In this episode of Inquisitive VC, host Nawaz Ahmed sits down with Bhavik Vashi, Managing Director at Carta, leading Asia Pacific, Middle East, and Africa.

Bhavik shares how Carta evolved from digitizing cap tables to becoming infrastructure for over 9,000 funds and 50,000 companies and what that vantage point reveals about the real state of venture capital.

They dive into the rise of mega-funds like A16Z’s $15B raise, whether venture is drifting toward beta instead of alpha, and why emerging managers consistently outperform in the top decile. Bhavik also breaks down how private markets differ across Hong Kong, Singapore, Australia, and the Middle East and what trends LPs should actually be paying attention to.

In this episode:

* Why emerging managers generate more alpha than mega-funds

* The structural incentives behind $15B venture funds

* How private markets are becoming more transparent (and AI-driven)

* Why Australia punches above its weight in venture

* Carta’s strategy to become the ERP for private capital

🎧 Brought to you by Carta — modern infrastructure for private markets.

Follow @nawazahmedvc and subscribe to Inquisitive VC for more stories from founders and fund managers redefining venture.

Season 1 is Sponsored by Carta:

Carta is the leading provider of world-class software purpose-built for everyone in private capital. We connect founders, investors, and limited partners through software purpose-built for private capital. Trusted by 65,000+ companies in 160+ countries, Carta’s platform of software and services lays the groundwork so you can build, invest, and scale with confidence. Our Fund Administration platform supports 9,000+ funds and SPVs, representing nearly $185B in assets under management, with tools designed to enhance the strategic impact of fund CFOs. Recognized by Fortune, Forbes, Fast Company, Inc. and Great Places to Work, Carta is shaping the future of private market infrastructure. Find out more about Carta at carta.com/sg/en/.

Transcript:

[00:00:36] Nawaz Ahmed:

Hey, welcome Bhavik. I’m excited to have you here.

[00:01:19] Bhavik Vashi: Thanks for having me.

[00:01:21] Nawaz Ahmed: Thank you for joining. I wanted to start with a quick, high, level on, your background and what you’re currently doing at Carta.

[00:01:31] Bhavik Vashi: Yeah, of course. so yeah, my name is Bhavik Vashi, managing director at Carta. looking after Asia Pacific, middle East, and Africa.

So really, A large portion of our international business, which is a relatively new business for us. so Carta has been around since 2012, but our international business really started in 2021, as we saw a lot of success, in the US and we found product market fit both for our cap table and, private company offering, but also our fund administration, fund accounting, platform in the us.

we had this realization that there’s this larger opportunity and private capital is really a global problem. And it’s been fun. It’s been a really fun journey to be here at Carta for the last three, three and a half years, building out our presence, across these really, unique, exciting, different.

Markets, in this part of the world, I’ve spent most of my career in SaaS. so I started as an accountant. so that’s like the connection to what we do here. But, for the last almost 15 years I’ve been in B2B SaaS companies. and for the last 10 years I’ve been here based in Singapore, building and scaling the Asia Pacific, piece of global businesses.

[00:02:51] Nawaz Ahmed: Very cool. so Carta supports over, 9,000 fund managers. What unique, perspective and insight does that give you, in your business, of the current state of venture capital?

[00:03:08] Bhavik Vashi: It’s, I think one of the, things I love about most about working at Carta is just, thinking about the different people that we serve, right?

to your point, we serve almost 9,000, funds. we serve over 50,000 companies. We have over a hundred thousand LPs that log onto our platform. And so just being like fully immersed. This private market space and obviously indexed pretty heavily towards private, private equity and venture capital is, honestly just an interesting space, to operate in and meet founders and fund managers every day, for a living.

So that’s great. In terms of the unique, perspective that it gives us, there’s, two sides to it, so I think one which. Is obviously just the day-to-day meeting people in this space all the time. I think it gives us, and certainly gives me a, feel like I’ve got a pulse on the market. at least for me, it’s in Singapore, it’s in Abu Dhabi, it’s in Sydney and Hong Kong.

These are the four markets where I spend the most time. But globally as a company, we’ve, we’ve replicated that same model globally. And so as a company, I feel like we’ve got a pulse on private markets. Anecdotally. Subjectively qualitatively, but we’ve also got this amazing, data insights team that can actually take all of the data that we have on our platform, again, across those 50,000 companies and 9,000 funds and, all of that, and actually start to really analyze that and draw real insights and real trends, whether it be on the asset level in terms of what we’re seeing of fundraising and valuations.

equity compensation and things like that at the company or the asset level, whether it’s fund performance, benchmarking of how are funds actually performing, how does it defer by vintage fund size, et cetera, et cetera. You can cut that by a lot of different dimensions. And then even more recently, we’ve been able to, release things around fund economics.

So not just the fund performance, but like the fund operations. How did those really work? Are there any changes we’re seeing in terms of the economic structures, the GP commitments, the fee structures, et cetera, which is something that, LPs are really, curious to, to better understand.

and then last but not least, as we’ve gotten into private equity, we’ve, also got a point of view on. Private equity, in terms of executive compensation, for their portfolio companies and things of that nature. So yeah, all the data, the quantitative, stuff is also quite, interesting.

so yeah, happy to jump in to any of that. Whatever feels like kind of most relevant.

[00:05:43] Nawaz Ahmed: Yeah, no, for sure. I guess curious, as you talked about, you guys started with cap tables, moved into, fund management and, ops and I think more recently also went into lp, related relationship, stuff as well.

So curious how you are thinking about product ex expansion across those different, I guess within the same stack. Venture capital, but then also adding in private equity. Are you thinking across like private capital markets? how do you guys think through some of that product decision making?

[00:06:16] Bhavik Vashi: Yeah, I, it’s been a really fun journey, I think. really just mapping the entire ecosystem out and, I mean our, CEO Henry talks about this too. I don’t, think we saw it all on day one. This wasn’t like the master plan since the beginning. We went step by step, effectively just focusing on solving a customer problem.

Classic founder mentality, like the, in the original problem statement was like. Stock certificates are on paper, that seems weird. And they’re very expensive to create, distribute, and they’re hard to track. You lose that stuff. it was a very simple problem back in 2012, but, worth solving.

And then step by step every, step of the way, we just kept running into new problems that needed solving. So when we started with the kind of the eShares kind of cap table solution. actually it’s funny, even the eShares bit of just being like PayPal for equity, as we used to call it. Took us to cap tables.

‘cause we’re like, the cap table is just the ledger of who owns what. And since if we’re gonna digitize that, we could actually do the cap table. And that led us to valuations because it was like, Hey, every company needs a valuation. They’re paying service providers a lot for that. But now we have more data to do the kind of benchmarking and comps that are used in that valuation process.

As well as anyone else. And then we kept just solving those problems. And then when we solved so many company problems, we had all these basically VCs logging into the platform and seeing the shares. They hold in tens if not hundreds of startups. And then they came to us and say, Hey, this is really interesting.

You have my whole portfolio or a majority of my portfolio on the platform. It’s really slick. I can log in and see it all in one place, you know when I bought it, how much I bought it for. You also know how much it’s worth now with the valuation piece. Could you tell me my net asset value?

Like I think you’d be really close. Maybe you’re missing a few details, but you could actually gimme my net asset value. You could start calculating IRR for me, T-V-P-I-D-P-I, and that’s how we stumbled into fund administration in, a, way. And so we said, yeah, that seems totally doable for us.

In fact, we have a unique. advantage to be able to do that ‘cause we have all the asset level data, so therefore in theory, doing fund administration or fund accounting should be, relatively straightforward from an accounting perspective. And then we just had to figure out the workflows in terms of how a fund actually conducts itself.

how does it form, how does it. Subscribe people into the fund. How do you KYC, those people, how do you call capital? How do you make investments? So on and so forth. but, one step by step, and as you alluded to, that’s the same thing that’s taken us to the LPs or the allocators now, is with, as you noted, almost 9,000 funds that we administer hundreds of thousands of LPs log onto our platform.

Everyone from high net worth individuals all the way up to sovereign wealth funds, and they are starting to have the same experience with us where. They’re like, Hey, this is great. Like I invest in 10 funds. Seven of them are on Carta already, and I can log in one place and see all of that in one can.

I have these other problems at my level. I have issues benchmarking fund managers against each other and against the market, and the data is pretty. you fragmented and, self-reported, so there’s not a lot of data fidelity there. Like I, I would love to know, how my fund managers are really doing similarly, I would love to understand my exposure at an asset level.

Like I’m, there are investors probably holding Carta five different times at three different prices based on the funds that they’ve invested in and all those funds having invested in Carta. We’ve done multiple fundraising rounds, for example. So those kinds of problems. In many ways just present themselves to us.

And then as usual, if we have a unique advantage in being able to solve that problem, generally stemming from a, some form of transformative connectivity that we have through the suite of products that we bring to market, then that’s a problem that we’re gonna go solve. And so today. As you alluded to, we think of ourselves as an ERP for private capital.

If, you think about it that way, we think that we’re in the best position to connect these different nodes, assets, investors, or funds and allocators or LPs. All on a single platform as well as solve that problem across multiple asset classes. As you mentioned, venture private equity, private credit, real estate, solve that problem globally across all countries and regions and major jurisdictions where companies form and investors want to, obviously form and invest.

And also we want to do that across various. I’ll call them functions or, just workflows within the fund. So I think generally speaking, we focused on the back office, we do the fund accounting, the fund administration, tax compliance. But we’ve really realized that there’s a ton of opportunity in the middle, in the front office as well.

So the middle office, you think about portfolio monitoring and fund forecasting and valuations. In a private credit context, covenant modeling and tracking, there’s a lot in the middle office really, when you think about the investments team and the value creation teams. those are problems that we, feel very well positioned to solve.

And then even moving into the front office, right? When you think about. the deal teams and you think about the transactions that they, conduct or kind of the, relationships they have with LPs, if you’re on the IR side or, with prospective portfolio companies, if you’re obviously in the sourcing and investment side.

So thinking of kind of a CRM capability there that we can really connect the social network. To the preexisting financial network that we already understand very well, so we understand those relationships. Can we bring those social relationships onto the platform and really start to marry everything together?

So our product strategy, in many ways is driven by this concept of connectivity, whether that be across nodes, across workflows and functions or asset classes or geographies.

[00:12:16] Nawaz Ahmed: Exciting, I think like the expansion within the, firm is really interesting. So is that something you guys are looking into right now or what’s the plan?

What’s the thinking there?

[00:12:29] Bhavik Vashi: Yeah, that’s right. Yeah. it’s a publicly stated, product strategy. so yeah, we want to be the one-stop shop, for lack of a better term, that a fund manager needs to come to if they wanna run a fund, if they wanna form a fund, run a fund. Carta should be the only software you need to buy.

and, we’ll bring to bear all the different capabilities, feature sets, that you need in a relatively modular way as well. And I think that’s what’s really exciting is like we’re doing this concurrently with this AI revolution. Henry is, our, acting CTO right now.

So he is deep, in it with the engineers in terms of, obviously fully embracing ai, not just to speed up, how we actually write code and deploy code, right? Test, deploy code, but also thinking through. The first, and most impactful, I think, capabilities that we can bring to bear for our customers, right?

it’s an interesting business we’re in. We have to be a hundred percent we’re, it’s a very deterministic, context that we’re, operating in, but there’s a huge opportunity for AI to transform this. Industry from something that used to be very like reactive, almost ticket based structure that you have with a fund admin or a service provider.

It’s I need something, I ticket, I email and then I get something to something that’s far more proactive, always on orchestrating in the background and actually being a lot more intelligent. And so that’s, really exciting as well, is just like embedding those capabilities in.

And then, like I said, just having the different modules that you need.

[00:14:09] Nawaz Ahmed: For sure. And you mentioned you’re across a bunch of different geographies.

[00:14:13] Bhavik Vashi: Yep.

[00:14:14] Nawaz Ahmed: How are they different to each other, like in terms of your customers? I know they’re all like, if it’s venture managers or even startups, how do you see much difference across each geographies?

If so, like what is it?

[00:14:28] Bhavik Vashi: Yeah, I have a very interesting region of coverage, or, just a geographic remit, which is, like I mentioned, AsiaPac Pacific, which has its own sub regions within it that are extremely different, like Ian versus, Hong Kong, greater China versus Japan, Korea versus Australia, New Zealand.

just to give a couple examples, and then there’s obviously India as well. Then there’s Middle East, which is, predominantly a lot of our businesses coming in UAE and Saudi. but yeah, really across the Middle East or the GCC and then more recently Africa as well, which is very new for us.

but very different. And, to answer your question, I guess shortly, yes, there are, tons of differences, which makes the job really. interesting but also difficult right? Is, how do you think about deploying our resources and investments in a smart and thoughtful way, to maximize the value that we can create across such a big surface area geographically?

right now our core bets are really around. Singapore, Hong Kong, Australia, and the Middle East where we’ve set up in, Abu Dhabi. So those are the four co focus regions for us. And if I just, draw like a high level comparison. Hong Kong is still actually the biggest market.

If you just look at total addressable market on the private equity, and venture capital side, just in terms of however you want to measure it. Assets under management, number of fund managers, Asset, level activity, if you think about Greater China as well. So it’s still the biggest market.

Obviously it went through. a bit of a, kind of a, pretty cold period, frankly, over the last five years. we think it’s bouncing back. we’ve made a bet, to, to expand to Hong Kong, so a contrarian bet, But we see it, bouncing back in a big way and. It has such a long and rich history, such a depth of financial, services, experience and talent.

and now, geopolitics continue to change as well, where you’re just seeing a more diversified approach, right? Like everyone, you can’t really be all in on anything anymore. And so Hong Kong is really interesting in that sense. I think because of the gap over the last five years, there’s not been a lot of people investing in Hong Kong.

Certainly not a lot of. International, companies, service providers capabilities that have been coming into Hong Kong. we’re probably one of the first, to make a, big move, at least in our space, into Hong Kong. And so we’re pretty excited about that. But that’s a, that’s a legacy market that we think that we’re gonna end up disrupting, shaking up and transforming, hopefully a lot quicker, than some of the other markets.

‘cause we’ve learned a lot versus. You maybe a contrast. The Middle East, is the smallest market, if you look at the total addressable market. But it’s the fastest growing market year over year. Again, across any of those measures in terms of new fund formation, assets, under management, so on and so forth.

And that’s, we made a bet there too. But that bet was. Not a contrarian bet, it was just a bold bet in that, how early we bet on it. So I think, we made the decision that we wanted to participate, in the Middle East private markets three years ago. It took us some time to get set up and get licensed, but we’ve been there and we’ve been working with some of the largest venture capital firms there for years.

And so in that market we’re, an incumbent, in a sense. Like I, I think we’re reasonably. known at this point. We’ve spent an incredible amount of time there. We’ve got a team on the ground and so we’re growing with the market, there where we’re very much there, we’re trying to make it happen.

And equally, obviously support a disproportionate share of all of the companies and fund managers in that space and make it happen with them. And then you’ve got the kind of Singapore and, Australia, which is somewhere in between for both sons. one Singapore is just a much more kind of, I’d say conservative, traditional.

and a bit more, process oriented. they’re very comfortable with service providers, and, a, certain way, a business model of doing things, versus Australia. You’ve got. A more, I would say, technologically progressive, community, that can really do thorough due diligence on any technology provider, including Carta, which is great for us ‘cause we, genuinely believe in the strength of our tech.

