This edition of Cointelegraph’s VC Roundup features Mira, Astria, Compute Labs, BOB, Dora and BITKRAFT Ventures.
A Major League Baseball logo at Angel Stadium in Anaheim, California, May 22, 2022.
Ronald Martinez | Getty Images
It’s been about a week since Disney, Warner Bros. Discovery and Fox announced a new joint venture to offer live sports outside the traditional cable bundle, and pay TV distributors are still trying to figure out just how disruptive the new service will be.
The key question for distributors such as Comcast, Charter and DirecTV is whether they’ll be allowed to offer the same skinny bundle of linear networks that Disney, Warner Bros. Discovery and Fox announced will be available to consumers later this fall. That bundle includes ABC, ESPN, ESPN2, TNT, TBS, Fox, FS1, FS2, and a handful of other cable channels that showcase sports.
If Disney, Warner Bros. Discovery and Fox allow distributors to offer the same product, in addition to the standard cable bundle, there’s likely to be minimal consternation about the joint venture. But it’s not clear that will be the case, given that may defeat the purpose of its existence.
In 2023, Charter began offering a package of cable networks that didn’t include sports to lower the cost of cable TV for customers who only wanted news and entertainment. Offering sports to only those people who want to watch sports is good for distributors, but it’s harmful to programmers, who benefit from the millions of households that pay for sports but don’t watch them.
That’s why, logically, the new sports joint venture only makes sense if the three media companies bar distributors from offering the same product.
So far, the largest pay TV distributors haven’t spoken publicly about the forthcoming bundle because they’re still gathering information on the joint venture’s plans, according to people familiar with their thinking, who asked not to be named because the discussions have been private.
Privately, however, leaders at Disney, Warner Bros. Discovery and Fox have begun to hear complaints from some distributors, who are concerned the new skinny bundle will lead to increased cable TV cancellations, according to people familiar with the matter.
Terms of agreement
Pay TV distributors typically strike most-favored-nation deals with programmers that allow contracts to be replicated among like partners. It guarantees that a company such as Disney can strike a deal with DirecTV that’s similar to its deal with, say, Dish.
If the sports joint venture refuses to allow distributors the same terms as it’s offering retail customers, distributors could either refuse to carry their networks when carriage renewal deals are up or even sue, according to Craig Moffett, an analyst at MoffettNathanson.
“The distributors have been begging for the right to offer cheaper and skinnier bundles, especially bundles that would segregate expensive sports from cheaper non-sports programming, for at least two decades, and they’ve been met with a brick wall,” Moffett said. “At the very least, this would seem to violate the most favored nation clauses that prohibit the programmers from offering better terms and conditions to another distributor, even if that distributor is a JV [joint venture] of the programmers themselves. I would be surprised if there aren’t some lawsuits.”
Disney, Warner Bros. Discovery and Fox all rely on the pay-TV distributors for the bulk of their revenue.
And while some stand to indirectly benefit from the potential popularity of the joint venture — Charter and Comcast, for example, could see a boost to their broadband businesses, since the digital app would require high-speed internet service for best performance — others, such as DirecTV, Dish and YouTube TV stand more directly in the crosshairs and could lose video subscribers.
Still, early conversations between distributor executives and leaders at Disney, Warner Bros. Discovery and Fox haven’t been particularly substantial, because limited information has been disclosed about the strategy of the joint venture, which hasn’t been formally named or even legally agreed upon by the companies.
“The formation of the pay service is subject to the negotiation of definitive agreements amongst the parties,” Disney, Warner Bros. Discovery and Fox said in a statement last week.
No leader for the joint venture has been named yet, although one has tentatively been selected, according to people familiar with the matter. Puck reported Tuesday the front-runner is former Apple executive Pete Distad.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
WATCH: Paramount Global CEO speaks about new joint sports venture
Metaverse technology company Improbable announced in an end-of-the-year statement on Dec. 18 that it had sold its gaming venture, The Multiplayer Group (MPG), to Keywords Studios for £76.5 million ($97.1 million).
Herman Narula, co-founder and CEO of Improbable, called Keywords “a like-minded business partner” and said he was delighted to see MPG embark on a new chapter. Keywords works with large names in the gaming industry, such as Activision Blizzard, Bethesda, Zenimax, Epic Games and 2K.
“Nurturing and fostering ventures across Sports, Web3 and fashion is at the heart of our philosophy and allows us to realize lasting value.”
Narula said this deal is a part of its venture strategy for 2024. Improbable originally acquired MPG in 2019 for around £30 million.
