Blockchain Technology Plus Venture Capital Equals Boston's Startup Culture

Venture Capital and Blockchain Technology in Boston’s Startup Culture

From Americaninno.com by Kirill Bensonoff Oct. 9, 2018

When people think of Boston, several things typically come to mind: cravings for clam chowder, the iconic Fenway Park, and the exaggerated “BAston” pronunciation from strangers. Lately, the city that spawned companies as diverse as Gillette and DraftKings is becoming known for its vibrant startup culture that’s launching dozens of new companies each year.

This is not surprising.

Our city has twice been named the top startup community in the U.S. by the “Innovation that Matters” report compiled by the organization 1776 and the U.S. Chamber of Commerce Foundation.

This fact is not lost on entrepreneurs. According to The Boston Globe, 1,869 startups are operating in Boston, and those numbers continue to increase as our venture capital scene becomes more competitive with other startup hubs including San Francisco and New York. In terms of actual investment dollars, San Francisco leads the nation, but Bloomberg’s assessment of regional startup investment found that Boston places near the top of the list in each of the last several years. This year, Boston’s venture capital initiatives jumped 15%, surpassing New York City for second place in the national rankings.

In the past, the city’s prominent universities served as a launching pad for some of the most famous platforms in the world, but those businesses typically found their way to other cities once they became popular. For instance, Facebook, which began in 2004 in Mark Zuckerberg’s Harvard dorm room, and Dropbox, founded by Drew Houston while he was studying at MIT, both ultimately moved to San Francisco.

Now, the combination of available venture capital and the innovative ethos promulgated by Boston’s universities is encouraging companies to stay. Therefore, as the next wave of innovation is preparing for launch, Boston is uniquely suited to meet the new demand.

The Cryptocurrency & Blockchain Movement

Just like internet startups were on the precipice of mass adoption more than two decades ago, blockchain technology is at the forefront of the innovation curve. In addition to receiving significant investment and attention from companies like Microsoft and IBM, hundreds of startups are building new platforms to meet the demands of the decentralized economy.

In 2018, nearly 700 new blockchain startups launched through Initial Coin Offerings (ICOs). Collectively, these companies have raised $17.5 billion this year, which is more than triple the amount from the previous two years.

Not to be left on the sidelines, several prominent venture capitalists have picked up on this movement. Andreessen Horowitz launched a $300 million venture capital focused on blockchain startups, Tim Draper has committed a similar amount to various ICOs, and Sequoia Capital prominently entered the market last year.

At this year’s Boston Blockchain Week, local venture capital firm Pillar asserted themselves as the de facto financing arm of Boston’s blockchain scene. In an event roundup, Pillar encouraged ICOs looking for funding to “Call Pillar first, obviously.”

Venture Capital Streams

In many ways, the ICO model was meant to disrupt traditional capital raising methods including venture capital initiatives.

Instead, venture capital and ICOs are operating in tandem with one another. In May, Bloomberg observed, “While ICOs were supposed to disrupt venture capital, such funding in blockchain-based companies is surging, with startups raising $434 million since December, the most ever in a three-month period.”

In general, this seems to be a boom for both industries. Venture capital firms are finding fresh relevance and entrepreneurs are afforded another opportunity to finance their platforms.

The Challenges of Change

The ICO movement isn’t without its detractions.

For starters, this novel fundraising mechanism remains in a state of regulatory limbo. Although the SEC has decided that Bitcoin and Ether, the two most popular cryptocurrencies, should not be regulated as securities, there is a broad expectation that some ICOs will eventually be classified as such.

In short, VCs are participating in a game in which some of the rules are still being written.

This ambiguity is illustrative of the broad crypto movement. It’s an industry under construction, and it can change swiftly. Venture capital firms will be tasked with keeping up with this rapid innovation and the emerging legal framework that accompanies its novelty.

Boston & The Blockchain

While blockchain sentiment can fluctuate wildly, it’s evident that the decentralized ecosystem is not going away any time soon.

Many describe the blockchain economy as the third iteration of the internet, which places tremendous scale and opportunity in the industry. Of course, like any burgeoning industry, there are likely to be an abundance of failures, and blockchain prognosticators have indicated as much.

Last October, Ethereum co-founder, Vitalik Buterin, told a crowd at the ETHWaterloo Hackathon in Canada that “It is an established fact that ninety percent of startups fail. And it should also be an established fact that 90 percent of these ERC20s on CoinMarketCap are going to go to zero.”

Therefore, risk management and market maturation become critical metrics for venture capitalists.

In Boston, the prominence of blockchain technology and the emergence of a dynamic startup culture are bound to coalesce. As the first generation of blockchain platforms begin emerging out of Harvard and MIT, it’s less likely that they will flee to the other coast. Boston is offering everything we need.

Source: https://www.americaninno.com/boston/from-the-community-boston/venture-capital-and-blockchain-technology-in-bostons-startup-culture/

Private equity giant Leonard Green takes another chance on retail, buying hot online retailer Shade Store for $325 million

Terms were not announced, but CNBC has learned the deal is worth $325 million.

• Private equity firm Leonard Green & Partners is acquiring customized treatment company The Shade Store.
• Terms were not announced, but CNBC has learned the deal is worth $325 million.
• The Shade Store sells its custom-made window treatments online and in 60 showrooms across the country.
• The Shade Store start out in 2006 as a website.

Lauren Hirsch 9 Aug 2018

Private equity firm Leonard Green & Partners announced plans Thursday to acquire The Shade Store, a customized window treatment company.

The deal was valued at about $325 million, sources familiar with the situation told CNBC, which first reported the deal. The sources requested anonymity because the terms are confidential.

The acquisition highlights the opportunity private equity firms continue to see in niche retailers that marry online and offline businesses, despite the challenges the retail industry has seen over the past several years. For Leonard Green, it marks a shift in strategy away from its larger retail bets in recent years, like J.Crew, David's Bridal and BJ's Wholesale Club. Many private equity firms with retail expertise have shifted their focus away from large retailers with expansive real estate, as they look instead toward smaller brands with more runway.

The Shade Store sells its window products online and in 60 showrooms across the country.

It started in 2006 as a website that offered customized window treatments. Two years later, it launched showrooms in New York and San Francisco to promote its products and allow customers see them in person.

Many online retailers, including Bonobos and Warby Parker, have opened brick-and-mortar stores in recent years, because the market for digital shopping has become flooded and the cost to compete for online eyeballs has risen.

The Shade Store sold to private equity firm Great Hill Partners in 2013. Great Hill's investments have included online brands like home furnishings company Wayfair and vitamin and supplement seller Vitacost.

Under Great Hill, the drapery retailer built out showrooms across the East Coast and on the West Coast, the Northwest and states including Arizona, Ohio and Illinois. It often places those showrooms in clusters, to appeal to shoppers whose interest may be piqued by driving past one, but who may not be quite ready to buy drapes.

Its shoppers spend on average $2,800 in showrooms and $1,000 online. Its products includes shades, drapery and blinds, which it customizes with designer materials, trims and decorative borders. It offers installation and free shipping.

Under Leonard Green's ownership, the company expects to continue to expand its footprint across the U.S. The customized window treatment business remains highly fragmented, dominated by mom-and-pop offerings.

It may also go further into private label, having already signed a partnership with RH, the home furnishings company formerly known as Restoration Hardware. It will also look to increase its sales to hotel chains, restaurants, gyms or other businesses.

Article Source: CNBC