Blockchain venture studio to open in Portland
Venture capitalists say blockchain, a distributed ledger technology, will transform business as we know it. Portland seeks a leading role in that revolution.
A partnership backed by R/GA Ventures, Nike, OHSU, Intel, the state’s economic development agency Business Oregon and blockchain research firm Smith & Crown, is taking shape this month. The venture studio, based in Portland’s Pearl district, aims to attract out-of-state blockchain leaders to apply the emerging technology to business and policy conundrums.
Investors will pump $3 million each year into the project, dubbed the Oregon Blockchain Venture Studio. The effort seeks to nurture 20 to 30 companies within the next three years. It will issue a public announcement, along with a website, in the next two weeks.
“We have the opportunity to be a leader and dominant player in this space,” says Jeff Gaus of Oregon Blockchain Venture Partners, one of the studio’s founders. “I want us to be known as the blockchain state.”
A venture studio is not an incubator, accelerator or venture capital project, though it incorporates elements of all three. Incubators focus on quick growth and take little to no equity in startups. Studios adopt an early stake in the company, developing its business model from idea to exit or initial public offering. The approach combines the financial investment of venture capital with the human resources provided by incubators and accelerators into one tidy package.
The key difference for investors, Gaus says, is yield. In an incubator only about 25% of companies ultimately get to scale, while in studios that number approaches 85%.
A wave of local investment in blockchain became apparent at an event hosted by full-service law firm Schwabe, Williamson & Wyatt last night at the brand-new Central Eastside headquarters of Autodesk.
Robin Jones, chief operating officer of e-commerce platform Public Market, outlined the blockchain-based alternative for third-party sellers disadvantaged by Amazon. Digital tokens will incentivize good consumer behavior, like paying with a debit card and providing personal data. Sellers will no longer have to account for the 15% to 40% margin Amazon takes from their profits. She said a private beta version will launch within days.
Justin Mart, corporate development director at Coinbase, an online platform for trading in blockchain currency, outlined its global strategy to create open financial markets. Much of the activity will take place in Portland. In June, the company announced a seven-year lease on a Portland office and plans for 100 local jobs.
One speaker, tech CEO Richie Etwaru, said blockchain will upend traditional notions of trust in business. Current business transactions rely on personal connections, meeting face-to-face until the other party becomes close enough to trust.
In a world secured by blockchain, Etwaru says, the need for those interactions will go out the window. Algorithms will easily verify datasets with no human intervention.
“The new economic era will be based on trust and transparency,” predicated on the blockchain, said Etwaru.
The application of blockchain for multinational companies, healthcare providers, law firms and city governments appears endless. The technology, for instance, can instantly verify whether information in a quarterly report is credible. It can incentivize power users to put energy back into the grid through token rewards. It can track a product as it moves through the global supply chain.
Put simply, blockchain works by duplicating a publically available spreadsheet or other dataset thousands of times across a network of computers. That makes it almost unassailable. To compromise the blockchain, a hacker would have to modify every one of the thousands of copies of their target data.
The technology could obviate the need for third-party intermediaries. A driving record, for example, would no longer require verification by the Department of Motor Vehicles. Instead, an algorithm could immediately reveal whether someone tampered with the data. Blockchain enthusiasts say that process will eliminate or reshape entire sectors of the economy.
The venture studio will focus on five key applications for blockchain technology. Those include identity and security, manufacturing and supply chain logistics, transportation and smart cities, the Internet of the Things and the energy grid, and uses for local governments.
Before business can realize blockchain’s potential, however, they must recruit and educate a workforce that has mastered the technology. Portland State University, Gaus says, intends to develop a “world-class” blockchain curriculum. Business Oregon sees workforce development as a key objective of the venture studio project.
“This is more than Blue Star and bicycles,” Gaus says. “We have to have the legal and investment community, the real estate and an educated workforce all aligned.”
The audience of venture capitalists, coders and lawyers, however, raised a number of red flags. They noted that complex datasets, healthcare records for example, face numerous obstacles to being encoded in the blockchain. They also questioned what effect blockchain, which relies on widely distributed public datasets, will have on consumer privacy.
“Privacy is dead right now,” Etwaru said in response. “If you understand computer science, you know that.”
While the other speakers charged ahead with bullish proclamations, Ned Smith, principal IoT security architect at Intel, issued warnings. He walked through several technical scenarios that could compromise the blockchain. As blockchain innovations proliferate, he warned, so will hacks.
“If it’s possible someone’s going to do it,” he said. “The more value we place on blockchain, the greater the threat. You’ve got to be humble.”
If Gaus and his fellow blockchain boosters succeed, Portland will leverage its considerable tech talent to become an epicenter of innovation, and likely controversy, centered on the emerging technology.
“This is more of a journey than this is a destination,” Gaus says. “We’re at the very beginning edges of the next wave of technology based on trust and transparency.”
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