We’ll, engage those customers for a very, long time to make sure that they’re really, comfortable with our capability set. But once they make that choice, they really understand what we’re talking about. And they, have a strong desire to actually run a lot of their finance and operations in house, which I think is great.

and so that. Is it very different from all the other markets like in Middle East, Singapore, Hong Kong, most people are still outsourcing most of their back office and parts of their middle office. But Australia takes a tremendous amount of ownership across the stack, internally themselves. And again, they’re, we think we can be a software player.

So yeah, the markets are super different, for us as well. and then in terms of where they’re investing, they all have. Certain strategic or natural, proclivities based on there. The natural resources available in that country. The strategic priorities of the government, the kind of, I guess history and background of depth of talent that they have, the industries that have historically been successful there.

that’s a nice even spread. You’ve got a little bit of everything across the big region and everybody’s complimenting each other. So we’re seeing the cross border open up a lot, which is great.

[00:20:23] Nawaz Ahmed: Yep. Yep. No, very interesting. And you know how when you go into these type of markets, I imagine like there are incumbents that they might be using some sort of software, and that software I imagine has decent spread across the particular region.

How have you found coming in and displacing that type of software that’s already embedded into, the local kind of venture scene? And what’s been, I guess the, hardest challenge when doing something like that?

[00:20:57] Bhavik Vashi: Yeah, it’s, it’s, really interesting for us, that we have competition across almost everything that we do, but.

We don’t have any competition that does everything we do, if that makes sense. So in any of our discrete use cases, whether, okay, there are other cap table players mostly. Anytime we, we show up to a country, there’s at least one local version of Carta on the cap table and equity management side.

Most of the time they are inspired by Carta as well. Like we meet the founders or we meet the team and we’re like, they’re like, yeah, you guys were doing it in the us. We thought it made perfect sense. we did it here. And it’s honestly great because. Frankly, they’ve shouldered a lot of the hard part of, awareness and education and just this idea that you would move from spreadsheets into software at the, basic level.

so they did that hard part and then we’re coming in and saying, that, that’s fantastic. and look, we ideally, the ecosystem grows. As a result of both of us being here. And people will make their choice on the software side, but if we can grow the whole innovation ecosystem, then there’s, more than enough room for two players in every market.

I always use like the, Uber grab or the Lyft Uber example. Like I feel like cap tables is a market where you can have. At most two players, like there’s just not enough for three and you can have one, but two is good, two is good for competition. You want customers to have choices as well. I think that’s like our competitive landscape.

Broadly speaking on the cap table side and. Cap tables is a tough business if you don’t have additional service offerings or additional things to do. It’s, a high velocity, low deal size business. it’s critically important when you need it, but it’s not something you log in every day. and especially in this era of AI where.

You can build apps pretty quickly. Cap Table is certainly one of those areas where, you don’t want that to be the only thing you have, like it’s in, it’s important. But I think having a product portfolio and also the, network effects, of, a platform make a lot of sense in that context.

[00:23:06] Nawaz Ahmed: Yeah.

[00:23:06] Bhavik Vashi: On the fund admin side and the fund broadly, I’ll just call it like the fund financial side. Tra traditional service players, right? they’re, more global in nature. So the cap table players will normally be very local, maybe regional, but the fund admin players are all global, right?

Usual suspects, tens of thousands of people globally, proper professional services companies at the core of them. And so they’re the real, decision point for anyone is like, Hey, do I, like software or do I like services? What do I believe in? and they believe in software.

They’re probably gonna end up going with us. and if they believe in services, they might still go with us. ‘cause we offer services as well. and certainly having technology enable a large portion of kind of the preparer and the reviewer activity that happens just makes our service team I’d say more elite, almost like a swat team that just handles the real complexity. The exceptions and, focuses on, kind of customer management.

[00:24:12] Nawaz Ahmed: Yeah.

[00:24:12] Bhavik Vashi: Or they may choose a traditional service player ‘cause they’ve known them for 10, 15, 20 years. They’re comfortable, nothing’s broken.

And, that’s okay too. technology adoption curves are long. We understand that. And our goal is not to. Force anyone into doing anything that they’re uncomfortable with. There’s plenty, as I mentioned, in just like the total market, but I do think that rate of adoption is going to accelerate, if not naturally a little bit, just in terms of the overall market pressures that we’re seeing from LPs and from the entire world.

yeah. in terms of AI and other things. So yeah, it looks a little different. And then if you break down to any of our sub components, like fund modeling, CRM, valuations, like each of those will have its own, kind of niche, point solutions for sure. but then, it’s like you’re operating a, a private equity fund or a venture fund is not like a company, right?

it’s, yeah. they may be managing a billion dollars, but they still probably only have. 15 people, maybe 20 people. It’s not if a, if, a company is, has a billion in turnover, even today in ai, they will have more than 15 people, right? And I think they, there’s a decision point there of do I really wanna buy 15 different pieces of software to run this business that has 15 people?

or do I, and then do I really want to invest any of these 15 people’s time in building this? Or should I just take a software provider that. All they do is think about this day in and day out, constantly building, constantly appreciating asset because they’re investing hundreds of millions of dollars in r and d every year just to solve this one problem and just have them do it and focus on.

sourcing capital, forming capital, and deploying that capital into amazing assets. So we’re betting that it’s the latter. Yeah, we’ll see. Hopefully if we’re right.

[00:26:07] Nawaz Ahmed: No, I think those are some great points. And I think to, to the point that you just made, I feel like, obviously with a bunch of these AI coding tools, people at, spinning up their own things, their internal products, that help out their own workflow, It makes sense that obviously that takes up a bunch of their time, but are you seeing, that actually having any sort of impact on the business, at least when it comes to the holistic business where it’s modular, right? So certain parts of it, if someone’s building it in-house, it might have impact on your business.

Is that, a concern right now or again, not, really.

[00:26:49] Bhavik Vashi: We’re seeing it, for sure. it’s not really a concern. and the reason for that is frankly, I know this sounds a bit, just like presumptuous, but I think the more people that do that will realize how difficult it is to do it at scale for operational excellence every day, right?

Because even if you vibe code an app today, which you can, and I’ve tried it, it’s fun. but. It’s outdated in three months today. And if that’s not your primary job, are you going to go back and keep recoding it, and keep iterating on it and making it better? Or are you gonna solve the problem, go back to investing, and then realize what you have is now outdated and not, being, maintained well?

Or do you want to have, work with somebody who all their only job is to take everything that. Open AI, anthropic, Google DeepMind, anybody else is coming up with taking that, contextualizing it on proprietary data sets that are very industry specific, across 50,000 companies, 9,000 funds, hundreds of thousands of LPs with millions of documents, records, transactions that we’ve seen specifically in this space.

Then training on those models, almost like an SLM. On that particular data set, and then thinking through how to then embed those capabilities, AgTech or other, or generative or otherwise, into the platform that they anyways use to conduct their business and then bringing those to bear, generally speaking, for free.

Yeah. Most of the things, most of the advancement that we release in our products, most of it as a, percentage. It just comes into your subscription, right? It’s just Hey, we have a new feature, please use it. there are a few things once in a while where it’s like, Hey, you’re gonna have to pay more for this big release.

But I’d say 80% of our releases just hit you, for free. So you have this appreciating asset, relative to this subscription model that you pay. And, we’re not like a seat space, SAS either. I know that’s being challenged a lot. A lot right now.

[00:28:53] Nawaz Ahmed: Yeah.

[00:28:54] Bhavik Vashi: Ours. We never relied on seats.

‘cause our, customers are small, as I mentioned. A private equity fund could be managing a ton of money. They don’t have a ton of people. So we’re not like a seat space model. It’s much more value based, frankly. It’s like the amount of capital that you manage and that we then help you track account for, report, analyze, transact, et cetera.

that’s the relationship with Carta.

[00:29:17] Nawaz Ahmed: Yep. Yep. No, that, those are fair points. Your, you guys do some great work with putting out these massive reports across the sector. As, you mentioned, you have a great data team. when it comes to the, I guess Australia, New Zealand region, have you noticed any interesting insights when it comes to, fundraising on the venture fund side, over the time that you’ve been operating here?

[00:29:45] Bhavik Vashi: Yeah, it’s, The Australia, so I’ll tell you this of on the Australia side, we haven’t published any data Australia specific, frankly, just because we don’t have the sample size yet, that we would feel comfortable publishing. Like we, support GPS in the region. We report, we support plenty of startups in the region.

But then when you start cutting it by different dimensions, like you wanna cut the GPS by vintage year by size of fun, now you start to get to intersections where you only have one or two and it’s I, don’t think I can publish. That as a trend yet. Sure. so I think most of our observations are, pretty anecdotal or just from being on the, on the ground and speaking to folks.

But, from that I will share with you that I think what’s really exciting specifically around Australia is it’s actually been had. a relatively early start and it’s had more success. it’s punched way above its weight in terms of success, in terms of exits and the ability to export technology globally, which I think gives.

LPs and therefore fund managers and therefore founders, all much more incentive to continue to participate in that entire cycle. Yeah. Versus a Singapore and a Southeast Asia, which has unfortunately the opposite problem. Where there just haven’t been. Globally exported technology brands coming out where have created huge exits, returns and liquidity that then get recycled back into the ecosystem.

And also then you get those talent, that the talent and the teams from those that then recycle back into the ecosystem as well. Whether they go start another thing or they become an investor or an advisor or somehow, participating in that. you’ve seen that in Australia, which is really exciting.

Then particularly you’ve seen this tilt towards more kind of what I’d call like deep, tech biotech, where partially ‘cause of obviously these, some of the r and d grants and then provisions that are made available in terms of the policy perspective, which are further supplemented by additional policies like tax concessions related to early stage investing and employee share schemes, all of which.

Looks and feels a lot like the us frankly, if you just think about the tax regime and then where all the concessions and kind of grants and exceptions come from, if there’s similarities there, that make Australia feel, very exciting. And like I said, punching above its weight, frankly, in terms of just the overall market opportunity, but the outsize impact that it’s having.

And hopefully, this year we’ll see something with Canva and, maybe a few others that will. That will be just like the next wave of that.

[00:32:30] Nawaz Ahmed: Yeah.

[00:32:31] Bhavik Vashi: in Australia. So that’s really, exciting. You also see this interesting trend where. I think people have really earned their stripes by the time that they start managing meaningful capital.

If you look at some of the biggest firms in Australia, whether it’s Air Tree or Blackbird, or Square Peg, et cetera, like they all actually have really earned their stripes. Starting with very humble beginnings and humble roots. Maybe it even started as a syndicate, a deal by deal kind of thing, and then really work their way up into becoming legitimate billion dollar venture, fund managers that are still deploying a majority of their capital into Australia.

So very like domestic, regional, focus. I think that’s incredible. we have, fewer people operating at that scale with that regional domestic focus. The Middle East now is starting to have that because of some of the. Strings attached to sovereign money, and there’s a lot of that. And so that’s it’s a forcing function to accelerate, but I, would think that they’ve picked that up from, markets like Australia, where it’s worked really well.

And in the early days, Singapore did that, but it, is gotten away from that a bit. Hong Kong now is also doing that. Strategically as part of the kind of the restart or the recharge of that ecosystem as well. You’re seeing HKIC for example, start to like seed fund managers in exchange for setting up in Hong Kong, investing in Hong Kong, et cetera.

So yeah, I think Australia’s just been ahead on that, but they didn’t have to, it didn’t have to happen, necessarily top down. It happened organically, which is really beautiful.

[00:34:01] Nawaz Ahmed: Yeah, no, great insight. I’m curious on your opinion on, the. I’m sure you recently heard the A 16 Z raised like 15 billion, which was a large portion of like total venture funding raised by venture managers.

you guys obviously on the fund. Admin and financial side service fund managers, if we start seeing like these large, brands able to raise majority of the capital, and there’s, a reduction in the number of funds in the space, how do you, think through that? Is that something you think about, when it comes to the market or, yeah.

how do you think through that?

[00:34:46] Bhavik Vashi: we certainly think about it, it’s interesting, so I think there’s, we have a perspective on it. I think from a business perspective, we’re, reasonably resilient. In either scenario. because as ultimately, as long as the total capital that’s being raised and deployed into private markets remains consistent or hopefully grows, then that’s defines the market opportunity for us.

to give you the simple example, we go from a company that has like an SMBA mid-market enterprise motion and all of a sudden we just have an enterprise motion. ‘cause there’s only big funds raising tons of money. So sure we’re resilient. We’d have to change what we do. I don’t, I think from a, from an intellectual perspective, we certainly have a perspective, which is, we’ve seen time and time again in our data that, establ, emerging fund managers, excuse me, emerging fund managers outperform, on the top decile versus established or upmarket fund managers, which makes sense obviously.

‘cause you think about the returns that. A 16 C has to generate on 15 million.

[00:35:54] Nawaz Ahmed: Yeah.

[00:35:54] Bhavik Vashi: You know how many unicorns, like when you do the fund construction model, you know how many unicorns or decacorns have to come out of that fund to give you a above market return there? versus the economics of, obviously the management fee and et cetera.

Like, they can make more money. With a, lower return profile versus obviously what an emerging manager can do. So which is the incentive to obviously raise bigger funds. And these days, thankfully for them, probably they now have an asset class in terms of AI infrastructure that they can pour that much money into because it’s really CapEx Yeah.

Nowadays and in some of these companies that, that, that is happening through venture, which is really interesting. That used to be more of like a debt situation. I think thankfully there’s a story about why you would want to raise that much capital and how you’re going to deploy that much capital, which didn’t exist frankly, five years ago in the SaaS era, like nobody needed that much money.

You, it was concerning if you did. but time and time again, emerging fund managers outperformed, like I said, on the top decile. And the reason for that, the underlying reason for that is. By definition, if you’re an emerging fund manager, you have to have a, much more discreet and nuanced, thesis in theory, and, it’s just, it’s gotta be something that they feel like they know.

Better than some. Everyone else, they have a unique edge in terms of being able to source, invest and value create for those deals. And they’re probably doing it in a pretty discreet part of the world as well. there are a lot of, characteristics that tend to correlate with an emerging fund manager and that is critical for jumpstarting new industries or new capabilities.

and so I. I, I can. And then if you think about venture as an asset class, so you zoom out and you think of the LP perspective, right? In terms of their allocation first to private versus public, and then within private, how much is going to venture versus like growth, like early stage venture versus growth versus private equity buyout versus private credit debt yield type instruments and real estate.

there’s a diversification there too. So when they look at the venture asset class. By definition, that’s the piece that you’re looking for the most alpha.

[00:38:17] Nawaz Ahmed: Yeah.

[00:38:18] Bhavik Vashi: Just as a result of the asset class and you’re balancing it out with the rest. If you start looking for beta in the venture asset class, which is basically what you’re doing, if you’re investing into the Andreessen like large fund at that point, then where is the alpha coming from?