Related: Web3 firm sees future where gamers rent out their in-game assets for crypto
Improbable also released its 2024 predictions, stating the metaverse and Web3 are not “yesterday’s news.”
Narula said:
“The metaverse is poised for growth in 2024, fueled by the convergence of gaming, VR/XR, and Web3 technologies.”
He told Cointelegraph that the metaverse in 2024 is going to “define the future of virtual events.” He also commented that in this upcoming year, he expects to see more businesses leaning towards decentralized metaverse platforms.
“Brands are graduating from experimentation run on platforms, but ultimately want sovereignty and the right business model,” he said. “That’s why we expect to see a lot more experiences in decentralized environments.”
According to the Softbank-backed metaverse developer, 2024 will also see more consolidation and streamlining in the gaming, Web3 and crypto sectors, which it says will result in a “stronger, more resilient, and more cohesive startup ecosystem.”
In 2023, Improbable partnered with Major League Baseball to create a virtual baseball stadium for fans to join in on games in digital reality.
Improbable forecasts more physical-digital crossover experiences in the gaming world and the growing use cases of generative artificial intelligence (AI) in content creation and business applications.
Peter Lipka, the company’s co-founder and chief operating officer, added that AI has revolutionized how businesses operate and predicts AI-generated 3D interactive objects will surface in 2024.
Improbable isn’t alone in anticipating a big year for Web3 and gaming. In a recent interview, two GameFi executives, Yat Siu and Johnson Yeh, told Cointelegraph they believe more users will step into Web3 next year via blockchain games.
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Binance will publicly roll out a Thailand-based crypto exchange in early 2024 via a joint venture with local energy giant Gulf Energy Development.
A Nov. 15 Stock Exchange of Thailand filing by Gulf Energy said the Gulf Binance venture will initially be on an invitation-only basis with a public rollout by early 2024. The firm received approval from the Thai Securities and Exchange Commission (SEC) on Nov. 10.
A Binance spokesperson confirmed to Cointelegraph that the platform has initially launched as an invitation-only exchange and would give more details as information becomes available.
On May 26, Gulf Binance received digital asset operator licenses from Thailand’s Ministry of Finance, which enabled it to operate a crypto exchange regulated by the country’s SEC. At the time, Binance had planned to launch its Thai arm by Q4 of 2023.
On the same day, Binance’s regional head of Asia, Europe and the Middle East and North Africa, Richard Teng, said the exchange would harness “Gulf’s established local presence and network,” and Gulf Binance aims to show the potential of blockchain technology to local users.
Gulf Energy is one of Thailand’s largest natural gas distribution companies. It was founded and is run by Thai billionaire Sarath Ratanavadi. The company actively invests across different business verticals, including renewable power generation, infrastructure development projects and digital infrastructure businesses, among others.
Related: India, Nigeria, Thailand top Chainalysis’ 2023 Global Crypto Adoption Index
Gulf Energy invested in Binance’s United States-based arm, Binance.US. In April 2022, the firm disclosed that it invested in “Series Seed Preferred Stock issued by BAM Trading Services,” the operator of Binance.US.
Last month, Binance assisted the Royal Thai Police in seizing $277 million from scammers. Following the revelation, over 3,200 victims contacted the authorities to file for compensation.
#Binance Aids Royal Thai Police in Crackdown on Criminal Networks | @Binance Blog https://t.co/GzMGjTlzmI
— CZ Binance (@cz_binance) October 3, 2023
At the time, Binance’s head of financial crime compliance, Tigran Gambaryan, highlighted the company’s intent to partner with various authorities worldwide to help with “restoring the trust in the digital-asset ecosystem.”
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Global venture capital (VC) investments in the cryptocurrency sector are down 63% during the third quarter, marking the lowest level of funding since 2020, Bloomberg News reported, citing PitchBook research.
A mere $2 billion was poured into the sector, contrasting sharply with the enthusiasm seen in previous industry peaks, based on data provided by PitchBook.
VC Retreat from Crypto Investments
The decline coincides with the ongoing legal tumult involving FTX co-founder Sam Bankman-Fried (SBF) and his alleged mismanagement of the cryptocurrency exchange, which received hundreds of millions in venture funding.
Once the driving force behind the meteoric rise of the crypto industry, venture capitalists are now retreating in the face of increasing scrutiny due to their association with the beleaguered FTX platform.
Robert Le, a seasoned analyst at PitchBook, said:
“We aren’t seeing the big deals anymore. That’s one of the drivers of the decline – deals are smaller.”
