top of all other currencies so that you never have to transact, you never need to cash out of a currency while you like travel the world. And more than that, what was really, I liked that concept, like a global currency. But I also loved the idea that, well, I loved, it was a strong word, but I really, I thought it was really cool. Cool is not the right word either. Interesting. That in 2011, Bitcoin had gone from $30 per Bitcoin to $0 per Bitcoin. Because of that crash, I found, because at that, at the time I was speaking with Brian Armstrong at Coinbase, the price of Bitcoin was already about $15 per Bitcoin again. And that, to me,

made me feel that there was a passionate community of people who really wanted this to exist. And that's a really great indicator of some form of technological evolution or revolution, or revolution, one or the other. And so my early days of Bitcoin, so I ended up investing in Brian more than anything. I wasn't even, I wasn't a crazy expert on Bitcoin. I had just learned about Bitcoin from Brian, I ended up investing because Brian was this, three years ago, he had just left Airbnb. He was one of the first 100 employees at Airbnb, which was known to be a rocket ship company. And he was leaving this company that was probably valued at about a billion dollars to join a market that in total was $200 million, the entire marketplace. So he was trying to jump

into a market and it's impossible to own an entire market. And so I was thinking either this guy is absolutely insane or he knows something I don't. And so I ended up really being enthusiastic about Brian. And that was my first foray into Bitcoin. What ended up happening six months later was well about two weeks later after I invested in him. I found a boost. We were not focused on Bitcoin at that time. We did an entire session just to making sure that the wheels stayed on the ship while it was moving at a thousand miles per hour. And then, you know, our first session went really well. Six of the seven companies raised additional money. It went great. In between the first and the second session, we were trying to figure out what technology we really wanted

to throw our weight behind. And Bitcoin kept coming up. And we realized that there were only five Bitcoin companies two and a half years ago that anyone could list on their hands. So this was January, February, 2013-ish, something like that. Is that right? I think so. Yeah, that's right, yeah. So it was 2012 before 2013 that. Yeah, so I think at the time maybe Coinbase and like one or two others had gotten. Well, it was Mount Gox. Everyone knew Mount Gox if you were in this case. Everyone knew BitPay, Coinbase, Bit4 was one, and then blockchain. blockchain. And those were like the main five. There was really probably six or seven that anyone could, masters could list. But we were thinking, okay, well, let's write down all the

ideas that could exist from this new technology. And we wrote down 10 ideas immediately that we were like, well, we might as well double the population of Bitcoin companies, because I think that these are all going to be different companies using this new technology. And there was a resounding response immediately, but then also, you might remember, six weeks after February, so about late March, early April, there was a huge run-up from $20 per Bitcoin to $250 per Bitcoin. And so all of a sudden, because we had proclaimed that Bitcoin was going to be a sector, we looked like experts because, like, there was an immediate reaction in the marketplace. And so, like, we got called by, you know, $1.00.

50 different enthusiasts, investors, and entrepreneurs in the space. And so I met with every single person I could. I probably became an expert over that time just because I had finally met with as many people as I could. And so that's really like the background of how we ended up getting into Bitcoin. We have now invested in about 47 Bitcoin companies, so we've maintained the focus throughout the last five tribes, four tribes. So we've done five tribes at boost, but four tribes with Bitcoin focus. Our last session had about 22 Bitcoin startups. And yeah, and we've just really enjoyed being such a big part of the Bitcoin space.

We've had a lot of fun helping out the Bitcoin companies get off the ground and get funded. So when you have Bitcoin startups applying in Boost, so you mentioned Brian Armstrong and him being either crazy or he was onto something. Is that something that you still look for when filtering applicants? Definitely. So I mean, I would say on the sort of what we look at it when we're reviewing an application, we do normal stuff like market team idea. So that's what most investors will do.

They'll go through, is the market big enough? And we're making the assumption that the Bitcoin market is going to explode over the next X number of years. Can the team do what they're saying they're going to do? Is this the right team? Is this the team that's actually going to pull it off? Idea, is this the right time for the idea? Is it possible that people will want this idea? Is it useful to the world?

And then we have a fourth category that we go through, which is called scrappiness. And so we, basically the filter for scribing is if this person were, you know, out of money living in their parents' basement, would they still be building this product? Because one of the things that I think entrepreneurs don't understand sometimes when they're starting a business, because it's sort of cool to start a business right now, is it's really, really hard. and so if you're not in it for the reasons to be, if you're not passionate about the idea, if you're not going to be doing it for no money, when the times get tough, you will not continue to do it probably.

