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Traditional VCs are finally investing in cryptocurrency and blockchain startups

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Recent data suggests traditional venture capital (VC) firms are gradually starting to diversify their portfolios, investing in more cryptocurrency and blockchain projects than ever before.

Not surprisingly, VC firms specializing in funding blockchain projects top the list. But traditional VC firms are slowly starting to catch up, making cryptocurrency-based investments a larger portion of their portfolios.

Household names like 500 Startups and Andressen Horowitz have made the top 10 after showing continued interest in funding blockchain projects. The study – put together by Crypto Finance Conference and exclusively shared with Hard Fork – highlighted how traditional venture capitals are spreading their risk by investing in specialist blockchain funds as well as startups.

Boost VC top the list of firms of this nature, with 30 percent of its portfolio made up of cryptocurrency-based companies. Among its 42 crypto-investments, Boost VC’s portfolio touts stakes in Etherscan, Coinbase, and blockchain-specialized VC firm, Polychain Capital.

“Polychain Capital, the tenth [sic] investor on the list, is in the portfolio of several higher-ranked investors.” Crypto Finance Conference CEO Andrea-Franco Stöhr said. “This suggests that some VC firms and investors want to benefit from the growing crypto economy but feel they lack the time or expertise to invest themselves.”

Outside of the top 10, ZhenFund, Naval Ravikant, GV, and Foundation Capital are other big names slowly funding more cryptocurrency projects.

This increase from the more traditional VC firms creates competition, highlighting a belief in the potential of blockchain. VC firms tend to spread risk with a diverse portfolio that ensures steady consistent returns. The data suggests that blockchain and cryptocurrency projects are either becoming less risky, or that there are substantial gains to be made.

Indeed, the fourth entry on the list is Pantera Capital, a specialist blockchain investment firm, which recently bragged that their fund has seen a return of more than 10,000 percent over its first five years. Quite the payout if you dont mind hedging the risk.

Stöhr added that, “Sometimes, investors turn to newer technologies simply to add risk to their portfolios.

As previously mentioned, blockchain-focused investors like Digital Currency Group (DCG) and Blockchain Capital (BC) are the most active investors in the cryptocurrency space. While all of DCG’s 97 investments are in blockchain-based businesses, and only one out of BC’s 59 investments isn’t related to blockchain.

This is not all that surprising in light of other recent research which is now showing that a growing majority of ICOs are now being undertaken in private rounds of investment, rather than being opened to the public.

Crypto Finance Conference used Crunchbase data to compile the stats, and then ranked them according to the number of cryptocurrency or blockchain investments in their portfolios. Unfortunately, one thing missing from the data is the value of each investment.

Bloomberg reports that initial coin offerings (ICOs) – once reserved for small-time investors – are becoming exclusively for wealthy investment firms. In the case of Telegram, it notably cancelled their public token sale in favor of private investors

This technology is meant to power a decentralization revolution – changing the way we connect and interact digitally. Having private ICOs and companies funded by venture capitalists turns this notion somewhat on its head.

Published August 9, 2018 — 12:11 UTC

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Income Investing Ideas – Today's Editors' Picks

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  1. Income Investing Ideas – Today’s Editors’ Picks  Seeking Alpha
  2. Full coverage



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Uber is investing its growth into its next chapter — including scooters and bikes

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Uber isn’t expanding the global footprint of its ride-hail service at breakneck speed anymore. It also isn’t close to being profitable yet. That’s in large part because the company, under CEO Dara Khosrowshahi, is spending a lot of its money building out its next chapter, which goes far beyond ordering car rides with your phone.

The Uber of tomorrow includes food delivery, scooter- and bike-sharing, car rental, flying cars, partnerships with transit networks, plus expanding its rides business in key global markets such as India, the Middle East and Latin America.

“Cars are to us what books are to Amazon,” Khosrowshahi has said. Just the beginning.

Fortunately for Uber, its business is still growing rapidly — though a bit slower these days — putting it in a position to invest in these newer areas.

According to financial documents supplied by Uber, the company generated $2.8 billion in revenue last quarter, a nearly $1.1 billion increase over the same period a year ago, representing 63 percent growth. (That’s down from 70 percent year-over-year growth in the first quarter.)

But Uber still lost close to $900 million last quarter, down 16 percent from a $1.1 billion loss in the same period a year ago.

