Dear Reader,
Understanding which sectors are on the verge of exponential growth is one of the key things smart investors can leverage to find the best investment opportunities.
One of the easiest ways to do this is to track the amount of venture capital (VC) investment flowing into each sector. This is something I do for all sectors that Brownstone Research covers.
This information empowers us to invest alongside massive growth trends. The best companies and projects in the sectors I track always deliver outsized investment returns.
And when I see a sector that is experiencing large upticks in venture capital investment, I know that we are hitting an inflection point.
Private capital builds conviction around an industry or technology and allocates much larger amounts of capital to fund the next major tech companies. Incredible developments always follow such large investments, as well as incredible investment returns.
And that couldn’t be truer in the blockchain industry. This year has already been incredible, and the numbers below only represent the first half of the year.
In the chart above, we can see that 2018 marked a standout year for investment into blockchain tech and cryptocurrency companies. Investment levels jumped from $1.6 billion in 2017 to $7.4 billion in 2018.
And most of the investment in 2018 happened in the first half of the year. That’s when the industry fell into the “crypto winter” that lasted for about two years – well into the first half of 2020.
$7.4 billion may seem like a lot, but it isn’t much in terms of total venture capital investment into a sector. We saw lower levels of investment in 2019 and 2020, which wasn’t a surprise… but this year is something else.
The first half of 2021 brought in $17.2 billion of VC investment. And the pace of investment into cryptocurrencies and blockchain projects hasn’t slowed down at all in July and August. The industry is witnessing an “all in” moment.
While the press likes to write about CryptoKitties and Dogecoin as if they are comical, the industry is building and launching the next generation of the internet and financial services all at the same time.
Real tech, real applications, less friction, lower cost, higher security… and all without the centralized control wielded by governments and large corporations.
It’s a remarkable period in time. We’re seeing the development of the foundational infrastructure for this technology. And we have all of the growth and upside in front of us. I can’t imagine a better investment window of opportunity. Our time is now.
And here’s the thing… Even at these investment levels, VC investment into the cryptocurrency industry is still only around 1% of all venture capital invested. That’s right – just 1%. In other words, we’re still early. We have so much to look forward to.
And that’s why I launched Unchained Profits last Wednesday night. It’s my very first investment research product focused on the most promising and explosive cryptocurrencies and digital assets.
This isn’t a trend to miss. This is a once-in-a-generation opportunity. And I hope my Bleeding Edge readers will join me on this incredible journey that we’ll have over the next few years. Please go right here to watch.
This leads me into our first topic for today…
We are going to start off by talking about non-fungible tokens (NFTs) again today. This is such a hot topic right now, and one that is not very well understood.
It’s easy to get a chuckle from NFTs, but to do so without understanding what NFTs enable and the investment opportunities they represent would be a big mistake.
As a reminder, NFTs are digital collectibles. They allow us to cryptographically secure and authenticate unique assets or data on a blockchain.
This makes NFTs perfect for sports franchises. Franchises can create what are essentially fan club tokens to drive fan engagement and raise money at the same time. And a major deal just occurred that illustrates this perfectly.
Those who like international football – or soccer here in the U.S. – will recognize the name Lionel Messi. Messi has long been considered one of the best footballers in the world.
Messi spent most of his career playing for Futbol Club Barcelona. He also served as a captain on the Argentinian national team.
But Messi just made a dramatic change that was heartbreaking for many… and exciting for others. He moved to the Paris-Saint Germain (PSG) Football Club. This was a huge deal in the sports world.
And here’s what’s most interesting about this – Messi is taking part of his compensation in the form of NFTs. The PSG club issued its own NFTs, essentially a cryptocurrency, and Messi received a portion of his two-year, $47 million compensation package in PSG tokens.
These PSG tokens were created by a company called Socios using the Chiliz blockchain. This is an emerging blockchain focused entirely on tokenization.
We don’t know exactly how much of his compensation Messi received in NFTs, but apparently it was a meaningful chunk. That tells us that Messi believes in the technology as well as how passionate the fans are. And I’m sure he will get a lot of recognition for doing this.
To me, using NFTs to create fan clubs is a perfect application. Sports fans are very passionate, and NFTs give them a way to invest and participate in their favorite teams. As interest in the team picks up, the NFT should rise in price.
Plus, there are non-financial benefits that can be conferred to a team’s NFT holders. That creates a social aspect to this.
For example, NFT holders could be invited to do a Zoom call with key members of the team. Top NFT holders could even be invited to a private event where they can meet their favorite players. And teams could send out signed jerseys and other memorabilia to NFT holders as well.
This is a great way to drive fan engagement that is far more exciting and interactive than email and social media posts. NFTs can make fans feel like a key part of the team.
