The Developing World Will Lead the Way, Says One of Blockchain’s First VCs
11.07.2018

Jalak Jobanputra is the founder of Future Perfect Ventures, and one of the first venture capitalists to specifically fund blockchain technology. Her first fund included investments in Blockstream, Blockchain, Civic, and BitPesa—a killer lineup by any standard. Her second fund is now aiming to raise $50 million after contributions from prominent investors including Marc Andreessen and Chris Sacca. The following interview has been edited for clarity and length.

You were a pretty early bitcoin adopter, especially as a VC. When did you realize that blockchain was going to be a big deal?
My aha moment was the first bitcoin conference I went to, in 2013. I was just blown away by the energy in the room, and read the white paper while I was there. And because I was born in Nairobi, and had been investing in emerging markets for pretty much my whole career, I got the value proposition right away—a censorship-proof way to send money across borders almost instantaneously and at low fees.

And then my mind immediately went to how the underlying technology could be used not only for currency, but for data. This is 2013, and I had spent a lot of time thinking about artificial intelligence and machine learning and the proliferation of sensors. And one of the things that I knew I wanted to focus on over the next 10 years was, how do we keep this data secure, and how do we transact with it more seamlessly?

After that, I started talking with cryptographers and some of the leaders in the space, and the more I dug in, the more excited I got. So it was love at first sight.

When that happened, did Future Perfect already exist, or did you specifically start it for blockchain investing?
I had already decided to start the fund, and I was putting together the investment thesis, really around data and data proliferation and data infrastructure. What had been bugging me was the connectivity mechanisms and the storage mechanisms around this data.

So that first conference kind of solidified the thesis for me that blockchain could be the underpinning around a lot of this new connectivity, in the way that broadband internet infrastructure underpins the mobile activity that we have.

Were you at that time thinking about the problem of centralization and private ownership of data, and what the consequences of that would be?
Yeah, and ironically, what had drawn me to the internet back in 1995, 1996, were all the personalization capabilities of the internet, what we could do with the data. And that just continues to grow as, for instance, smartphones lead to the creation of more data, and we have billions more people coming online.

But over time, looking at how the companies have dealt with our data really gave me pause. I thought, we’ve unleashed this monster out into the world. If you’ve been hacked or your identity’s been stolen, you really understand the pain points around that, and it has almost become a necessary evil. In order to get services we need to give up data; I just think there’s something wrong with that.

What are we getting for that data? Really bad ad retargeting and some basic services. And I think the companies will get away with it for as long as they can, unless we start funding technologies that can counteract that. What’s also interesting that’s happened in the last five years is that companies have realized they’re not only getting bad PR, they’re losing customers, and they’re losing money to fraud, and cyberwarfare’s a real threat. So they’re more willing to look at infrastructure.

Over the last two years there has been this great terrified awakening to the problems that you’re talking about with data. How has it felt to see more people become anxious about the stuff that you were anxious about three or four years ago?
I can’t say I’m happy about it, because I wish we didn’t get to this point where so many people’s data has been compromised. But I don’t think people really understood how the data was being used, and I don’t think we should expect people to understand. It’s really partly up to companies to be good stewards of their customers.

What I feel great about is how the thesis has played out. I can’t say I love the fact that there’ve been hacks, and all this information has come out about Facebook and the elections, but I think it was only a matter of time before we started to see the implications of people sharing their data.

When you start a venture fund, you then have to go out and find investors. Did you find it difficult to convey the role of blockchain in solving this problem, years before the problem itself was clear?
[Laughs.] Yeah, I became persona non grata.

Oh, really?
I’m being a little facetious, but there were a lot of raised eyebrows.

One of the reasons I decided to start the fund, even before I went down the rabbit hole of crypto and blockchain, was that I saw the internet early, I saw mobile early, I’ve seen a lot of things early throughout my career. And I wanted to be able to act on that. As forward-thinking as venture is often portrayed to be, I found it not to be as cutting edge as I wanted. It [wasn’t fulfilling] what I thought venture was supposed to fulfill, which is funding entrepreneurs thinking about the future, and not the present.