Le further delved into the predicaments now facing companies that once thrived during the crypto bull market, such as FTX, OpenSea, and Yuga Labs.
With VCs stepping back, these companies might have no choice but to cut costs, lay off employees, or, in dire circumstances, face acquisition at slashed valuations.
He added:
“If they’re not able to raise a round, even a down round, they’re either going to go out of business or get acquired at a valuation that’s much, much lower.”
While early-stage crypto companies still see some investment deals, many established tech investors have vacated the scene entirely. Adding complexity to the situation is the continued ripple effects of the FTX scandal.
FTX fallout on VCs
Prominent VCs, such as the renowned Sequoia Capital, once backed FTX with relatively substantial investments, which it had to write off when the exchange went under.
FTX and its trading division, Alameda Research, were prolific investors in their own right before legal challenges clouded their horizons. Their vast investment portfolio boasted industry heavyweights like Circle, Paxos, Aptos Labs, and Anchorage Digital.
As FTX and Alameda navigate bankruptcy proceedings, their equity stakes in various startups have become crucial lifelines. The buzz surrounding a prospective funding round for AI startup Anthropic, an FTX investment, offers a silver lining for FTX’s creditors, holding out the promise of recouping losses through potential equity sales.
However, the U.S. Department of Justice (DOJ) is opposing SBF’s attempt to present the current value of investments, like AI startup Anthropic, in court. Prosecutors argue this is irrelevant and could mislead the jury.
Meanwhile, the prospect of a broad liquidation sale looms large, which, if executed hastily, could further drive down the valuations of crypto startups. Le accentuated this concern, stating:
“Because FTX and Alameda have such a huge portfolio, it could further depress valuations in this space.”
The global crypto investment community now waits with bated breath, keeping a keen eye on developments surrounding the FTX saga and its possible ramifications on the sector’s future.
Posted In: Analysis, Investments
SBI Holdings and TradeFinex will look to drive trade finance adoption of the Ethereum Virtual Machine-compatible enterprise blockchain XDC Network through a new joint venture in Japan.
United Arab Emirates-based firm TradeFinex operates its own decentralized platform on the XDC Network for trade finance originators to connect to a variety of banks and lending institutions. Aimed at enterprise use cases, TradeFinex primarily provides blockchain-based trade finance products, including invoicing, letters of credit, purchase order finance and supply chain finance.
The XDC Network is an EVM-compatible layer-1 network with interoperable smart contracts. Its documentation describes the protocol as a “highly optimized, bespoke fork” of Ethereum that uses a delegated proof-of-stake (DPoS) mechanism to achieve fast transaction times, low gas fees and high transaction per second capacity.
Related: Japan PM reaffirms Web3 plans as Binance announces imminent launch
XDC operates using its native XDC token, which serves as a reserve cryptocurrency for third-party decentralized applications (DApps) running on the network. The token is intended to be used for a variety of use cases, including DApp payment settlements, micropayments, transaction costs and smart contract deployment and settlement.
TradeFinex has been involved in collaborations with the World Trade Organization, the International Chamber of Commerce and various government agencies to explore blockchain as a means to overhaul the speed, transparency, costs and traceability of trade finance.
A 2020 report from the World Trade Organization highlighted TradeFinex as a network that operates “as both permissioned and permissionless: permissionless for public verification, but permissioned for selective data sharing.”
At the time of the publication, several participants were using TradeFinex, including Validus, Enigio, Ramco and the International Trade and Forfaiting Association, among others.
An announcement shared with Cointelegraph outlined the goal of the joint venture to localize XDC Network information and documentation in Japan, proliferate XDC tokens to local cryptocurrency exchanges and deploy trade finance solutions across the Asia-Pacific region.
The launch of the joint ventures comes after recent reports from Japan that its government intends to permit startups to raise funds through the issuance of cryptocurrency tokens instead of conventional stock listings.
Japan’s Financial Services Agency also announced its plans to amend its tax code related to cryptocurrencies in August 2023 to take a more active role in cryptocurrency regulation. This could include exemptions from paying “unrealized gains” tax on cryptocurrencies.
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Instacart IPO Is an Expensive Lesson for Venture Firms
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Anshu Agarwal has joined VC firm Converge as a general partner.
Converge
Longtime Silicon Valley entrepreneur Anshu Agarwal has decided it’s time to be a mentor rather than an operator.
In 2021, DigitalOcean Holdings Inc.
DOCN,
acquired Agarwal’s cloud company, Nimbella, the fifth startup in her portfolio of nearly two decades. After serving as vice president and general manager of DigitalOcean’s Serverless & Kubernetes business unit, elevating DigitalOcean to more than 600,000 customers, she was ready for a change.
