A VC’s perspective on Blockchain opportunities & impacts on Australia
by Victor Jiang, Managing Partner, Sapien Ventures LLP.
I was truly honoured to have presented to and judged alongside a distinguished panel (from ANZ, Westpac, UBS, & Northern Trust) and key industry leaders at the inaugural Australian Blockchain Summit 2016 (Melbourne June 28-30th, 2016), and to have a chance to speak about what we felt are the opportunities and impacts of Blockchain on Australia.
(The speech was immediately before a pitch/showcase session of 6 excitingly disruptive blockchain startups from USA and Australia, including one dialling in from 3am in their local time!)
I’m really excited and honoured to be here, speaking just ahead of some truly exciting startups in the blockchain space.
Who are we:
Sapien Ventures is a fin-tech focused venture capital firm based in Australia, with teams in Silicon Valley, Sydney, Melbourne and Shanghai.
As a VC, we look for problems or inefficiencies in big enough markets, where an innovation can come along and solve that problem. We then scale that solution with capital and our resources, and in the process, make a positive return for our LP investors.
There is a joke among our circles, the PE guys look for downside minimisation, the VC looks for upside maximisation…
By that virtue, and by our investment mandate of 10x or greater ROI, we are necessitated to look for the biggest problems in the market to solve…
This is why blockchain is so important for us.
Every now and then a technology comes along that changes societies.
When the Internet first emerged in the mid 1990’s, people associated it with only bespectacled nerdy types…
When the first social networks emerged in the early 2000’s, people associated it with nothing more than a “college prank”…
When the first iPhone emerged in 2007, Steve Ballmer at Microsoft called it a “poor email machine” and said corporates would never take it up…
When block-chain first emerged barely 7 years ago, no one thought it could be considered as potential replacement for the backbones of banking and exchange clearance systems. Or at least not so soon…
Yet when we look at the possibilities of what a blockchain-driven society could enable:
Of instantaneous asset transfers, across borders, at little or no fee, with public scrutiny and (theoretical) immutability, we can’t help but feel that this technology is inevitable and inevitably going to be huge.
The very concept of money and how we transact with one another could fundamentally change.
When we combine that with the wider fin-tech revolution that is going on around the world, where financial services are being RE-INTERPRETED through technology, this makes for truly exciting times.
Who does it disrupt
Here I’d like to repeat some of the questions asked earlier in the day:
Why is it that buying shares in a publicly-listed company takes only seconds, but the actual full settlement takes 3 days?
Why is it that buying a house should necessarily take 4-6 weeks to complete, even if I have the cash to buy it outright? Why can’t I buy it this minute, and sell it to someone else the next minute?
Imagine a world where we can do those kinds of transactions, at those speeds…
We have heard from David Lawrence (of SSX) from earlier talk about high-frequency trading capabilities they are actively developing on the back of blockchain. This is starting to happen, RIGHT NOW.
Imagine a public-private repository of personal data – powered by blockchain, where every bit of information you need to complete the purchase of a house is stored, and with your permission, accessed in matter of minutes or seconds, to facilitate the completion of the purchase. And where in the next minute, someone else can interact with you to buy that very house off from you, safely knowing that you were indeed the legitimate owner of that property?
What will technology like that do to our property markets? To our share markets? To our financial system?
These are the sort of questions we as technology investors asks ourselves everyday. We then look for specific entry points with low enough hanging fruits and high enough yield potential, put enough capital behind these changes to catalyse them in the shortest timeframe possible.
The good news (or bad, depending on your point of view), is that this timeframe is constantly getting shorter.
In a rapidly-changing world such as ours, where global shocks can instantly affect the entire world’s economies (look at Brexit as an example), it would be very interesting to see how the incumbents would prevent themselves from being disrupted, and how the would-be disruptors pivot and adapt to realise their full potential.
For example, it wasn’t so long ago that Alibaba – today the world’s largest eCommerce player, went to their local banks and financial institutions to ask for help on payments and escrow functions. The responses they received prompted them to create Alipay – now the largest payments platforms in the world, if it were an independent company.
