Dear Reader,
Last night was fantastic! A big thanks to all of you who took the time to join me and my friend Mr. Hurt at the Day One Summit.
For anyone who was unable to attend, you can go here to watch a replay If you have found any of my thoughts interesting this week, I can assure you that it will be worth your time.
To wrap up this week showcasing examples of a handful of my angel investments, I’d like to share one of the techniques that I always use as an analyst – and more importantly, as an angel investor. It’s something I call unconstrained thinking.
Investing in exciting companies at day one is the opposite of investing in well-established public companies that publish quarterly reports with the U.S. Securities and Exchange Commission (SEC).
Angel investors are always dealing with imperfect information. Oftentimes, there isn’t yet a product or a service… just a vision of what things might become.
If we wait until all the right pieces fall into place before making the investment, I can all but guarantee that we’re leaving the biggest gains behind. If the success has already been proven, the chance for the kinds of day one gains that I shared this week is no longer possible.
Unconstrained thinking requires us to discard any biases that we might have. It is easy to fall into a bias trap. We can think along the lines of, “Oh, that won’t work, it has been done before.” Or we might say, “That’s a terrible business model – it couldn’t possibly work. That market just isn’t big enough.”
Biases like these are anchored to experiences that happened in the past.
Yet investing in day one companies is all about the future. It’s not at all about where the company is today, or what it has done in the last year. What’s important is where it is going.
What does the product road map look like two, three, or five years down the road? What will the competitive landscape look like? And how will the market, technology, economy, business, and consumer patterns change over time?
Answers to these questions require unconstrained thinking. They also require a heck of a lot of experience as an angel investor, executive, technologist, and analyst.
And we have to be willing to investigate opportunities that may not look great at first glance, but through the right lens have incredible potential.
And this is where Axiom Space comes into the story. I invested in Axiom Space at the time of its seed round in the summer of 2018. It feels like ages ago, but it has only been three and a half years. My entry point was at a $72 million valuation.
This is a higher valuation than normal for a seed round, but it’s not unheard of. Axiom Space had been around for a few years and was already an ongoing business, which is what drove the higher valuation. That was less important to me, because what I was most interested in was Axiom’s future.
Axiom’s business at the time was unique. It had a contract with NASA to provide project support for sending commercial, sovereign, and even tourist astronauts to the International Space Station (ISS). That business wasn’t interesting to me from an investment perspective. But the fact that it had such a tight operating relationship with NASA was critical to the investment thesis.
The big play was Axiom’s vision to build the world’s first privately owned space station. It is going to do so by launching modules of the space station and attaching them to the ISS.
In time, it will have the entire station built, and when the ISS is decommissioned in the coming years, Axiom will have something that no one else has – it will have cornered the market.
That sounds hard, right? Maybe impossible? Anytime there is lots of hardware involved, and the need for launch services to orbit, it is hard.
Investors who have a bias will think, “It’s too hard, won’t scale quickly, will take forever, and will probably fail.” That is constrained thinking. And that results in missing out on fantastic investment opportunities.
Fast forward to today… Axiom Space is a unicorn. It raised capital this summer at a $2.5 billion valuation. I’m now up 35X on my investment. That’s about 3,400%, and it is still early days. Had I fallen into the trap of “that’s too hard,” I would have missed out entirely.
And I didn’t have to wait 20 years for these kinds of returns. This all happened in three and a half years.
Axiom Space continues to make incredible progress. I’m more excited about the prospects of the company, and I am absolutely certain it will become a decacorn (valued at $10 billion or more).
When that happens, I’ll be up about 139X (13,800%). And I believe that Axiom will become one of the most important aerospace companies of our time. That’s something that I want to be a part of.
But that’s not the best part. The best part is that I’ll be able to point up into the sky and say, “That’s my space station.” Ha! Well… at least a small part of it.
I feel very lucky to have had the chance to invest alongside a group of fantastic investors who shared the same vision that I had for Axiom.
And hopefully, one day, I’ll get a chance to go up and visit for a few nights and see our world from above.
Amazon is one of the greatest success stories of the internet boom, but not for the reasons that most would guess. And one blockchain company is set to mimic its incredible rise…
Very few people realize this, but Amazon’s tremendous success can be attributed directly to Amazon Web Services (AWS). And, perhaps ironically, AWS has nothing to do with e-commerce.
AWS is Amazon’s cloud computing and data storage infrastructure. It allows software applications to run in the cloud rather than on-site.
And this makes AWS an invaluable resource to companies and governments around the world. It democratized access to powerful computing at fractional costs and gave all of its customers the ability to scale up or scale down with a moment’s notice.
Because of this, AWS is the engine that fueled Amazon’s growth. It generated the majority of Amazon’s free cash flow, which the company then reinvested into its logistics infrastructure.
That’s how Amazon’s e-commerce platform became so comprehensive. And it is why Amazon will soon become the largest package carrier in the U.S.
Today, Amazon is worth over $1.7 trillion. It has basically become a utility in our lives, one that we would struggle to live without. And it has made early investors rich beyond their wildest dreams. That’s all thanks to AWS.
And this story is about to play out all over again.
A company called Alchemy is quickly becoming the AWS of the blockchain space. This company is a perfect infrastructure play on Web 3.0.
As regular readers know, Web 3.0 refers to the next generation of the internet. It’s what comes next.
Web 3.0 will be open, transparent, and censorship-resistant. That’s because it will be decentralized. It will not be owned or controlled by any corporation or any government.
And Alchemy is the company providing cloud computing infrastructure to much of the Ethereum ecosystem. Alchemy’s infrastructure supports many decentralized finance (DeFi) applications. It also supports all the major non-fungible token (NFT) projects that we have talked about recently.