I think is, a question just from a portfolio thesis perspective, whereas if you look at an emerging fund manager, yes, it’s true. Many of them just don’t return. That’s venture. That’s always been venture. Yeah. And, you’re playing for the alpha, you’re paying for the top decile who have outperformed.

And those have been emerging fund managers time and time again. because for them they just have to hit on one. They hit, there’s a power loss still applies even if it doesn’t apply to the extent that it doesn in the US ‘cause people talk about how Asia and the US are different in terms of the ultimate upside on an asset.

Like in the US you have a listing, the path to liquidity is more clear. In Asia especially, you see a much more m and a from strategics. people even selling off on subsequent rounds just to get some DPI and hopefully fight for a second or third fund. Yeah, like there are different dynamics in Asia and then obviously the IPO markets are very different across Australia, Singapore, Hong Kong, and Middle East as well.

But put all that aside, if you’re an early stage investor, you’re probably doing 10, maybe a 10 to 20 million fund. The construction looks very similar. You’re, maximizing shots on goal. Yeah. And you gotta get one or two of those right. substantially. And, that has that, that, that has always been true.

And I think that there’s always a space for that and there needs to be, a space for that. ‘cause that’s what feeds the Andreessen. Like, those, one or two are gonna be going into the growth funds. And somebody’s gotta get that started. So there’s a cold start problem there as well.

[00:40:01] Nawaz Ahmed: Yeah. No, great insight. final question I have is. Is there anything that you can talk to us about around like the current, corporate development m and a kind of thinking or strategy that Carta might be having right now?

[00:40:18] Bhavik Vashi: Yeah, I obviously somewhat limited in what I can share on that topic, but I think what I can share, which is reasonably public but maybe not known to everyone, is we’ve been in acquisitive.

Over the last three years now, we did two acquisitions in 2025. We did one in 2024. We, had done like 10 before that as well, right? So we’ve always been a pretty active company in terms of corp dev, but I think the. I think the more recent ones have been much more discreet in terms of adding a capability set very clearly to what we have, whether it was tactic in 2024, which gave us really the fun construction fund modeling almost the fp and a for funds, capability in terms of multidimensional modeling, analytics, really forward looking versus backwards looking.

Then you look at, a cellex, which we did in 2025, which. Was the first product that took us directly to monetizing the LP or the allocator and, really our first like AI native product in the sense that effectively what we’re doing is, automating the extraction classification. Aggregation and then analytics on, fund, fund to funds sovereign wealth funds, LPs, right?

We’re able to now combine the direct investments with the fund investments and basically try to automate the entire process of understanding that exposure and analyzing it. End to end. Yeah. which is, really, powerful. So that took us into a whole new node, a whole separate product. And then those capabilities will actually then extend back across the car to stack.

When you think about just document extraction, classification, aggregation, et cetera, which is very bespoke into. In a fund context and fund semantics, which is why we, thought that made sense to invest in. And then, and a great team as well. And then the, the third one more recently was Certis.

which, if you think about what we’ve always done, we’ve always connected the asset to the fund and then the fund to the allocator. That’s our unique advantage that everything is connected. And we realize that with this surge in private credit. All of a sudden there’s a lot more demand for this asset class.

But the asset is not a company, it’s not going to be solved with a cap table, like private equity or venture capital. The asset is a loan. Yeah. And so what we needed was a, again, AI native sophisticated loan operations, and management capability that could then take us to covenant modeling and covenant tracking, which would then give us.

Enable the rest of our suite to work as is. Whether it’s fund, accounting, fund admin, tax, compliance, valuation, all that kind of broadly looks the same. But these asset level pieces we needed to bring in. And again, rather than building it ourselves, there’s just a fantastic team that was working on just that piece.

[00:43:15] Nawaz Ahmed: Yeah.

[00:43:15] Bhavik Vashi: And so it’s a, marriage, made in heaven, so to speak. ‘cause they’ve got the experience, the technology, AI has totally accelerated our rate of. Integration when we think about a new code base into our existing code base. So technology integration has become way easier. ‘cause if you know what you’re, if you know what you’re aiming for, a cloud code can help you build it really, quickly.

And so you can do that really quickly and then you immediately get our distribution, right? Yeah. So we’ve already spoken to probably all the folks that need this and That I think gives a pretty good insight into our corp dev strategy right now. And as we look forward, we’ll continue to look at opportunities.

‘cause as I stated at the beginning, like we have a pretty. Clear stated objective, which is we want to try to make private markets operate more like public markets in terms of the transparency, the consistency, the accessibility, the equity across that, and we think that happens through financial infrastructure.

And so that’s where the network DRP product comes in. And anywhere where that network DRP is currently falling short or has a gap in terms of servicing the capabilities that our customer needs, that is the Natural Corp dev. target or strategy, right? It’s always that thing of should we build something?

Should we buy something? Like how is that or should we partner? And those, we, look at all three of those vectors all the time.

[00:44:36] Nawaz Ahmed: Very great. thank you so much for the insight there. and yeah, that’s all I, all the questions I have. Baik, really appreciate your time and I think it was, super insightful learning from your experience in these markets.

[00:44:51] Bhavik Vashi: No, thank you for having me. Thank you for giving me the opportunity to, talk a little bit more about Carta and what we do, which is not something we do as often, but, we love talking about the industry. We love talking about the markets and the trends, it’s, fun to also reflect on our role in all of that.

So thanks for giving me the opportunity.

[00:45:09] Nawaz Ahmed: Of course, Thank you so much for your time.

[00:45:12] Bhavik Vashi: All right. Appreciate it, man. Thanks.

In this episode of Inquisitive VC, host Nawaz Ahmed speaks with Hootie Rashidifard, Founder and General Partner of Hash3, a $30M crypto venture fund built on a mission to bring self-sovereignty to all end users.

Hootie shares how his Iranian upbringing—watching his father’s bank accounts frozen after the 1979 revolution—instilled a deep mistrust of centralized systems and shaped his belief in Bitcoin’s promise. From investment banking to five years at Canaan Partners, and now leading Hash3, he reveals what it takes to raise and run a crypto fund through market chaos.

Listen as Hootie and Nawaz unpack:

* Why distrust in institutions led him to Bitcoin

* Lessons from raising Hash3 through the depths of 2022

* How to survive LP rejections and stay focused

* Hash3’s approach to high-conviction investing across equity and liquid markets

* The difference between alpha and beta crypto deals

* And why Hootie finds peace fixing vintage cars

🎧 Brought to you by Carta — modern infrastructure for private markets.

Follow @nawazahmedvc and subscribe to Inquisitive VC for more stories from founders and fund managers redefining venture.

Season 1 is Sponsored by Carta:

Carta is the leading provider of world-class software purpose-built for everyone in private capital. We connect founders, investors, and limited partners through software purpose-built for private capital. Trusted by 65,000+ companies in 160+ countries, Carta’s platform of software and services lays the groundwork so you can build, invest, and scale with confidence. Our Fund Administration platform supports 9,000+ funds and SPVs, representing nearly $185B in assets under management, with tools designed to enhance the strategic impact of fund CFOs. Recognized by Fortune, Forbes, Fast Company, Inc. and Great Places to Work, Carta is shaping the future of private market infrastructure. Find out more about Carta at carta.com/sg/en/.

Transcript

00;02;02;19 - 00;02;06;05

Nawaz Ahmed

Thanks for joining me. Hootie! Excited to chat today.

00;02;06;08 - 00;02;09;01

Hootie Rashidifard

Yeah, I’m excited to chat to,

00;02;09;03 - 00;02;17;22

Nawaz Ahmed

I’m really keen to start off with your background, how you got into the world of crypto and how you got into venture capital?

00;02;17;24 - 00;02;40;13

Hootie Rashidifard

Yeah. For sure. So, crypto is is sort of a, a bit of a longer story for me. My parents are Iranian immigrants, and they came to us in the 70s. They came here for college. Their plan was to go back to Iran. But the Iranian revolution happened, when that happened. My dad had all of his bank accounts frozen.

00;02;40;13 - 00;02;58;22

Hootie Rashidifard

So this is like, a pretty, pretty weird thing to happen. And probably pretty terrifying given, you don’t really speak the language here. And so when I was a young kid, I grew up with, like, this deep mistrust of centralized institutions. Like my dad always, like, don’t trust the banks, don’t trust insurance companies going on and on and on.

00;02;58;24 - 00;03;19;13

Hootie Rashidifard

And, that just sort of like, nestled in my head. In 2012, I came across, the Bitcoin white paper. I was in investment banking at the time. I was sitting in a bullpen of a bunch of analysts. I remember it, it was like midnight or 1:00 am, and the guy next to me was like, who’d he. Bitcoin just hit $80.

00;03;19;13 - 00;03;46;08

Hootie Rashidifard

And you know, I think he was excited about the speculative aspect of bitcoin. I not knowing anything about bitcoin read the white paper. And all of a sudden all of these stories about what my dad was telling me came back. And so this idea of having a, a way to transfer value without having a centralized institution was like literally what happened to my dad.

00;03;46;08 - 00;04;05;00

Hootie Rashidifard

And so, you know, I got I got pretty excited about it. Funny enough, we actually tried to buy Bitcoin on, Mount Gox at the time, but we, like, we couldn’t get through KYC for some reason. Like, it was like like we had our passports out trying to buy, but we weren’t able to do that.

00;04;05;02 - 00;04;33;02

Hootie Rashidifard

So later on, I joined, this fund called Canaan Partners in 2000 and, 17. And, I, when I joined them, I was basically like looking at areas that no other partners had explored, and Canaan had made some crypto related investments in 2013, but no one really like covered it. And so when I came in 2017, analyze a few different sectors and I said, oh, crypto is pretty interesting.

00;04;33;02 - 00;05;04;04

Hootie Rashidifard

Once again, I sort of had this, like weird, like affinity for this technology, given my background. And so during that year, I made a lot of presentations to the partnership to explain, like, why is our crypto is interesting, why? I thought it was a category where we should put a non-zero percentage of capital. And funny enough, simultaneously, there’s a whole class of junior VCs that did the same thing at various funds.

00;05;04;04 - 00;05;25;15

Hootie Rashidifard

And it’s funny because I now they’ve gone on to do things in crypto full time. And so like, it’s this whole class of people that went through that same, process. But anyway, we did that at my last fund. They did start, investing in crypto. And I was the one sort of, managing a lot of it, or at least advising how we customize it.

00;05;25;17 - 00;05;49;22

Hootie Rashidifard

And if we’re going to stake and doing a lot of the research there. And I was at that fund for five years before starting hash three. So we started hash three and 20, 22. It’s a $30 million fund, pre-seed and seed, focused fund, largely focused on infrastructure. And so, yeah, we’ve been running running it for, for three years now.

00;05;49;25 - 00;06;10;24

Nawaz Ahmed

Fantastic. No, I think, the background of, you know, understanding and having that personal relationship with with Bitcoin and crypto seems to be like an interesting way a lot of people get in, and especially when you live out and I feel like in the US or even new Zealand where we have great financial systems, it’s hard to understand why it’s useful.

00;06;10;24 - 00;06;14;16

Nawaz Ahmed

But when you have this type of history, it makes clear sense.

00;06;14;19 - 00;06;44;19

Hootie Rashidifard

Yeah, I actually use that example quite a bit. Is like the US, you have like on average, like relatively compared to the world, you have a lot of trust in financial institutions for the most part. You know, I think Iranian revolution and my parents being Iranian, like, that’s like kind of this, like rare circumstance. But I just want to give a very quick example about Iran and my grandpa, my grandpa was, he was 95 years old.

00;06;44;19 - 00;07;04;04

Hootie Rashidifard

He passed away last year. My grandpa didn’t have an email address, but he knew what Bitcoin was. And when my parents came to the US, the term on the Iranian currency was trading at 7 to 1 to $1. Okay, so that was the exchange rate today. The exchange rate for two months a dollar is 30,000 to man to $1.

00;07;04;07 - 00;07;24;16

Hootie Rashidifard

That’s the legal rate. And the black market rate is 150,000 to 1 to $1. So that means people are so desperate to get out of come on that they’re willing to spend five times the quote unquote legal rate. And that just goes to show you what, if you do not like a centralized institution, if they are nefarious, what can be done to the to the native currency?

00;07;24;16 - 00;07;42;10

Hootie Rashidifard

Right. And you’re stacking that two month inflation on top of U.S. dollar inflation. We all like in the U.S, we complain like, oh, a cup of coffee is so expensive now or whatever it is, like inflation has occurred over the last five years. Imagine if your currency has gone up thousands of percentages on top of and then the base rate inflating.

00;07;42;10 - 00;08;05;27

Hootie Rashidifard

So it isn’t like a real problem for a very large portion of of the globe. You know, I think in certain countries you are protected from that because you have some level of trust. But there might be a day where that trust gets eroded. And if we don’t have decentralized systems, then you can experience what happened in Iran, in the US.

00;08;05;29 - 00;08;30;05

Nawaz Ahmed

Yeah. No, that’s that’s a fantastic example. So I guess stepping, a bit, forward in terms of going from, canon to, to starting has three would love to understand, you know, you know, where was that inflection point when you decided you need to start to leave and start a new fund?

00;08;30;07 - 00;08;56;16

Hootie Rashidifard

Yeah. So, once again, I started focusing on, crypto or researching crypto in 2017. And, at the time, there weren’t a lot of dedicated crypto venture vehicles right there. There were only maybe a handful, maybe ten. There were pretty small, they’re pretty rocky in terms of are they going to stick around? And obviously a lot of those have stuck around and they’ve done very well.

00;08;56;16 - 00;09;16;01

Hootie Rashidifard

So I’m not saying anything mean about them. I’m just saying from a founders perspective, if you’re taking capital from, a capital source and you don’t know if they’re going to have a fund two or fund three, you might be a little bit worried. And so I, I’m explaining that because at my last fund, my last fund has been around for 40 years.

00;09;16;01 - 00;09;37;24

Hootie Rashidifard

They raised an $800 million vehicle every three years. Their fundraising process was like three weeks long. You know, like they have long standing LPs. That commit to them. You know, they’ll commit like a, a quarter of the fund. Right? So as a founder, if you’re building your cap table, you might want some of those crypto native LPs, but you might also want some stable capital.

00;09;37;24 - 00;10;04;08

Hootie Rashidifard

Right. That’s a good diversification. Now, what happened from 2017 to 2021 was that, a lot of those successful crypto funds from 2017 had raised much larger vehicles. And they did have that stability. And so from a founder perspective, the, the value that a traditional venture fund brought to your cap table was significantly lower, right.

00;10;04;08 - 00;10;24;13

Hootie Rashidifard

Because a crypto, a crypto native fund will help you on a bunch of crypto native things, right? They might have good relationships with market makers. They might be able to review your market maker contracts. They, might have, relationships at, hedge funds so they could buy your liquid token. They might have, opinions on how to structure your, tokenomics.

00;10;24;13 - 00;10;52;24

Hootie Rashidifard

Whereas traditional funds, you know, they may have done, like one to 3 to 4 token protocols in terms of deals in their portfolio, but they don’t they haven’t done 20 or 30 or 40 or 50 or whatever the number is. And so, that was a time and that was about 2021 where that happened, where you had a lot of those funds that raise a first fund in 2017, 2018 really have established themselves.