I was already taking a big risk, as a woman, as a solo manager, striking out with her own fund, and then overlaying the thesis of global technology innovation in places like Africa as well as Silicon Valley. It was not something that was done five years ago. And so it was challenging, very challenging. I always tell entrepreneurs I can relate to their journey, especially the ones that are pushing innovation to its edges, because I had my own version of that with the fund.

But I also was very convinced, and that’s where I think experience comes into play. I felt like this technology was important. I didn’t know exactly what form it is eventually going to take. And I would say it all evolved much quicker than I had anticipated, which is great.

I think it was that conviction that has helped me and the fund survive the crypto winter. We invested in some great entrepreneurs who share this vision for the future. They’ve been building for the last five years. I tell entrepreneurs this all the time, you just have to heads-down and build. And if you believe in the market, it will happen, but you have to have resilience and patience.

You were born in Nairobi. Is there enough attention focused on Africa and developing regions more generally, for investment opportunities and development opportunities?
There definitely is way more than there was when I started the first fund. And I actually think blockchain and crypto have increased awareness of what’s happening in other regions of the world. We hear a lot about China and WeChat and business models coming out of China. But what crypto has really opened up is the fact that there are hubs all over the world, in the Philippines and Mexico and Argentina, in India, in Singapore. There’s no monopoly on innovation.

And this is also open-source technology, so anyone is able to build on it. That has lowered the barriers for entrepreneurs to get into the sector. I think that’s one of the most exciting pieces of what we’ve seen.

I was an early investor in BitPesa, a company that forged the path of how we can apply this technology in a very different way in places like Africa than we would in the United States. Those early, pioneering entrepreneurs have inspired thousands of others to look at how this technology can be used in local markets.

Look at the conversation around security tokens. I just talked to someone earlier today who said, ‘We don’t really need those.’ But if you look all over the world, they don’t have access to investable assets, right? There are a lot of places where I think there would be strong markets and liquidity if we can develop the infrastructure for some of these assets. So it’s looking at each region and seeing what the demand and use cases are today on a region-by-region basis.

With bitcoin today, you have ideologues and cypherpunks on one side, and business people on the other. What has been your experience of the interaction between those two elements?
I think similar to other technologies, it starts off with ideologues, and we wouldn’t be where we are today without them. Those are the people I hung out with in the early days, and we have a shared vision. I see myself as being able to bridge those two sides. Because really, without business models or adoption, they can’t get the technology out there.

A lot of the entrepreneurs in our portfolio are very much bought into the decentralization thesis and what it does to empower the individual. We’ve gotten so out of balance, in terms of who has power and who can participate in economic development. I think we can get to a world where there’s a little bit more balance, and where governments can’t take away people’s assets. So I don’t think the two are as at odds as Twitter makes them out to be.

There are outliers on both sides. There are the ideologues who just want to get rid of all governments, and then there are business people who don’t care about the philosophy behind all this, they’re just speculating around these crypto assets. For me, what’s important is getting the technology out there and making sure that it reaches as far as it can, and that’s the goal of the fund. And that’s what I consider my life’s mission.

The implications of blockchain for data and machine learning are frankly something I am a little hazy about. Could you lay out the role that blockchain can play in data management, identity, and AI?
Well, one case is portability. Think of a world where all 7 billion people have a crypto wallet that has all of our information, that’s kept in a secure way so that we are the only ones who have access to that information. And we can contribute that information for free in exchange for services, or in exchange for something else, for fiat or crypto assets. And we can we can take that with us.

I was just with the head of the World Food Program yesterday, who lives in Rome. They started a pilot distributing refugee aid through crypto wallets with 100 people, and it’s now at 100,000 people. And it’s not just having that aid, it’s the fact that people feel more in control when they have ownership of something, versus just being given a handout. That should relate to all of us in terms of our data.

Right now, the reason companies like Facebook and Google and Palantir are monopolizing AI and machine learning is because they have a large data set. If data can be anonymized or pseudo-anonymized, and available to more people and more entrepreneurs, we can distribute it, and we can also give access to people who may be able to build better things with it than these large companies are.

Because we’re on the topic, Civic is one of your companies. They’re pushing pretty hard on putting identity on the blockchain.
Yeah. And that was a company that we invested in two years before their ICO, so the token market hadn’t developed yet. Vinnie [Langham]’s vision was of being able to store people’s social security numbers in a decentralized way. And any time the social security number was being asked for and being used, you would get an alert. That’s where it really started. And then obviously, it has grown from there.

