Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Bastian Brand: The Intelligent Cryptoinvestor, Bitcoin Investment Whitepaper

Episode Date: September 15, 2014

Dr. Bastian Brand is an investment manager at Pathfinder Capital. Pathfinder Capital is a London-based Venture Capital firm that focuses on frontier markets and cryptocurrencies. He is also the founder of the Bitcoin Startups Munich group and was previously a consultant at McKinsey. The episode focused on his comprehensive paper surveying the investment landscape in the cryptocurrency space. We discussed the advantages of buying bitcoins versus investing in cryptocurrency startups, the prospect of Bitcoin 2.0 projects, and his views on the different sectors of the Bitcoin industry. Episode links: Pathfinder Capital The Intelligent Cryptoinvestor Blog Bitcoin Startups Munich Bitcoin Startups Munich Meetup This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/039

Hello, and welcome to Epson or Bitcoin, the show which talks about the technologies, projects, and startups driving decentralization and the global cryptocurrency revolution. My name is Sybesen Kuchu. Today is September 15th, 2014, and thanks so much for joining us on episode 39. So today's episode features an interview that Brian did earlier this week with Bastien Brand, who is an investment manager at Pathfinder Capital. Bastien recently wrote a comprehensive paper surveying the investment landscape in the cryptocurrencies. It's sort of a Bitcoin investment white paper.

It's very comprehensive and very interesting. Now, they'll discuss that paper in much detail during the interview, as well as different aspects of the Bitcoin and cryptocurrency industry. The white paper isn't out yet. It will be out in the next few days. And as soon as it will be, when it does come out, we'll post the link to the white paper on our Twitter page, as well as on our SoundCloud page and on our website.

So we'll update the show notes so you can find that white paper. So look forward to it. to the white paper and also enjoy the interview. Our guest today is Bastian Brandt. He's a venture capitalist at Pathfinder Capital. Previously, he was a consultant at McKinsey, and he's also done a PhD in business. He's been interested in Bitcoin since 2011,

and he also recently started the Bitcoin Startup's Munich meetup, which is kind of a similar meetup to the one I've been doing in Berlin. And he's written in almost 100-page, report exploring Bitcoin and investing in Bitcoin. And we're here today to talk about that report and about his views on kind of investment opportunities in Bitcoin. So thanks for joining us today, Bastian. Yeah, hi Brian. It's great to be with you. Thanks a lot for having me. Yeah. So can you tell us a bit about Pathfinder capital?

Sure. Pathfinder Capital is a fund management capital. company from the from the UK. The focus of it is actually frontier market investments that which is which is also very exciting investment opportunity and which is also for for the risk tolerant investors similar to Bitcoin investors. I got in touch with Pathfinder capital two years ago beginning of this year when I went myself to a conference in Cambodia to investor conference in Cambodia and I met Kevin virtual who's the founder of PATH Fund Capital so he saw that there are no investment vehicles in this

area so to create a new fund management company and just to get to the Bitcoin topic I told told them about Bitcoin and got them excited about it. And now you're looking or you're trying to raise a separate fund just for investing in Bitcoin companies. Is that correct? Exactly that's true. We have a hedge fund which is incorporated in the Bermudas and all the regulatory stuff is

already done. It's investment advisor. We are FCA regulated and we also have the go-ahead from the Bermuders. Now we are seeking out, we are seeking for funding to invest in Bitcoin startups, primarily in emerging markets. Okay, so I guess that would be a way for you as to combine your expertise in the merchant markets with Bitcoin. Exactly. That's the idea behind that. So for opportunistic reasons, it's that obvious pick for Pathfinder Capital, because we have on the one side this frontier market expertise from Pathfinding Capital, as said. And on the other side, we have my expertise, basically, and my network in the Bitcoin space. But just if you're curious about it, just some words on the frontier market investment,

side. The idea here is that we all know about China, about the Pricks countries, Pricks, which is for Brazil, Russia, in China, South Africa. And this has been basically the dominant investment story 10 years ago and driven by a couple of factors like young population, a lot of consumer demand

by needs for investment and infrastructure and basically this story is still valid for some of the for some of the other counties like Vietnam, Philippines which we expect

to be the next in line to develop. So it's interesting that you guys are interested in investing in Bitcoin companies in frontier markets because it seems like investing in Bitcoin company is so much at the beginning. I guess in the U.S. is a bit further

advanced, but even in Europe, there's been very, very little activity. So do you think that in the near term, you would also invest in European Bitcoin companies or in American? And the idea is more to in the long-term switch to investing in Bitcoin startups in the frontier market? Or do you think we're already at a stage where this kind of thing makes sense? Yeah, I think you really mentioned a couple of important points here. It's true. What you're saying is true enough for a number of reasons. It's first the Bitcoin market is still very young in emerging markets.