00;10;52;24 - 00;11;23;29

Hootie Rashidifard

And they had raised larger vehicles, and they were going to stick around for a while. And being at a, at a traditional fund, I just recognized that if I want to work with the best crypto founders and, ultimately work with the best projects or companies that have the most impact, I would need to fertilize more, and go, and go, more specifically, Taylor Taylor, a capital source, more specifically to the asset, to the asset class.

00;11;24;02 - 00;11;39;08

Nawaz Ahmed

Understood. Okay. That makes sense. And then, so how did you go down the path of, you know, thinking more deeply about it? You know, tell me about thinking about the sizing of the fund. You know, what stays to invest at the thesis. Would love to understand that.

00;11;39;10 - 00;12;08;01

Hootie Rashidifard

Yeah. For sure. I think like you as a, as a venture investor, both as an individual and as an institution, you always want to ask yourself, like, what is your edge? Like, how do you differentiate yourself? How do you win? The ability to get on a cap table and, you know, maybe, maybe the light bulb moment that I had at my last fund was a founder telling me, hey, hoodie, we’re letting you on the cap table because of you.

00;12;08;04 - 00;12;28;16

Hootie Rashidifard

We’re not letting you on the cap table because of Kanan. And that was really the point where it was like, okay. Like, I need to explore other opportunities if I want to work with the best founders. And so when you’re thinking about starting your own fund, you really need to think about, like, what differentiates me? Okay.

00;12;28;16 - 00;12;51;24

Hootie Rashidifard

So great. I’m at Canaan. They have $800 million, 7 billion A1 fund. They have a full finance team and help of the recruiter. And so I’m going to leave a lot of that. The services or the value add that they provide. And also lose a lot of time as an investor because now I have to go fundraise, I have to run operations to some extent.

00;12;51;26 - 00;13;29;01

Hootie Rashidifard

So what is going to be my edge to make up for that loss? Okay. And, that’s what I really spent a lot of time thinking about when when starting hash three. And that actually came through pretty serendipitously. So I was in the process of interviewing at crypto native funds, because I was like, well, me as an individual, it’s like, I think, like if you’re an operator and you started a successful company or a successful crypto protocol, you could go on to be, you know, a great investor where you can, you know, I’ve, I’ve seen this playbook before.

00;13;29;01 - 00;13;55;16

Hootie Rashidifard

I have all these relationships. And you see that a lot in in crypto. Right. You can see that with Constantine from Leto creating cyber fun. You could see that with Bowtie Ventures. So Kane from, from synthetics and Jordan from synthetics. You could even see that with some of these more ecosystem specific funds, like the big brain holdings, like those guys really, like, have been through it and they’ve they’ve seen a lot.

00;13;55;16 - 00;14;15;08

Hootie Rashidifard

And so, that’s value additive. And for me, like it came around serendipitously where I was interviewing at these crypto native funds and I reached out to a friend of mine, Prabhakar Reddy, who’s one of the co-founders of Falcon X, and I just as sort of asked him for advice. And he was like, you should go talk to surrogate.

00;14;15;08 - 00;14;39;02

Hootie Rashidifard

Chatterjee, surgeon at the time, was the chief product officer at Coinbase. And he was thinking about starting a fund, but he didn’t. He just want he wants to be an LP and he wanted to be an advisor, but he didn’t want to operate or run or be a decision maker. And that introduction really catalyzed the concept behind hash three.

00;14;39;02 - 00;14;55;16

Hootie Rashidifard

And that concept was really born between conversations between myself and surrogate, and, that ultimately became our edge for the fund and how we, how we win, spots on cap tables.

00;14;55;18 - 00;15;19;04

Nawaz Ahmed

That sounds like a really valuable introduction. So that’s super cool. It seems like. Well, it sounds like from the story you weren’t that involved in, like, fundraising at can. And correct me if I’m wrong. So your your first head of fundraising also has three. I would love to understand that journey is like first time fundraising for a fund one.

00;15;19;07 - 00;15;22;07

Nawaz Ahmed

How was that?

00;15;22;09 - 00;15;48;25

Hootie Rashidifard

Yeah. So I mean, fundraising is, essential to running a fund. Believe it or not, I think some investors or some junior VCs don’t really understand that concept. And, I which it seems kind of obvious when you say it, but I think people are like, oh, like if you look at like my track record, like it’s good and one short of having like pretty significant DPI or hitting like some big winner.

00;15;48;25 - 00;16;08;27

Hootie Rashidifard

And even if you do like I think LP is always squint and say, is this a one time thing or is this a scalable or repeatable thing? It’s really hard to, to, to get capital. Once again, if you were a successful operator, if you started a business and it sold for multiple billions of dollars or whatever, like, yes, you can go to an LP and say, I’m going to create an operator led fund or whatever.

00;16;08;27 - 00;16;37;10

Hootie Rashidifard

So raising capital, once again, I was in a position where I, met surrogate. The concept behind cash three was really to raise about half of the capital from well-known operators. And entrepreneurs, folks who have built multi-billion dollar businesses and then raise the other half of the capital from institutional capital sources. Now, surge. It had deep relationships with a lot of these entrepreneurs, and operators.

00;16;37;17 - 00;17;02;20

Hootie Rashidifard

And that was really, so that ends up being about half of the capital that were raised for fund one. That’s really like the momentum that we needed to go out and raise the the rest of the capital. And so that was kind of the I guess, quote unquote trick that we used. And that’s going to be like the really difficult part for anyone trying to go start their own fund is getting that initial momentum.

00;17;02;20 - 00;17;25;24

Hootie Rashidifard

So, I remember this quote, someone told me this is bull market of 2021. You know, everyone is like like capital is flying out the door. FTX is just wiring out hundreds of millions of dollars a week or whatever. It turns out it was depositors money. But, I remember this guy told me it doesn’t make sense to raise a crypto fund unless it’s $100 million.

00;17;25;27 - 00;17;49;10

Hootie Rashidifard

Okay. And, that was just like the idea at the time. And that just goes to show you, like, how easy people thought it was to raise capital. Yeah. But raising that first hump chunk of capital is the hardest part. And then once you do that, it tends to get pretty. Not pretty easy, but it tends to get easier.

00;17;49;13 - 00;18;10;20

Hootie Rashidifard

And so, it allows you to create urgency in the rest of the fundraise. So, that’s, that was kind of like the catalyst that really helped helped me for three. I won’t you know, I fundraise through the depths of 2022. So, I had sort of a uniquely scarring experience. So I won’t by any means say it was easy.

00;18;10;22 - 00;18;28;02

Hootie Rashidifard

But, if I don’t think if I had that initial bulk of capital, I would be in a position where, you know, fund one was raised. Yeah. You know, but maybe, maybe at all. I mean, maybe it would have been, you know, significantly smaller. Maybe it would be quite difficult.

00;18;28;04 - 00;18;35;04

Nawaz Ahmed

Yeah, yeah. Is there any rejection that particularly stood out for you?

00;18;35;07 - 00;18;55;05

Hootie Rashidifard

I think if you talk to any, any ambitious person who is really has deep conviction in their idea, they’ll always remember, all the rejections, is the truth of it, but I try to look at it positively. So there definitely rejections. I say in my mind, I just, you know, I’ve had I’ve had all different types of rejections.

00;18;55;05 - 00;19;15;15

Hootie Rashidifard

Once again, I raised through the depths of 2022. So any excuse you wanted as an LP, you got it. Okay. So like Luna exploded. You got a bunch of excuses. Some are slow down. You got. You got more excuses. FTX blew up. Oh, we don’t believe in the asset class. Lots of excuses. You know, Solana went from 260 down to $8.

00;19;15;17 - 00;19;51;22

Hootie Rashidifard

Lots of excuses. Leverage blew up in every single sort of way. Excuses. Right. So but I think, like some people, I’ve had people who had docs fully filled out and approved, KYC approved, but didn’t sign the docs, and the day of the close, I’ve had closes where we’re oversubscribed and Luna blew up and like $10 million just said, hey, we’re not we’re not going, I had a family office once that I spoke to someone there and they were like, okay, we’re in for 5 million.

00;19;51;24 - 00;20;13;24

Hootie Rashidifard

And then I met the person whose name was on, like, the, you know, the family office person, the guy. And he was like, no, no, we want to do 10 million. And I was like, okay, like, first let’s just start at five. We’ll see where that goes. And and then like FTX blew up and they froze commitments for a quarter, you know, like it just like I’ve seen it all.

00;20;13;27 - 00;20;33;22

Hootie Rashidifard

So but my positive spin on it and maybe this is hopefully something that, maybe other fund managers can take away is that, look, if these people are on the edge when they’re committing, if you twist their arms and get them to commit, a lot of times that creates problems for you down the road, right? I don’t ever want to send out a capital call.

00;20;33;22 - 00;20;54;04

Hootie Rashidifard

And I, I, I hear, like groaning on the other end, like you just don’t you don’t you don’t want that to happen. Because then you have people who are trying to sell their stakes later on, people who are trying to do, you know, and that just always, mentally that doesn’t lead to the best place to, to, to make the best investments.

00;20;54;04 - 00;21;03;28

Hootie Rashidifard

Right? You want your LPs to believe in you, and you don’t want to feel that they’re hesitant to do to to participate.

00;21;04;00 - 00;21;27;05

Nawaz Ahmed

No, that’s, that’s great advice, for, for any upcoming fund managers. So as you, as you raise this fund, I would love to understand how you thought about, you know, deploying it in the sense of, you know, concentration versus diversification and check sizing reserves, that, interested to hear your thoughts there?

00;21;27;07 - 00;21;53;26

Hootie Rashidifard

Yeah. So, the way that we deploy the fund, so the fund, 75% of it goes to pre-seed and seed opportunities, 25% of it goes into liquid opportunities, what I call reserve investments. Liquid opportunities are used as a way to first off, liquid opportunities are not short term trading. We don’t farm it. We don’t. There’s no yield strategy, there’s no shorting, etc. it’s long term holds.

00;21;54;04 - 00;22;13;05

Hootie Rashidifard

If we think that we’re entering a position and it’s going to create short term cap gains, it’s not really a position for us. I mean, look, if we if we buy a token and it goes up 200 x in day one, like you’re not doing your fiduciary responsibility if you don’t, you know, take chips off the table. That’s just the truth of the matter.

00;22;13;07 - 00;22;44;07

Hootie Rashidifard

But those are long term holds. And those are those are a way for us to get, market made, but also have DPI back to our LPs and recycle capital to fill the hole. And that’s essential, right? You have to fill the fee hole to get, top, top decile returns. On the, precedent side, how we think about it is any check that’s written needs to be needs to have the potential for a fund returning outcome.

00;22;44;12 - 00;23;07;20

Hootie Rashidifard

Okay. So that means any check that we write needs to be able to return $30 million back to the fund. And obviously that doesn’t happen every single time. You’re placing a lot of bets for that to happen. But it’s like a what if this goes right scenario. Okay, that’s the way that we think about it. And sometimes, those opportunities might require reserves and sometimes it might not.

00;23;07;20 - 00;23;48;23

Hootie Rashidifard

So, like what’s a case of each. It might not require reserves if you’re investing in a protocol and you buy enough of that protocol upfront and there’s, it’s non dilutive, until the token gets launched, it might require reserves. If you didn’t get your full position and you’re tracking the team and you want to buy more in subsequent rounds or, if things are going right and you want to double down, which we have done, in, in multiple opportunities in the fund, but the way I think about investments in that pre-seed and seed bucket, I think of them in terms of alpha and beta.

00;23;48;26 - 00;24;15;11

Hootie Rashidifard

So what does that really mean? Beta are deals where the founder is really well known. The founder, knows every venture fund. They’re really prominent figure. They’re going to raise a seed round. It’s going to be really expensive. And the hope is that it’s really the outcome is really expensive to write. That’s a high entry valuation but also high exit valuation.

00;24;15;13 - 00;24;49;19

Hootie Rashidifard

Now, you know, the problem with those is getting getting your allocation right. It one. So making the price into getting getting your allocation. And I think if you generally do those deals, it’s good to work with people who are top tier in the asset class. But in my opinion, that’s not where the real money is made, especially given the the just like the astronomical level, some of these entry valuations, real money is made on the alpha side and alpha is the way I describe it is like it could be an ecosystem that no one’s looking at.

00;24;49;19 - 00;25;12;18

Hootie Rashidifard

So for example, hyper liquid. Very early on we invested in Felix, an early lending protocol on hyper liquid. We invest in that pre-seed. They only raised 600 K, we did half the round, and that team has done exceptionally well. Since running and this was before anyone was looking at any hyper liquid deal. Right. So new ecosystems, young founders.

00;25;12;18 - 00;25;32;22

Hootie Rashidifard

So, also that deal, Felix, the two founders were still in college when we did the deal. They’re doing their senior year of college. So, young founders, you’re taking a bet on someone, who doesn’t have the cachet of that that that really amazing founders done a lot of stuff in the in the in the category. Three is like broken companies, like companies that are going to require a lot of work.

00;25;32;22 - 00;25;50;06

Hootie Rashidifard

Maybe you need to change the management team around. Maybe you need to recap it. You got to do all this stuff. People just don’t want to roll up their sleeves and do that. And then the last one is sort of like distressed assets, just broadly. So things that are sort of like painting the edges of what an early stage deal means.

00;25;50;06 - 00;26;19;22

Hootie Rashidifard

So like an example of that is like we bought, Swan out of the FTX estate. I even look at buying hyper liquid points before hyper liquid launch. So, these are just uniquely crypto opportunities that, could, could be extremely profitable. But, like, I think that’s what, like, generally generates a lot of the returns, in the category, like the beta stuff is great and they’re nice, like flashy names that you can put on your website.

00;26;19;24 - 00;26;39;17

Hootie Rashidifard

And hopefully they return well to like, that’s great. And maybe they heavily help you sell the fund to the next founder. But in general, I think like the alpha deals, are the ones that like, really differentiate. You get in at low valuations, contrarian deals, that that could generate, you know, massive returns.

00;26;39;19 - 00;27;16;15

Nawaz Ahmed

Yeah. Though very interesting. I was, this morning, I was reading a tweet by, somebody from A16z. I’m not sure if you saw it about how, venture investors end up investing in consensus deals, even though they like to say that they’re non consensus. And most returns are probably driven by consensus deals anyway, curious on your opinion there when it comes to crypto, especially as early stage investors like I, I felt like, you know, it’s easier to say that you’re a non consensus investor when you’re investing at Pre-Seed because there’s actually not a lot to look at and prove.

00;27;16;15 - 00;27;31;16

Nawaz Ahmed

And you might be unless it is that, you know, very, credible founders or something like that. But if it’s some of the stuff that you’re talking about that might be hard, but, you know, if you’re doing a series, a investment, they might be a lot of things to look at to, to make it a lot more consensus.

00;27;31;19 - 00;27;34;00

Nawaz Ahmed

I feel like it’s very much stage driven.

00;27;34;02 - 00;27;53;20

Hootie Rashidifard

Well, I was literally about to say that, like the person injuries and they have a much fundamentally different job than I do. Right? They’re managing billion, billions of dollars of capital. They should not be distributing billions of dollars of capital in 300 K to 500 K. So that’s that, that, that, that is just like not a, a really a smart strategy.

