Directionally Correct: How Crypto is Unlocking Entrepreneurs and Investors

Crypto is a unique space for many reasons. One, in particular, is that founders can generate immense wealth outside of the equity value of their company (i.e. Coinbase, ConsenSys, etc). while they are building and the speed at which they are “exiting” those companies through community governance (i.e. Comp, Synthetix, Balancer).

Many people recognize this emerging trend but it is less understood how it might impact the future of innovation and startups.

The Change in Value Capture

The Internet directly generated hundreds of billions in value. Trillions indirectly.

Most of the value generated by the Internet was captured by startups like Facebook, Google, and Amazon that capitalized on the internet’s potential. The equity owners of these companies profited massively, and rightfully so. However, there were thousands of entrepreneurs that also saw the value of the web, built companies, and failed.

To become the most successful entrepreneur or investor required being more than “directionally right” (e.g. The internet will succeed) – it required being “precisely right” (e.g. This specific search algorithm will win).

This is the path of nearly all technological trends in history. Entrepreneurs whose railroads went bankrupt didn't reap the financial benefits of the completed transcontinental railroad. It wasn’t enough to know that a completed rail system would transform a young and rapidly industrializing nation. You had to execute or bet on the right horses ala Cornelious Vanderbilt, Jay Gould, or JP Morgan.