And so we really want the founders who are going to be fearless and really go after big ideas and be very passionate about them. Actually, I find it very difficult to say no to a founder who is both very passionate and very knowledgeable about their space because when they're knowledgeable

about the space and they speak very passionately about it. It's like, they understand everything about this space. And you're sort of like, here, take my money. So is there something different about Bitcoin entrepreneurs from people starting business in other areas? That is a, it's an interesting question because, so I'd say there'd been an evolution over the last three years for Bitcoin entrepreneurs. there was, I'd say it started out as like philosophical idealists were the entrepreneurs that were in the space and they've gradually evolved into opportunistic builders

and I think that that's one thing that there has been a steady evolution towards like the just the entrepreneurs have just evolved and changed over the last three years. In the Bitcoin, space, already you have to be a little crazy to be in the Bitcoin space because it's, the market's still not huge. The ideas still aren't flushed out.

The, you know, it's becoming more useful. So I would say entrepreneurs in general, if you're entering the Bitcoin space, you are passionate about the technology still. Like, there's no reason for you to be as insane as jumping into, like, the Bitcoin space. not passionate. So it's almost a filter for us that they're already fascinated, like, fascinated and passionate about this space. And then I'd say, uh, some Bitcoin entrepreneurs, and this is something that we've run into a little bit is, uh, some Bitcoin entrepreneurs

just love really the technology layer. Uh, this happens with other entrepreneurs, too, where they're, they just want, they like want to really change the way that the technology works, but then you really need to be solving, a problem. Otherwise, like, the business side of it doesn't work. And so that's, we want to find where those two things clash, like, where those two things, like, mix, because that's where great companies come from. It's sort of like, I mean, the best analogy is probably, like, you know, Wozniak couldn't have done Apple without jobs, and jobs probably couldn't have done without Woznihan. And you sort of need, like, those two pieces to make a really great

foundation for a company. Otherwise, you just have someone who loves fiddling with the technology and then someone who likes to just talk about things. It's time for a word from our sponsors, Ledger, makers of the Ledger Nano Hardware Wallet. Now, you may have heard of cold storage before, Leisure makes your cold storage even colder. That's right. Don't be the guy on Reddit that's complaining because he lost his money in some heist or someone stole his laptop or his mobile phone or something like that. No, you want to have a safe and secure solutions for storing your Bitcoin that doesn't, that isn't expensive, that is affordable, and that doesn't require you installing armory on six different machines spread across different continents. No, the ledger is smart

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You mentioned before you guys are making the assumption that Bitcoin's going to explode, right? So otherwise this wouldn't make much sense. Are there other aspects to your investment thesis or other assumptions you guys are making? Yes. So I would, well, yeah, I mean, the fact that we're, in the Bitcoin space at all, you know, we're probably the largest investors as far as sheer number of companies in the Bitcoin space. It means that we're definitely making a couple large assumptions. One is that the Bitcoin space is going to go through a huge transformation

and become this huge, huge technology that everyone uses. My assumption is that all payments will be running on Bitcoin in the next 10 years. And so if you assume that, it makes sense to back basically every Bitcoin company you can get your hands on. And how I justify that to myself is really there are a couple of ways, but one is mostly it's voiceover IP. So originally everyone has been making telephone calls for the last, you know, 70 years or whatever, whenever Edison created the telephone. Was he the one who created the telephone or was he the light bulb?

I think it was Alexander Graham Bell. Alexander Graham Bell, whenever he made the telephone. But recently in the last 10 years, Skype, Zendstrom and the team at Skype, they, with Skype, you were still making calls. It was still call to call because you could hear the other person over this mechanism. But the entire backend had changed out. And suddenly they were like decoding bits and then sending those bits across a wire and then re-encoding the bits so that you could hear it like we're using on Google Hangats right now.

And so voice over IP was an entire shift for the entire telephone industry that I'd say the end consumer didn't see as much because they were still just making calls. And I think that that's very similar to Bitcoin with payments where it's still going to be called a payment. But the entire back end is about to shift out and become an international payments network. And so I'm really excited about that, and there's a lot of opportunity in that that we're excited about. So that's what I think. But having said that, a lot of the companies in BusVC haven't necessarily been doing payments.

I mean, some have. I mean, there's been Snap Card and some others, I believe. Yeah. But can you talk about, you know, what's the sort of thesis behind the other companies that you funded, like ZapChane or... Yeah. So others that are not necessarily... in a transfer value or in the payment sector? So I would say when you're looking at Bitcoin and the blockchain,

first I'll break, like I'll break down sort of Bitcoin. And I group them all together, and I think that they're all in the same sector. So I don't really deviate too much. But the, so what we did is we broke down what Bitcoin does better than cash, because that's where really usefulness comes in.

