Venture Capitalists! The Time to Invest in Ethereum Has Come

Just months after the platform’s product launch, the first wave of ethereum startups have begun to receive interest and undisclosed investments from digital currency venture capital firms.

In interviews with four of the industry’s top blockchain and cryptocurrency investors, they revealed that many of their firms have begun rigorously evaluating startups that leverage decentralized application platforms. Ethereum has gained huge traction after a successful hard fork and testing by major financial institutions.

For example, Digital Currency Group (DCG) investment manager Travis Scher said the firm has evaluated 20 to 30 startups working on ethereum. Blockchain Capital managing partner Bart Stephens told CoinDesk that his firm has invested in two ethereum startups.

Bart Stephens said Blockchain Capital was one of the most active early investors in Ethereum technology and that they were “bullish” on Ethereum because of the positive feedback it received from large financial institutions. They even appointed a junior associate, Jeremy Gardner, to focus on their portfolio in this area, including Bitcoin startups Coinbase and Xapo.

Stephens told CoinDesk:

“We love Bitcoin, we love the Bitcoin blockchain, but we also see a multi-chain future. Some enterprise consumers are interested in federated chains and private chains, and Ethereum is very high on the list of these companies.”

In the coming months and years, the Ethereum platform is scheduled to undergo several complex updates and upgrades, including a shift from proof-of-work transaction validation to a proof-of-stake approach.

Other bitcoin and blockchain venture capital firms such as DCG, Boost VC and Pantera Capital have expressed interest in investing in ethereum startups.

DCG said it expects to make its first investment in a digital currency company in the second or third quarter of 2016, with more Ethereum startups expected to join its portfolio by the end of the year.

In contrast, Bitcoin companies did not receive their first investment until April 2012, more than three years after the first block was mined in January 2009. At that time, Draper Associates received a seed round of funding from the now-defunct Bitcoin incubator CoinLab.

Challenges of Ethereum Investment

For those investors who have not yet invested in Ethereum, most respondents said they feel it is too early to say how long the Ethereum developer ecosystem will last.

These respondents agree with those who are long-term investors that a healthy Bitcoin developer ecosystem is one of its most attractive features.

Meltem Demirors , DCG Community Director:

“One of the challenges facing Ethereum startups in their evaluation is that the Ethereum community is still small and many entrepreneurs are still new to the cryptocurrency ecosystem, so their leadership capabilities are questionable.”

Demirors believes that the early Bitcoin ecosystem may have more connections and technologies than the Ethereum ecosystem.

Brayton Williams, co-founder of Silicon Valley incubator Boost VC, said there may still be a lack of mature entrepreneurs in the field of Ethereum technology.

Williams said:

“We need to first find an entrepreneur who can solve a problem and is confident that Ethereum can be a solution or can provide tools for a solution. We try to avoid people who are just excited about the Ethereum technology and then create trouble.”

Pantera Capital venture capitalist Paul Veradittakit said his company is often called a Bitcoin investor, but we have always been eager to invest in multiple chains, and now there is Ethereum. However, he also said that the company has some questions about how Ethereum technology can overcome future challenges.

Veradittakit said:

“We want to make sure that the security and scalability are well thought out and identify the use cases for it. We are watching Ethereum.”

Interest from Bitcoin Startups

Respondents said one driving factor behind the interest is that companies in the digital currency industry are looking at and implementing Ethereum as part of their go-to-market solutions.

Stephens noted that Blockchain Capital’s portfolio companies, including Bitfinex, Kraken and BitGo, currently offer Ethereum services, while payment processing company GoCoin will soon support Ethereum.

“We’re seeing a lot of companies adding Ethereum services.”

Demirors said some DCG portfolio companies are taking a similar approach, building infrastructure for ethereum ecosystem services.

She said:

“I think the early investors we’re seeing now are coming from the Bitcoin ecosystem, who can leverage their operational capabilities and strategic partnerships with banks, regulators, and other stakeholders to begin building a robust global network to trade, hold, store, and manage Ether.”

Notably, this logic has been used by the financial industry to explain why it is better positioned to help blockchain technology reach the mass market.

Ethereum’s potential

Respondents had mixed predictions about the potential for Ethereum startups to thrive.

DCG's Schell said Bitcoin can be used for both value storage and finance, and Ethereum cannot compete with Bitcoin in these areas.

However, Schell sees areas where Ethereum can compete with Bitcoin, such as smart contract platforms, identity management and provenance tracking of things, among other areas with huge impact.

“Startups building these types of products and services may choose to use Ethereum in the future because of its greater ease of use and other features, which is a great development opportunity for us and the blockchain ecosystem.”

Demirors said she believes the ethereum community will one day surpass bitcoin in terms of developer numbers because ethereum’s scripting language is simpler.

Stephens noted that he believes VCs’ interest in Ethereum is a positive phenomenon and that VCs are beginning to analyze the investment potential of the Ethereum industry.

Original article: http://www.coindesk.com/first-ethereum-startup-funding-investor-says/
By Pete Rizzo
Compiled by: Kyle
Source (translation): Babbitt Information (http://www.8btc.com/first-ethereum-startup-funding-investor-says)