Bitcoin's biggest investor bought its leading news outlet
There is one trade publication in the digital currency industry that every mainstream news outlet knows well, and cites regularly in stories about bitcoin: CoinDesk. It is a source of news about bitcoin investments, price spikes or crashes, and executive hires, and it is a regular destination for journalists who write about bitcoin (as well as for bitcoin enthusiasts who don't get paid to write about the currency).
Last week, CoinDesk reported some news about itself. The website has been bought by Digital Currency Group, the investment firm of Barry Silbert, who in 2004 founded SecondMarket, which allows for the trading of private-company stock. He sold the platform to Nasdaq (NDAQ) last year. This is DCG's first full acquisition; it did not disclose the sale price, but sources tell Yahoo Finance it was around $750,000.
DCG has invested in 60 different digital currency companies, and the companies in its portfolio have raised 70% of the venture capital in the industry. You might think that creates an obvious conflict of interest here. Silbert owning CoinDesk is like Red Sox co-owner John Henry buying the Boston Globe (which actually happened), or Peyton Manning buying the Denver Post, or Donald Trump buying Politico.
But Ryan Selkis, the DCG executive who will oversee business at CoinDesk for the time being, insists that won't be a problem. Nonetheless, he says the possibility did concern him at first.
The subject of changing ownership at a bitcoin news site may seem like granular inside-baseball, but it is significant when viewed in the context of ongoing fears about who owns the media. From NewsCorp to Bloomberg to recent changes at the Las Vegas Review-Journal, it is a topic on the minds of both journalists and their readers.
Is bitcoin's primary news site selling to bitcoin's biggest investment firm another piece of bad news for the industry? Selkis, DCG's director of growth, spoke to Yahoo Finance about that question and about DCG's plans for the site. What follows is an edited transcript.
Yahoo Finance: Before we get into CoinDesk, what was your take on the fallout from Mike Hearn's post last week? [Hearn, a bitcoin developer, declared that bitcoin had "failed" and that he was leaving the industry; it resulted in a media firestorm.]
Ryan Selkis: I won’t comment on the theatrics of it. I will say that Mike Hearn was one of the really solid developers, he’s contributed a good chunk of his life and energy into making bitcoin what it is today, so, style aside, there’s not a whole lot people can say to critique his overall contribution to the industry. But this [ongoing debate over the size of blocks, or bundles of transactions, recorded on bitcoin's public ledger] is more of a governance issue than it is a bitcoin issue, in terms of how this will get resolved. I think it will get resolved. But the governance of the overall project needs to be better.
What was DCG's approach to buying CoinDesk, what were the considerations?
The first priority we had when we considered this acquistion, my main hesitation, was whether we’d be able to preserve CoinDesk’s editorial independence. And it’s why I’m working with the team full-time now on operating activities. We are going to create both informational and physical barriers between the editorial team and Digital Currency Group. From a policy standpoint, I’ve recused myself from all investing activity at DCG. I was its director of investments; I have completely transitioned away from that and now I’m director of growth.
How does handling growth for DCG pertain to CoinDesk?
In this particular instance it means making sure we have a smooth transition post-acquisition. We’re combining two teams. We’ve kept all the CoinDesk employees and our plan is to continue to employ everyone that came over, hopefully for a long time. But we also have a professional events team we’ve been working with that were already in the midst of planning a large conference in May, and now we’re merging those two teams to plan one event, Consensus 2016. So now everyone, with the exception of myself, is a CoinDesk employee. And functionally, I’m full time with the CoinDesk team.
So how are you separating CoinDesk from DCG?
We are physically relocating offices to a different part of Manhattan. So the CoinDesk folks are not going to be sitting right next to our Genesis [a broker dealer that is another DCG subsidiary] trading team or our investment team, which has proprietary information on how 60 or so bitcoin companies that we are invested in are performing.
What if CoinDesk is now afraid to write bad news about companies DCG is invested in? Or it could go the other way: Will CoinDesk start getting all the scoops on DCG companies?
On the latter point, I’m not concerned because even before this, CoinDesk had established itself as a clear industry leader in terms of a trade journal. So they were already getting most of the scoops. When you talk about embargoed news releases, they are going to continue to be on the same lists as the other folks that DCG reaches out to. So that doesn’t really change. To be honest, CoinDesk was typically part of a broad group of outlets that would be contacted whenever there was news about a DCG company, because we never want to restrict press attention to just one outlet for any of its business interests. So that is the much easier question to answer.
With respect to editorial conflicts, look, that’s what I’m here for, is to make sure there’s a buffer between both entities. So on the one hand, I’m not influencing CoinDesk editorial, but on the other hand, I’m leading the team on a day-to-day basis, and I’m able to interface with DCG but I’m no longer privy to any inside-baseball related to the portfolio companies.
That seems like a contradiction: You won't influence CoinDesk editorial, but you'll lead CoinDesk day to day? So will you be full time at CoinDesk, or at DCG?
I’m DCG's director of growth, but I'm focused full time on CoinDesk and this acquisition, and the 10 or so employees we’ve absorbed, and the large-scale conference we’re producing in May. That makes CoinDesk our top priortity in terms of growth initiatives.
Is the conference the main reason DCG bought CoinDesk? Why else?
We think there’s a lot of organic growth potential for CoinDesk. They’ve had display advertising and various sponsors, but last year they hosted Consensus 2015, it was profitable, it was well-attended, folks were raving about the content of the event. And in mid-2015 they also began publishing paid research reports. As we continue new investments in CoinDesk, paid research and live events are going to be meaningful drivers of growth for the business.
We have the resources to invest not only in fantastic new editorial talent, as in full-time reporters, but also strengthen the ranks of freelance contributors. One area we will invest in is looking beyond just bitcoin the currency and the very insular community there, and branching much further out into blockchain applications that enterprise is taking a look at. Now, that doesn’t mean we are on this "blockchain, not bitcoin" bandwagon, because I don’t want to give that impression at all and it’s a very shrill conversation that happens on Twitter and Reddit when you bring it up. But I do think there will be private ledger solutions that work for enterprise where bitcoin isn’t necessarily a good alternative.
Yes, big financial institutions and banks, from Nasdaq to JPMorgan, have been on the "blockchain, not bitcoin" trend lately. Do you think that's all talk?
I think the interest is definitely real. The bigger question is, over what time frame does this play out? I don’t think that anyone should expect fully functioning products in the next year, two years, handful of years. It will take many years to build some of these core products that are used currently for clearing and settlement. But I think it’s not just a buzzword, I think "blockchain for banks" truly is more relevant in many cases than using the bitcoin blockchain. If you’re a large institution and you’re looking to create an open ledger where you can move securities around safely and transparently to other regulated institutions, you don’t need a native currency like bitcoin or a consensus mechanism that uses anonymous miners. You already know the parties. You could have five banks that are the only signatories to that particular blockchain. So that would be interesting.
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Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology.
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