Startup Investor School Day 4

Bromberg frames venture history around three recurring shifts: lower costs to start companies, lower barriers to investing, and pressure for faster liquidity. He argues that as those barriers fall, more capital and more startups enter the market, though liquidity can slow down in some periods.

He traces venture from early firms such as J. H. Whitney and ARDC, whose investment in Digital Equipment Corporation returned about 500 times in 11 years, through the growth of institutional capital and the 1980s fund boom. Later shifts included YC’s standardization of convertible notes, the SAFE in 2014, and online platforms that broadened access to startup funding.

Bromberg describes ICOs as a new fundraising path that can let projects raise money online, while stressing that tokens represent participation in a network rather than company ownership. He distinguishes protocol, application, and asset-backed tokens, and contrasts token investing with seed rounds in governance, valuation, founder access, and liquidity.

Using Filecoin as an example, Bromberg explains how a token can reward people for providing storage and checking that files remain available. Storage providers stake tokens that they can lose for failing to meet commitments, while verifiers and miners are rewarded for their work. He cautions that ICOs were a young, volatile market and called for careful evaluation of the technology, team, and deal structure.

Bromberg expects continued pressure for faster liquidity and lower costs to start and fund companies. He also warns that early investor exits can weaken a company during a downturn, so token projects may need longer lockups. In the Q&A, he says a token project ideally raises enough to launch its network, but acknowledges that many may run out of money before reaching that point.