May 23

Wonders & Blunders: Unicorn Problems

 

 
OUR CRITICAL ANALYSIS OF THE WEEK’S NEWS
It appears the recent wave of tech unicorns with huge IPOs has a serious downside: venture capitalists are now flocking to late-stage companies rather than early-stage startups. With early-stage startups starving for funding, will tech lose the innovation driving the industry? Or is it all part of the investment cycle?
 
In other news … the jobs that first come to mind for ex-CIA and military operatives probably don’t involve a bank’s headquarters, but the out-of-the-box thinking that’s driving banks to fill top cybersecurity positions with military intelligence gives financial institutions the upper hand against cybercrime. Beyond movies and TV shows, bank robberies are more likely to happen virtually than physically, cementing cybersecurity as CEOs’ reigning concern.
 
And … the wild west atmosphere of the newest financial sub-sector, cryptocurrency, may soon ride into the sunset on the back of the first crypto unicorn. Coinbase reportedly talked to U.S. regulators about bank licensing possibilities, which would put the company under more scrutiny and regulation. Crypto enthusiasts stress deregulation, but Coinbase’s law-abiding stance could help propel cryptocurrency further into the mainstream.
 
Unadventurous Venture Capital
Blunder: When It Comes to Tech, Venture Capital Grows Less Venturesome – Jacky Wong in The Wall Street Journal.
 
Massive fundraises surged last year for late-stage companies, while early-stage startup funding declined 29 percent. Large private companies with robust user bases and market-leader positions, which includes tech unicorns, attract more funding from venture capitalists seeking a safe bet. Unicorns have the potential to provide later-stage investors with a quick profit from IPO “pops.”
Military Tactics Bolster Bank Cybersecurity
Wonder: Banks Adopt Military-Style Tactics to Fight Cybercrime – Stacy Cowley in The New York Times.
 
Banks have been filling top cybersecurity positions with former soldiers and cyberspies, who are repurposing their combat training exercises to fight online financial security threats. In addition to cyberattack simulation drills, financial companies including Mastercard have recently built fusion centers, Homeland Security’s term for the intelligence hives fighting threat and disease outbreaks.
Coinbase Considering Banking License
Wonder: Cryptocurrency Firms Explore Getting Bank Licenses – Ryan Tracy in The Wall Street Journal.
 
Coinbase met with U.S. regulators about the possibility of obtaining a banking license. Bank licenses allow fintech companies to offer a broader range of products, including insured bank accounts, at the cost of compliance with additional strict regulations. Federal banking charters could replace and simplify the myriad of state-based regulations by having one primary federal regulator overseeing the company. Additionally, a bank license may attract affluent institutional investors, such as hedge funds.
» IN THE NEWS
CNBC quotes John Samaan, senior vice president and head of human resources at Millennium Trust Company, about companies paying off employees’ student loans.
InvestmentNews speaks with Jack Hillis, President of Hillis Financial Services, about building a flexible succession plan.
» BOTTOM LINE: State of Digital Money in Review
For those of you who weren’t at the State of Digital Money event on May 5th, here is a quick summary of what you missed. The event producers secured a top-notch lineup, from Jesse Lund of IBM Blockchain to Capital One’s Jim Kresge and Daniel Aranda of Ripple. The brain power they managed to pack under one roof still has our heads spinning!
» FEATURED CASE STUDY: COBINHOOD 
COBINHOOD, a cryptocurrency platform built for the blockchain era, approached KCD PR as an unknown entity to the outside world. From our initial proposal to the Initial Coin Offering (ICO), KCD PR had three weeks to build awareness with the media and potential investors. In addition to being in Taipei, Taiwan, the firm also faced challenges associated with not having a U.S. presence or U.S. representation on its board of advisors.
 
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