c2c #4: funds on blockchain, ESG NFTs, Taiwan, VC

Welcome to Cowries2Crypto, my LinkedIn newsletter on innovation in finance and capital. In here you will find:

1.????Work from the Week: aspects of the original work I do at DigFin and AMTD Digital covering digital finance, fintech, and digital assets

2.????Talk of the Town: thought-provoking (or at least funny) hot takes on fintech and finance from around the internet

3.????Weekly c2c (comment2critique): my review, experience, opinion, or other commentary

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Work from the Week of Jan. 23-29: mutual funds on blockchain, NFTs for ESG, Taiwan’s CDFH

Fund distribution DLT pilots struggle to get airborne: There’s a lot of mess in handling the sale of mutual funds, and blockchain could definitely help, but getting enough people to try it remains hard. Some tech companies hope to crack it this year.

DigFin Green: Bree Yek, Carb0n.fi, NFTs for ESG: A young startup in Singapore thinks blockchain can help change the incentives to make sustainability an affordable practice for Asia’s small businesses.

Taiwan’s CDF banking group building digital partnerships: The head of digital at this largish Taiwanese group talks about how technology and embedded banking models can breathe new life into how a bank can expand overseas.?

Talk of the Town

It's been a crazy week in digital finance, with markets crashing, Big Tech getting punched in the nose, Wealthfront selling to UBS, and more heat on BNPLs in Europe.

Risk assets crash

With the Fed threatening both to shrink its balance-sheet holdings of securities, and to raise interest rates, the writing is on the wall for risky assets. Markets have been volatile, with US tech stocks, crypto, and other asset classes suffering reversals. Heroes of the bull run, from bitcoin bros to Cathie Wood of the ARKK ETF all came in for a razzing.

And on a more sober (and insightful) note:

I definitely recommend Michael Pettis's short but revealing thread.

Bad week for Big Tech

America's biggest tech companies can handle a little stock volatility, but they are still struggling with fintech. This week saw both Google and Meta (Facebook) retreat from digital payments.

Meta's selling Diem, its crypto business. This raised the question of exactly what Diem ever amounted to.

Zuck can take comfort that he's not the only titan who's getting finance all wrong.

So, a tough week for Silicon Valley. But, you know, setbacks happen; companies figure it out. If I were a banker, I would NOT get smug or comfortable. There's a reason why JP Morgan's Jamie Dimon announced the bank will spend $12 billion on tech this year. At least half of that will go to maintenance and cybersecurity, but the banks are still full of fat. Even the biggest ones.

Big Tech will be back!

Wealthfront gets acquired

One of the biggest stories this week in fintech was Wealthfront, the pioneering robo-advisory, sell itself to UBS. This is a big moment for wealthtech. It proves the value of tech-led investment platforms and the scalability of service, which results in a hugely valuable customer base.

But not everyone was happy to see UBS be the buyer. Wealthfront invented something new in asset management, only to be snapped up by an incumbent.

BNPL blues

There's also been a backlash in Europe against buy-now, pay-later fintech, as regulators uncover some of the more predatory aspects of the industry. (Anything to do with lending is always going to have some ugliness.) But BNPL is here to stay because consumers and merchants like it. The bigger problem these fintechs face is how to keep growing. Increasingly that means offering products that make them start looking more like the credit-card companies and banks they're meant to disrupt.

Meanwhile, in Asia...

Closer to home, fintech is still going gangbusters.

There's just so much dynamism in this region!

Meanwhile in the US, control-tower traffic tech is so 1970s that they had to get the government to a do a last-minute ban on 5G rollouts near airports. Hope Biden's infrastructure bill earmarked some spare change for the FAA.

Weekly c2c: VC: An American History

VC: An American History, by Tom Nicholas, Harvard University Press, 2019

“Venture capital is largely an American invention,” begins this history by (British) professor at Harvard Business School Tom Nicholas. By digging through the history of American risk-taking, he sheds light on why the US remains the greatest source of innovation, even today.

I agree with his premise, but VC in 2021 is no longer just an American story. That bigger drama, however, is outside of Nicholas’s ambition. He wants to show why venture investing emerged the way it did, and that means understanding how America packaged inventiveness.

The roots go back to the whaling communities along the cold, rocky coast of New England. The book’s showstopper of an opening delves into the relationships between ship owners, captains, and the financiers who paid for these uncertain voyages.

Nicholas identifies many parallels between these early arrangements and the modern VC fund, including both the high degrees of risk and return, and the structures that investors used to protect themselves.

He touches on the period of corporate enterprise in new industries such as electricity, the development of family-based investment funds, and the first formal VCs in 1940s Boston. Nicholas has unearthed a wealth of detail about contracts, fees, and returns. He does a good job of keeping the story on track even as he explores such minutiae.

He also, rightly, turns his attention to the critical role of the US government in fostering entrepreneurialism, both directly by supporting venture firms, indirectly through military contracts to tech companies, and generally by supporting an ecosystem for innovation, including tax and regulations for pension funds.

Nicholas chronicles the early VCs and the iconic names that grew out of the 1960s and 1970s, from Venrock to Kleiner Perkins to Sequoia, and the big companies they backed, such as Fairchild Semiconductor and Genentech.

These led to different styles of venture investing, a diversity that has only multiplied since. (Nicholas also notes the lack of a different kind of diversity in VC, noting the industry’s biggest hurdle in today’s America is its lack of women and minorities.)

He ends his story with the dotcom bubble that burst in late 2000, and the industry’s shift from investing in chips and hardware to backing software and the early consumer internet.

Although Nicholas provides an afterword that mentions new forms of risk-taking capital that have since emerged, he does not explore the immediate past: he wants to remain where he has the research and data to tell the story in full.

And because the author remains focused on VC in America, there are some omissions, such as the impact of Japanese competition on US technology in the 1980s and 1990s, or the growth of foreign talent in Silicon Valley and what that meant for creating international networks. But sometimes it is wise to stick to one’s knitting. For anyone interested in the creation and evolution of VC in its home market, I recommend this book.

(There is a new book now in the market on VC’s American history, by former FT editor Sebastian Mallaby. I’ll probably get around to it, but it’s like 500 pages long.)

See you next week

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Cowries2Crypto will be back next week! But with less stuff, as we're headed into Chinese New Year. Kung hei fat choy!

About Jame

Jame DiBiasio is a book author, financial journalist, media entrepreneur, and a speaker/moderator. In 2015 he launched DigFin, a website media brand covering digital finance, fintech and digital assets. The business was acquired in 2021 by AMTD Digital, part of Hong Kong-based AMTD Group. Jame is also a member of the board of the Hong Kong Fintech Association.

He is author of “Block Kong” (co-authored with Charles D’Haussy) profiling 21 blockchain entrepreneurs in Hong Kong; and “Cowries to Crypto: The History of Money, Currency and Wealth”. He is currently working on a book about the venture capital industry.

Jame has also written books about Asian history, including “Who Killed the King of Bagan?” and “The Story of Angkor”. He writes thrillers too, including “Bloody Paradise” and “Gaijin Cowgirl”. You can find all of Jame’s published books on Amazon.

A native of the United States, Jame has been based in Hong Kong since 1997. Follow him on LinkedIn and Twitter.