Tim Draper dives further into web3, but will other capital follow?

I’ve wondered aloud how damaging the dent to crypto’s reputation will have been in recent months.

The collapse of FTX (deep dive into that sordid affair here) felt like a straw that broke the camel’s back in a lot of ways. Regarding institutional adoption, the tempting conclusion was that any reputable firm would run a mile from the industry, as a wave of scandals, bankruptcies and implosions cascaded across the space.

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Against this backdrop, the news that venture capitalist Tim Draper is going deeper into crypto stood out to me. Draper Venture Network, which is an alliance of venture investors founded by Draper, will be launching a web3 syndication vehicle called Draper Round Table aiming to bring more family offices, corporate VC’s, angel investors, and others into web3.

The world of investing is changing rapidly. We are expanding access for investors so that the best entrepreneurs, wherever they are, can get funded

Tim Draper, Founding Chairman of the Draper Round Table

Draper has a crypto background

Tim Draper is no crypto newbie, of course. The business mogul famously purchased 30,000 bitcoins in 2014 that were seized from Silk Road, the illegal marketplace. The stash was auctioned off to the public by the US Marshals Service, and Draper stepped in with a cool $19 million, translating to a price of $633 per coin.

Just for fun and games, I plotted Draper’s investment below, all the way up to today, when Bitcoin has jumped to the start the year, trading back above the $20,000 mark.

The fall from over $2 billion to $600 million likely hurts, but hey, that’s still a 33X return. Beats the S&P 500.

Three months after the purchase, Draper had notoriously predicted on Fox Business that the orange coin would surpass $10,000 within three years. One bitcoin was trading for $402 at the time and it sounded…well, it sounded ridiculous. When it fell down towards $200 the following January, things were not looking good, especially when he doubled down that the price would rebound, with a $400,000 bet.

But by November 2017, Bitcoin was at $10,000 (technically this was three years and two months later).

Crypto hurt on mainstream stage

It’s clear that Draper’s history with crypto goes back further than most, to a time when it was still a niche internet thing which only niche internet people paid attention to. With that context, perhaps the launching of this Draper Venture Network doesn’t symbolise anything at all.

Then again, it does highlight that deals are still to be made in this industry which has been ravaged by the bear market. Looking at the last crypto winter, some of the most successful companies this time around were built during the fallow years of 2018 and 2019 when it felt like nobody was paying attention to crypto. It certainly would have tough to imagine something like this existing when market were lagging so badly in the last winter.

Of course, the difference with this winter is that crypto is fighting a bear market in the wider economy for the first time in its history. It’s funny how often people forget that Bitcoin was launched into the longest and most explosive bull market in history, and that therefore renders this current climate of high interest rates and falling prices completely unprecedented.

Time will tell how crypto will rebound from this bear market. With inflation softening, it certainly appears a brighter climate now than a couple of months ago. News like this will help, and it will be interesting to track how quickly institutions and traditional investors come back to the space in the coming months.