“Going forward, we’re deliberately investing in the future of our platform: Big bets like Uber Eats; congestion and environmentally friendly modes of transport like Express Pool, e-bikes and scooters; emerging businesses like Freight; and high-potential markets in the Middle East and India where we are cementing our leadership position,” Khosrowshahi said in a statement.

It’s not exactly a surprise that the company continues to lose cash. Uber executives have been vocal about their plans to pour funds into growing the surprisingly successful UberEats food-delivery business while strengthening their position in the Middle East and India.

UberEats, for its part, is already in more than 290 cities. At Recode’s Code Conference in late May, Khosrowshahi said that Eats is growing 200 percent at a $6 billion bookings run rate. The company doesn’t break out how much it spends on specific businesses, but a recent report from The Information indicates that losses are “low single digits as a percentage of gross bookings.”

As for its global footprint, winning in the international markets it hasn’t already exited remains especially important. (Uber’s most recent exits include deals with Southeast Asian rival Grab and Russian competitor Yandex, which combined to generate a nearly $3 billion gain for Uber in early 2018.) While the Grab deal was in part an admission that Uber couldn’t compete with its homegrown rival, it was also a sort of call to arms in markets like India, Latin America and the Middle East.

On top of that, Uber has invested in becoming, as Khosrowshahi put it, the Amazon for transportation — a platform that riders can use to access several different modes of transport. It’s a critical part of creating a viable alternative to personal car ownership — and thus more of a reliance on Uber.

To that end, in addition to acquiring Jump Bikes for about $200 million, Uber has also participated in a $335 million financing round for scooter-sharing company Lime. Under that partnership, Uber will let its users rent Lime scooters in its app.

This is all in the lead-up to a potential public offering, which Khosrowshahi said will happen by the end of 2019. It’s critical that the company is able to show that there are new viable growth opportunities while continuing to build out existing revenue streams.

“I think being able to demonstrate [to investors] that we are a company that is able to deliver multiple growth engines and is able to incubate and execute upon a few different opportunities; I think that’s a really important story,” Uber COO Barney Harford previously told Recode.

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These Are The Top 5 Beverage Companies Investing In Cannabis

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Over the past year, a number of partnerships developed between the cannabis industry and big alcohol. Heineken is now the latest beverage company to throw their hat into the ring.

Falling Beer Sales

In January of this year, researchers of a ten-year-long joint study undertaken by two US universities and one in Lima, Peru showed a 13.8 percent drop in beer sales following marijuana legalization. Overall, data showed that sales of alcohol were, on average, 15  percent lower in states with legalized cannabis. The study also showed that marijuana and alcohol have a widely overlapping consumer base.

Sales volume of light beers such as Coors Light and Bud Light took the most significant hit dipping by 4.4 percent, while Budweiser and Coors dipped by 2.4 percent. Also, according to the data, Denver’s beer sales plummeted by 6.4 percent following the legalization of cannabis.

Another study which took place in 2016 showed similar results. Performed, by the New York-based research firm Cowen & Company, the study found sales of beers made by the larger domestic producers had “collectively underperformed” over the past two years in Colorado, Oregon, and Washington.

The report stated, “With all three of these states now having fully implemented a [marijuana] retail infrastructure, the underperformance of beer in these markets has worsened over the course of 2016.”

[Read More: These Are 5 Marijuana Stocks Worth More Than $1 Billion]

Given these facts, it’s no wonder that both cannabis and alcohol companies are looking at the potential market for cannabis-infused adult beverages. These are some of the companies, both large and small, lining up to be contenders in this space:

Heineken

Almost two weeks ago, on July 30, Heineken (NASDAQOTH:HEINY) launched Hi-Fi Hops, a cannabis-only beverage in a handful of dispensaries in California under its Lagunitas brand. The beverage is designed to taste like beer but does not contain alcohol.

Currently, the beverage comes in a ten-milligram version with tetrahydrocannabinol (THC), and a hybrid version with five milligrams of THC and five milligrams of CBD. Although the drink costs $8 per can, according to reports sales continue to rise.

Constellation Brands

Constellation Brands (NYSE:STZ), North America’s first publicly traded cannabis company, is a multi-billion-dollar firm known for brands such as Corona. Last year, Constellation Brands announced that it would partner with Canopy Growth Corporation (TSX:WEED) (NYSE:CGC) to research the possibility of developing a cannabis brew.