So you, it's not so easy to find companies big enough to invest serious amounts of money. Also, there are lots of interesting opportunities still in developed countries. So it's going to be a mix. We are going to be pragmatic about, also about investing in, for example, European company. Anything here is nowadays really first to leverage our knowledge on frontier markets and emerging markets. so that's something that's an opportunity one to jump on and the second opportunity is you want to jump on is really European companies for example which are still underserved by by US which bit and there is a lot of potential in Europe which isn't served well enough I think

yeah absolutely I think we'll get back to this topic later but I agree it's it's an interesting it's an interesting topic. Well, before we kind of dive into the, you know, sort of a meat of discussion about investing in general, I'm curious about your thoughts on the structure of VC funds and how well they work in the Bitcoin space. I know I had this conversation a few months ago at the Inside Bitcoin's Conference with Pamir, Guillainbee.

And the basic issue, I think, is this, right? So we're starting to have like different types of companies or companies that work with issuing their own currencies and The normal Mandate of a venture capital firm if I'm correct about this kind of precludes a venture capitalist from investing in and that kind of thing So I'm curious like so are you guys are you gonna have a sort of a standard agreement? That precludes you or would you like to have also the flexibility to invest, for example, in a currency, like let's say someone, let's say a project like Ethereum that you that one could come as a VC firm and say,

hey, we're going to give you guys a million dollars and we will actually try to do similar work to a venture capitalist traditional dollars and the kind of support of the team. Yeah, it's I think what you're talking about. it touches on a couple of dimensions. First is how do you get your money and there are a couple of models. So there's for example the model that you have seen with Bitcoin, which who went to travel investments to fund themselves. And well there are traditional recies on the opposite side of the spectrum and then of course then if you have your funding done, And well, you also need to think about where to invest. And it's true what you're saying. It's not that easy to invest in cryptocurrencies.

Honestly, I'm not the expert on regulation. And I was not in the lead in our team to draft the investment prospectus. But yeah, we have a practice, which we, which is basically standard. for all our LPs and we have refrained from investing in in cryptocurrencies as such it's for a number of reasons the regulatory reasons and also it's the banking relationship so if it's difficult enough to get a banking relationship if you have something to do in any case but if you also want to invest in in Bitcoin currencies as such, crypto currencies as such. Yeah, I mean, I was in Toronto recently, and we did an episode there with the guys from DeCentral and they are also in the process of starting an incubator and raising a fund to invest in the companies that come through.

And I think they said that the one thing that's holding them back is the whole regulatory side because they do want to be able to invest in currencies, for example, because they specifically want to focus on these kind of Bitcoin 2.0 projects, but then it's very hard to figure out how to do that and how to do that if you try to kind of attract traditional investors that perhaps on their side are restricted to giving, you know, with regards to the kind of entities that they're allowed to give and the kind of activities they're allowed to invest in. Yeah, absolutely. Well, it's not that easy.

And that's an issue many people have to face. For example, there was in the UK there was a Bitcoin Superfund or something. And it's which was been an hour's half a year ago. And I haven't heard anything about that since. So I don't want to make any conclusions. but it just seems there seems to be tendency that things, to implement something like that, just takes longer. Yeah, no, absolutely.

Well, I think we touched on something important and that is, you know, I guess one point is from your perspective, right, as a fund, would you like to be able to invest in currency or not? But also, of course, from an investor's perspective, assuming you have no restrictions and you can invest in anything you want, And the question of whether it makes sense to invest, just buy Bitcoin to invest in Bitcoin companies, you know, to do a bit of both. It is interesting, right? Absolutely.

