A number of blockchain startups are struggling to provide a credible use case for blockchain tech and fund their crypto projects as cryptocurrency prices have taken a deep nosedive, as reported by CNBC on Feb. 11.
Crypto startups are closing shop, and their talented employees have gone on to become free agents.
This works in favor of big tech companies such as Facebook as they can snatch the “free agents” for their own projects.
Facebook Confirms Hiring Chainspace Employees
Online publication Cheddar reported on Feb. 4 that Facebook had acquired Chainspace and its employees.
However, the social media giant confirmed to CNBC that it had hired the startup’s employees but did not buy the company or any of its technology.
Chainspace is a blockchain firm established by Ph.D. researchers from University College London.
LinkedIn records reveal that two of the startup’s founders are now listed as employees of Facebook. Chainspace says it wants to give people ownership of their personal data.
Zachary Schwartzman, an RBC internet analyst, sent a note to clients in which he highlighted that blockchain poses a threat to major tech companies such as Facebook.
Schwartzman said that Facebook’s position on Chainspace could be categorized as an “acqui-hire,” a term widely used in Silicon Valley to refer to a company that acquires another company with the aim of hiring its employees.
In April last year, crypto unicorn Coinbase paid slightly more than $100 million to acquire Earn.com in a move considered by many as an opportunity for the cryptocurrency exchange to snatch Balaji Srinivasan and appoint him CTO.
Satya Bajpai, head of Blockchain and Digital Assets Investment Banking at JMP Securities said that “acqui-hiring” affords tech companies the opportunity to onboard a team of blockchain experts already working together towards a common goal.
Bajpai further added that there would be more deals and partnership as the crypto industry matures and evolves.
Facebook, whose blockchain division is led by David Marcus, a former PayPal executive, is one of the several major tech companies including Amazon, IBM, JP Morgan, and Microsoft that are exploring blockchain technology and its potential use cases.
Crypto Mania and the Reality of the Bear Market
By all standards, 2017 was one of the most important and memorable years for cryptocurrencies. The price of Bitcoin reached an all-time high of nearly $20,000.
At the same time, entrepreneurs and engineers flocked to the space to get their own pieces of the pie.
In 2018, venture capital flowed in the industry. Pitchbook data shows that 301 companies acquired $2.6 billion from venture capital.
This is three times more than the crypto deals signed the previous year.
However, due to the effects of the bear market, venture capital is no longer flowing in the industry freely.
Bajpai compared the crypto space to the dot-com industry.
New startups that have a meaningful and convincing idea manage to raise venture capital while those that don’t have a solid business plan fail to secure any funding.
“In order for them to raise more capital, they need to show progress on customer adoption and revenue, which is where a lot of these companies fall short.”