Constellation wound up taking a 9.9 percent equity stake in Canopy Growth Corp. totaling approximately $190 million and has since given itself a chance to expand that stake by acquiring more than $150 million in convertible debt from Canopy. Constellation Brands and Canopy will work together to create new products, including beverages, to reach markets where marijuana is legal.

Last month, Canopy Growth announced a deal to acquire Hiku Brands, a retail-focused craft cannabis producer for CAD$269 million.

Molson Coors Brewing Co.

Back in January Molson’s noted their concerns about falling beer sales. Earlier this week, Molson Coors Canada announced a joint venture with The Hydropothecary Corporation (TSX:HEXO), a recognized leader in Canadian medical cannabis to develop a line of non-alcoholic, cannabis-infused beverages. Molson Canada is the Canadian arm of beverage giant Molson Coors Brewing Company (NYSE:TAP)(TSX:TPX).

[Read More: Matt Barnes on Cannabis, Cancer, and Beating Snoop Dogg at Flag Football]

The Molson-HEXO deal is structured as a standalone start-up company, complete with its own management team and board of directors. Molson Coors Canada will retain the majority controlling interest with a 57.5 percent ownership stake.

Alcanna

Alberta-based Aurora Cannabis Inc. (TSX:ACB) recently announced a license agreement with Alcanna, Canada’s largest private-sector liquor retailer. In February, Aurora paid CAD$103.5 million ($82.5 million) for a 19.9 percent ownership interest in Alcanna, which at the time was called Liquor Stores N.A. Alcanna already started converting some of its 229 liquor stores into cannabis retail outlets.

The exclusive agreement allows Alcanna to open retail cannabis stores under the Aurora brand in provinces where private retail will be permitted. Alcanna will build, own, and operate the new cannabis stores, which will carry a suite of brands from Licensed Producers, including Aurora-owned MedReleaf and CanniMed.

Great North Distributors

Aphria Inc. (TSX:APH) (USOTC:APHQF) signed an agreement with Great North Distributors, Inc. a wholly-owned Canadian subsidiary of Southern Glazer’s Wine & Spirits to serve as the exclusive distributor for Aphria’s adult-use cannabis products throughout Canada. The deal gives Aphria 100 percent coverage of all cannabis retailers, whether provincially or privately operated, across Canada from the first day of legal adult-use marijuana sales.

Other Beverage Brands To Watch

Province Brands in Ontario, Canada is developing new enzymes and fermentation techniques. The aim of the research project is to create a product with a high that is roughly equivalent to a single beer. So far the company’s experiments have produced a brew with about 6.5mg of THC.

Interestingly, Province Brands claims that the product being developed is brewed from what is now considered a byproduct of marijuana production — the stalks, stems, and roots of the cannabis plant.

The company seems fairly confident that it can do so and plans to invest CAD$50 million into building a first-of-its-kind facility for brewing cannabis beverages.

***

Keith Villa, the founder of Blue Moon Brewing, recently retired from his position at Molson Coors. He and his wife are now founders of CERIA Beverages, a brewing company in Colorado that is working directly with cannabis research company ebbu to develop a THC-infused, alcohol-free beer.

***

Doctor D’s, maker of a probiotic drink, is said to be diving into the cannabis beverage market. Founder Stuart Dimson said that CBD-infused beverages are very attractive to health-conscious consumers who are already purchasing his drinks. Doctor D beverages are already sold in 2,000 stores nationwide. However, none of them are licensed to sell cannabis.

A Growing Trend of Cannabis Beverages

These are just some of the players aiming for the cannabis-powered adult beverage market. In the short term, it’s the cannabis companies and the craft brewers who have the most to gain by the trend. In the long run, however, depending on how well received these products are, the large alcohol companies may or may not be able to make up for diminishing beer sales.

Although recreational marijuana will become available by mid-October in Canada, cannabis-infused edibles and beverages will have to wait until rules are drawn up sometime in 2019.

The rules of the game would have to change for there to be a significant upside for the multi-billion dollar players in the alcohol industry. At this time, no U.S. states allow the sales of cannabis products in liquor stores, bars, restaurants, sports stadiums, and other places where alcoholic beverages are commonly served and sold. Realistically that situation is not expected to change in the foreseeable future. But, in both Canada and the U.S. cannabis laws are still in flux and probably will be for many years to come.

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