The Story Behind My Investment in Protocol Labs
Almost three years ago now (summer of 2014), a friend said I should spend some extra time looking at a new small company that had formed out of Stanford. I remembered seeing the company at Y Combinator’s Demo Day in August 2014. The presentation was memorable for the scope and clarity of the company’s mission. I got the introduction to the founder and back-channeled him a bit before meeting — everyone I talked to didn’t just say he was smart, they all paused and said something to the effect of, “No… I mean, he’s different. He’s really, really smart.”
Those endorsements became quite evident when I met Juan Benet. You can read about his background here, or even more interesting, I’d encourage you to watch some of many his speeches and lectures on YouTube here. After meeting Juan the first time, I wanted to invest. Looking back on the email chain we had back then, he was incredibly gracious, flexible, and patient with me. However, while I knew I wanted to invest, I didn’t fully understand the scope of his mission at that time. In a somewhat embarrassing (yet recurring) request, I asked to invest, but also that we meet again and that he help me understand the real drivers behind Filecoin, IPFS, and his vision.
At that time, I had been reading up on Bitcoin and the blockchain, I’d held a decent little chunk of BTC personally, and I had invested in Gyft, which leveraged Bitcoin to help with overseas payments (and was eventually acquired by FirstData), and I had invested in Chain, which is building enterprise-grade blockchain infrastructure for the financial services industry (and is one of the leaders in this category in the financial services world), and I had invested in SFOX, advanced trading platform for professionals to exchange cryptocurrency (which is on fire right now, too). Also at that time, I started writing more about the blockchain and how venture investors could play in this space. You can read that primer here. And, since then, Bitcoin hit its own “Crunch” and then came back to life. Ebbs and flows.
While I was following my interest and trying to educate myself on the business implications of a blockchain, it was Juan who opened my eyes to how some of these new startups — new Internet protocols, really — could actually rebuild and reshape how information is stored, retrieved, and moved across the Internet. What if the web was designed in a manner such that applications didn’t need to be centralized? What if control and decisions could be both distributed and live on the edge of the network? What if scarce resources could be mined, discovered, and added to the network, creating incentives for new participants to engage, lower costs across the board, and improving efficiencies along the way? Juan patiently explained to me, in lay terms, how a distributed system architecture was his ultimate vision and a future he was passionate about building.
I won’t try to explain all the intricate details of what Protocol Labs is building with Coinlist (the exchange for pre-ICO offerings, in partnership with AngelList), or with IPFS, aka Inter-Planetary File System (the open source project which oversees a content-addressable, peer-to-peer hypermedia distribution protocol), or with Filecoin (Protocol’s forthcoming token that will be issued to incentivize storage on the IPFS network), but you can click on the links here to read more about them. And when it comes to the long-term implications of Protocol Labs, I would simply point to this elegant post by USV’s Brad Burnham, who is an investor in the company and advises them closely. It is simply exciting to read Brad’s post and ponder the massive potential this technology and network holds.
I am fortunate to be a small early investor in Protocol Labs. Juan was gracious in teaching me about his world. Reflecting on this investment, I’m reminded of a theme which seems to recur for me in this world of technology investing — it is the founders who generally tip investors off about the future — not the other way around. While I was somewhat prepared to meet Juan back in 2014, I hadn’t yet been exposed to the type of company he was trying to build. I had to gain the conviction in real time, and lucky for me, I trusted my gut and my network and went forward.