I'm curious what your point of view is with that regard. Do you think it's better to invest, to purchase Bitcoins or do you think it's better to try to invest in companies that build Bitcoin businesses or cryptocurrency businesses? A short answer, it's just a different risk profile, but just to start from the beginning, it was exactly that question that was at, that it really was the starting point of the report. To start a fund, if you want to be an investment manager and if you have talks with other people, if you really want to have a solid, I just feel better to have a lot of, I just feel better to have, a solid understanding of investment strategy which makes sense. And if you look at the Bitcoin base, you just have so many different possibilities. You have so many different investment

options. There is Bitcoin, there are alternative cryptocurrencies, there are all these Bitcoin 2.0 or 2.0 projects. You have physical Bitcoins you can invest in, you can invest in a mining company. And finally, you can also invest in in all sorts of Bitcoin startups. So, yeah, if you really want to optimize, if you really want to have the best returns for investors at the lowest risk, then you should really ask yourself. And what I do is in the report or what we do

because they've been some guest contributors as well. It's to we just look at all these options one by one. To your question, if you, I see more potential in Bitcoin startups for a number of reasons. But if you don't have access to we see then probably to invest in just in Bitcoin. it's easier. So why do you see more potential in Bitcoin startups? Well, to answer that, let me just look at Bitcoin first. It's whenever you invest in something, you should do something like a valuation and just to look

at the fair price or look at the perspective. And if I look at Bitcoin, I see basically three different time around. horizons and three different risks. So the first time horizon, it would be the speculation. So in the short term, speculation, and by news and regulation and all these sort of things. So in the short term, you have a lot of volatility. So if you look at that, you don't have that, obviously with the venture capital investment, because you don't have that liquidity.

In the medium term, you have adoption. So what drives Bitcoin prices in the medium term is really to have success, a solid success in becoming, making Bitcoin a popular means of payment and a popular. So that's the things. There has been recently the Dell announcement to accept Bitcoin as a payment option, but I think we have to see much more. and some people like Tim Spencer are correct that we really high time to shift gears and to get Bitcoin adopted more widely. And then the third point, and that's something that too many people don't think about, is really the technology.

and that's something that people discuss in forums like Ethereum, chairs. There's this notion that proof of stake is just a superior technology and that there are good reasons to shift in the long term to another cryptocurrency. So that would of course be bad for Bitcoin. if you have a startup that can flexibly shift between cryptocurrencies, it's not so much of a problem. Yeah, so, yeah, that's interesting. So, I mean, my point of view in this is kind of that, right? So I often look at Bitcoin as a type of, like an ETF a bit. So like an exchange traded fund, which sort of tracks the value of all that's being created

in the Bitcoin ecosystem. So I actually think that it seems to me much less risky in many ways to just buy Bitcoins than invest in specific companies and potentially even more profitable because

it's still a little bit unclear to me how much profit companies can actually make in this sort of peer-to-peer world decentralized peer-to-peer world maybe the time of just massive companies with huge profits maybe that's going to be harder in that world.

But I agree one aspect where this may go wrong is exactly what you mentioned, right? So when you start having, you know, if for some reason Bitcoin doesn't remain the leading cryptocurrency, and if that kind of value gets transferred to other currencies, if perhaps some proof of stake turns out, turns out to be better in the long term because just, I don't know, mining is too expensive or it's not secure enough or something. Then I agree, of course. Then it could turn out to be better if you're invested in some company that can just switch to a different currency.

Yeah, exactly. It's, I think the ETF notion is actually makes a lot of sense. It's, yeah, it's a bit the difference between passive investing and active investment. If you're a good stock picker, it makes sense to, to pick individual stocks or in this case, startups. If you don't have deep industry knowledge, then it's probably easier to switch to just to buy Bitcoin and to follow technology so that if there is some move to another currency that you are basically, that you have the time to make that move as well. I sort of have this arrogant preconception, which may be unwarranted, that if that actually happens, if actually Bitcoin is not going to succeed in the long term because of some structural weakness

and it's going to be different currency or it's going to be switched to something else. I actually believe that if you really involved in the Bitcoin world, you will see that coming like long before you know i mean i think we were still kind of unclear on on you know the mining incentives and and you new ancient tim swanson and i know he's done some some nice work like thinking about that and other people have as well and think about like is it really going to work in the long term but i think we will see that coming you know i think people there will be a sense of clarity like long before that happens yeah so maybe i'm wrong of course who know I tend to agree. That's also my idea. It's do you, you should see it unless you are just sleeping and not heating the warning signals, which actually happened to a lot of people in the case of Mount Gog. So let's just, let's not be too self-confident because there have been a lot of smart people who just didn't carry it. They didn't have the, they didn't really.

they weren't able to manage things professionally, let's say. That's an interesting point. I think the difference there may be, you know, being inside or outside. Because when I got into Bitcoin, it was already, everybody was already saying that Mount Cox is terrible. There's something fishy going on. And that was in more in like a year and a half ago about. So for me, I never had the idea of like, why would I use my,