You were a tech investor during the first internet bubble. What was the most important thing you learned from that era?
Enjoy the parties while you can. [Laughs.] No, but seriously…I’ve learned human nature is very predictable. Last year, people—especially those who were younger and hadn’t been through these cycles—thought they had discovered something new in the world, you know, the paradigm completely shifting. And that was the mentality in ‘99 when I moved out to the Valley: Things are different. Everyone bought into it—the bankers, the lawyers, the entrepreneurs, and larger companies.

And what we learned is, fundamentals are fundamentals, and you can’t create money out of thin air. It’s all paper profit. It’s like these tokens that were created in the ether. There’s very little underlying them, but they just brought in more and more speculators and people piling on.

Most people are followers, and I think it’s important anytime you see a bubble like that to recognize that it is a bubble. There’s a way to make short-term gains, but if you care about the longer term, then it’s really about finding people who are like-minded who aren’t going to get caught up in that.

As somebody who was standing by and watching the ICO boom, were you hopeful that tokenomics would actually prove out? Or did you know that there was something not quite right there?
I knew something wasn’t quite right. I told most entrepreneurs I spoke to last summer, come back in a year when you decide to do an equity round after the ICO market crashes.

And that doesn’t mean I’m not a believer in tokenization. I’m excited about allowing users of technology to participate in the upside that they are helping to create. But I don’t think most of the investors last year were bought into cryptoeconomics. I think they were just looking for the next Ethereum, and they were willing to just bet anywhere.

That being said, I think next year is going to be fascinating in terms of projects actually launching. We’ll definitely see some that have legs, but there’s also a ton of money that has gone into experiments. And frankly, I’m glad it has, because without that capital going in, we wouldn’t know what actually can survive, and what technology can be built out, and which teams can survive.

I’ve seen a different sentiment, and I am sort of sympathetic to it, that there’s such a thing as too much money. There are projects that have no technology or compelling use case. But now they have these giant war chests, and they can just kind of keep going. Is that a problem for the space? And is there a way that it unwinds?
This is another thing we’ve seen throughout cycles, too much money going into companies. And even if it is a strong team, once they’ve raised a lot, they have pressure to spend it, and they have a pressure to deliver. And some of this is just not scalable. Some of it is market timing, and different pieces of technology need to come into place before we can see certain use cases.

What I noticed, when I started investing in this space, was there wasn’t a lot of capital available to a lot of these entrepreneurs. So they made it work, and they made it last, and they figured out efficient ways to build. And I’ve always kind of gravitated toward those types of entrepreneurs regardless of market cycle.

So while I’m happy all this money has gone in, I’m also glad I’m not an investor in lots of those companies, that it’s other people’s money funding innovation and experiments. I am running a fund and I’m very clear about the fact that I have to return capital to my investors.

If you look at so many innovations over time, they were funded by government. A lot of it does take just sheer capital. That doesn’t mean that those companies are necessarily going to survive, but we’re going to be learning from what’s created.

The unique aspect of this compared to even the internet bubble is how much of this capital is just free and clear, because with the token sales, there’s no legal claim on anything.
Well, unless the SEC comes in.

There are certain people, particularly in blockchain VC, who have made the case that investor accreditation rules are antiquated and unfair. Do you have a take on that?
Yeah, I think a lot of our regulation and institutions are very 20th century. I do believe they’re antiquated.

I have the perspective of someone who spent a lot of time in places where people don’t have a lot of money, but have a lot of savvy and are smart and just haven’t been given the opportunities to have a high income.

After business school in ‘99, before I started at Intel, I spent six months in Dar es Salaam, Tanzania, training women entrepreneurs. I set up a program of the United Nations Development Program, the UNDP, and these women had received loans to buy equipment for food processing. I put together training programs, teaching them about loans, microfinancing, marketing and distribution, and all these other things.

Some of those were smarter women than the people I went to business school with. They just didn’t have access to education. But certainly they had the ability to invest if they were given the assets to be able to invest.