00;27;53;23 - 00;28;15;29

Hootie Rashidifard

So that just by that, you know, math maybe they do C deals or whatever, but you know, they’re probably just using C deals as a way to track it. So they could double down in future rounds. But realistically they’re trying to deploy anywhere from 10 million to 100 million of capital on any in any given deal. So yeah, by that point, you’re playing a fundamentally different game.

00;28;16;03 - 00;28;40;01

Hootie Rashidifard

You’re trying to invest, you are trying to invest in consensus deals, but consensus deals that have a massive market that can become, hopefully even more consensus over time. And then you generate significant returns on bigger dollars, like, my job is to find, the non consensus things very early on, that hopefully become consensus later on so that then the sins of the world can back it up.

00;28;40;01 - 00;29;05;13

Hootie Rashidifard

And then it looks very interesting. So if you look at things like, you know, even if you’re like making the analogy to AI or whatever, the people that were investing in AI in 2016 through 2020 when I was not interesting and everyone was rolling their eyes saying, oh, we’ve heard this story over and over and over again.

00;29;05;16 - 00;29;23;17

Hootie Rashidifard

You know, now that AI consensus, those are the people that are making incredible returns, not the people doing seed rounds at $200 million valuations, and and hoping that this thing goes to 20 billion. Because the reality is, is that’s probably not going to work out and you’re going to burn pretty big clips of capital.

00;29;23;19 - 00;29;37;19

Nawaz Ahmed

Yeah. No fair point, fair point. Okay. I, I think I forgot to ask you, how many positions do you take as a, as appreciated investor in terms of number of, companies in the portfolio?

00;29;37;22 - 00;29;41;12

Hootie Rashidifard

Yeah, we we tend to try to shoot for about 35 to 40.

00;29;41;14 - 00;29;46;13

Nawaz Ahmed

Okay. Makes sense. So yeah, trying to trying to get to parallel.

00;29;46;16 - 00;29;47;14

Hootie Rashidifard

Exactly.

00;29;47;16 - 00;29;56;26

Nawaz Ahmed

Yeah. What does the next kind of 5 to 10 years look like for you? And has three.

00;29;56;29 - 00;30;23;04

Hootie Rashidifard

Yeah. So the vision of the fund is to bring self sovereignty to all end users. And I mean, this goes back to just sort of my personal story, you know, that moment of, of my dad being able to take out, assets that he had and, you know, the next 5 to 10 years, like the goal is to continue working with founders and best in class projects to achieve that, that mission, and also work with people that also align with that mission.

00;30;23;06 - 00;30;44;03

Hootie Rashidifard

To some extent, I think, you know, success for me, what does that look like? Success is, you know, finding opportunities super early on. I think one of the amazing things about venture is that everyone is telling you their secrets, right? Everyone should have a secret as to why they’re starting company. And everyone’s telling you those secrets.

00;30;44;06 - 00;31;08;08

Hootie Rashidifard

You get to hear those secrets day in and day out. You get to think about which ones are the most credible or which people can execute the best against it and which ones can have the biggest impact. And obviously, you hope that economics follow impact, right? If something can have massive impact, hopefully it will be rewarded for that impact economically.

00;31;08;11 - 00;31;32;05

Hootie Rashidifard

And that’s what you get to do day in and day out. And then I think the hope is to continue doing that. And that’s just kind of how we look at the portfolio broadly, where we’re generally investing in things. And maybe this is just the the mindset I bring from traditional venture to crypto, but generally looking for businesses that can be massively value generative and more importantly, cash flow generative.

00;31;32;05 - 00;31;53;09

Hootie Rashidifard

Because ultimately, you know, if you look at the bedrock of how assets are valued, you know, with the exception of some commodities and bitcoin, I think in our sphere, well, I guess maybe a lot of crypto assets are mis valued, but cash flowing assets at the end of the day are is sort of the core way to value these things.

00;31;53;09 - 00;32;01;14

Hootie Rashidifard

So that’s kind of the hope, for the types of companies we want to continue investing in.

00;32;01;17 - 00;32;19;01

Nawaz Ahmed

Okay. Makes sense. And so you’re you’re a solo GP, right? So what is you know, how do you feel about that? What’s the one of the most, unexpected things you found being a solo GP?

00;32;19;04 - 00;32;54;15

Hootie Rashidifard

I think one of the most. Okay. So one of the most unexpected things is sort of like the independence of thought that comes with it. So a lot of times, I’m by myself thinking and reading and looking at all of these various signals, throughout, whether it’s through Twitter or someone messaged me something or tells me some piece of information and I don’t have any individuals to bias me on that information.

00;32;54;15 - 00;33;23;06

Hootie Rashidifard

Like I get all this information, whether it’s primary sources or secondary sources or whatever it is, and I synthesize it by myself, and I just sort of churn through it. And I see all these signals and things, and I come up with a conclusion on where I what what I think will happen from those signals. And, you know, sometimes I go back and I talk to people who work at funds with other investors, and I sound pretty crazy.

00;33;23;09 - 00;33;44;21

Hootie Rashidifard

And people are like, what are you talking about? Like, and then I walk them through, like, all the signals that I, that I have. And then, you know, sometimes those people are like 3 or 4 months later, I sort of like parroting the things that I say. And it’s like, that’s good to know. But that was like one of the more unexpected things.

00;33;44;21 - 00;34;12;07

Hootie Rashidifard

And I think when you’re in a group setting, a lot of times you just sort of default into what other people in that group setting are saying. And, you know, sometimes you just you just, like, let them do the thinking for you. And, You’re forced to exercise that muscle like the, the, the independence of thought muscle as a soldier because you don’t have anyone telling you.

00;34;12;09 - 00;34;33;17

Hootie Rashidifard

Yeah, my dog sleeps in my office, but he doesn’t tell me, like, what I should be doing, you know? So, like, I don’t I don’t I’m not conversing with anyone deeply enough to have them influence me. At the level of, like, you know, my prior fund is like, okay, the this GP who was at the fund for 20 years, if that person says something, then that’s going to influence you a lot.

00;34;33;19 - 00;34;36;09

Hootie Rashidifard

But here it’s like you don’t you just don’t have that.

00;34;36;12 - 00;34;45;10

Nawaz Ahmed

Yeah, that’s an interesting one. Final question. What’s the secret obsession of yours that nobody knows about?

00;34;45;12 - 00;35;12;24

Hootie Rashidifard

I don’t know if no one knows about this because I’ve maybe quite a few people might know, but, I, I like classic cars a lot. And, I have, some classic cars, and, I like working on classic cars, and I, I, I might actually like working on them more than I like driving them, which is a kind of a weird thing, because most people buy, like, a nice car or whatever.

00;35;12;24 - 00;35;29;27

Hootie Rashidifard

Sports car, classic car. And they just outsource all of the work, and they like, they just want it to work, like, okay, you get in the car, you want it to start, or you get in the car, you want it to run right? Or whatever. I actually like the, the working on it more. And for me it’s like a very much like a meditative thing.

00;35;30;03 - 00;35;53;27

Hootie Rashidifard

So people go on like 20 mile runs or people bike or do whatever. I work on cars. I have a, I have a concept to do list of broken cars that I’m fixing, at any given time. And it’s just a way to kind of think through a challenge that is really, really different than my daily work.

00;35;54;00 - 00;36;11;12

Hootie Rashidifard

And, you know, poor through old resources is all my cars are mechanical. So they’re like from the 70s and 80s. They’re not that modern, modern cars. And, yeah. It’s just it’s just a really, nice way to relax.

00;36;11;14 - 00;36;16;14

Nawaz Ahmed

So that’s cool. And you just self-taught. Self-taught yourself? Yeah.

00;36;16;16 - 00;36;29;18

Hootie Rashidifard

Yeah, I’ve just been, you know, I’ve been obsessed with cars since I was a little kid. Classic cars since I was a little kid. And, Yeah, I’ve just been wrenching on them for a while.

00;36;29;20 - 00;36;40;13

Nawaz Ahmed

So love it. Love it. Well, thanks so much for jumping on Hootie. Really appreciate the conversation. I think it’s going to be quite insightful for, any new fund managers as well.

00;36;40;15 - 00;36;43;13

Hootie Rashidifard

Yeah, I appreciate it. Thanks for thanks for taking the time.

00;36;43;15 - 00;36;44;02

Nawaz Ahmed

Of course.

Andy shares his journey from investing at Two Sigma during the 2017 ICO boom to founding Metalayer after the FTX collapse—driven by the belief that crypto’s next chapter lies in real-world deployment, not speculation.

He opens up about the emotional rollercoaster of raising a first fund, the key lessons learned from rejection, and how Metalayers balanced 50/50 approach to equity and token investments positions them for the evolving crypto landscape.

Listen as Andy and Nawaz discuss:

* Why financial services are the next frontier for blockchain adoption

* What makes crypto fundraising so different (and harder) than startups

* How to stay sane through constant LP rejections

* Metalayers strategy for concentrated, high-conviction investing

* Andy’s surprising obsession with skateboarding in New York City

🎧 Brought to you by Carta — modern infrastructure for private markets.

Follow @nawazahmedvc and subscribe to Inquisitive VC for more inside stories from founders and fund managers shaping the future of venture.

Season 1 is Sponsored by Carta:

Carta is the leading provider of world-class software purpose-built for everyone in private capital. We connect founders, investors, and limited partners through software purpose-built for private capital. Trusted by 65,000+ companies in 160+ countries, Carta’s platform of software and services lays the groundwork so you can build, invest, and scale with confidence. Our Fund Administration platform supports 9,000+ funds and SPVs, representing nearly $185B in assets under management, with tools designed to enhance the strategic impact of fund CFOs. Recognized by Fortune, Forbes, Fast Company, Inc. and Great Places to Work, Carta is shaping the future of private market infrastructure. Find out more about Carta at carta.com/sg/en/.

Transcript:

00;02;15;08 - 00;02;17;15

Andy Kangpan

Thank you for having me. Excited to be here.

00;02;17;18 - 00;02;31;23

Nawaz Ahmed

Fantastic. I wanted to start with, you know, your background a little bit. So how you got into crypto and how you got into the world of, you know, private investing and venture capital?

00;02;31;26 - 00;02;59;06

Andy Kangpan

Yeah, definitely. So I came into the crypto ecosystem, with, from the venture capital perspective. So I’ve been in the VC space for, about ten years now. Most of that time was at a firm, called Two Sigma Investments. So I sat on that, the private investments team there. And, initially I started out as a journalist, at that firm.

00;02;59;08 - 00;03;24;18

Andy Kangpan

Crypto was, always part of my focus there. So I joined the team in 2017 at that point in time. There was a lot of excitement about the ecosystem. Given the ICO boom that was happening. And, I worked closely with, a few of my colleagues there who are now my partners at meta layer on leading research for the organization.

00;03;24;20 - 00;03;50;21

Andy Kangpan

Across a number of different dimensions, but ultimately led to some of the firm’s early investments in the ecosystem. So that was really my first, real foray into the space. And over time, I started to spend more of my professional and personal time working into the space. Ultimately, around 2020, I made the decision to shift all of my attention, on the category.

00;03;50;21 - 00;04;03;02

Andy Kangpan

And, at that point in time, basically started to lead all of the firm’s private investments in the category. Until I left, a little over a year ago.

00;04;03;05 - 00;04;16;20

Nawaz Ahmed

Understood. And could you talk a little bit about the type of investing you did at Two Sigma? Was it private, like, venture capital style was illiquid? Curious on that part.

00;04;16;22 - 00;04;48;06

Andy Kangpan

The investment activity happened across, a few different buckets. The, bulk of the focus was, early stage private investments, within the venture capital mandate at Two Sigma. So, in that capacity, we were focused on a mix of equity and token based investments, at the seed and series stages, pretty broad thematic focus, but I would say it tended to have a tilt more towards, applications and, financial services ecosystem.

00;04;48;09 - 00;05;23;22

Andy Kangpan

So a lot of like trading infrastructure, DeFi applications, things of that nature. There was a second bucket of activity, which was, investments into the crypto space that had a little bit more of that strategic lens. So, I was tapped to help lead an effort, that got started around 2021, to really start building connectivity into, the space through, minority investments and primarily market infrastructure companies that are, that were catering towards more institutional players on the trading side.

00;05;23;24 - 00;05;50;25

Andy Kangpan

And then lastly, around that time, the organization was exploring, the opportunity to, trade crypto as an asset class. And I had the opportunity to work pretty closely with a number of teams there. I should probably shouldn’t get into too much detail. Exactly what, sort of, ripple strategies were there, but, I played at, pretty active role and some of the early days of that, that effort.

00;05;50;25 - 00;05;56;26

Andy Kangpan

So, those are the three primary categories, that I focused my time on. And I was at Two Sigma.

00;05;56;29 - 00;06;19;12

Nawaz Ahmed

Okay, great. Really helpful. And I guess now at this point, curious, the thinking on, you know, when you were leaving to Sigma, you know, what was the thinking around leaving to start a new venture fund, you know, how do you come to that type of decision, you know, how do you find your partners who are willing to kind of take this leap as well?

00;06;19;14 - 00;06;23;22

Nawaz Ahmed

Would love to kind of go down that that mindset.

00;06;23;25 - 00;06;57;27

Andy Kangpan

Yeah. So, this all really started to come together after, in 2023, after the collapse of FDX. Within the context of, the Two Sigma organization, it became clear to me at least that building, a crypto strategy and the way that I felt was, the right way to go about it. Was really difficult to do within the context of a larger investment management platform.

00;06;58;00 - 00;07;23;26

Andy Kangpan

And, you know, it’s interesting, I spoke with a lot of my, peers at other firms, at different HFT funds who faced similar challenges at that point in time. And I think they’re they’re basically they’re a variety of issues. Some specific to the firms themselves. But I think the commonalities are that, at the time, at least crypto wasn’t a big enough market from a volume perspective for a lot of these firms to dedicate a lot of resources to.

00;07;23;28 - 00;07;50;05

Andy Kangpan

So it was a space that clearly was growing, and was interesting, but just not something that could be put at the top of that priority list. And secondarily, if you remember, at that point in time, the regulatory environment for crypto, especially in the US, was extremely adversarial. So, the regulatory risk, that these firms faced when assessing the opportunity was pretty significant.

00;07;50;06 - 00;08;19;08

Andy Kangpan

So taking those two things together, it, there’s a lot of friction and sort of, pushing forward, on a crypto strategy, especially after the market went sideways. But the the thing that really catalyzed it for me was, you know, that that sort of friction caused me to take a pause and think about, you know, if I could start, if I could build a crypto strategy without these, constraints, like, what would that actually look like?

00;08;19;10 - 00;08;38;19

Andy Kangpan

And I reconnected with, my partners, David and Micki, who I mentioned, worked with me at Two Sigma, for a period of time. And we started to just, spitball ideas around what a fund would look like. You know, where we would start. What are the things that we would focus on from an investment perspective?