Mount Cox made no sense to me. But then, you know, people who'd been around for longer, they knew Mount Cox and, you know, maybe they traded there or they already had money there. They were too lazy to take it out. Or perhaps they'd seen similar crisis before, but Mount Cox survived. And so I guess many of those were kind of caught off guard. And of course, that may turn out to be different in the future, right? Perhaps then I would be the one who's sort of in and it's not.

see is not seeing it coming right it's actually interesting point it's uh it's if you if you start to fall in love with a certain technology or a certain coin uh because you have spent like looking at it and uh to conference as talking with people uh then you also get a buyer that especially as an investor you have to be very careful uh about i when i to conferences, everybody is very enthusiastic and everybody is, there's not critical voices. And so actually for that reason, you just mentioned Tim Spenson before. I really like to have also these dissenting voices because they basically force you to really to give very good, to back up your opinion.

Yeah, no, that's very true. And there aren't that many of them in the Bitcoin space, right? There's very few people who actually understand what's going on and are skeptical. Yeah, absolutely. Well, let's talk a little bit about, so you made a distinction in your paper about four different segments. So those were infrastructure in which you counted wallets, exchanges, and mining. then merchants so e-commerce and gambling you had under that category payments which were payment processor micropay payments and remittances and then the last one financial services like

p-to-peer lending derivatives insurance can you talk a little bit about that distinction and perhaps about which area you find the most interesting yeah absolutely well first of all why to have a distinction, I think it's necessary because the business models are just very different. And so you have to look at different things for different sub segments. And what is more when you look at a specific company, it's always some benchmark, which is basically something that I have done a lot at McKinsey when I was analyzing companies there. You can only do benchmarking if you have comparable companies. So you really need these segments. There are a couple of hands to segment the Bitcoin industry. The logic that I have that you see here in my expectation is that infrastructure basically encompasses everything that you need to get Bitcoin running in a certain country.

It could be in a emerging market, for instance. Merchants at Bitcoin at the end customer side. Payments that includes some companies like BitPay or BitPesa. And financial services, that's all the stuff that, yeah, I would say the advanced stuff. That doesn't fit in the other. Nitches. Exactly. I thought it was true as well.

It's well. I mean, I thought it was interesting. because CoinDisc has done a similar thing in their state of Bitcoin record. They added these different categories and you know some of them made sense and they had like, I think they had the financial services category as well. And just threw in everything else in there. There were things that had absolutely nothing in common. Um, I think even they had like things like coin disk and totally different things in there.

But I think your distinction is, um, you know, is a sensible one and it's a useful one. And I guess what's interesting here is if we look at the VC investment, that has mostly happened in the infrastructure space. Is that correct? Do you see that as well? Yeah, infrastructure and payments. Yeah, that's true. There's actually a fifth category that is not mentioned here, which has been introduced by CoinDesk, which they call universals. Universals are basically companies which are doing a couple of things at the same time.

I think I guess the name comes from Universal Bank, which also does all kind of financial things at the same time. So companies like Coinbase or, yeah, Coinbase. Blockchain. Yeah, blockchain. Info, they are wallet and they are a news company or they are a wallet and data provider. Exactly, exactly. And this is a kind of different model. If you really want to dominate a market, then things at the same time.

Of course, you need a lot of financial backing for that. If you like, I can talk about the different categories a bit in more detail. Let's talk a little bit about where you would put your focus on as a VC. Yeah. Well, obviously, if you go to, if you look at Bitcoin and emerging markets, you have to look at infrastructure first. Because it's, you first need to build up the infrastructure in a country, like say Vietnam, Philippines. So exchanges. Exactly.

And that's mainly exchanges. The thing about exchanges is, of course, there are troubles. You need to get regulation right. You need to get the security right. But in terms of monetization, it's one of the. one of the things that's more solid than others. If you compare that, for example, to payment providers, like BitPay, who recently said they don't charge fees anymore.