And that's where opportunity is for businesses. and there are three things that Bitcoin does better than cash. It's store of value for emerging markets that really don't have a great currency. Greece should probably adopt Bitcoin. I'm going to probably write a blog post about how Greece should adopt Bitcoin. The transfer across border for money using Bitcoin as the rails, and then micro-transactions, It's something that is actually was probably not possible before Bitcoin existed. And so I'd say almost all of our investments, all 47 Bitcoin companies, we've invested in

our encompassed, the Bitcoin ones are encompassed in those three categories. And so we're trying to find, you know, each of those, though, even break down further where, you know, there are a lot of really great companies doing micro transactions. Zapchain, I believe, is one of the best implementations of micro transactions in their tipping. And so that was one of the reasons that we were really excited about what they were building it. They just started out as sort of a social network for Bitcoin people, and now they've built out this great tipping system, and people are actually making money off of this tipping system, which is incredibly powerful long term. But when we deviate to the blockchain, I'd say the blockchain, everyone's very excited about blockchain 2.0 or Bitcoin 2.0 or whatever everyone's calling the next generation of Bitcoin stuff.

But really what it comes down to is it's digitizing assets, transferring assets, and then a smart contracts. inside of those and those aren't even like categories they all sort of group together in a lot of ways because if I'm going to transfer like real estate I'm going to need it to be a digital asset and I'm going to be able to transfer that asset so they're all sort of one thing

and you need a smart contract to be able to enable those two things to happen I'd say it's still super early in the blockchain development everyone is still creating what those three things look like

And I'm really excited, you know, we mentioned Flavian earlier, who works, who's founded Coin Prism. And he really was one of the core reasons that open assets is as fully flushed out as it is. And the, which is probably the primary thing that most companies are looking at in order to digitize assets. They're looking at that over Ethereum, over other technologies who are trying to do that. So I think that that's sort of our investment thesis is going down those two category verticals and then seeing who's really solving big problems. And then we try to invest in help where we can. Has that evolved since you started BoostBC?

So when we started Boost, Boost, everyone was excited about the speculative nature of Bitcoin. And the reason that it went up so high was because traders were like, hey, I could triple my money in a day. That's awesome. Their huge margins is where like speculators and traders love to play. And so a lot of people were looking at it as like Bitcoin as the currency. And I'd say the evolution has been a way, has been a like,

and we were on board with that too. We backed payment processors, and I still think some payment processors will probably end up working, especially if Greece adopts Bitcoin. We backed brokers. We backed about 10 brokers in different countries. Just like Argentina, Mexico, Brazil, South Africa, just tons of really great Europe, lots of them. And the reason for that was I believe that my initial belief was cross-border transfer. And I was thinking, hey, the fastest way to get a huge remittance network set up is to have these brokers in every country. So that you could send Bitcoin in as long as the broker handled the cash-in, cash-out, you'd have an entire remittance network.

So right now, technically, you could send money from Argentina to Brazil to Australia to Europe, all on the... some like a Bitcoin companies a boost Bitcoin company's rails, which is really, really cool. And you can save a lot of money because that's what Bitcoin does cross-border. But I'd say the steady evolution has been really about not sending Bitcoin specifically, but sending money cross-borders. And I'm, I mean, I'm also really excited. So I told you my two verticals, but I'm also really excited about things. I wasn't expecting to hear about.

So like, we had a company in the last tribe that was called BitMesh, and they allow you to resell your Wi-Fi. And the reason that they're able to do that, you couldn't do that before Bitcoin. The reason you're able to do that is because of Bitcoin, but also because of micropayment channels, because you only have to, you can pay for what you use, rather than like a monthly subscription

or an hourly subscription. It's like literally what you use you pay for, which has never been done before, and it was theoretical, and now BitMesh has done it, so it's awesome, and they're going to be trying it in a couple places. But, like, I love the crazy things also that are, like, even no one was expecting that this would influence. I think what ZapChane is the beginning of is really replacing ads on the internet. Like, now there's a new way in which people can get paid or be paid for content on the internet, which is really, really exciting. Because before, everyone's been sort of handcuffed to ads. Like, they've completely, you've needed to be using ads.

Yeah, so I, the, you asked about the evolution. I went back to your last question. Sorry. The evolution has really been about, it's really been about Bitcoin, transitioning to everyone's saying the blockchain, but really I'd say right now we're in the state where it's Bitcoin as the rails for sending money, which is using the blockchain, I guess, technically.