It’s interesting that you mentioned microfinance. Where can blockchain play a role there?
I think the challenge of microfinance is, how do you graduate people beyond microfinance? If you can actually collect more data and provide access to more capital, through trusted validation of data, I think it can open up these microfinance entrepreneurs to have even bigger businesses. So that’s actually one of the things I’m looking at.

A lot of microfinance organizations still have to graduate to even mobile distribution of payments. And that’s something that you don’t need blockchain to do, but I think it opens up more possibilities.

BitPesa is one of your companies, and it’s one of the real successes in blockchain to date. Is that a project that wants to be worldwide?
I think there’s a lot of business in Africa that’s underserved. BitPesa started off in East Africa, and they moved to Nigeria, which is their largest market now, and then Francophile Africa and Senegal. They also have operations in Congo. So they’re pretty busy building there.

It seems plausible that some of the things that are really immediately needed in the developing world can find their way back to the developed world and disrupt things here.
Yeah. In 2014, when I was interviewed by the Observer, we talked about a phrase I sometimes use: “when third is first,” kind of using the old-school language of the “third world.” I referenced bitcoin, but I also talked about things like telemedicine. I was investing in telemedicine projects in India and Africa in 2010, and we’re just now getting more familiar with telemedicine here.

I remember being in Kenya in 2008, and having somebody there teach me how to use [the mobile payments tool] MPesa. And they just thought it was hilarious that they had to teach me how to use this mobile money platform, because we didn’t have that here.

The U.S. payment system is strangely primitive.
It just goes back to 20th-century institutions. Because we’ve been first in the U.S. with so much infrastructure innovation, it’s harder to move off of these legacy systems.

Another one of the most infuriating examples is the New York subway system.
Right? You’re having floods in the New York subway system now, but when you go to Singapore, China, or even Delhi, they have this beautiful, clean subway system.

To totally shift gears, you’ve invested in Token Ring, which is a biometric private key-management solution. Do you think 10 years from now, everyone will have some sort of private key? Whether they directly interact with it or not?
I don’t know exactly the timing is going to be, but I do believe some version of that.

I travel a lot. And as much as I hate it, I have started depending on Clear, the iris scan, to bypass the TSA PreCheck lines, because those have gotten so large. And Clear also allows you to not have your ID with you at the airport.

I’m theoretically against that, because they’re scanning where I am, and it’s a private company, and they’re scanning my boarding pass, so they know where I’m traveling. I’d love to see a system where I’m just giving my identity information, maybe through this ring, and it’s specifying that I only give up my identity information, I’m not giving up anything else about where I’m traveling. And so everything else remains with me, but they only get the information they need.

Now, there are a lot of incumbent interests, right? That want that data collection; they are basing their business models on that data collection. So it’s not going to be an easy process to get to that world. But I think, again, if we look at efficiencies created, it will make sense down the road. I think consumers also have to demand it.

There’s a sense that commercialization, tracking, and data collection have seriously undermined the democratic potential of the internet. Do you think VCs should take responsibility for those second-order effects? Or is that something other parts of the ecosystem need to pay attention to?
Well, I consider it part of who I am to think about those things, and I consider it good business, frankly, to look at those things. I’ve been talking about diversity and inclusion for my whole career. Obviously, it’s my literal DNA as a minority female. But the reason I really started paying more attention to it is that I would sit on boards where it would be an all-male board, an all-male management team. And then they talked about not hiring a woman because they weren’t sure if she was going to have kids. A man never gets that.

And I started thinking about the business risk of that. There’s the business risk around litigation. But there’s also that lost business opportunity, when you have only one point of view around the table. And that becomes more and more important as you look at global technology creation.

So to me, it’s just good business. And if I’m looking to optimize returns, it’s very much in line with caring about impact. We’re finding that things catch up with people. If you are in something for the longer term, which is what early stage venture capital is all about, you have to think more broadly. You have to think about the implications of what’s getting funded.

I’m so glad you brought up the diversity point. I’m a big believer in the ridiculousness of how blind people are to the business case for inclusion, but I’m a white man having a conversation with you, and I didn’t bring it up.
Well, I don’t want to just talk about that point; I appreciate just being treated as an investor in this space. I just use it as an example of why thinking more holistically leads to better outcomes.