00;08;38;22 - 00;09;00;03

Andy Kangpan

What are the competencies that we could pull into the fold that, would be somewhat unique? You know, how would that evolve over time? And it just became clear to me through those conversations that, there was a really exciting moment in time happening in the space to start. And you find it getting to do it with partners that I really respect and also enjoyed working with.

00;09;00;06 - 00;09;09;21

Andy Kangpan

Was something I wanted to pursue. So it was, it was those sort of combination of things that came together that ultimately led to me wanting to take the leap.

00;09;09;24 - 00;09;37;18

Nawaz Ahmed

Understood. Okay. And so while you are having these conversations, spitballing what a fun would look like, you know, I would love to hear you talk through how you got to where you are now with the fund in terms of, you know, how you think about portfolio construction, how you thought about sizing the fund, the types of checks you write like a little bit more, detail on how you came to those decisions, would be great.

00;09;37;21 - 00;10;12;00

Andy Kangpan

Yeah. So, we can start with the thematic focus of the fund. So, I think the key thesis of the firm, is a meta layer is that the blockchain industry is evolving from one that has a singular focus on infrastructure building, to one that’s focused on deploying blockchain technology across a variety of industries. And specifically, we see adoption happening in the financial services ecosystem.

00;10;12;03 - 00;10;42;15

Andy Kangpan

We felt strongly at that point in time when we were talking about what would a fund if we were to start now, focus on from the best perspective. We saw a lot of tailwinds at play, particularly with the sort of increased interest in institutions, to, both trade crypto assets, but also look at using, different, crypto technology as a way to build more efficient and innovative financial services.

00;10;42;17 - 00;11;08;08

Andy Kangpan

So we thought that was going to be a trend that really drove the ecosystem forward in the midst of, the sort of market consolidation that was happening at that point in time. So, that was really the the, driving force of like what we wanted to invest into, in terms of the fund model, we, we knew that we wanted to to start with the venture capital fund.

00;11;08;11 - 00;11;31;23

Andy Kangpan

It’s, where the three of us have spent most of our time professionally, myself at, two Sigma. My partner Mickey spent also a lot of time at a firm called workbench, which is enterprise software focused find, in addition to Two Sigma. And then my partner David also spent time at Green Oaks, which is a, another firm in the venture capital space.

00;11;31;25 - 00;11;55;26

Andy Kangpan

So we knew we had a lot of shared interest and passion for, investing and, the early stages of an entrepreneur’s journey. And we also knew that, at least historically speaking, smaller funds tend to outperform larger funds from a returns perspective. And looking at the crypto space in particular, that’s that’s historically been true.

00;11;56;03 - 00;12;25;16

Andy Kangpan

But also, we felt that given the size of the market, a smaller fund would make, the most sense, just in terms of the number of opportunities that we felt excited about that we were seeing and the size of rounds that we thought would make sense. And so we ultimately landed at a fly at, sort of, smaller fund a size, from a, fund model perspective at 25 million.

00;12;25;19 - 00;12;57;00

Andy Kangpan

And we take a relatively concentrated approach, to portfolio construction. So we’re looking to build a portfolio of roughly 30 companies and investing, on average, about 700 K into those companies, over a three year period. And, yeah, I won’t get into, like, the weeds of how we got to those numbers, but, we feel it’s, ultimately just a good pace that we can execute against in order to build a portfolio of exciting businesses, and all focused on pre-seed seed investments.

00;12;57;03 - 00;13;18;23

Nawaz Ahmed

Okay. Makes sense. And, you know, it sounds like all three of you come from interesting backgrounds. The three firms sound quite different. You know, I as far as I know, Green Oaks, they do a lot of, you know, growth stage, very large checks, you know, workbench being not so much crypto. How do you guys, you know, come together work in the crypto fund.

00;13;18;26 - 00;13;26;15

Nawaz Ahmed

You know, align the way that you think and make decisions. How how does that kind of work out for you guys.

00;13;26;18 - 00;13;49;29

Andy Kangpan

Yeah, we we the benefit of having had a broad set of exposure, to a variety of venture funds in the space is, you know, we have a lot of institutional training and how to think about, finding deals, how to think about assessing those opportunities, and how to go about getting allocation into competitive rounds.

00;13;50;02 - 00;14;17;26

Andy Kangpan

And, that’s really benefited us nicely, at least. And sort of the early phases of deploying fund wine, and our ability to invest in the companies that we’ve been excited about, to date, we’ve always had a shared, interest and passion for crypto. As mentioned, when we were together at Two Sigma in 2017, we were like those young guys basically on the team that were trying to convince, a big hedge fund to do more stuff in crypto.

00;14;17;29 - 00;14;42;14

Andy Kangpan

And like, we were going through all the whitepapers, tried to explain to the investment committee way, all these networks were, what all these applications could be. And we were also, even after we sort of went our separate ways, so very excited about crypto, and, and continued to stay in touch.

00;14;42;16 - 00;15;06;29

Andy Kangpan

Despite the fact we no longer were colleagues. And so, that shared interest had, has continued, you know, to that, to the journey that we’re on now. And I think we’ve benefited a lot from having a variety of experiences. You know, myself primarily coming more from the investor side of things. My partner Mickey, when he left Two Sigma, I joined chain as an early employee there.

00;15;07;02 - 00;15;33;28

Andy Kangpan

So he was able to get firsthand experience building, a blockchain network, particularly at a phase when that protocol was growing quite quickly. And my partner David comes at the space. More from the engineering perspective, where, he actually spent most of his time at Two Sigma on the trading side of the house. And when he was at, Green Oaks, he was mostly focused on, engineering at building out, infrastructure for the investment process.

00;15;34;00 - 00;15;51;04

Andy Kangpan

So, we, I believe we come at the space with a really unique set of experiences and competencies that gives us a really, unique perspective while also, you know, having a lot of experience in crypto and shared passion for, the future of the space.

00;15;51;06 - 00;16;16;26

Nawaz Ahmed

Yeah. Gotcha. Okay. Would love to understand the the journey of fundraising for you. Like, I understand all three of you probably didn’t do much fundraising before starting to layer. So we’d love to kind of understand how was that journey for you? What was the most surprising parts of fundraising?

00;16;16;29 - 00;16;45;11

Andy Kangpan

Yeah, well, it was very hard, as you’ll probably hear from, most first time fund managers. And, you know, it wasn’t surprising that it was hard, but I think how hard it actually was when you’re in that process was somewhat surprising. And maybe we’re a little naive thinking that given our, our sort of institutional background would be more prepared for it, but nothing can really prepare you for it until you just go through it.

00;16;45;14 - 00;17;20;28

Andy Kangpan

I’d say the things that were surprising, was the the intensity of the emotional roller coaster coaster ride was, was very significant. So, you know, there’s just a lot of factors outside of your control. Everything from the market environment at large to the particular situation that NLP has. Like, you know, where NLP is in their fund cycle, what NLP likes to hear in a pitch, all those kinds of things.

00;17;21;00 - 00;17;40;20

Andy Kangpan

And there’s a lot of uncertainty, especially at the outset of like whether or not you’re even going to get the fund off the ground. But in order to even have a shot at getting off the ground, you have to leave your job and you have to take that leap. And so there’s this, like, very scary period of time where, you’re not making any money, you’re unclear the things going to work.

00;17;40;22 - 00;18;15;02

Andy Kangpan

You’re getting a lot of rejections. And so there’s that sort of roller coaster ride is, is really intense. Yeah. And then, you know, I wouldn’t say this was surprising, but, you know, venture fund fundraising was is challenging, in many unique ways relative to startup fundraising, which, you know, we can get into. But there was sort of a lot of unique nuances to, like managing a fund fundraise process that was surprising once you get into it and so difficult, to manage.

00;18;15;02 - 00;18;20;24

Andy Kangpan

So that that was an interesting, growth experience for us going through it.

00;18;20;26 - 00;18;29;11

Nawaz Ahmed

Yeah. For sure. What would you what would you say were those nuanced differences and.

00;18;29;13 - 00;19;06;20

Andy Kangpan

Yeah. The, you know, the, in fund fundraising for LPs, it’s actually rational for most LPs to wait until the very end of the process to make a commitment or not. There’s a lot of reasons for that. But I think that the probably the biggest one is that the price remains the same, whether or not for the LP, like whether or not you commit at the beginning or the end of the process, and you get way more information at the end of the process, around what the portfolio is going to look like, how the teams working together, who the other investors are.

00;19;06;23 - 00;19;43;01

Andy Kangpan

So like managing, creating deadlines and process around something where everyone incentivized to wait till the end to give you an answer. Very challenging. And the sheer amount of yeses you need to get to in order to get a fund off the ground is also somewhat distinct from startup fundraising. In your typically for most funds, you have, like, you know, a couple to a few dozen LPs in a fund, whereas in most startup rounds a year you might have, a handful of investors that’s all off the ground.

00;19;43;03 - 00;20;00;24

Andy Kangpan

It’s not to say one is any harder than the other. It’s just, there are there are a lot of dynamics at play in the country, fund fundraising, which makes it, on average, a much longer process and a lot more to us around how you how you sort of, create, a structured, process around it.

00;20;00;24 - 00;20;03;03

Andy Kangpan

So, that was quite interesting.

00;20;03;06 - 00;20;14;09

Nawaz Ahmed

Yeah. Okay. What would you what would you say was a rejection that you had that really stuck with you?

00;20;14;11 - 00;20;36;19

Andy Kangpan

Well, going back to the comment about it being a, a dynamic that you need to get to a lot of yeses, like, I think one of the things that became very clear to me through the process is that venture fundraising to a, to a certain extent, is really just a numbers game, like you just you need to talk to enough investors to get to the yeses that you need.

00;20;36;21 - 00;20;55;00

Andy Kangpan

And the generic advice that I’d probably give people now is like, don’t raise a venture fund if you can’t stand rejection, because that’s just going to be like a very common part of your job. And especially for people who come from an investor role. Like that’s a very, very much something that you’re not used to because you’re used to sitting on the other side of the table.

00;20;55;00 - 00;21;26;02

Andy Kangpan

So that’s, that’s something that you, will need to get used to. I won’t, name names, but I would say the, the rejections that are really frustrating are the ones that come from, what I called Time Bandits. Where, like, they’re investors that express a lot of interest and, give you a signal that they can action, like, make a decision.

00;21;26;05 - 00;21;45;20

Andy Kangpan

But for various reasons, aren’t aren’t actually in market, aren’t able to make an investment given where they are in their, like, fundraising cycle. And then also like, do the work of like spending time with you and getting to know you. And you know, there’s different reasons why people do that by I think those end up being really frustrating.

00;21;45;20 - 00;22;00;03

Andy Kangpan

And there are there are a few of those of the process in particular that where like, it’s frustrating to, to, to deal with. But I would say, yeah, I think those were the ones that stuck with me. But I’ll, I’ll, I’ll hold off on. Yeah.

00;22;00;05 - 00;22;27;18

Nawaz Ahmed

But fair enough. Fair enough. Yeah. One of the things, when, when people were asking me about, like, fundraising was, I think one of the big differences I saw between startup fundraising and fundraising for a fund is that for a startup, you know, I feel like VCs and even angels to an extent, are quite out there in the in the sense of, you know, they want to look for interesting companies and do a deal where LPs are very much the opposite.

00;22;27;18 - 00;22;42;25

Nawaz Ahmed

They’re like quite hard to find. A lot of them are really not, looking to do a lot of deals. So it’s, it’s a quite a big job to kind of convince them to come around. I’m not sure if you had that type of experience to.

00;22;42;27 - 00;23;02;11

Andy Kangpan

Yeah. There’s there’s a segment of LPs that are like known like, you know, the, the fund of funds and, the really big thing in the office is that do this like very commonly, but there’s a whole universe of all these that, you’d be very surprised to learn that they are actually investing in bonds, are open to investing in funds.

00;23;02;14 - 00;23;33;23

Andy Kangpan

So unearthing the universe of LPs in and of itself is a challenge. And so, yeah, a big part of the job became prospecting, like actually surfacing up names that you could pursue and build relationships with. And the other challenging dynamic, with venture fundraising, by the way, is that it’s a very long commitment for an LP as opposed to raising a liquid fund, which has a, faster time to liquidity.

00;23;33;25 - 00;23;55;15

Andy Kangpan

This this is a very long commitment, a 7 to 10 years often. So, that’s also commitment you’re making. You’re asking someone to make oftentimes without really knowing you for very long. So, that that’s a, that’s a dynamic that you have to manage and get around, at times. So that’s another unique sort of challenge of the process.

00;23;55;17 - 00;24;13;24

Nawaz Ahmed

Yeah. Right. Is there any advice that you received from other, you know, GP’s or investors that you spoke to before starting fundraising that just turned out to be completely wrong, or was unexpectedly true?

00;24;13;27 - 00;24;38;25

Andy Kangpan

Well, there’s definitely advice that was true. I don’t know if it was unexpected, but, you know, a couple of things come to mind. One piece of advice I got actually, from a number of people was, get going, like, just just, start investing and get to a first close as quickly as you can.

00;24;38;27 - 00;25;03;01

Andy Kangpan

And, that ended up being really good advice for a lot of reasons. One of the the psychological challenges of fundraising when you set out, like when you go out to raise, you tell people that you’re going to you’re targeting a certain amount of money. And that can become a goalpost that really only you care that much about.

00;25;03;03 - 00;25;26;23

Andy Kangpan

And you can actually raise a fund that’s smaller than the target and still have a viable fund wine, to sort of demonstrate that you can get access to good deals next year to venture strategy. And so, it being led to this, like, number that you start with the beginning of process, can sometimes be, not a productive thing.

00;25;27;00 - 00;25;52;24

Andy Kangpan

The other thing is that, it’s very helpful in a fundraise, to get going, make some investments and, just start demonstrating that you can execute because the conversation shifts away from the sort of vision. And then more about, like, here are the deals I’m doing. And that ends up becoming a more fun thing, I think for both sides to talk about, as opposed to just like a very high level market thesis.

00;25;52;27 - 00;26;18;05

Andy Kangpan

So, that that is to be really sort of great advice that, you know, we, we took to heart through the process, I mean, another piece of advice that we got that, we didn’t do the best job of listening to, which interestingly, I would probably give this advice to founders, too, is, your pitch is going to get better, over the process.

00;26;18;09 - 00;26;46;16

Andy Kangpan

It’s going to get more concise. It’s going to get more focused. It’ll be more concrete. You’ll be able to speak more about the things that you’re excited about, all that stuff. And, so I would, I would, like, manage the process appropriately, where that, that sort of, the checks out with that, the conversations where it’s like higher stakes, like larger checks or like more sort of professional quote unquote LPs that made me more used to hearing the pitch.

00;26;46;19 - 00;27;07;28

Andy Kangpan

Probably worth stating those conversations for when you’re actually well prepared to have those conversations. So, you know, warm, warm up as much as you can, sort of build momentum before you get to those conversations versus like just trying to do it all at once. And so, that advice ended up being an, in retrospect, really good.

00;27;07;28 - 00;27;16;29

Andy Kangpan

Although I don’t think we necessarily get the best job and following that advice. But, I think if I had to do it over, that’s definitely one thing that I would try to pace better.

