The Inquisitive VC – Stephen McKeon , Partner at Collaborative Fund

Stephen McKeon graduated with a Bachelors degree in Finance from the University of Oregon. He started his career in tech in Palo Alto in 2000, at the height of the dot com bubble. McKeon found himself at a winery in Napa Valley in early 2001, after the bubble burst.

Following his role as a CFO at the winery, McKeon attended Purdue University, in 2007, and left with a Ph.D. in Finance. After receiving his doctorate McKeon moved back to Oregon in 2012 and co-founded a software company focused on commercial drone operations, called Skyward.

Skyward went on to raise just over US$8M from venture capitalists including Tim Draper of Draper Associates, TechStars, Norwest Venture Partners, Voyager Capital, and Verizon Ventures. Skyward was later acquired by Verizon Wireless in 2017 for an undisclosed amount.

McKeon first came across blockchains, primarily Bitcoin, when he was working on Skyward, but he wasn’t able to give to much attention. McKeon decided to dedicate more time to crypto in 2015. “Ethereum had launched at that point and it really seemed like the use cases were expanding substantially,” McKeon told Brave New Coin. “It just grabbed my interest and so I dove in. I just started talking to everyone I could meet, developed a relationship with Chris Burniske, who was at ARK back then, now at Placeholder and I guess sort of fell down the rabbit hole as they say.”

By this time McKeon was doing research on blockchains at the University of Oregon. He then received a call from Craig Shapiro, who is the founder of the Collaborative Fund. “He said they were seeing more and more deal flow around the space,” McKeon said. “So we looked at some deals together.”

McKeon and Craig have known each other for over twenty years, as both started their careers around the same time in Silicon Valley. Following McKeon’s work with Collaborative, the fund did several investments in the space. McKeon formally joined the firm in 2018 and started to raise a separate pool of capital, which is now called Collab+Currency.

Collaborative Fund was started in 2009, and the thesis of the fund was focused on the sharing economy. “Collaborative has had decentralization in its DNA forever — even before the blockchain investment thesis manifested,” according to McKeon.

The core thesis of Collab+Currency is financial infrastructure, and the firm invests in both equity and tokens globally. Being a part of Collaborative allows McKeon to leverage the brand reputation of the firm and the deep expertise and network in venture investing it has built over the past decade. This distinguishes the fund from others in the space.

McKeon also has a deep interest in security tokens but thinks that there is still a long way to go, “especially if you think about it on the scale of requiring the whole infrastructure.” He explained how the growth rate is substantial with tokenized securities going up from a few million dollars worth issued to a few billion dollars worth issued over the past few years.

McKeon also explained how the use case of tokenized securities for property compares to the structure of a real estate investment trust (REIT). He stated that the issue with REITs is that, “they may make sense for very large pools of assets, but there are lots of individual buildings, and smaller funds, where going through the entire REIT process is not going to make sense from a cost standpoint. Whereas tokenising a single building is going to be substantially more cost-effective.”

The academic turned VC thinks that the key to unlocking mass-market appeal for tokenized securities, as more Alternative Trading Systems come online, is providing trading venues and a solution for custody.

Collaborative Fund hasn’t made any investments in tokenized securities yet, but McKeon stated that “we’ve made investments in projects that we think are going to be adjacent to tokenised securities down the road.” Examples he gave are TaxBit, Arwen, and KEEP Protocol.

KEEP Protocol is the most recent crypto investment Collaborative Fund has made, a project bringing bitcoin to the DeFi ecosystem through tBTC. Makers of the KEEP Protocol raised US$7.7M in a funding round led by Paradigm. Participators in the round also include Fenbushi Capital and others. In December 2018, Keep had a prior round that included participation from Andreessen Horowitz, Polychain Capital and Draper Associates.

McKeon said, “the idea that Bitcoin, which is by far the largest asset in the space, isn’t really integrated into DeFi has always seemed crazy to us and that’s the obvious first use case.” He also added that they were “really impressed with the team.”