Simply put, much of the innovation happening in blockchain right now is happening on top of Alchemy’s infrastructure.
And what I love here is that Alchemy is focused exclusively on the blockchain industry. All its tech is crypto-native. That makes it an obvious choice for all the blockchain companies out there working to build Web 3.0.
And think about this – Alchemy was valued at $520 million after its Series B venture capital (VC) round in April. That round raised $80 million. Then Alchemy followed that up by raising an impressive $250 million a few weeks ago. The company is now worth $3.5 billion.
Alchemy’s value just increased 6.7X in a matter of months. That’s how fast things are moving in the blockchain space right now.
Alchemy is well-positioned to become the blockchain version of AWS. It’s still private at the moment, but we’ll keep an eye out for a public offering or possibly a reverse merger into a special purpose acquisition company (SPAC). This is one company that I’d like to see go public sooner rather than later.
Helium just made a big announcement regarding its decentralized fifth-generation (5G) wireless network rollout. It will be partnering with Dish Network on the venture. This is interesting…
We first talked about Helium’s plan to build a blockchain-powered 5G network back in September. The network will be called “FreedomFi.” And it is working with a handful of manufacturing partners to build the small cells and gateways needed to enable the 5G network.
Except FreedomFi won’t be managing these cells. They’ll be sold to customers to create their own decentralized networks.
Anyone will be able to set up these small do-it-yourself (DIY) cells. In fact, many Bleeding Edge readers wrote in saying they were interested in becoming part of this network.
We can think of the FreedomFi devices as small cell towers. They’re roughly the size of a hardback book and can be set up on a desk or just outside the house. Simply plug them in, configure the software, and you’re up and running.
And the other benefit is that we’ll get paid in Helium’s native currency (HNT) for contributing to the network.
Obviously, this project caught Dish Network’s attention. But Dish’s motivations may not be what they seem…
Regular readers may remember when we talked about the 5G spectrum auctions last year. The auctions were run by the Federal Communications Commission (FCC). And the purpose was to sell wireless spectrum to companies that could build out 5G networks for consumers.
There are some stipulations, however. The FCC requires that any company purchasing spectrum actually put it to use. And it has deadlines by which purchasers must show that they have begun building a 5G network using the spectrum.
That’s what brought Dish into the picture here.
Dish purchased some 5G spectrum itself… but I just don’t see the company building out its own nationwide 5G network. Dish isn’t a wireless network company. Its business is primarily direct-to-home via satellite, multi-channel pay TV.
So Dish is hoping that its partnership with Helium and the FreedomFi network will at least in part satisfy the FCC’s stipulations. The company wants to demonstrate that it is working on its own 5G networks without investing much of anything itself.
I suspect Dish wants to turn around and sell its spectrum in the next 12–24 months, when it can command a high premium. That’s the endgame here. Do enough to satisfy the FCC while squatting on the spectrum for a higher price down the road.
That said, this partnership is a great way for Helium to demonstrate how blockchain-powered 5G can work. The partnership with Dish will certainly raise awareness for Helium and FreedomFi. I’m excited to watch this story play out.
Adobe just announced Project Morpheus… and it’s incredibly concerning. This project could make deepfake technology mainstream. I’ll explain with a little context…
For the sake of new readers, deepfakes are altered media content. They are fake videos or audio where artificial intelligence (AI) is used to mimic a real person’s voice and/or image. We have talked several times before about the nefarious side of deepfakes.
And Adobe is the company behind a suite of graphics and photo/video editing software, including the popular Adobe Photoshop. With its suite of products, Adobe commands over 81% of the market. So when Adobe releases a new feature, it becomes prominent very quickly.
And that’s where Project Morpheus comes into the picture.
Last year, Adobe developed a feature for Photoshop called Neural Filters. This feature allowed photo editors to take a portrait of someone and alter their facial features in a way that appeared natural.
For example, if someone was angry, Neural Filters could make them smile just by using the AI-powered software. It didn’t just slap a smile on the person’s face – it made the subtle changes necessary to make the picture look authentic.
Interestingly, Neural Filters could also make a person look older or younger than they were. It could portray anyone as they likely looked 20 years ago or as they might appear 20 years in the future.
So this was neat and novel software that anyone editing photos could have fun with in a harmless way. But that all changed with Project Morpheus.
Project Morpheus took this feature for photos and applied it to video. This opens the door to all kinds of problems. The example below demonstrates why…
Adobe’s Deepfake Tool
Source: Adobe
The video on the left is real, while the video on the right is a deepfake. And look at how realistic it is. We could never tell at a glance that it was engineered.
While the above video may be harmless, it’s easy to see how this could be used for all kinds of nefarious purposes.
For example, imagine a video of a political leader or other influencer talking about a tragedy. Naturally, the person would likely have a sad or somber demeanor.
But Adobe’s tech could make the person look like they’re overjoyed about the event instead. And when that deepfake video goes viral on social media, all hell could break loose… especially if a coordinated deepfake campaign was arranged to produce many different videos.
Videos like this are designed to smear or slander an individual. We saw a lot of that back in 2019–2020.
In a world where we have been subjected to so much censorship and misinformation designed to cause division in society, technology like this is incredibly scary. It is not hard to envision how bad things could get from here.
And sadly, I don’t think there is anything we can do to stop Adobe from making this available to its customers. Let’s just be vigilant and aware that this kind of tech is out there.
The way I look at it, this is just one big circus. If we choose to “tune in” and watch, let’s recognize it for what it is. Or we can just choose to not watch it at all.
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.