And NFTs can even be used to confer voting rights to fans. For example, PSG could empower its NFT-holding fans to influence or decide on matters related to the football club. Perhaps a new club logo or uniform design? They can also be used to make fans eligible for promotions.
This is possible because NFTs are powered by smart contract technology. These are contracts that execute automatically once the agreed-on conditions are met. This will enable teams to automate many aspects of fan interaction, saving time and manual labor.
So I am bullish on NFT applications like this. I think the NFTs of top sports teams or even individual athletes will do extremely well, as will the digital assets powering the underlying blockchain platforms like Chiliz.
If readers would like to learn more about investing in the NFT trend, I recently put together a presentation with more details. Simply go right here to check it out.
I never thought we would talk about Taco Bell here in The Bleeding Edge. I certainly had my fair share of Taco Bell when I was younger, but I hadn’t thought much about the restaurant chain until I saw this:
Taco Bell “Defy” Restaurant
Source: Taco Bell
This is a rendering of a Taco Bell “Defy” restaurant that will open in Brooklyn Park, Minnesota, next year. It looks pretty futuristic, doesn’t it?
This is a “digital-only” restaurant. There are four drive-through lanes for customers, but that’s it. There’s no seating area. The area above the lanes is the kitchen.
Three of the four lanes are for customers who order food ahead of time using the Taco Bell app. Those customers simply drive up to grab their pre-ordered food and scan barcodes on their phones. Then their orders are delivered to them, and they drive off.
These three lanes work the same for delivery services like Grubhub and Uber Eats as well. The delivery driver simply scans a barcode on their phone to pick up a customer’s order for delivery.
As for the fourth lane, it will have a terminal for customers to order food on-site, like we do today in traditional drive throughs, just contactless. Then they sit in their cars and wait for the food to be ready.
So Taco Bell is clearly emphasizing app-based orders here. That’s smart.
And that brings us to the most interesting part of the “Defy” model – how the staff delivers food to customers.
Notice how this looks a lot like a bank’s drive-through window. That’s not an accident.
Taco Bell is employing pneumatic tubes just like those at the bank. The food bags will be pushed down to customers from the kitchen above using these tubes. How neat is that?
So this model is completely contactless. Everything is done digitally. Customers will never interact with the Taco Bell staff. No need to hand a credit card or cash back and forth. Talk about the perfect post-pandemic offering.
I’m very interested to see how the first Taco Bell “Defy” restaurant does next year. I suspect both customers and employees will prefer this model to the legacy fast food restaurants. If that’s the case, we will see more and more restaurants convert to this digital-only structure.
Digging even deeper into the new technology being applied to the fast-food industry, we’re going to have a look at new developments from burger chain Wendy’s. This is another company I never expected to talk about in these pages.
Wendy’s just announced plans to open 700 “ghost kitchens” in the U.S., Canada, and the U.K. over the next five years. And about 50 of those kitchens will go live before the year is out.
These are mobile kitchens that produce food for delivery-only orders. They are very much like food trucks, except they are not open to on-site orders. Here’s a visual:
Wendy’s Ghost Kitchen
Source: Wendy’s
Wendy’s is partnering with a company called Reef Technology on this. Reef makes these prefabricated ghost kitchens that can be deployed immediately. The kitchens can be driven anywhere, which means they can handle delivery orders for multiple restaurants in a given city.
Wendy’s is making a big investment here. This tells us the company must have seen a major uptick in delivery orders over the past year. And Wendy’s must expect the percentage of delivery orders to increase going forward. Otherwise, it wouldn’t be making this move.
And that’s why these ghost kitchens make perfect sense. Once you get into heavy delivery-based models, it pays to have the kitchen closer to where the orders are coming from. That cuts delivery costs, reduces delivery time, and maximizes efficiency.
While we’ll see the kinds of pop-up kitchens shown in the image above, I believe what will become more prevalent are nondescript buildings or prefab structures. This is where the name “ghost kitchen” comes from. They will be there, but we really won’t see them.
And this gets really exciting when we think about some of the autonomous delivery vehicles we have profiled here in The Bleeding Edge. They would be a perfect match for this new venture.
The ghost kitchen cooks could bag up each order and then drop it into a small self-driving delivery vehicle that’s standing by. Then the vehicle would send a message to the customer’s phone when it was outside their home. Customers would walk outside and scan a barcode on their phone to retrieve their order.
Again, it’s a completely contactless model. Customers and restaurant staff will never need to interact with each other. This kind of disintermediation in commerce is a cultural trend that is extremely popular and here to stay.
It’s becoming clear that the restaurant industry – particularly fast food and the fast-casual segments, at a minimum – is destined to go in this direction. Digital-only orders are going to become the norm.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
