Venture Capitalism: Making The Wealthy Even Wealtheir

in LeoFinance22 days ago

There are many reasons for the wealth inequality that is arising around the world. Of course, in the poorer countries, this was always the case. However, over the last few decades, we saw this trend rising in the developed world.

While we could spend many articles sifting through all the reasons for this, there is one factor that is standing out: Venture Capitalism.


Source

To start, we must state that VCs perform a terrific service. They are willing to invest money in companies that are very risky. In fact, they take losses more often then they succeed, especially in the technology arena. That said, their service is now going above and beyond.

The problem is the Venture Capitalists are the first in line. They are also protected. When a VC gets into a deal, you or I are not included. We are exempt from participating.

It is an exclusion that is supposed by the government, obviously "for our protection".

Coinbase is a prime example of this. We saw the company go public with a $100 billion valuation. Perhaps this company becomes worth half a trillion in 5 years. Who knows. The problem is the Venture Capitalists were able to extract $100 billion before the public even had a chance to participate.

We see another potential situation forming with Epic Games. This company keeps raising billions of dollars from the VC world. Since it is involved in the laying the foundation of the Metaverse, this could hit the market at $250 billion (or more). That is a lot of cheddar before the general public can get involved.

While either of these companies could see valuations higher in the future, the issue comes in the return. Will someone see a 20x in Epic games if it goes public at a quarter of a billion dollars? A $5 trillion company would be quite a feat considering the largest publicly traded entities only just crossed $2 trillion.

There certainly were VC firms that made more than 20x on their money with Coinbase. Again, it is a situation where the average person was excluded.

Would you have liked to get that type of return? Perhaps many reading this would have been willing to put $250 or $500 into it. That would have turned into $5K or $10K. Probably not life changing money for the developed world but a heck of a return.

It is easy to look back at Coinbase with hindsight. However, would you like to be involved with some funds in the next round of capital raises by either Epic or SpaceX? I would surmise there are many here who would toss a few bucks at a situation like that.

For the stability of the global economy, isn't it better to spread things out? Presently, a billion dollars can be raised through 3 or 4 companies. Wouldn't the overall market benefit from 1 million people putting up $1,000 apiece? Then, if there is a 20x, 50x, or 100x, the payouts are affecting large groups of people.

Of course, this cannot take place unless those one million people are "accredited investors".

Do we realize now how the laws are structured, not to protect us but, rather, to protect the big money players?

In the drafts for professional sports, the players taken early tend to be the best players, at least at the time of being selected. Of course, this is not a science and there are many instances where the top draft picks fail. However the present system we have is akin to the best teams selecting earlier in the draft and the others selecting afterwards, taking what is left over.


Source

Cryptocurrency has the opportunity to change this. In fact, cryptocurrency has to change this if we want to see financial freedom spread throughout the world. We need to use this technology to change the system in such a way that will collapse the Venture Capital market. Instead of projects going to major firms for funding, it turns to the public markets, via tokenization, for this.

Here we see an opportunity for everyone. We then would have a system whereby anyone could participate. Some might only put up a few dollars while others get involved with large sums. It will be up to each individual to judge the amount of risk one wants to take.

Of course, this is best done with people who take the time to financially educate themselves. The fact that most people lack the basic understanding that goes along with this is a serious problem. Fortunately, the Internet changes all of that.

There is now a wealth of educational material available for free online that enables anyone to learn about investing, money management, and wealth building. This will enable them to enter this arena in a sound manner.

We are now seeing a lot of Venture Capital money flow into cryptocurrency. It is not buying up tokens but funding the development of applications that could become mainstream in a number of years. Here we see another problem. Just like with Bitcoin, we are seeing the hijacking of the entire industry. While the blockchains might be public and open to all, the applications which will be a big part of the wealth building going forward are still structured (and funded) in the same manner as everything else.

Who do you think is going to reap the bulk of the rewards?

On a number of occasions I wrote how we need to start funding ourselves. Cryptocurrency has the opportunity to generate a circular economy where a self funded system that generates profits keeps reinvesting them into other projects that grow the system.

Ironically, this is exactly what VC firms do.