Yeah, and then exchanges really look attractive. Yeah, absolutely. I talked about this before, I think on the podcast. and I also talked about it with Mo Levin at the conference last weekend, no, yesterday. Who's the, you know, he was the guy organizing the BTC Miami conference and he's doing the European business development for them. And, and funnily enough, apparently they went through the exact same reasoning that I had about BitPay, which was that you don't have network effects really with payment processing.

and the marginal cost is like zero, hence the prices are going to go to zero anyway. So they were like, well, let's just put them to zero now. It gives us an edge in the market because we will have to figure out other ways to make money anyway. So they sort of preempted that development, which of course also makes it more difficult for a new entrance in the market. So I think it's an interesting space in that way because it's just going to be very, It's not clear how they're going to make money. And then, of course, you're right with exchanges that may be different. Although we also had a panel at the Bitcoin conference in Cullen yesterday on exchanges,

which I was moderating. And I asked about that. And they also felt that exchanges were going to go to zero fees. I think all of them agreed. Yeah, let's start with the payment providers first. I think that, yeah, there was. there's big economies of scale. So there's actually no reason why there should be more than three, four, five payment

provide. Well, you can you can just plug into an exchange, no? And then I don't think you have such economies of scale, do you? Well, economies of scale means basically there you have much costs of zero, basically what you just said. So if you are bigger than you have smaller costs, I mean, smaller overhead costs. Yeah, true. In any case, I think it's a payment provider to be a payment provider.

It's more of an enabler. Yeah. If you want to build up an ecosystem in a country, then it's good to be able to go to merchants to say, yeah, we have this exchange. We also have this tool to plug into our exchange. So it's very easy for you. It's really something that enables you to promote your exchange, for example. But the standalone business, I think it doesn't make so much sense. Yeah.

So you think you would particularly focus on the infrastructure space in an emerging frontier market so that that would be exchanges I guess also wallets things like that right perhaps that are specifically suited to the local situation yeah that's right it's a it's if you look at the the fees in emerging markets they are still higher than the ones in very big country of course long term it's a different situation it's a challenge you're right with that but just the thing is if you are

a investor, especially in the venture, and you look at a lot of these young companies, most of them, they really make losses. Most of them, they don't become market leaders. And it's oftentimes also very profitable

profitable strategy to buy smaller companies or buy by the bigger players. So I can imagine a scenario in two or three years' time down the road that a coin desk or a coin desk, sorry, a coin base will be really interesting and interested to buy up exchanges in emerging market and because it's just easier to to buy into exchange. existing customer base than to build up things from scratch. And also from this perspective, I think that emerging markets are the most attractive in Bitcoin. So what about the financial services category? That seems to me a category that has both gotten a lot of attention in terms of development,

in terms of new projects like Ethereum, but that hasn't seen so much investment. Do you think that's going to change soon? I think, I will, Ethereum, that's in a way different animal because it's, well, it's very technological. If you look at financial services, you can split that up again into a couple of categories. Of course, Ethereum and these really, really advanced Bitcoin 2.0 projects.

And on the other hand, it's more simple things like insurance like a data analysis. So if I look at the second category, there's a interest in that. There's been a couple of people writing on that. And these can be interesting niches. Yeah, I guess with insurance, it depends what you're talking about, right? If you're talking about insuring Bitcoin wallets, and I guess that's something just regular insurance companies will do.

But then if you talk about it, we play actually competing with insurance company using uh a decentralized markets and a blockchain you know then that's something super interesting also very complex of course but but i guess we are just at the very beginning there and and you know it it makes sense to me that those will take a longer time yeah it's it's an interesting topic and i um i have regular conversations on that with bastion spielman who's who's basically like you one of the contributors to the report, we have put together. He's an expert on these Bitcoin 2.0 projects and he's very enthusiastic about it.

My, he specializes on, to look at which of the projects are basically the most interesting. My own opinion is, I'm a bit cautious on investing in Bitcoin 2.0 projects. if you look at Mastercoin, how MasterCobey and how counterparty has performed if you just look at the price development of the coin it has been sobering Yeah, true, there was a lot of excitement

I remember MasterCoin was like insanely high In the price at some point and it's kind of like all flattened out I think people also just really underestimated the complexity of this and how long it's going to take Absolutely. There's a nice parallel for anybody who is familiar with investing in mines, so like gold mines or something like that. There is also a similar pattern in the development of the price, of the stock price. If there is some new deposit found, there was always a huge hype and of course the share price skyrocket.