00;27;17;02 - 00;27;37;16

Nawaz Ahmed

Yeah. That’s, that’s some great thoughts. Okay. I, I’d love to understand how you’re thinking about the market right now in terms of, you know, crypto venture. You know, there’s a lot of kind of people have a lot of opinions about crypto VCs on on Twitter. How do you kind of feel about the market right now?

00;27;37;18 - 00;27;53;21

Nawaz Ahmed

And also, you know, considering, how tokens are doing for, for venture investors, you know, in the past few years and how you feel about that compared to you know, equity investing, in your current strategy?

00;27;53;23 - 00;28;44;07

Andy Kangpan

Yeah. I so from a market dynamics perspective, I think we’re in a really exciting time in the space. Like undeniably. Stablecoins are, top of mind for everyone. I think circle’s IPO really has pushed that conversation out of just crypto native, circles into, the broader, public. And so, as a result, that’s been driving a lot of the activity in the venture space where you have a lot of capital going towards, stablecoin issuers, stablecoin infrastructure, payments related companies, things of that nature.

00;28;44;09 - 00;29;21;14

Andy Kangpan

But I would say generally like the, that trend and sort of the, the sort of broader push for crypto being infused into the financial industry has really reignited, I think, interest in the space, at least, especially in like the public markets, you know, it’s interesting in the crypto venture side of things, while the space, has started to take up in growth in the sense of like capital, capital deployed, it’s still relatively subdued compared to where we were a few years ago.

00;29;21;16 - 00;29;56;02

Andy Kangpan

Maybe this is actually just the steady state of the industry on the crypto venture side, but it does seem like it’s artificially constrained because there’s the ecosystem. Is is nursing like a hangover still from that like 2122 era of, mania and excess. So, the big thing there is that, as, as most folks listening to is probably, recognize like raising a fund new fund right now, both for emerging managers and for existing funds is is challenging.

00;29;56;04 - 00;30;29;24

Andy Kangpan

There’s a lot of anecdotes that I hear of just that continuing to be a dynamic and the, the capital raising side of things. So as a result, there’s a trickle down effect here, like the the sort of size of the industry, in terms of just total capital that could can be deployed into the ecosystem. So despite the fact that, you know, many assets are getting are reaching all time highs, on the public side of things and IPOs are happening where, you know, people are sort of, getting excited again about crypto equity businesses.

00;30;29;26 - 00;30;56;13

Andy Kangpan

Yeah. Venture still kind of remain subdued. It’s really, great for funds that have capital to deploy because that creates an environment where, you know, it’s not always the case, but I think on average, valuations still are somewhat reasonable compared to what we saw again in 21, 22. So I think it’s an interesting dynamic from that perspective.

00;30;56;15 - 00;31;22;22

Andy Kangpan

The crypto equities versus token, debate is an interesting one as well, where interestingly, when we set out to raise the fund, we made it very explicit to LPs that we would be balanced in our approach, said the fund model we sent to LPs had an allocation of 50% of our investable capital going towards equity deals, at 50% of our capital going towards token investments.

00;31;22;25 - 00;31;43;03

Andy Kangpan

We got a lot of questions, actually, about how we think about equity investing, given that historically there hasn’t been a lot of liquidity and the time to liquidity tends to be, on average, longer. And, you know, so right now what’s interesting is like the tokens in past few years at least have been underperforming a number of equity investments.

00;31;43;05 - 00;32;07;05

Andy Kangpan

You know, circle’s IPO has obviously done really well for its investors. Hayden Road was acquired for a very significant amount. Their bid, you know, bridge, and, and a handful of others. So, that that’s really flipped the script a little bit on what people find. It’s interesting. I still think that token investments are going to perform really well.

00;32;07;08 - 00;32;33;10

Andy Kangpan

You know, one of our investment early lessons in the fund was in Athena, and they’ve done really well from a token price perspective. So I think there’s still room for, for, for projects to launch tokens that are, going to perform well, I just think that there’s going to be a greater amount of, I think the public markets are a little bit more discerning.

00;32;33;10 - 00;32;59;19

Andy Kangpan

So like the, the, token, the project actually needs to have a compelling product and, increasingly what we’re seeing is, projects that generate fees or revenue are actually doing relatively well. From a token price perspective, compared to the projects that are, a little bit more amorphous in terms of like what the product is and what the business model will ultimately be.

00;32;59;21 - 00;33;25;16

Andy Kangpan

So, I still think, if, you know, projects are, sort of tick those boxes, though, they can have a chance of doing well. But I still I also continue to be bullish on equities. Like, I think we’re entering a market now where public markets are much more receptive to the crypto pitch. And also there are a lot of strategic buyers making a big push into the ecosystem that are looking to make acquisitions to accelerate the digital asset strategy.

00;33;25;19 - 00;33;46;28

Andy Kangpan

And we’ll see more M&A activity as a result. So we continue to remain balanced in our approach. I think both types of investments have pros and cons by, I think, a venture portfolio that has balanced exposure to both of those asset types will outperform any one portfolio that’s heavily weighted towards one side or the other.

00;33;47;00 - 00;33;57;18

Nawaz Ahmed

So when you say you have, about 50, 50 equity tokens, is that like total private token investments or liquid token investments?

00;33;57;20 - 00;34;09;25

Andy Kangpan

So those are, all private token investments. We at the moment and the venture fund don’t do anything on the liquid side. So we’re not purchasing tokens on the open market.

00;34;09;27 - 00;34;26;29

Nawaz Ahmed

Okay. Cool. Makes sense. Is there a company that you may have invested in already from the fund or previously that really, you know, exemplifies what are the types of companies Medallia wants to invest in?

00;34;27;01 - 00;34;46;04

Andy Kangpan

Yeah, I think that, all that yeah, I’ll do like the classic venture comment, which is like all of our companies are great. They’re all representative of all the companies that we would want to invest in. But I, you know, the example that I threw out there, which I often talk about is because it’s I think it’s easier to understand is, the company called Crossover Markets.

00;34;46;04 - 00;35;17;01

Andy Kangpan

So, crossover markets as an equity business. They are, building an institution only exchange, that is, bringing the ECN model to the digital asset space. Basically what that means is, they are focused specifically on the exchange side on executing the trades. But they’re not focused on other aspects of, why exchanges in the space today focus on meaning like custody, and brokerage.

00;35;17;07 - 00;35;50;18

Andy Kangpan

So, what you see is from a market structure perspective today in crypto exchanges, too, is that these exchanges like Coinbase, Kraken and others are vertically integrated for the most part. So they tend to offer these services as a bundled, platform to their customers. If you look at other asset classes that, have significant institutional volume, so equities, affects commodities, etc., the market structure on the exchange that looks very different and that these things are typically separated.

00;35;50;18 - 00;36;23;24

Andy Kangpan

So you have different service providers focused on custody, different time brokers in the space. You have exchanges that are, you know, focused on, execution. And we believe that the digital asset space is moving in that direction. And crossover markets is the first to market, and the market leader currently and, building, that, exchange model and the ecosystem, the founder is also very representative of the type of entrepreneur we like to back.

00;36;23;24 - 00;36;53;11

Andy Kangpan

So, Brandon was formerly the head of prime brokerage at Jefferies. He’s also an executive at an organization called XLM. So he has deep connectivity into the trading ecosystem, but also very intimately understands crypto from a market structure perspective. And they’ve quickly become, a leader in the space in terms of working with the leading institutions in the ecosystem.

00;36;53;13 - 00;37;04;20

Andy Kangpan

In terms of, market participants on the exchange. So, they’ve done really well. And I think a really good example of the type of business that we want to be supporting. Kind of fun.

00;37;04;22 - 00;37;14;16

Nawaz Ahmed

Cool. Very cool. Final question. What’s the secret obsession of yours that nobody knows about?

00;37;14;18 - 00;37;47;18

Andy Kangpan

Oh, man. I, I’m very into, skateboarding, so it’s, a hobby that I picked up when I was really young that, when I moved to New York for college, a while back now. But, reignited my passion for it because the New York City is like a really big, Mecca for skateboarding.

00;37;47;21 - 00;38;14;01

Andy Kangpan

There’s, like, a lot of famous parks and spots that people skate and skate videos. So, I got really excited about it again when I moved here and picked it back up. And so I still actually, skateboard a decent amount, although I’m older now and, more prone to injuries. So, and not as much free time as I used to have, so I don’t, I don’t really do anything, so, risky anymore, but it’s still a great way to get around.

00;38;14;01 - 00;38;37;26

Andy Kangpan

And I still to this day, keep up with the skateboarding scene, for lack of a better term. Like the, the major brands. And like this, the skaters they’re sponsoring and like, the state of the sport and that kind of thing. So, yeah, it’s it’s something that I, I’m really, interested in personally that I don’t want to talk about too much in crypto circles.

00;38;37;29 - 00;38;59;09

Nawaz Ahmed

That’s really cool. That’s really cool. Yeah, I, I haven’t heard that before. As well. And when I ask people these questions. So it’s cool to see a skater back out there. But cool. Thanks, Andy. That’s that’s all, the questions that I have for today, you know, really appreciate your time. I think, that it was a great chat.

00;38;59;11 - 00;39;04;25

Andy Kangpan

Thank you. I appreciate you having me. And, Yeah, I it was great having a conversation.

Key Moments

* [00:01:50] Travis’s crypto journey: From lawyer to crypto VC at Digital Currency Group.

* [00:03:51] Lessons from DCG: Scaling blockchain investing during Ethereum’s rise.

* [00:06:55] Choosing a partner: Values alignment for venture fund success.

* [00:11:36] North Island’s enabling technology thesis for crypto’s financial applications.

* [00:14:17] Portfolio diversification: Spreading risk across time and use cases.

* [00:16:49] Fundraising challenges: Navigating the 2020 COVID market shutdown.

* [00:27:40] Travis’s obsession: Broad knowledge for better crypto investing.

Guest Bio

Travis Scher, co-founder of North Island Ventures, is a crypto investing expert with a decade of venture capital experience. Formerly at Digital Currency Group, he now leads a crypto VC fund focused on blockchain’s financial applications. His values-driven approach emphasizes integrity and long-term blockchain investing success.

Resources

* North Island Ventures: Discover Travis’s crypto VC firm advancing blockchain investing.

* Digital Currency Group: Learn about Travis’s early crypto investing experience.

* Silver Lake: Explore the firm connected to North Island’s co-founder.

Love these crypto investing and venture capital insights? Subscribe to Inquisitive VC for more blockchain investing tips and share on X with #CryptoVC!

Transcript

[00:00:00] Travis Scher: I actually briefly started my career as a lawyer at a big firm, and fortunately for me, I really hated it. It was just, uh, an excruciatingly boring experience for me. We’re both introspective people and we strive to build a firm where ego doesn’t get in the way. We’re on a quest to discover truth together.

We kicked off our fundraise in early March of 2020 before COVID hit and the, uh. Financial world basically shut down, but we really didn’t know what was gonna happen. Our goal is to back the best entrepreneurs solving real problems in the real world.

[00:00:49] Nawaz Ahmed: Welcome to another episode of The Inquisitive vc. Today I’m excited to have with us Travis Cher, co-founder and managing partner of North Island Ventures, a crypto focused venture fund with the belief that is the next great enabling technology. Travis’s journey is particularly compelling from his early days as a lawyer who discovered Bitcoin in 2014 to becoming one of the most experienced crypto VCs in the industry.

After spending four transformative years at Digital Currency Group, during crypto’s early venture era, Travis co-founded North Island Ventures with the mission to enable the convergence of crypto and traditional finance. In this episode, we’ll dive into Travis’s perspective on crypto as an enabling technology, his approach to building a values driven investment firm, and the philosophy behind North Island’s focus on real world financial applications of blockchain technology.

Thanks for joining me, Travis. Keen to have this interesting conversation with you. I wanted to start with, you know, a quick background on yourself and your entry into crypto and, and venture capital.

[00:01:50] Travis Scher: Sure. So I have been incr as a VC for almost 10 years now. So I mean, if you take a step back, I actually briefly started my career as a lawyer at a big firm, and fortunately for me, I really hated it.

I think had I hated it a little bit less. I might have hung on for a while, but it was just an excruciatingly boring experience for me. So while I was practicing law, this was, you know, 2014, I started looking for things in the world that might be a bit more interesting. And so I started learning about different areas of technology.

Um, and, and the one that really resonated with me was Bitcoin at the time. I read a book about Bitcoin and, you know, I had some, some background in. E-com and some of the ideas around, you know, what blockchain could enable, particularly around payments. That I think was what caught a lot of people’s interest at that time, was really exciting to me.

So, you know, in 2015, I, I just quit my job as a lawyer and I got very fortunate and found this opportunity to join Digital Currency Group, DCG, on their investments team in the very early days of crypto. So. You know, that was latter half of 2015, so I’ve now been a VC in the space for almost 10 years.

[00:03:06] Nawaz Ahmed: That’s amazing. It’s probably quite a long time considering how young venture is in, in crypto.

[00:03:12] Travis Scher: Yeah, I, I mean, at the time that I joined, there were only a handful of firms in the world that were focused full-time on crypto. Though there was DCG, which wasn’t really a venture capital firm, it did other things as well, but I think we were most well known for our VC investments and there was Panera and Blockchain capital and that was really it at the time.

[00:03:29] Nawaz Ahmed: Yeah, that sounds like it sounds about right. And you know, so you were an investor, you were there for, you know, a couple of years and then you decided to leave to start your own fund. Can you walk me through the thinking on, you know. Spending your, your time at DCG, some of those learnings, and then what kind of drove that decision to go start a, a new fund?

[00:03:51] Travis Scher: Sure. So I was at DCG for four years, from 2015 through 2019. And it was, it was an incredible experience. I mean, I. The blockchain space during that time really experienced a radical transformation. You know, we had the emergence of Ethereum and ICOs and sort of the beginnings of the crypto venture sector.

So, you know, I, I kind of learned the ropes there. You know, we made about a hundred investments during that time. We were the world’s most active VC during that period. And so, you know, in working for Barry, frankly, I was jealous of him. In that respect too. I mean, he really put everything he had into DCG in the early days and created, you know, what he wanted to build.

So that, that was kind of the selfish reason, you know, I wanted to go on my own entrepreneurial journey. There were other things as well. I mean, at DCG we were writing smaller checks. That was the model. You know, we were in a proper VC firm. We were really a, a corporate investor of sorts. There’s a unique beast, but I wanted to.

Write bigger checks, you know, own a little bit more of the companies and projects that we invested in, you know, and, and kind of like, you know, be a bit more focused, make fewer investments. So that was a huge thing. I, I also think on the investment side, when you are. Working for somebody as a venture investor, you know, you’ve got your own views of the world and your own preferences for what you wanna invest in, what you think will be successful.

But I think that unless you’re a gp, at least part of, if not all of what you are doing is. Expressing somebody else’s thesis and, you know, using their filters. Because ultimately, you know, I had, I had a lot of autonomy at DCG, you know, particularly after spending a year or two there, and I could, I could pound the table on things and, you know, get things done.

But a lot of what I was doing was trying to figure out what was it, the dairy. I wanted to invest and were the companies that I was meeting, you know, what he was looking for and things he would like. And, and as somebody who loves investing and wanted to be a real investor, I wanted to figure out, uh, what it would be like to.