And then the next stage is going to be blockchain related and it's going to be a transfer of assets. You know, NASDAQ's doing tests with it. I get reached out to by institutions. I actually think the next evolution in these stages. So startups have done a lot from the bottom up, building the technology, getting users, getting people excited about it. But the marketing costs that it would cost to get everyone on the earth to adopt this would be very, very capital intensive. So I actually think that the next

step is going to be institutional adoption from the top down, where institutions are starting to find that the technology is useful to them. And they're trying to figure out how they either save money or make money using this new technology. And that's a very exciting evolution that I'm not sure everyone's seeing yet, but it's going to be a really big deal over the next 18 months. I think you're going to see huge institutions adopt aspects of Bitcoin or the blockchain for actual products. And I think people will, and consumers will be using Bitcoin and the blockchain without them knowing they're using Bitcoin in the blockchain in the next 18 months. I think it's 18 months.

And do you think those institutions will primarily use the Bitcoin blockchain, maybe through some projects like site chains or open assets or things like that? Or do you think that they will use other types of blockchains, maybe private blockchains or things like that? So it's going to depend on what problem they're trying to solve for themselves. So I think a lot of big institutions have problems with cross-border payments. And so I think that's actually going to be a big piece of it. I think a lot of people are going to try to start figuring out a way to do cross-border payments more efficiently using the blockchain.

But then also, you know, great loyalty programs can be created using the blockchain. I mean, NASDAQ is openly saying that they're running tests with open assets to do transfer of stocks, securities. and I think on a per institution basis, there is a different way to use Bitcoin or the blockchain. And I think that it depends what they're trying to solve for themselves. So this is actually a question that we wanted to bring up with you. There appears to be this sort of shift. I mean, I don't have any really concrete examples, but it seems like companies are starting to shift towards more financial institution type services. I mean, one example is chain now.

If you go to chain.com's website, there's like not one place on the website that it mentions Bitcoin. I think though... Or even BitPay mentioned something like that. Yeah. I mean, I think that the... What's probably happening, what's probably likely to be happening is all this adoption that Bitcoin startups were expecting a year ago when the price had gone up to, you know, $1,000

or whatever didn't happen. And now they're running out of money or perhaps, you know, their investors are saying, like, what's going on. And now they're sort of shifting to where there might be some money, which is institutions and trying to sell them on the technology. And I mean, which is fine, right? I mean, if it gets people using Bitcoin one way or another, whether that's through, you know, banks using Bitcoin to, like you said, in the back end or financial institutions now offering payments for consumers to use, but having Bitcoin in the back end, that's fine.

If it brings more adoption, then why not, right? Yeah. And so I actually think that that's what, that's sort of, the way you're explaining it is sort of how it's, I'd say it's sort of how it's happening. A big piece of it is, you know, as a business, you want to figure out how to make the business work. And so, and where you can solve big problems.

And if an institution is the way that you get to solve a big problem, startups will start working with the big institutions. And institutions are a little unsure of how they can use it. And so they need the startup's guidance a lot on this stuff. So it's sort of a, it's a great thing that the institutions might start working with all these different companies. Brian, I'm curious what you think about this apparent shift. I think of it like this, right? So if you made this bet that Bitcoin was going to use widely,

And I think many of us, like I certainly believe that, and especially I was going to be used widely, like, as a currency by like normal people adopted on a mass scale soon to pay like for the coffee, for remittances and whatever. So I think that was sort of a common assumption we had in, you know, 2013 when the price is going up. And, you know, adoption was also increasing rapidly then. And so I think a lot of startups, they built their business model. models, you know, using that assumption, right? They say, oh, we're going to execute great and then all these users will be there. And maybe that's going to happen, but it hasn't happened so far. And I think I'm actually really curious about what your point of view is there, Adam.

But, you know, one problem is you raise money and then you burn through the money, you spend it. They need to raise more money. And then if you don't, if you aren't able to show like big traction, then And it's hard to raise more money. And if the Bitcoin user base doesn't grow, it's really hard to show traction and grow the user base. I mean, because the Bitcoin user base is so limited. Maybe to some extent you can do it just with that,

but then soon you hit the ceiling. I mean, Coinbase is going to have a really hard time growing more users unless they can convert, you know, new people to using Bitcoin. Well, unless they sort of become a, and I have no idea what their plans are, but if they become an international repository for the unbanked, like technically that would be a use case that would be really valuable to the world, or be unbanked anyway.

