Mark Cuban wants in on the cryptocurrency boom even if it turns out he’s right that bitcoin is in a bubble.
Cuban is investing in 1confirmation, a fund that plans to raise $20 million to invest in blockchain-based companies, the tech billionaire said in an interview. The venture capital firm Runa Capital is among other investors, and its technical advisers include Andreessen Horowitz board partner Balaji S. Srinivasan and Brendan Eich, founder of the programming language JavaScript.
“I have always looked at blockchain as a foundation platform from which great applications can be built,” Cuban said in an Aug. 19 email response to questions. “Hopefully we can find a few.”
Runa Capital principal Nick Tomaino was an early employee at the digital currency exchange Coinbase Inc. and runs the cryptocurrency-focused blog The Control. They plan to differentiate 1confirmation from the slew of digital currency hedge funds that have sprung up recently by taking a page from the venture-capital playbook.
Rather than investing in digital tokens through initial coin offerings or in the secondary market, 1confirmation plans to invest from $100,000 to $500,000 in early-stage companies before their ICO, and help those companies develop their product. Once the startup is ready to issue an ICO, the fund hopes to negotiate a discounted price.
It’s a more cautious approach to the frenzy that has consumed the space this year, with startups raising hundreds of millions of dollars in days, or even minutes, with little real business applications besides a white paper and a website. Startups had raised $1.8 billion in ICOs as of last week, according to Coindesk.
The fund will focus investments in projects that help developers build decentralized applications, rather than those aimed at end users, on the belief that the sector isn’t mature enough for blockchain applications to be adopted on a mass scale.
A number of funds focused on blockchain companies and their tokens have opened in the past year as bitcoin’s price more than tripled and cryptocurrencies’ market capitalization surpassed $100 billion. Polychain Capital, founded by another Coinbase alum, Blockchain Capital and Pantera Capital are some examples.
Cuban, who is a majority owner of the Dallas Mavericks basketball team and star of the startup investing theme show "Shark Tank," tweeted in June that bitcoin was in a bubble, causing the cryptocurrency to drop in price. Cuban says that’s beside the point given the developing underlying technology.
1Confirmation would be Cuban’s second foray into cryptocurrencies; he also plans to invest in tokens sold by his portfolio company Unikrn. Cuban says he plans to invest on a third crypto-related project in the future, as well as potentially buying cryptocurrencies, which he doesn’t currently own.
“It’s hard to establish any intrinsic value for bitcoin or any of the the cryptocurrencies. If everyone continues to tell their grandparents, cousins and co-workers to buy, the price can go a lot higher as there is a definable, finite amount, but if the number of buyers dry up or there are a few massive sellers we could see under $1,000 again,” Cuban said. “None of this has anything to do with the applications that can be built with blockchain. The question is whether great companies can be financed and built, and I think the answer is yes.”