In the end, cryptocurrency has the opportunity to completely restructure the funding world and destroy how the VCs do business. This does not mean they will disappear, simply that they will have to adapt.

If we can develop a more inclusive system, then the wealth inequality will start to diminish as others enjoy some of the rewards earlier.

We are seeing companies going public much later now. This means that the VCs are taking even more of the early profits. It will only continue down this path unless we step in and change things.

This is how Venture Capitalism is making the wealthy even wealthier.


If you found this article informative, please give an upvote and rehive.

gif by @doze

screen_vision2025_1.png

logo by @st8z

Posted Using LeoFinance Beta

Sort:  

The great part is that we already had Venture Capital funding beat with ICOs during last bull market which had very young ecosystem in the cryptosphere. We have already made the first steps into a better future.

One of the largest legal barriers is banning certain investments for anyone who is not an "Accredited Investor"

An accredited investor is an individual or a business entity that is allowed to trade securities that may not be registered with financial authorities. They are entitled to this privileged access by satisfying at least one requirement regarding their income, net worth, asset size, governance status, or professional experience.

In the U.S., the term accredited investor is used by the Securities and Exchange Commission (SEC) under Regulation D to refer to investors who are financially sophisticated and have a reduced need for the protection provided by regulatory disclosure filings. Accredited investors include natural high net worth individuals (HNWI), banks, insurance companies, brokers, and trusts.

https://www.investopedia.com/terms/a/accreditedinvestor.asp

Some projects like Hashgraph were not within the reach of investors like me due to the legal environment these laws that were allegedly created to "protect investors".

Posted Using LeoFinance Beta

Last time we might have had them beat and look at what the SEC did among other regulatory agencies. It went after all those companies that held ICOs for dealing in unregistered securities.

This is why decentralization is so important. Put it outside the reach of the regulators.

Posted Using LeoFinance Beta

Decentralized version of ICOs and IEOs have been around for years. People simply didn't pick up on them. https://komodoplatform.com is one of the greatest cryptocurrency projects ever working on both privacy and decentralization.

It would be great if you can give a shoutout to the project in one of your articles. Below are some information to get you started. We need people to adopt these technologies. The innovation part is mostly done.

https://docs.komodoplatform.com/whitepaper/chapter4.html#the-challenges-in-current-ico-platforms
https://developers.komodoplatform.com/basic-docs/start-here/core-technology-discussions/initial-dex-offering.html

Posted Using LeoFinance Beta

Of course, this is best done with people who take the time to financially educate themselves. The fact that most people lack the basic understanding that goes along with this is a serious problem

Education is quite an important part and must be done before putting in money. VCs are getting wealthier because they are taking and as you said that they are not always in profit and they bear losses as well. Maybe the case that the percentage of loss is quite lower than the profit.

Posted Using LeoFinance Beta

The loss is often complete.

Just when they are right, they really profit. It is a numbers game. How many losses can one absorb if there was a 50x on Coinbase?

Posted Using LeoFinance Beta

Its indeed a number game and cases like Coinbase makes a huge impact.. I got it. thanks.

For our protection-like hell lol. I looked at StoreDot recently hoping to get some shares at some point as the battery industry will explode with what they are doing. The likes of you and me have no chance and by the time shares hit the market the 1000x gains have already gone.

Posted Using LeoFinance Beta

Yep. That is how it works. There is no way to get in the early days unless you are an accredited investor and even then it is slim pickings. The VC firms have so much money locked up that they get to pick from the best projects.

Crypto needs to change that and it starts with our mindset.

Posted Using LeoFinance Beta

For our protection for our freedom collectively as a people, I’m all up for everything but Venture Capitalism, they haven’t really done much for me. Did you invest in $COIN?

No I did not. I dont mess with IPOs. Sometimes they run on you but most often they drop back.

They are bad returns because of the fact that the early stages already had the money taken out by the VCs. They are inflated beyond belief. Then the hype train can get going.

Posted Using LeoFinance Beta

Hmm very interesting thanks for the insight

In the end, cryptocurrency has the opportunity to completely restructure the funding world and destroy how the VCs do business. This does not mean they will disappear, simply that they will have to adapt.