But then everything just takes longer than expected and there are always problems and there is really this value of tears. And then only after a couple of years when the first production goes online, then and everything turns out well, price goes up again. And my theory is that actually you have the same thing that we will see or we are basically seeing right now, the same thing with the same thing with the same thing with the same thing. Bitcoin 2.0 projects. So there is a potential, but it's not very wise to be one of the first investors, because typically things become cheaper. And it's if you have done your research and you really know the technology and things have become undervalued, then it's the right time to invest. Yeah, of course. Yeah, no. I mean, I'm certainly of the view, like, let's,

let's say if you talk of something I could hear, I think it's going to take years for, like, especially the more complex things to work on there. Now, we may have like gambling things soon or things like that, but then if you talk about like insurance things, yeah, it was going to take a really, I think it's going to take a long time. It's just there's so much complexity. it and the whole, another big thing that we'll just have to totally figure out from scratch is the whole user interfaces, user experience, and I think that's really complex to get that right. I think we're already seeing that with Bitcoin, just how difficult it is to do that and do it in a way that people can use and sort of normal people can use and feel comfortable

with. And then of course, when you talk about these more complex applications, even something like multisic, which we think of as a pretty simple thing generally in the Bitcoin space, like it conceptually is very simple. But even there, the user experience is a big challenge. And then you talk about those those other thing, complex projects like counterparty and all that. I think it's going to take a long time. Yeah, absolutely. It's well, things are getting better.

So people Bitcoin is well, the prototypical Bitcoin enthusiast is an IT

an IT guy. Really rather things about substance than form, than appearance. So that's basically probably part of the reason why user experience

wasn't so good over the last years but this is improving but yeah but there's actually even there's all the regulation and all these other things on top of it it's it will be an uphill battle for for companies like swarm and and some of the other yeah sophisticated crypto a blockchain application because this regulation you think yeah absolutely yeah yeah it's anybody who has read the latest news on on the bid license on the eBA yeah has unfortunately had to have to recognize how just how traditional regulators are and reason because the regulators are basically appointed by politicians and politicians are have to report,

yeah, to communicate with the, with the mainstream population, which is rather risk-averse for, for good or bad. Yeah, absolutely. And when it comes to, right now we are seeing all these regulatory statements on Bitcoin,

but just thinking of it as money, right? Nobody yet is thinking of Bitcoin in these other ways. It can be used or the blockchain can be used. And I think it's not going to take that long until they catch on to, yeah, things like swarm. And I do think they're going to have regulatory issues. I absolutely agree with that. I think that's going to be it. The whole crypto equity thing is super interesting, super revolutionary.

But also, I think they're going to have huge. these regulations. Yes, if things turn, if, if things turn out well, we would see something like a lightweight regulation, which, which it's a playing ground for these technologies, where basically if you have to give you, you know about the risks that you, that you know what you are doing, and that you're then in that case allowed to, to use these technologies. similar to basically the accredited investor clauses that you have when investing in sophisticated financial products.

There you see as well, people are accredited investors are supposed to be more sophisticated, so consumer protection is lower. If you could see something similar for Bitcoin, that would be great, but I haven't heard anything. I haven't heard anybody talking about that idea. Yeah, I'm not so optimistic there. I mean, maybe in some places we see that lightweight approach. But I think especially when it comes to the issuance of securities, which is super regulated,

then I'm quite, you know, I think they will basically try to impose the same rules that exist. And that just is going to basically kill the whole blockchain thing. so you really have to then be kind of underground, a black market type setting. And that, of course, makes it difficult when it comes to companies raising money, because whereas it may be easy for individuals to stay anonymous and online in hiding, so to say, and use services. And I think that's the case with money, right?

Governments are going to have a hard time coming after every single Bitcoin user. but it's not so absurd for governments to go after every single company that tries to issue shares on a crypto equity platform yeah that's true so i think it will be a challenging yeah but so to summarize the bitcoin the bitcoin 2.0 projects aren't the aren't going to be the primary focus of a pathfinder, but you will focus more infrastructure and emerging markets or frontier markets. Yeah, absolutely. Yeah. Well, let's talk a little bit about, you know, a topic that I think both of us have been

thinking about sort of being located in Europe and involved in the Bitcoin scene, which is the sort of state of the Bitcoin ecosystem in Europe versus the US. what's your view on that yeah yeah it's just just fair to admit that in in the u.s or in in big capital like london i think there are more advanced than in continental europe at least and i think that's that's just for i have seen that in a couple on a couple of occasions first if you go to to conferences you see rather a few Germans like us. It's only a couple of them

who really move around. If you look at the news space, actually analyze in quite some depth. You just have much more

products, much more news websites which are which originate from the US. And yeah, and also meetings. If you go to meetups, you have really huge meetups in countries like the UK, in Canada, in Argentina, for different reasons,

or New York or Silicon Valley, and the meetup groups in continental Europe, they aren't that big. If I think about the reason for that, it's difficult to say. one aspect of course is that such as some countries are more innovative innovative than others so if you look at Israel it's just a startup there is even a book with that title or if you go to London there is a huge financial community there when it comes to financing yeah it also makes a lot of big difference that most financial VC companies are based in Silicon Valley or in New York. You can see that if you look at the big fundings, at the big deals which have been made. It's companies like BitPay and Coinbase that got really large fundings.