I think one of the reasons that Bitcoin itself captivated me early on was how global the world has become. Like if one country gets hit by economic crisis, the entire world gets hit by economic crisis in some way, and everything's connected so closely, mostly because of the internet, because of how you can communicate frictionlessly through the internet. And I think that when you think globally, every country still has different financial issues and problems,

and those are all different ways in which Bitcoin can help and improve that situation. And so, you know, like one of our companies, Zapko, they're in South Africa. turns out they have 2% credit card adoption and no one buys anything online just because that's how it works. And like in America, I don't know how I would live without being able to buy anything online. And so I, it's just everyone's in a different situation. And so I think Bitcoin is the thing that will bring us all to one level where we effectively have the same payment structure and rails. and so but everyone needs to solve their own problems inside of their own countries and so it's important that internationally bitcoin companies are building yeah no i mean i agree i think that that vision i

totally share with you i think it's such an exciting thing and something that makes so much sense the idea that you have a global currency that's like free from nation states free from that i think that's just an idea that kind of makes sense and it's obviously super powerful idea Yeah. So what's your impression? Is the rate at which new Bitcoin startups are being created now at the sort of, you know, maybe pre-seed level, but people trying to build something, trying to raise money? How has that developed? Has that been going down with the decrease in price?

So I could probably say that after our applications have come in, and I could see, like, what the enthusiasm is. based off a number of applications we get. In general, I would say it's becoming a more legitimate currency and there's less speculation in it. So it's more about business. It's more about what business you can build rather than what technology you can build,

which is sort of an interesting transition as a technology. It's sort of like TCPIP was just this weird thing for a while for communication, and then, you know, people tried out web pages. And then they were like, oh, this is sort of like marketing. And then they found a use case, which was marketing for the web pages. And then things were built on top of that, communication, AIM, like all these different ways of communicating. I think that we're in the stages of like, if you are starting a Bitcoin company, you do need to find a use case that's different than what other people are building

right now. And that is, it's, you have to be creative. I mean, you have to find the, you know, create something where robots are paying each other for something or get the, you know, found a new country that's founded, you know, currency first. Like, it's almost like everyone needs to start thinking a little bigger about, about the, about their ideas because, you know, promised 100 Bitcoin companies of the Bitcoin ecosystem. We're at 47 and I plan on following through on my promise, which I'm definitely going to be doing, and probably continue to back more after that because I think eventually it's just going to be like I'm backing fintech companies because everyone's using Bitcoin. I think that's how it's going to work.

But the like people need, A, they need to be actually solving a problem and B, it needs to be different from the market. Like I think a lot of people saw a lot of money flowing into brokerages, like Coinbase or, you know, or payment processor. They pay, blockchain, got some wallets, that sort of thing. But, like, there were so many, like, competitors that were created just because that money flew to, in that direction, that now it's sort of like, we need to see the next generation of, like, Bitcoin and the blockchain. We need to see what really, it's entrepreneur's job to really push the limits rather than play

it safe and follow the money. and I want to see the next level of stuff. And, you know, we've backed 10 brokerages. I will, for good entrepreneurs, I'll probably continue to back brokerages. But the, it's just the competitive level and landscape in every country has gotten pretty high, that you find a new opportunity. That's basically my suggestion as far as building companies. But I do continue to see stuff.

And I continue to see crazy, weird stuff. And so I would say the speculative enthusiasm has definitely died down a little bit, but like, people are still so curious. And I'd say on a institutional level, they're curious now. And so there's going to be a lot more money pouring into the companies over the next 18 months. But it really needs to solve problems, big problems. Yeah, no, I think one of the funny things was that when, This is website bought with Bit With Bitcoins. Do you know it? What's it called?

But with Bitcoins. No. So it's sort of a joke, but it says like a Bitcoin business generator. So you can click like a button and it comes up with something and then bought with Bitcoins, right? I felt like that it was a little bit like that. You know, during the bubble, during that bubble where just everybody was like, I'm starting like some Bitcoin company. And I'm just doing that.

but with Bitcoins. That's funny. We used to have a sort of inside joke at Boost where it was like, anytime we needed a solution that we didn't really have to, a question, we would say, because Bitcoin. Like, so yeah, like, I'd say it's a little less that way now, and it's more finding an actual business. Today's magic word is tribe, T-R-I-B-E.

Head over to let's talk bitcoin.com to sign in, enter the magic word, and claim you're part of the listener reward. So moving on from startups to a recent event in the U.S. at least, which affects U.S. companies and specifically those in New York, but also might affect companies and startups worldwide, is bid license. I believe today, this day of recording is the day that actually comes into effect. I might be wrong on that, but... Oh, really? I actually didn't even know that. And I think I said it on Reddit this morning. Anyway, but so can you tell us what do you think about Bit License?