This is a process and won't happen overnight. They may dominate for some time but I'm sure not forever. People are accumulating wealth every day, just as we do here. That is also a process and takes time. Patience and knowledge :) and it will happen, one day they will not have so much power.

Posted Using LeoFinance Beta

Well the problem is the laws that favor them. So without this changing, it is going to be difficult.

Hence we need to see it operating in a decentralized way where the SEC really has nobody to go after or see it take place in countries that allow it and have it spread from there.

Either option is not very easy. But the more the bags are filling up in crypto, each day the playing field tilts a bit more.

Posted Using LeoFinance Beta

Excellent assessment of the problems associated with the notion that we need government to protect us from our own decision-making.

Same has been the situation with the pandemic, which my friend @johntamny addressed when he spoke to our students a few weeks ago. Links to an overview and an archive of his talk are available here.


Posted via proofofbrain.io

The way you put it looks like VCs are perfectly aware of the two sides of the sword. I see such risk management quite similar to investing in low cap coins. High risk high reward.

Posted Using LeoFinance Beta

They understand the situation very well. They tend to have a breakdown where they know they are going to lose all their money on half the deals. On 3 out of 10 they might break even and one or two make a profit.

It is the one of the two that they are seeking to cover the rest. They money in a Coinbase makes up for a lot.

Posted Using LeoFinance Beta

Its hard to get into the door to be a venture capitalist. I think you need a ton of money and then you need the connections to know the business owners. In the youtube video I saw, I think he was a millionaire and he bought a part of one of those online banks. Basically he put down a decent chunk of money and he was hoping for it to succeed. So a high risk high reward opportunity but the problem is its not very inclusive. The normal person can't get in without enough money or connections.

Posted Using LeoFinance Beta

Yes this is another issue. I worked for a venture capital firm for several months. Prior to that i worked for some of the largest wallstreet firms in the country. The problem with venture capital these days is it's still based on the ill flawed capitalistic model post 1960's.

What do i mean by post 1960's. Well this is the era where families could have one earner support their entire family. This is still the era of the housewife. Not to say keeping women in the house is a goal. However to say that it was possible for one paycheck to support a family.

The capitalistic model today or the corporatist model. Is purely a profit driven model that confuses an ecosystem for an economy. So what i'm saying is our entire structure stopped caring about the worker and participants in our economy a long time ago. They then moved resources and profit over people. They made people less important. Overall that's made our society sick.

So whereas, big profits created in our systems whether it be from venture capitalist or the government picking winners. I feel is not advancement at all. So the problem i have with your article is you say it's done good. I think its done measurably worse year after year.

Now you are correct in saying that regulation keeps small investors out who could have more economic prosperity as they'd pick the next big companies. Some would lose all their money. However the opportunity may balance itself to a degree in which you could have more opportunity for wealthier citizens.

The issue though is more than likely many still based on this system wouldn't have enough disposable income to even participate then. However i still think its their choice in that state lotteries are sanctioned and there is no legal restrictions on who is able to do that if they are concerned about citizens well being. However they are more than eagar to take away any possible chance of you becoming wealthy overnite lol. So the corruption and sickness and treachery of our systems are unbelievable.

Right before i'm ready to give up on humanity. As human beings i know in my country we're behind in education tremendously. I think in Europe they got a bit better idea. So their structures when it comes to how you value people i think are a great deal better than the united states. However in europe and canada the education system is higher iq people.

Now some will say yea but these countries suffer from this or that or they gotta pay high taxes. That may be so but atleast they have enough common sense to understand a human being is more valuable than a product. More important than b eing used for cattle in consumerism. Atleast they got a little better grip on prioritizing their pyramid of values. In the United States we don't even have that.

However right before i'm ready to give up on especially Americans. Their thought processes. I run into this.

Posted Using LeoFinance Beta

They then moved resources and profit over people. They made people less important. Overall that's made our society sick.

And this is only getting worse with AI and robotics. People are being pushed out of the equation.

So the problem i have with your article is you say it's done good.

