A few thoughts on a recent trend I've been watching closely, which I'll uncreatively call The Rise of The Ecosystem Fund. I find this trend to be problematic for a number of reasons:
1. When investors contributed to a project's ICO, they did not contribute so that the company could start a fund. They contributed so that the company could *build the thing* that they claimed they were going to build. Anything else is a distraction.
2. I understand that once you have a bazillion dollars you are inclined to feel the need to do something with it. But let's perhaps consider that these absurd amounts of money should not have been raised in the first place!
3. These ICOs should have been capped. There is no world in which a pre-product company needs more than 20M. But now that they have it, there's a perverse incentive to allocate it, attempting to buy growth at any cost.
4. Perhaps the recent slew of deaths in VC on-demand companies should serve as a reminder that growth is a death sentence when it's not built on solid foundations. In the case of these ecosystem funds, basically none of them are -- because the core protocols aren't even built!
5. Lastly, it is a serious mistake to conflate the skill sets of an maker and that of an investor. Many brilliant engineers are horrible investors, and many great investors could never build much of anything.
6. An investment firm and a company have different time horizons and incentive structures, and the two should not be confused.