Hey, everything you read on Reddit is true. So what are your thoughts about Bit License? Okay, so my... I actually released a response about... I don't think they made the changes that I sort of wanted to be changed. So I submitted a response. It was like a day or two after the responses were allowed to be due. But it was because the first time it was like very loud and like bit license came out and everyone like, you know,

crushed the spirits of the thing. And then they like silently released their second draft. And I didn't even know it was out there for until basically the end of the response period. but the things I didn't, there were only like two major, I actually think it's the closest thing to what we'll get. And it's very, it's pretty well thought through. Like, I will say the first one was like,

hey, let's throw as many rules at the board as possible. And do you want a rule? Like, let that guy create like five rules. And it was their attempt at, they aimed at the sun hoping to hit the moon sort of thing. And I think that's exactly what they got. And I think testament to Ben Lossky for actually releasing it on Reddit to accept comments and hear responses, I think that's a really big move as far as the government's concerned.

The things I don't like, I don't like that New York State regulators are duplicating the AMLKYC rules. So federally, you have to do a certain level of AMLKYC. And what New York is saying is that there's a, like, oh, that's not enough. Like, federal isn't doing enough. Like, we need a duplicate of that also. And doing it, it just ups the cost for every startup. I'd say BitLicense is something that's going to affect my business, almost more than anyone else's business,

because we give, you know, smaller checks to these companies. and they and so and you know our check won't be able to get them through the bit license at this level for becoming a brokerage or becoming whatever they want to do

as far as being a money transmitter and so I would say I'm I understand the regulation necessities I just wish that they allowed a little more like low level experimentation on like a hundred users so that you could test out ideas and that was something that I requested

I think a sandbox environment for fintech would be a really great idea for the government to have because if I knew I was being experimented on, I think I would probably, I would be fine with it. Like, as long as I knew that I was like the guinea pick. So those are, I mean, those are like the main things. It's just become, now it's going to be really, really the barrier to entry to becoming a Bitcoin company. And I feel what we were talking about last time was what's been the transition of Bitcoin companies. I would say the transition from Tribe 4 to Tribe 5 was Tribe 5 felt more, most of the conversations we were having were very regulation oriented. Where before it was very much more gray area, now everyone is very formalizing on processes and really they're a little worried.

and scared and fear the government, even if the rules aren't completely hashed out officially. And I mean, I completely understand why. And we really try to guide them towards, you know, doing appropriate AMLKYC and doing the appropriate regulatory steps. It's just, it does become expensive and burdensome. And like two people who decided to start a company in their garage and wanted to change the way banking works ends up now needing something like two. million dollars just to get off the ground. And so that process is sort of tough.

So what does that mean for you? How do you go about that now that it's too expensive or to start a company, especially if you have to go through bit license with the funds you guys are able to provide? Does that mean you're going to specifically try to fund companies that don't require a bit license? So not exclusively, you know, we won't exclusively do that. What we're really really good for is sort of hooking an early stage company into a network and that network includes investors who might be able to get them to that through that stage. And so that's really one of the benefits of joining an accelerator like ours is that we can click them into, you know, the biggest Bitcoin network there is. So we will continue to look at it because I don't want to be

afraid of the regulatory bodies that be, I want to be able to, like, help FinTech be innovated on and not be stopped in innovation. It's just, I do feel the general feel, really, in the environment is, like, when you're starting a Bitcoin company, you need to be regulated, otherwise you go to jail. Like, that is what they feel. And it's like, that, that's, like, not a great space. That's not a great feeling to have where, like, they fear like jail. That's a tough, it's a tough spot to be. So we're going to continue backing everything, like, because I think innovation comes from

the craziest of ideas. And, you know, sometimes people will have to innovate on themselves and figure out a way in which maybe they're not transferring money or maybe they're not transferring assets if they aren't, if it's not possible to raise the money at that time. but yeah, I'm not going to stop doing that. But we are looking more towards the future, and I would say that it will be more difficult for us to be backing more and more brokerages probably

because it's just there are so many of them now. So one question I'm really curious about, so you are based in California, and I presume most of the startups that joined Bruce V.C. are not from New York. Now, I know the interpretation of who these New York rules apply to are pretty broad, but does that mean if, for example, one of your startups just blocks New York IP addresses or something like that? Is that enough to avoid bit license? Because I've heard from people say that that's not enough, and some people have said that is enough, so I'm really unsure.

So I think that's something that's still being debated and there is no clear answer on. I think that that would be enough for you're making a statement that you're not dealing with New York and you're not breaking New York's rules. However, the problem is that I believe a lot of states will adopt whatever gets passed in the BIT license. So because they would rather like, oh, well, these people got all the way to the finish line. I think that we can probably either actually it turns out like I think South Dakota has very friendly Bitcoin rules something like that like there are a couple and then California is just awful like they're trying to approve something bit license at least had good like it's a good name in marketing California like they call it AB 126 or something it's not it's a number and letters it's a horrible concept and it has just a bunch of like overregulation I think and a Yeah, I don't know what they're expecting out of it. I think they should probably go talk to it. What's the status on that?

