Peter Diamandis Talks About the Abundance of Capital Available for Technology Innovators

December 11, 2017 – In his latest mind sharing, Peter Diamandis talks about massive amounts of capital available for what he calls “transformative purposes and moonshots.” This is new funding sources removed from traditional venture capital, which in and of itself contributed $70 billion U.S. to entrepreneurs in 2017. The new sources of funding include:

1. Crowdfunding and equity crowdfunding
2. Initial coin offerings and token generation events
3. Sovereign wealth funds and other mega funds

I am sure, other than point #1, most of you haven’t encountered these other sources of capital. That’s why I hope if you are budding entrepreneur, visiting this blog site, that you use the information below to help you get the funding to achieve your next moonshot.

1. The Rise of Crowdfunding

Global crowdfunding has exploded onto the scene, and crowdfunding websites make it easy for anyone to market their ideas and get funded. The total worldwide volume hit $16.2 billion as of 2017, with 375 crowdfunding platforms in North America alone. The World Bank predicts that crowdfunding investments will be a $96 billion per year market in the Developing World by 2025.

Kickstarter, one of the most popular reward-based crowdsourcing platforms, has launched almost 400,000 projects, and over $3 billion has been pledged on the site. The most successful Kickstarter campaign to date, Pebble Time, raised over $20 million in 37 days, with $7.4 million in the first day alone. Even Oculus Rift, the product responsible for making VR a household name, was funded initially on Kickstarter.

Equity crowdfunding is also taking off tremendously, with worldwide volume exceeding $4 billion in 2016 and expected to grow $20 billion by 2020, surpassing worldwide angel capital.

What crowdsourcing does is democratize funding, allowing any good idea, regardless of its origin, to become realizable. As such, Goldman Sachs has described crowdfunding as “potentially the most disruptive of all the new models of finance.”

2. Initial Coin Offerings and Token Generation Events

An Initial Coin Offering (ICO) or Token Generation Event (TGE) is a new fundraising tool from the cryptocurrency realm. In some ways, ICOs and TGEs are like crowdfunding campaigns, but instead of offering a product or shares of equity in a startup, companies offer “coins” (for ICOs) or “tokens” (for TGEs), which allow buyers to access blockchain-based software services. Rather than pitch to a venture capitalist to fund an idea, programmers may host a TGE and sell a fixed number of tokens to the open market (usually in exchange for Bitcoin or Ethereum). Consumers buy the tokens with the hope that, over time, the software or service will become widely used and increase the token’s value. This route is especially popular for companies that aim to create decentralized platforms because, by definition, no one owns these platforms or directly profits from them.

Nearly $2.3 billion has been raised to date in ICOs, with the large majority of that taking place in the first half of 2017 ($800 million in Q2 2017). In fact, in Q2 2017, ICOs outcompeted VC funding in virtually every regard as it relates to funding Blockchain projects (see chart).

Recently, an Ethereum startup and incubator called ConsenSys has been raising eyebrows in this exciting market. ConsenSys’s MTP is creating simplified and automated decentralized applications to facilitate peer-to-peer transactions and exchanges. They hope to spearhead this revolutionary idea into the mainstream. In September, the company launched a $50 million venture fund for startups working in blockchain technology.

3. Sovereigns Stepping Into Venture

I’ve noticed an uptick in funding to promising startups from Sovereign Wealth Funds (SWFs). A source of over $6.59 trillion in assets, SWFs are investing in early-stage ventures that hopefully will yield outsized returns if the funded firms experience exponential growth. Globally, there were 42 SWF deals valued at some $16.2 billion in 2016 based on data from the Sovereign Wealth Lab research center at Madrid’s IE Business School.

The largest technology investment fund ever, Softbank Vision fund, is backed by two sovereign nations: Saudi Arabia and the United Arab Emirates. The $100 billion Softbank Vision Fund plans to invest over $1 billion in Uber when it goes public. The fund recently bought Boston Dynamics (the robotics company) from Alphabet.

In addition to the Vision Fund, Saudi Arabia has also made recent headlines with its Vision 2030 initiative which describes a prosperous and sustainable future for Saudi Arabia as the Kingdom prepares for new technologies to replace the oil market that the current economy relies upon. Saudi Arabia has announced plans to invest $1 billion in Virgin’s space tourism companies as just one of many SWF investments.

Other SWF examples include Ireland’s “Strategic Investment Fund” and Australia’s “Future Fund.” In fact, many countries are so convinced that the future belongs to powerful entrepreneurs with massively transformative purpose, that they are pooling together billions of dollars to help them go for it. They see the potential of exponential technology coming from do-it-yourself innovators, and they want a slice of the pie. Perhaps your startup could be the next to catch the imagination of an entire country.