Yeah, I don't know if I don't know if I'm. totally agree if you are continental Europe is lacking that much behind the UK or the US. I mean, I think in terms of the state of startups, yeah, quite obviously, right, Silicon Valley in particular is way ahead and there's just so much going on. There's so much money and people I guess also people just have more experience, right? There are a lot of people getting, starting Bitcoin companies that have experience starting other startups and then they raise money very fast. They scale very fast. Whereas in Europe, it all takes much, much longer.

But I don't know if this is due to lack of interest or if it's more due to, well, lack of funding and perhaps a little bit of lack of a startup culture. Yeah, it's a lack of interest. I wouldn't say a lack of interest. I think there was just places like, I don't know, like Israel where people are particularly innovative or Silicon Valley and of course that's a different level but it's if you if you compare continental Europe to all the other places in the it's probably more for the reason that you have just stated and if yeah it's if it's if you look at the

big the big seeding rounds and why people got much money. I mean, obviously I can only guess, but it's no coincidence that Jeremy Allaire and also the founder of Chapo or Chapo, that they are... Exactly, I think, no? Exactly, thank you. I think so. That they are serial entrepreneurs. They have very, very connections, close connections to Silicon Valley.

that definitely helps. Yeah, there's no question. I mean, I just hope this is going to change soon in Europe. You know, I really, one thing, I don't know if I'm, I don't think I've mentioned this on this podcast. Maybe I have. Well, if I have, I mentioned it again. But I've been in talks in Germany with people from Oxl Springer.

Now, Oxl Springer is one of the biggest media companies in Europe. And they have an accelerator in, Berlin together with plug and play. And plug and play, of course, is known by many for their accelerator in Silicon Valley, which also happened to be perhaps the first or at least one of the first Bitcoin accelerators. For example, 37 coins was there

and some other companies. I think personal I.O. And now they are seeking Bitcoin startups for their Berlin, the Berlin Oxyspringer plug and play accelerator. And there's already been at least two Bitcoin startups applying there. And I think they're both very solid and have a good chance of getting in. So hopefully that's kind of the beginning of some change there.

But it's really important. I think that will develop soon. And I guess also in Berlin, we've had now one of the first investments. rounds in Big Bond. You know, Rodko has been on the podcast a few weeks ago. Actually, he knew about that it was happening then, but it hadn't been announced. We couldn't talk about it. But he has now received, I mean, 200,000 euros from a venture capitalist in Berlin. So I guess there's starting to be some things, but there are still very, very few. Yeah, now that you mentioned that there are actually quite a, quite a couple of exciting companies,

Bitcoin-related companies coming from Germany. Yeah, it's Bitbond, 37 coins. Yeah, these are very interesting companies. Yeah, of course, 37 coins still had to go to the US for their accelerator and, you know, they spent a lot of time over there. But yeah, well, so to finish off, I would be interested in kind of hearing your perspective and your advice, now having done all this research and also as an investor on starting a Bitcoin business,

you know, I mean, I'm sure some of our listeners are thinking about that. I think about that often is what's, you know, what kind of Bitcoin business should one start if one started one today? Where should that be? What are your perspective on the right business models? Can you talk a little bit about? that and give some advice to the budding bitcoin entrepreneurs yeah sure sure i can only speak for myself and i can just explain what i like to see in bitcoin startups and um having looked through desks and

presentation having met with a couple with a lot of people i always do their market research first so they really show what is what is already out there and how their business really creates value, creates something new. If I see that, really that tells me that people really have thought about what they are doing. And there is, for example, just to give an example, there is one startup company coming from Berlin. I don't want to mention the name because I don't know if they have announced already, but they want to create some tax and accounting software for which I see as a really interesting thing because of all the regulation there is really a big need for that. And they have actually done their market research and have looked at competitors.