“When I left DigitalOcean, I could have started another company or joined an established one,” Agarwal said in an interview. “I know what founders want after years as an operator.”
On Thursday, venture-capital firm Converge named Agarwal as a general partner, thereby establishing a base camp in Silicon Valley. “It is a big change for me,” Agarwal said. “I used to receive checks [from investors], and I want to give them.”
Agarwal intends to bring the same team spirit and entrepreneurship skills to funding for startups in the business-to-business, AI-software-stack and robotics-hardware sectors. She considered several offers from VC companies before selecting the Cambridge, Mass.-based Converge, which she worked with at Nimbella.
“When you have the opportunity to work with an A+ player and bring them to your team, you grab it,” Maia Heymann, also a general partner at Converge, said in a statement. “Anshu’s rare five-times successful startup-to-exit experience makes her a unique partner to the founders we back.”
As a venture capitalist, Agarwal said, she wants to “let the founders do their magic.”
She added: “It’s about advice, not just dollars and connections. I’m done with my entrepreneur chapter. It keeps you young in helping people with great ideas.”
The Bank of New York Mellon’s (BNY Mellon) foray into the digital asset custody business has hit a regulatory hurdle, per American Banker.
It emerged that the Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin 121 (SAB 121) requires custodians of digital assets to record those assets on their balance sheets. This regulatory requirement presents a potential impediment for banks looking to scale their digital asset custody business, particularly those specializing in trust services like BNY Mellon.
BNY Mellon embarked on its digital asset custody venture in October 2022. However, the SAB 121 regulatory roadblock was not identified until after the bank had made significant strides toward establishing its crypto custody business.
BNY Mellon’s approach was treating digital assets similarly to more traditional ones, which are not recorded on its balance sheet.
In its application to the New York State Department of Financial Services, the bank stated an intention to support its Digital Assets Custody product by adhering to U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), under which digital assets held by a custodian are not reported on the balance sheet with only associated fiat currency balances needing reporting.
However, the SEC’s position on the matter has sent ripples across the banking industry, potentially deterring other banks wishing to expand into crypto custody, including JPMorgan and Goldman Sachs, who have an interest in cryptocurrency developments.
According to Lee Reiners, a Duke Law and the Duke Financial Economics Center lecturer, the more significant impact for banks would be the leverage ratio, as they would need to hold capital against digital assets. This could influence their decisions on providing crypto custody services.
The heart of the contention lies in whether crypto assets are fundamentally similar to traditional ones.
John Sedunov, an associate professor of finance at Villanova University in the School of Business, said crypto assets present higher technological, operational risks than traditional assets. For instance, a stolen or hacked cryptocurrency could be irretrievably lost, unlike most conventional assets in custody.
Therefore, while crypto and traditional assets may not pose the same risks, a valid argument exists for treating them differently.
The post BNY Mellon’s crypto custody venture runs afoul of SEC rules appeared first on CryptoSlate.
Venture capital financing in the crypto space is no different from typical VC, except the startups benefiting from financing operate in the cryptocurrency market.
Venture capital businesses in the cryptocurrency sector concentrate their investments on startups and initiatives linked to cryptocurrencies, blockchain technology, decentralized finance (DeFi) and other cutting-edge distributed ledger technology applications. Projects creating new cryptocurrencies, blockchain platforms, smart contracts, decentralized applications (DApps) and other technologies can be included.
Contrary to traditional venture capital, where stock holdings are often obtained, venture capital in the cryptocurrency industry frequently entails investing in tokens issued by the project or firm. These tokens can stand in for several different value types, such as utility tokens, which enable platform access, or security tokens, which grant ownership rights.
Many cryptocurrency firms use token sales to raise money by trading tokens for cash from investors. To assist in the project’s growth, venture capital firms may take part in these token sales and buy tokens early on, frequently at a discount.
To evaluate a project’s viability, venture capitalists in the cryptocurrency sector carry out extensive due diligence. This includes assessing the project’s technical viability, market demand, competitive environment, token economics and regulatory issues.
Outside of funding, venture capital firms in the cryptocurrency sector frequently offer strategic advice, connections to the industry and expertise to support the project’s success. They also help handle regulatory obstacles, business development, marketing, community building and token listing.
Through successful exits, venture investors hope to recoup their investments. Exits in the cryptocurrency sector can occur in various ways, such as when a project sees rapid growth and adoption, if a larger company acquires it, or when it lists its token on exchanges for trading and liquidity.
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