Has that been passed? So they have created it, and I think it's out for responses right now is where I believe A.B. I don't think it's A.B.126B. I just typed that in, and that wasn't what popped up. But it's A.B. something numbers. And the fact that I can't remember it, and I can remember bit licenses, is probably problematic for a lot of people.

And so, I mean, yeah, it's a, it's, there's still definitely gray area out there, but it's becoming more formalized, which is actually a good thing for the industry as a whole. The, when the government recognizes something as real and has spent enough time on it, the masses then think, oh, well, it's not just for, like, criminals and drugs.

And, like, it changes, the dialogue of what Bitcoin will be, how Bitcoin will be represented, the problem is more from the startup side where you do need to go through appropriate protocols and processes before you really break the mold and be a Bitcoin company if you're transferring money. If you're not transferring money, and I'd say that's a general reason that a lot more people are moving towards the blockchain is because it makes more sense from a cost standpoint. Like, it's just cheaper to start a blockchain company than a Bitcoin-related company. So let's move on to another topic.

Recently, you announced that you'd have 50% of the companies coming at the BoostVCB in the VR space. What gets you so excited about this technology? Okay, so actually, the reason that we picked VR was because there are a lot of analogous things to VR and Bitcoin at the stage. just VR virtual reality for people who are surprised by this turn. Yeah, so we're doing VR AR and Bitcoin and the switch is, we feel there's a lot of analog, for the state that the VR AR space is in, it's very similar to what Bitcoin was in three years ago, where the infrastructure layer of the technology had really been laid.

So mining equipment was sort of the infrastructure layer, which means, and so for VR, it's the goggles. So it's Oculus, it's, you know, Magic Leaps building them, but Samsung, all these other companies who are really laying the groundwork for the development of the next generation, which is where we're very good, which is sort of infrastructure software and infrastructure and apps built for the first generation. And that's where we were really good for Bitcoin and the blockchain. And I believe that that will be where we're really great for virtual reality and augmented reality. It's more of, and what we do really well and what we found with Bitcoin, and like we have a lot of thanks to the community of Bitcoin for this, is that we're very good at building early technology communities around an early stage technology sector, which is inclusive of investors, entrepreneurs, enthusiasts, and press, and, like, lots of things

in that space where we are able to build up and package this thing and then sort of help our companies plug into it. And so that's what we're, that's our value add. And I think that it doesn't only need to relate to Bitcoin. It can also relate to VR. Obviously, we're going to continue supporting the Bitcoin ecosystem. That's the plan indefinitely. but the, I think that we, if you've tried VR, also one of the things it's like, VR's really cool.

I don't know if you've tried it. It's pretty awesome. Yeah, I've tried it quickly at some conference, but it, I mean, I mean, I thought it was interesting. It's definitely one of those things where like, oh, I want to try this thing. At least that's the way I felt. Like, I want to try this thing. I've seen it on TV or on the internet. or whatever, but wasn't like totally blown away by it. But then again, you know, it's early stages. Like we're still using, you know, version one technology. It's sort of the perfect time for us to help supporting the ecosystem and help build our network to help sort of our, the companies we back become thought leaders in the space. And that's what we did with Bitcoin.

And we're going to continue doing that with Bitcoin. I will agree with this. There are, there's, does seem to be like a lot of people really, really, really excited about VR. Just as in Bitcoin, there's like a lot of really enthusiastic people. There seems to be like this whole other planet of people that are just all, all into VR. Yeah, it's, it's, there's very little overlap in the communities. That's one thing that we definitely recognized. And the, but yeah, one of the reasons that we also chose it was because small, passionate communities, Like when they start with small, passionate technological communities, it's generally, means it's probably happening.

Yeah. Yeah. So one question. Do you see any intersection or synergies between VR and cryptocurrencies being used together? I've heard some people mention that. I haven't, you know. I think it's going to be a big deal. I actually think, so, you know, people joke and say that Bitcoin's,

going to be the currency of the metaverse. Metaverse is like the virtual reality space. But I actually think the blockchain is going to be really, really important to the metaverse or the virtual reality world because what if you only want to sell like a hundred virtual reality chairs? Like being able to put a cap on the number of real virtual goods is only possible through something like the blockchain. So I actually think that there's going to be a lot of overlap with these two technologies. Given I think that those overlaps will happen in X number of years. I don't think they're happening in the next 18 months at all.