So that's something that I like a lot and I think that makes a lot of sense to do. from a more practical perspective, of course it makes sense to create a big and diverse team. It's in these days you always need a developer. You always need some guy who is good with graphics because important and user interface is important. And yeah, well, it's becoming more and more important to have also. somebody on the team who is knowledgeable about errors because yeah if we like it or not it's going is becoming more and more regulated so these are actually the two most important points I would say and I think you can you can find niches everywhere

It's of course it takes a lot of time to identify one but opportunities and it doesn't need to be confined to a certain segment. So I think there might even be a good business case for a new mining manufacturer if they are as that's a, that's a business case for a new mining manufacturer if they are. That's what some, I heard an announcement on that just very recently. Yeah. So, so I think that's, you know, that's solid advice. You know, I agree with that. I think do your market research. That's really important thing about the positioning, what you're actually trying to do.

And then get a diverse team. Of course, that can be very challenging, right? But it's super essential. I know, I agree with those. But I'd like to ask again about the, so, you know, let's say you had to start a Bitcoin business today and you say like hey I'm I don't want to be an investor I'm actually I'm going to start a business myself what would you do what do you mean what kind of sector or what kind of business idea what kind of sector would you try to look at

would you try to do something in emerging markets perhaps I don't know build an exchange there or is there's something else you would look into well I don't I don't speak Chinese or any of these other languages, so I could try. Maybe there would be some people who would be better at doing that. I really like this legal regulatory idea, really to build something that actually of regulation and taxes and legal. So I said to create a, to build a software that really takes care of that. takes care of all the accounting needed for the reporting to the authorities.

I find a great idea because it's something all the companies they will need. Yeah, I totally agree. I mean, we've been running this very small co-working space, I had a big on center in Berlin and you know, we've been like setting up some accounting there, etc. And of course we are also, you know, some people pay with Bitcoin and we pay our rent with Bitcoin. And, and, you know, just to figure out how to do that, you know, it would be nice to have sort of a plug-in-play system. And we haven't totally set it up.

You know, some funds I hold on a wallet I have, some funds of one of the, my partners. And it's a bit of a mess. Now, this is fine because it's just a small scale. And, you know, we can sit together and, like, set it up more properly and it all works. But of course, when you start having a much, you know, operating a business on a different scale, you can't do that anymore.

You need some automated systems that just take care of it and that also help you be compliant. So I agree. I think it's essential that services like that exist. Yeah, it's this, it's this, I don't know, the saying that you shouldn't dig for gold yourself, but you should sell shovels to the, I think it's a bit of that.

Yeah. So you'd get into the shovels selling business. Yeah, I would like to get into that as well, yeah. Okay. Is there something else you want to touch on before we? Yeah, I would like to announce as well. I'm also creating my own blog, which there is not so much there yet. But I will add content as time goes by.

and the earl the address is w.I.croproinvestor.com and this i. crypto investor is also stands for intelligent crypto investor, which is the title of the report. And this is basically an allusion to investor, which is a famous book of Benjamin Graham on, on how to do value investing, on how to do some stock picking, that makes sense. Yeah, absolutely. So also we're going to put a link in the show notes to your paper.

And I guess people will also be able to find it on your website. So iCryptoinvestor.com. Oh, it's, we will publish that. There will probably be a link at my website as well, but we publish it at Pathfinder Capital. Oh, at Pathfinder Capital. Okay. So hopefully it will be out by the time this gets out.

Otherwise, you know, we'll update the show notes and you can definitely find the link then. And I do highly recommend people check it out because I think it's a really nice, comprehensive introduction. And I think it's especially also good, you know, if somebody is new to Bitcoin and they're like, oh, what is this thing? why is it interesting? I think it's a really good introduction. I think it's one of the most solid,

comprehensive introductions I've seen. So I, you know, I'd encourage people to check it out and especially perhaps send it to people who are kind of new to Bitcoin and want to learn like, what is this thing and what is its potential. Yeah, I would also like to use a chance just to say thank you to all the people

who have contributed. Because even I was the person who wrote the main text, there were a lot spotlights we invited or I invited a lot of experts to contribute on on their specific area of expertise and including myself yeah to give full disclosure exactly so it's if you look at the report you also see their texts and you're about I would say thought leaders in in these fields okay well thanks so much for joining me today and Thanks so much for listening to this episode.

If you want to support the show, one great thing you can do is leave us your review on iTunes. And you can also follow us on Twitter at Epicenter BTC. And finally, you can donate to us, which of course we very much appreciate, since you still do not have any advertising, although we were sort of in talks with a few people. And the community at epcentrebitcoin.com slash tips. So thanks so much. See you next week.