I dont think it is debatable that some of what have come out of venture funding has done a lot of good for society. I agree with you that there is only one focus of corporations is profit and that is a problem. However, many of the things we have now were funded by VCs. In fact, their hand is all over the tech wave of the last 30 years.

Posted Using LeoFinance Beta

Well i mean here's the problem. What exactly are we calling advancement though? For example sure you can make the statement venture capital firms have funded the next gadgets and innovation the my pillow guy. sham wow guy lol. I would still raise the question though in a serious manner what exactly is advancement?

Obviously i'm not saying that there haven't been some great inventions. The more important question though is has the system we have now done more damage than good? Has it done more unnecessary damage when it didn't have to. I believe the answer is yes.

So to me advancement looks like more economic prosperity to all. We can check the box no on that. As people have gotten poorer the last 60 years not richer. That's provable data wise. We're living longer but not necessarily living healthier with a better quality of life. Many are miserable with their jobs and unhappy with their governments. To me those are the marks of advancement.

I"m not sure we need a venture capital firm to go fund a super soaker water gun, although that was fun lol. Same thing with crypto i don't know if we need another redundant project. So yes i agree vc firms hit on targets sometimes. although i've been humorous and serious at the same time. Sure vc's have hit right on in certain levels but certainly nowhere near the good they could have done if they had a better system which they don't have because its based on this failed model of what we worship i our minds called capitalism.. i call it corporatism. .that's been imploding for the last century.

What makes me feel more optimistic is there are some companies now introducting the idea of the " social company". In other words they wanna go back to the mood of the 50's and 60's. When your boss was worried about your home life and if it could do anything more to help you and your family. When the overall health of the system was good and not just some entity acting as a person but not a person only serving itself for itself and not for the common betterment for the communities they operate in and the people they hire.

I would have agreed that crypto would be a great new way to start all of this through venture capital using the blockchain. Unfortunately crypto has shown me so far that it's nothing more than me going on nasdaq and buying some penny stocks and taking huge risks. They gotta show me more the chain has to show me more. I think it has to show the rest of the world more. At this point all crypto is succeeding in doing is showing us it can replicate an existing economy and create a new asset class preferrable for banks. I'm not impressed and until there is a consciousness shift i dont think it looks very good. Now there are some project in my opinion just make sense should be on the chain. Products like Singularity.net. Which is decentralizing ai and making it safer for us all for a multitude of reasons. So thats good. However to be honest when i think of venture capital on the blockchain.

Do you know what i picture? I picture something like this hive proposal system. I wasn't impressed with that as well. So i think we got a long way to go. I hope we get there. I dont feel people at this stage think cryptocurrency is important in their lives. An ole wise man a long time ago told me. If you wanna make alot of money you gotta help alot of people. So alot of people come here they really wanna get rich. You gotta be valuable and relevant to people where they can see it . where there is a demonstration in their lives to get to that point where that is going to be significant enough to attract people. So alot of things has to happen. I just hope it doesn't take 50 years for us to get there lol.

Posted Using LeoFinance Beta

It is great but I also need some help with Hive power boss..could you delegate some for me.

I just delegated some to you.

Try to leave more comments that are more than just "Wow. Great article" or stuff like that.

Comments are to stimulate engagement. This is something that most do not do. Give content creators something to respond to.

Posted Using LeoFinance Beta

Okay, thanks for your advice.. Really appreciated with the delegation. I will leave more impressive comments and thoughtful ones..have a great day

Good job. I want to see all succeed.

And comments are a great way to do it, if they are thought out and applicable to the topic.

That is how you start to stand out and get a bit of a following.

Posted Using LeoFinance Beta

pixresteemer_incognito_angel_mini.png
Bang, I did it again... I just rehived your post!
Week 54 of my contest just started...you can now check the winners of the previous week!
9

Congratulations @taskmaster4450! You have completed the following achievement on the Hive blockchain and have been rewarded with new badge(s) :

Your post has been really appreciated and was the most upvoted of the day

You can view your badges on your board and compare yourself to others in the Ranking
If you no longer want to receive notifications, reply to this comment with the word STOP

To support your work, I also upvoted your post!

Support the HiveBuzz project. Vote for our proposal!