By Landon Manning
Trammell Venture Partners, a venture capital firm based in Austin, Texas, released groundbreaking research on the relationship between capital investment and the Bitcoin community, and how dreams of short-term gains have disadvantaged long-term profits for the industry.
It’s no secret that Bitcoin is a huge industry, based on a technology that has become a household name with billions behind it and a dream to revolutionize the future. Trustless and decentralized, Bitcoin relies on a global community of innovators and startup companies to optimize its network and increase the possibilities for Bitcoin’s use. Gone are the days when 10,000 bitcoin would be needed to buy a single pizza, and buying that same pizza using one ten-thousandth of one bitcoin today would not be possible without the tools that have developed to manage such small transactions. It is already a massive victory that Bitcoin has grown so much in value, but the dynamic community of Bitcoin startups is essential for its real future.
With the aim of highlighting this dynamic, Trammell Venture conducted a major study on the world of Bitcoin, specifically trying to analyze the role of venture capital and where that money goes. As a venture capital firm itself, Trammell is well-positioned to conduct research of this type, and it noted how much data there is to scrutinize: Despite “the broad crypto market drawdown in 2022,” the firm indicated, “the Bitcoin sector has emerged as a growth category in venture capital, seeing a 52.9% increase in deal activity year-over-year.”
And yet, despite the tens of billions of dollars that are flowing into the crypto industry, “venture capital for founders focused on the Bitcoin tech stack and ecosystem” only represent a little more than 1% of capital invested in the whole crypto world, per Trammell Venture.
This dynamic is indeed one that has interested Trammell Venture Partners for some time. Co-founder Christopher Calicott was quoted in 2022 saying that tokenization, a strategy to attract investors, is a “fundamental misalignment of interest” and that “investors actually become speculators trying to get out of their position with the best timing.”
This sort of behavior may indeed lead to lucrative gains, but it is hardly the bedrock of a successful enterprise in the long term. This dynamic is particularly bizarre to Calicott as Bitcoin has consistently remained as the number one cryptocurrency throughout its long history.
“We’ve known for years that there was a misallocation of capital for Bitcoin startups and now we have the data to support that assertion,” Calicott claimed regarding his team’s latest report, adding that Bitcoin “is becoming a platform at an accelerating pace.”
This survey began with a fund series in 2021, breaking new ground with its focus on the role of Bitcoin, and its release will mark the beginning of a new phase for Trammell’s strategies. Planning to conduct further research into the world of Bitcoin startups, the firm will support the growth of venture capital investment into this specific sphere.
It must be noted, at least, that Bitcoiners have still made a very impressive product despite the vast majority of “crypto investment” going either into totally unrelated altcoins or loosely-related projects with no actual bearing on Bitcoin’s development. Still, there are many examples of foundational changes to the platform that were only made possible thanks to companies actually working on Bitcoin infrastructure, and these developers are essential to continued usability and growth. Further attempts to highlight this funding disparity and give more money to bitcoin developers can provide incredible benefits to the flourishing of an international crypto community, and that will benefit investors everywhere.