The banks in question made the assumption that Alibaba needed to come back to them at some future point, because they provided the trusted payments infrastructure that consumers are familiar with and confident of.
Well I just saw some financial figures for Alipay, as of May 2014 they have processed USD $519 billion, with average daily transactions of over 80 million transactions.
Clearly consumers had a different idea to the banks around trust and confidence on their payments.
It is conceivable that if Alipay went all out on blockchain, the amount of transaction volumes they could handle would increase further.
What people need to realise about “fin-tech disruption” is that, disruption comes not only from fin-tech startups, not also from tech giants – including giants with market caps larger than most banks or financial institutions.
Implications for Australia:
Australia is uniquely positioned in the world of blockchain. As of now, we are the world-pioneers in the real-life adoption of blockchain technologies in any significant commercial undertaking.
Australian financial institutions stand in a terrific position right now. We have great blockchain talent in this country. Even the inventor Satoshi himself may yet be an Australian!
We have great regulatory support for blockchain at the moment. We have incumbent institutions all paying close attention to the subject. Your very presence at this conference is a testament to that.
We can influence the world right now. We can lead the world right now.
The ASX and SSX are literally leading the world right now.
I liked the comments made by Nick Groves (of ANZ) earlier that corporate institutions and blockchain startups need to really collaborate here, in order for each to benefit from the others strength and resources. What the blockchain startups lack is scale of customer reach / trust / distribution, as well as regulatory knowhow & infrastructure; what the corporates lack is fast prototyping and agility. The ASX and SSX are demonstrating this collaboration right now.
I also liked what David & Loretta (of SSX) talked about in terms of using technology as a disruptive revolution to change existing business models and processes. Don’t accept the status quo.
And I particularly liked how David talked about why Australia is, and could continue to be, the ideal place for driving Blockchain innovations throughout the rest of the world.
By serving as examples of forward thinkers, as risk-tolerant, first adopters.
I recently came back from a market reconnaissance trip to China, and several institutional partners of ours, including an asset-management firm, a stock-exchange, and a tier-2 bank with “only 7 million customers” are all interested in Australian blockchain technology.
As more of you get to hear about the blockchain innovations that exists in this country and aboard, you have a unique window to take up the opportunity to drive a competitive edge in your offerings, to improve your customer experiences.
The opportunities we are talking about here, are:
- an order of magnitude lower cost
- an order of magnitude faster transaction execution
- an order of magnitude simplified architecture (therefore higher efficiency)
This is why, this afternoon, we have assembled the best blockchain startups we can find, from not only Australia but also one from East Coast of USA, to showcase to you their innovations.
And this is a competitive pitch session. The winner of the competition will win automatic entry into Due Diligence mode with Sapien Ventures, with a view for an investment offer.
Don’t wait until the potential for disruption is bleeding obvious and commonplace before you explore their potential.
Because by the time that potential is fully visible, it’s already too late. You’ve already been disrupted.
Now without further ado, let us welcome on stage the blockchain startups!
The winner will enter straight into Due Diligence with Sapien Ventures for a potential investment offer. More importantly it will be in the limelight of the majority of the Australian financial services industry.
The pitching startups:
Living Room of Satoshi (Daniel Alexiuc from Brisbane) – A blockchain-based alternative to BPAY
Dime (Stefan Qin from Sydney) – Blockchain/bitcoin-based cross-border remittances
Full Profile (Emma Weston from Sydney) – Blockchain-based trade financing for wheat and other farmers
Cambridge Blockchain (Matthew Commons from Cambridge, USA) – Blockchain identity management **** Pitched via Skype from USA ******
FriendlySociety (Jonathan Miller from Sydney) – Blockchain-based crowd-insurance
TBSx 3 / BitPos Labs – (Jason Williams from Sydney) – Blockchain-based answer to counterfeiters, with three layers of protection.
And… the winner was… Emma Weston of FullProfile!
(Here’s a more detailed write-up in yesterday’s AFR: