NFTs and Crypto: A Symbiotic Relationship

The Paradox of Digital Ownership

The expenditure of substantial sums on digital artwork, easily replicated with a screenshot, can feel akin to the curious appeal of visiting a mundane concrete location as a tourist attraction. Initially, the value proposition isn't readily apparent – the accessibility of a simple Google image or a street view presents a challenge to understanding.

This observation offers a potential explanation for the bewilderment surrounding the rapid growth of NFTs, or non-fungible tokens. These tokens, created on the blockchain, provide a unique identifier for digital assets. While anyone can capture an image of a digital artwork, only one individual can legitimately possess the authentic, original version. This distinction is a key factor in the recent $69 million sale of artwork by Beeple, a digital artist.

Impact on Cryptocurrency and Startups

The relevance of this topic to the startup ecosystem stems from its potential influence on the broader cryptocurrency movement, which is witnessing increasing activity from both early-stage and established companies. As discussed in Equity this week, the increasing popularity of NFTs could be the catalyst that makes cryptocurrency understandable and appealing to a wider audience, beyond dedicated bitcoin investors.

Typically, platforms facilitating NFT sales require the use of cryptocurrency – most commonly Ethereum – for transactions. Coupled with the inherent human desire for ownership, preservation, and legacy, this creates a potentially transformative scenario. Beeple’s $69 million sale isn’t merely a significant financial event; it signifies the growing prominence of crypto assets and enthusiasts in public discourse.

Topics Covered This Week

• What drives the sale of digital memes?
• Why is the demand for digital collectibles surging now?
• The expansive and inclusive possibilities of NFTs within the creative industries.
• The rationale behind Terry Crews’ launch of a social currency.
• The Biden administration’s approach to cryptocurrency regulation.

The concept of ownership as a means to mainstream adoption for a decentralized network is a complex subject in itself. It’s important to acknowledge that the blockchain and NFTs still have considerable development ahead to achieve true equity, accessibility, and widespread implementation.

However, it’s difficult not to contemplate the opportunities presented by this technology. It transcends the simple act of taking a screenshot; it’s about imbuing pixels with a significance previously unattainable. Similarly, it moves beyond a simple concrete strip, becoming analogous to the iconic Hollywood Walk of Fame.

Consumers are drawn to the exclusivity found within accessible elements of their lives, and this could prove beneficial for creators.

Further in this newsletter, we will examine Coupang’s competitive advantages in the industrial sector, a startup aiming to replicate the Nasdaq’s success in revenue generation, and the internal challenges facing Google’s own artificial intelligence. You can find my ongoing thoughts and tech news updates on Twitter @nmasc_.

Coupang's Public Debut: A South Korean E-commerce Giant

Coupang, frequently likened to the Amazon of South Korea, commenced trading on the public stock exchange this week after setting its initial price. The company’s valuation reached as high as $92 billion during trading on Thursday.

• Goodwater Capital highlights how Coupang is surpassing even Amazon in certain areas.
• Coupang’s strong first-day performance mirrors that of Roblox’s recent IPO.
• Thuan Pham, formerly the Chief Technology Officer at Uber, has joined Coupang as a key leader.

Initially, Coupang identified a gap in the South Korean market: a lack of robust third-party logistics providers comparable to UPS or FedEx in the U.S. While competitors existed, this presented a significant opportunity.

The company capitalized on this by constructing a comprehensive, end-to-end logistics network, which now represents a substantial asset.

Additional IPO Developments:

• Key insights from Coursera’s IPO documentation have been identified.
• Olo’s initial public offering suggests a valuation exceeding $3 billion, with Toast poised to follow suit.
• Investors are now able to participate in the public market for Bloxburg.

Pipe: A Revenue-Based Financing Platform

Pipe presents a unique proposition within the startup ecosystem. It positions itself as an alternative to traditional venture capital, eschewing conventional round naming practices. The company’s stated ambition is to function as a revenue-based exchange, akin to the Nasdaq stock market.

From its inception, Pipe has focused on enabling SaaS businesses to access capital upfront. This is achieved by linking them with investors willing to provide funding in exchange for a portion of the company’s future contract value. Essentially, Pipe transforms monthly recurring revenue into an equivalent annual figure.

Recent developments include a $50 million funding round completed this week. According to reporting by TechCrunch’s Mary Ann Azevedo, the platform facilitated the exchange of tens of millions of dollars in the first quarter of 2021.

Further Reading on Alternative Financing

• Discussions are ongoing regarding alt-financing and its potential to reshape the role of venture capital.
• Insights from Arlan Hamilton explore the future of Backstage Capital and the evolving landscape of VC as an asset class.
• Bessemer’s 2021 cloud report offers valuable context regarding the increasing valuations observed in the software startup sector.

Challenging Google Using Its Own Innovations?

This week’s primary Equity segment featured a discussion of several recent developments, which directly relate to a previously published article: “Meet the anti-antitrust startup club.”

A significant discount on Extra Crunch subscriptions is available using the code EQUITY during signup, granting access to this article and a wealth of our analytical reporting.

Neeva, a startup founded by former Google employees – including the architect of Google’s advertising system – is a company deserving of close attention. The episode provides a comprehensive analysis, allowing listeners to determine whether their views align with Natasha and Danny, or with Alex.

Additional News Highlights:

• Zapier has acquired Makerpad.
• PayPal completed the purchase of Curv.
• Dropbox is in the process of acquiring DocSend.

Attributing breaches to inexperienced staff won't shield your startup from cybersecurity legal repercussions

Recent events, such as the SolarWinds incident, demonstrate that organizations can be held accountable for the errors committed by their personnel through a principle known as “vicarious liability.”

Chandu Gopalakrishnan, a specialist in cybersecurity, clarifies the implications of this for businesses and outlines preventative measures to ensure legal compliance.

Understanding Vicarious Liability

Vicarious liability essentially means an employer is responsible for the actions of its employees performed within the scope of their employment.

This extends to negligence resulting in a cybersecurity incident, even if the employer wasn't directly involved in the error.

Therefore, simply dismissing a breach as the fault of an “intern” or junior employee is unlikely to provide legal protection.

How Cybersecurity Incidents Trigger Liability

A data breach caused by an employee’s mistake – such as clicking a phishing link, using a weak password, or improperly configuring a system – can lead to significant legal consequences.

These consequences can include fines, lawsuits from affected customers, and reputational damage.

The scope of liability often depends on factors like the nature of the data compromised, the extent of the damage, and the organization’s security practices.

Mitigating Your Startup’s Risk

Startups, often operating with limited resources, are particularly vulnerable to cybersecurity risks and associated liabilities.

Here are some steps to minimize your exposure:

• Implement Robust Security Policies: Establish clear guidelines for data handling, password management, and acceptable use of company systems.
• Provide Regular Training: Educate employees about cyber threats, phishing scams, and secure coding practices.
• Invest in Security Tools: Utilize firewalls, intrusion detection systems, and anti-malware software.
• Incident Response Plan: Develop a plan to quickly and effectively respond to and contain a security breach.
• Cyber Insurance: Consider obtaining cyber insurance to help cover the costs associated with a data breach.

Proactive Measures are Key

Waiting for a breach to occur before addressing cybersecurity is a reactive – and potentially devastating – approach.

By proactively implementing security measures and fostering a culture of security awareness, startups can significantly reduce their risk of liability and protect their valuable assets.

TechCrunch Updates

Several important announcements and updates from TechCrunch are available this week.

• Comprehensive coverage of TC Sessions: Justice is now available, featuring summaries, video recordings, and insightful excerpts. This content is best experienced alongside a pragmatic outlook and your preferred beverage.
• TechCrunch is currently seeking a Head of Product to join its team; applications are encouraged for those interested in a dynamic and engaging work environment.
• An impressive lineup of speakers has been confirmed for this month’s Extra Crunch Live events.
• Stay informed by following Drew Olanoff, TechCrunch’s Community Lead, for exclusive offers, networking opportunities, and surveys designed to improve your experience.

Weekly Highlights

Featured on TechCrunch

Zapier has completed its inaugural acquisition, bringing on Makerpad, a company specializing in no-code solutions.

The publication, Eye on Robot, also covered recent developments.

Sequoia Capital has made a substantial investment in Gather, a platform designed to function as a virtual headquarters.

Highlights from ExtraCrunch

The current period is witnessing a record number of $100 million funding rounds within the fintech sector.

Insights were shared regarding valuable lessons learned about venture capital from the perspective of a founder.

Predictions suggest that white-labeled voice assistants will become dominant in the realm of podcast discovery.

Four distinct strategies were outlined, detailing how startups are expected to accelerate the implementation of GPT-3 technology in 2021.