That's interesting. Are you aware of a scribe? What is it? A scribe, the company ascribe. I've heard of a scribe. Yeah, so they use the blockchain exactly for that to track digital property and they have like edition and limited edition and loaning things. So that seems like it would be a perfect fit.

And they do focus on the digital art market at the moment, but it seems like that would be a sort of natural way to develop into. I think that there's been a huge, I mean, like I think a lot of this, you know, a lot of art and photos and stuff will still be free. Like a lot of them, you'll still be able to search through Google images and grab Google images and stuff. But some artists will just be like, hey, I only want there to be a hundred of these out there. And it's like, okay, that's now possible. That was not possible when the internet was created. The internet was just this open portal to like share everything. And so business

models were created as such. And now there's another way where you can restrict the number of goods and create a certain amount of demand for that good, which is awesome. So just before we wrap up here, So you're from a lineage of venture capitalists. Your dad is, of course, Tim Draper, who invested in some of the early internet companies like Hotmail, Skype, and others. And I read your grandfather's book at one point, like years ago. Oh, the startup game. Well done.

Yeah, that one, yes. Yeah, it's a great book. I actually really recommend it. It's a good. you can hear him when it's being when you're reading it like that is his tone that is his voice it's very yeah so my question was you know what what has your dad been able to to pass on to you or teach you regarding investing in such disruptive technologies as he did back in the 90s he was actually one of the ones who helped us make the decision to focus on bitcoin

because we were I was sort of deciding I was going to focus on something and I was talking to him and I said you know I think that there are a lot of different ideas in the Bitcoin space and his analogy to me was you know one of the best decisions we ever made at DFJ was we everyone thought we were crazy but we said we're only going to to be backing internet startups, which sounds like bogus because there's so many internet startups now. But like he got the pick of the litter at the beginning for internet startups, which got him, you know, hot mail and like a bunch of other ones like in that space. And so he said that ended up being a really great thing. And so I was like, well, that's, you know, it's a no brainer

that we should pick an industry now. We as a team ended up evolving into the Bitcoin space. but I love, I really, that was one major thing that he, like, helped us focus on. General stuff, it's difficult to say, like, I'm really close to my dad, and, like, I would say his advice has been invaluable. What's really, really great is the, you know, I'm running a funds that invests in companies and my dad's done it for 30 years, my grandpa's done it for 40 years. And so, like, if I run into a situation where I don't know what the answer is, they've probably gone through the situation. And so, like, that has been an incredible information base for me.

Other than that, you know, he's definitely helped me figure out what type of founders we'd like to back. He's definitely helped. It's really difficult to define everything because it's like, you know, crazy ideas. often are the ones that work. Like, there's like little, you know, idioms that he says that have sort of stuck with my whole thesis throughout the time I've been an investor. And he's super smart. He's way smarter than me.

So also, that's cool. Yeah. So I don't know. Those are all broad things, but it's just been, it's sort of fun having someone who I can bother and just be like, hey. I'm going through this thing right now. What is your answer to it? And then I take his answer and I change it,

but it's great to have his feedback on like, hey, this is how it will work for me. And then he sort of recommends what he would do. And then I'm like, well, you know, I need a position a little better, but that's a really good thesis. He's creative. Be creative is probably the other thing.

Like, think differently than everyone else because that is generally the way that the world's going. Yeah, absolutely. Well, I think we're at the end of our show. So you mentioned in the beginning, I don't know, that the boost VC application is due on. That's, is that Wednesday? So next Wednesday, boost VC application is due. So that is July 1st.

Yeah. So two days. Yeah. And then the program starts August 3rd. That's all I was going to say. Okay, perfect. Yeah. So we'll put a link in the show note.

So anyone who's listening to that, you have. have about 48 hours or perhaps less to finish your applications. So you may have to do some caffeine-infused all-nighters, but do so. And hopefully some of you will end up at BoostVC. We hope to see you all in Silicon Valley at some point. So yeah, please apply to Boost. We're really excited about the next chapter and it's going to be really, really fun. Tribe 6. Talk to you guys later. Yeah. Well, thanks so much for joining. So and thanks to our listeners for listening. So we put out new episodes of Epstein-Wikon every Monday, you can scratch the show on iTunes, SoundCloud,

or your podcast app. You can also get the video on YouTube. We're at YouTube.com slash episode of BTC. And if you like the show, please do us a favor and leave us an iTunes review that helps new people find the show. We haven't mentioned that in a while, but let's let's mention it again. And share it. And share, yes, share, because few people do. So yeah, thanks so much. And of course, you can all of a send us a tip in the address. So thanks and until next time.