Blockchain M&A is here.
Open-source, distributed blockchains with associated tokens are a novel and powerful innovation offered by our industry. This combination offers three compelling characteristics: (i) free access without a gatekeeper, (ii) a funding mechanism through selling tokens, and (iii) user financial incentives in the form of tokens. Thousands of blockchains quickly bloomed, and the battle for attention and relevance began.
That battle became a series of competing claims of success, measured by code commits, contributing developers, number of dApps, token market capitalization, token price, total value locked, token velocity, transaction volume, and other measures indicative of engagement with the blockchain or token. Many of these mirror the measure of “eyeballs” in the formative days of the internet. All have some level of validity, but are not necessarily indicative of enduring momentum or success.
Building anything requires deep alignment and coordination of efforts among a large group of people. Open-source governance, where “no one and everyone” has control, makes that challenging. Vision, strategy, and tactics become a blood sport and can inhibit rather than support success. One ramification has been the idea of inviting anyone and everyone (i.e., planting a large number of seeds) and seeing what emerges (letting the flowers bloom). Survival of the fittest, one might say.
However, history proves effective leadership matters. In our industry, the concept of a blockchain-associated corporate entity, often referred to as a “fill in the blank” Labs, helps fill the inherent leadership vacuum, with the blockchain-associated Labs dedicated to building their own commercial enterprise on their underlying blockchain. In some sense, the governance of the underlying blockchain is “led” by the Labs, not strictly, but certainly in practice.
As we have often said, M&A can be a tool to execute strategy. We are now in the early phases of M&A becoming an accepted element of “fill in the blank” Labs strategy, and therefore an element of blockchain strategy.
This week, Polygon Labs, closely associated with the Polygon blockchain, announced the acquisition of both Coinme and Sequence. Architect Partners represented Coinme in this transaction, and a detailed overview can be found in our linked M&A Alert. We are in numerous discussions that suggest this type of transaction will become commonplace.