Be the one coming up with the filters and these without this sort of complicating factor of, you know, having a, another ultimate decision maker.

[00:06:13] Nawaz Ahmed: Yeah, that’s a great point. I think, I think that is a, that’s a real reason I, I feel like a lot of people. Do leave to start their own firms so that they can kind of control exactly what they’re investing in, which is super interesting that you mentioned it, you know?

And so in, in saying that, you know, you, you started to think about this new firm. I know you have a partner in, in the firm that, that you started North Island Ventures with. Could you talk through, you know, the thinking of North Island Ventures itself, coming up with the name and, you know, deciding you’re, you are wanting to go into this partnership and how.

How should somebody think about, you know, when they’re picking a potential partner to start a firm with? It’s a pretty intense job and you’re gonna be with them for, for a long time.

[00:06:55] Travis Scher: Yeah. This is another huge part. Picking a partner is incredibly important. Picking the right partner, I should say, it is not something that is to be taken lightly.

And for me, you know, probably by 2018, I think that I knew at some level that I wanted to start something and it was all about. Finding the right person to do it with. And so, you know, there were, there were others, you know, in the ecosystem around the ecosystem who, who courted me at that time. ‘cause I was so early and, and the, you know, I had a lot of respect for some of these folks, but it just didn’t feel like there was this perfect sort of values alignment or personality alignment.

You know, had I gone with. Any of those opportunities, I think it would’ve been a bit more transactional. It would’ve been, you know, maybe they had access to capital and I had all these connections and knowledge in the space, but it wouldn’t have been, you know, these are the things that we really care about.

This is how we think, this is how we wanna work together. You know, I, there’s, there’s an element of chemistry too, and so. I met James, who’s my partner through his father Glen. So his father Glen, who’s our third co-founder. And our chairman was one of the founders of Silverlake, the big tech private equity firm.

And he was an early investor and board member at DCG. So his son James, who’d been a tech investors’ whole career, had left CO two to join the family office around 2018 and, and started focusing full time on crypto. And so he and I. You know, we met through Glen. We went out to dinner once and you know, it was kind of like one of these.

Dating experiences. I, I came home and I said to some of my friends, I think I found the guy, you know, it also had to do with synergies. I think James had, you know, he, having grown up with Glen and having worked at Code two, he knew a lot about how the world of finance work that I didn’t, he also had a deep research background.

So my background, you know, as I mentioned, was in law. And I, I studied business before then, but you know, my, my skillset is really meeting founders, connecting that with them, you know, high level pattern matching, building partnership with them, getting deals done. Whereas he frankly is much better at thinking about technology markets, business models, and big trends.

You know, those are some of the things he learned to code to. And so, you know, there, there were these synergies, right? That kind of like check the boxes, but that’s. I’d say that’s less than half of it when you pick a partner. The other half is values alignment and personality fit. And I think the thing that James and I, you know, really both had in common was a first off a desire to build a firm with a real long-term focus.

You know, neither of us were particularly focused, um, like. Getting rich super quick, which is possible in crypto. I think that we both were excited about the process of building a firm that could last for decades. I think both of us, it was really important to both of us to build a firm that had integrity, you know, where we don’t really play in the gray.

We know what we think is right, and we really try to hold ourselves. To high standards in that respect. And then the third thing is I, I think we’ve really, you know, we’re both introspective people and we strive to build a firm where ego doesn’t get in the way, in any way, shape or form. And that’s not to say I don’t have an ego, he doesn’t have an ego and doesn’t rear its head sometimes, of course it does.

But you know, at the end of we’re on a. Quest to discover truth together, to do right by all of the stakeholders in our ecosystem. So, you know, our LPs, our founders, our, our entire team, you know, even, even the service providers that we work with, we want this to be a value creation ecosystem for everybody that we touch.

You know, a, a checklist of surface level items. You really have to, I think, be more focused on. Um, some of the deeper factors that are going to enable the relationship to sustain, you know, big ups and downs, which you’re certain to encounter in, in this space.

[00:11:09] Nawaz Ahmed: For sure. You know, and I, I think you mentioned a, a little bit around the thinking of, of the firm.

I would love to understand the overall thesis that you ended up coming up with for North Island Ventures. You know, kind of going into the, if, if you do look at specific sectors within crypto, how you thought about check sizing, how you thought about the number of companies in your portfolio would be great to kind of understand that thinking.

[00:11:36] Travis Scher: Yeah, so I’ll talk about the thesis first. Back in 2020 when we set out, you know, our thesis was that crypto is the next great enabling technology. It offers a set of capabilities that the world had never before seen, particularly in combination, and those capabilities could unlock. Applications and experiences that could not previously exist.

And, you know, our view then was really around, you know, finance, including things like payments and, and you know, trading, lending. It was also around, gaming was a big focus of ours and, you know, decentralized social media things related to user owned data. And so I think that our, our thesis on crypto being an enabling technology is, is.

Certainly proven to be true. I think that where we are today, I look at crypto primarily as a financial technology and that, you know, our mission now is to enable the convergence of crypto, which remains quite segregated in its own silo. You know, mostly speculative, but a technology that has proven its potential and the traditional financial.

System, which has improved somewhat in the, you know, five to 10 years that I’ve been doing this, but, which really has not benefited from the new capabilities that crypto enables. And, you know, those capabilities are basically instant peer-to-peer payments anywhere in the world. You know, smart contracts and open platforms on which you can design.

A whole host of new sorts of financial services and financially enabled applications of the future. And so, you know, while while the thesis is around the financial capabilities that blockchain offers, it doesn’t mean that those capabilities will only serve to better the financial services industry. I still think that those financial capabilities have applicability and.

Things like deep end and computing markets and AI and things like gaming and, and social media. But you know, I do think it is very important to remember that the applications are first and foremost financial. So if there’s no financial problem to be solved, it is, it is. You really have to pause and think hard about.

You know, whether the company that you’re looking at is solving a real problem.

[00:14:07] Nawaz Ahmed: Yeah. Okay. That makes sense. And then, so how you went from that into deciding your check sizes and portfolio construction, how did you go about that?

[00:14:17] Travis Scher: So, you know, I would say that in some ways James and I are more conservative than your typical crypto investor.

The space is extremely volatile, extremely, you know, risky in many respects. And you know. I like risk. I have, I think in, in the world at large a high tolerance for risk. I think, you know, risk is, is what creates opportunity. But James and I, being very long-term focused, wanted to make sure that we were investing in a style that would maximize the probability of long-term success.

Rather than, you know, just merely creating an opportunity for extreme short term outcomes while also creating the opportunity, well, extreme outcomes in either direction. Right? So in that sense, you know, we, we make a fair number of investments, but you know, out of our first fund, we made about 35. This is not abnormal for a seed fund out of this.

Second Venture fund, we’ll make, you know, probably 40 to 45. But critically we wanna diversify across geography, across, you know, use cases within crypto and across time. So I think we’ve probably deployed our funds. A bit more slowly than your average investor? I think historically the best predictor of success in venture, well, first it’s probably been something like, you know, brand.

The mega brands in venture have been very successful. But secondly it’s been vintage. And so, you know, I think that very much helped us with our first fund, which we raised over the course of 2020 and 2021, but we didn’t deploy it all ultra quickly. There were funds at the time that were getting deployed in as little as.

Nine months. But, you know, our first fund we deployed across two and a half years. This fund will be like three and a half to four years. So, you know, people talk about diversification in a lot of ways. I think for, for us in venture time diversification is critically important as well.

[00:16:16] Nawaz Ahmed: Yeah, great point. I, I think a lot of people do end up leaving that out as a point of differentiation or, or divers diversification.

So it’s pretty interesting that you guys are thinking that, you know, and so you. You have now left. DCG, you’re working on NIV. Can you walk, walk us through your first kind of fundraising experience. I imagine you haven’t you, you didn’t fundraise at DCG the way it was set up, so how was fundraising for Fund one?

What were the main challenges that you experienced?

[00:16:49] Travis Scher: Yeah. Fundraising for Fund one was quite the journey. We kicked off our fundraise in. Early March of 2020. So we did about three or four meetings before COVID hit and both James and I separately fled the city and you know, the financial world basically shut down.

Nobody was investing a penny. And so from March to April, you know, we had a few small commitments at that point, but we really didn’t know what was gonna happen, you know? And so what do we do? Well every day, James and I, I mean, there really wasn’t much to do at the time because we decided that I. We should actually pause our fundraise rather than trying to beat our heads against the wall and just wait for hopefully things to turn around.

So James and I would just get on the phone every day at nine o’clock in the morning to maintain a normal schedule and we would talk about, you know, what was happening in the market. You know, refining our thesis. You know, we’ve met some companies during that time, even though we weren’t quite ready to invest, and, you know, kind of improving our pitch to investors working on our materials.

And so then at really the, I think at the end of April, early May, we said it’s go time and, you know, as, as quiet and strange as March and April were. May and June, things just started to go like this. So what seemed very unlucky actually turned out to be quite lucky. You know, we hit the market while there weren’t a ton of people fundraising initially, because we had nothing else to do.

We had no money to invest and we caught momentum quickly and we got to a first closing a few months later. So, and then, you know, we ended up. Closing the fund in full in January, 2021. So, you know, fundraising was basically impossible and then it was frankly fairly smooth because of the sentiment in the markets.

[00:18:44] Nawaz Ahmed: Yeah, that timeline sounds, you know, pretty, pretty amazing if you were able to go from April to Jan and, and fully closed, so that’s pretty cool. What would you say was the most surprising thing? You learned about raising a fund?

[00:18:58] Travis Scher: Surprising? Well, look, I, I think that when you’re raising money, what you’re trying to do is build trust in every way, shape and form.

You know, particularly with fund management and asset management, people give money to people who they trust. And so, you know, I think that you build trust. By telling a coherent and honest story, being very prepared and very reliable in terms of your follow up, keeping people updated on a regular cadence and generally seeming organized, right?

That is. One piece of it. The other piece of it, which is just a reality, is that, you know, social signaling matters a lot. So, you know, the secret sauce of fundraising, in my opinion, is to do it in concentric circles, right? And what you do is you start with the people who know you best, who can kind of vouch for you.

So James and I got, you know, our ex employers to invest. You know, very early on, and then you kind of go out to the next concentric circle and you say, Hey look, these people are investing and this is how much money we have. And with that, you kind of capture as much as you can of the next concentric circle, and then you go back.

Then you go to the next circle, you know, people who are a little more distant and you know, to some extent it really ties into the fundraising advice that I give founders, which is, you know, not necessarily smack in the middle of a process, but let’s say you meet an investor who might be a fit for a future wrap in in six months.

12 months, two years, whatever. It’s the absolute best thing you can do is when you first meet them, you tell them what you are going to do and when you point back to what you said and you said, Hey, I did what I said I was gonna do. Right. Because that shows. Conscientiousness capabilities, you know, integrity to some extent.

And so, you know, I think fundraising is a little bit like that. And the way in which you have the opportunity to tell people, to show people that you’ve done what you’ve set out to do is to show them momentum in terms of the dollars raised.

[00:21:13] Nawaz Ahmed: Yeah, great point. The concentric circles method, does that still apply when you’re raising your second fund?

[00:21:20] Travis Scher: It can, but it’s, it’s a very different process when you are raising, you know, a second fund. The first fund is the hardest to raise because you are building an LP base from effectively scratch. I mean, there are people who, you know, maybe they left the fund where they participated in the fundraise, and it’s not from scratch, but.

Building the, the building, the LP base from scratch is different than raising a future fund. The Future Fund, what you really wanna do is, you know, between funds one and two or two and three, whatever, you know, you wanna be building relationships with folks who could be a good fit for the new fund. And again, you know, what you wanna be able to do is show them that you, you know, you do what you set out to do, but then you know you wanna kick it off by.

Gathering as many commits from your insiders as possible, you know? And so in that sense, yes, there is this concentric circle element, which is you start with your existings and then. You touched base with the new folks who you’ve been in contact with, and maybe then, you know, you can try and get connected to folks who you haven’t met before and, and close down.

[00:22:26] Nawaz Ahmed: Mm. Makes sense. Is there, was there any rejection from an LP in that first fundraise that really stuck with you?

[00:22:33] Travis Scher: Didn’t stick with me that much because I don’t remember it. Now, oh look, I would say that there were, there were family offices that I had built relationships with during my time at DCG because we had interactions with a bunch of family offices and they had, you know, these were family offices who were very early to crypto.

Right. And I think I had naively assumed because I had great relationships with them, that they saw me, you know, do what I thought was great work at DCG for four years, that they were like. Very high probability investors in the new fund. And then when we pitched them, you know, some of them didn’t get there and some of them never even gave us a final answer because I think, you know, they, it wasn’t to be rude, but they had a hard time saying no to me because I knew them.

It’s just a handful. But the reason was, you know, they were very early to crypto and they had made other investments. Directly in crypto in DCG, in other funds. And so it really wasn’t personal. It was that they had made their allocations to the space and, you know, these, these weren’t family offices with, you know, many billions of dollars, right?

But they were smaller than that. And so, you know, I, I think what you learned is what, what, what I learned from that is, you know, these many, you know, these rejections are not necessarily personal. They have a lot to do with. The financial allocation needs of the investor at that time.

[00:24:05] Nawaz Ahmed: Yeah, that’s a fair point.

What would you say that success looks like for the North Island Ventures for the next five to 10 years?

[00:24:12] Travis Scher: Yeah, I mean, look, I think we’re still early in building this. I think I. Crypto has had a remarkable run over the last 10 years with a tremendous amount of wealth creation, and that’s been great, you know, because it’s enabled so much development of infrastructure and new ideas and testing.

But we’re still in the very early days of the real implementation of this technology in ways that matter and so. You know, our goal going forward is to back the best entrepreneurs in the world who are building for real use cases, solving real problems in the real world. And you know, I know and acknowledge that there are going to be more companies that get built and more projects that get launched that, you know, succeed without delivering any lasting value to anybody.

You know, I think the latest. The latest, the incarnation of this has been the meme coin frenzy. You know, that’s not our game. That’s not really what we’re interested in. And so, you know, for us on the venture side, you know, we just wanna keep doing what we’ve been doing. You know, evolve as the market evolves, get better at investing, get better at supporting our founders, you know, get better at.

Providing LPs with, you know, not just a product that, not just a product that, you know, hopefully has great returns for them, but also an experience that they value and enjoy, you know, continue to build kind of a great internal culture. Bring in. More great talent that’s values aligned. And so, you know, that’s, that’s what we’re excited about over the next five to 10 years.

And I think, you know, if we succeed, it may be the case then in 10 years. There’s no such thing as a crypto investor. I, I do think that’s where this is headed, but I think that for five to 10 years there, the window remains open for specialists in this field.

[00:26:11] Nawaz Ahmed: Hmm. Makes a lot of sense. What would you say is one thing about being, you know, a founder of a new firm that you wish you had known before you started?

[00:26:20] Travis Scher: I, I think, I wish I had known how much I enjoy it. You know, I think that, and as I mentioned, a big part of the reason I left was to really try by hand at investing with no guardrails, but it was also to be an entrepreneur. I have very much enjoyed the process of building a firm from scratch. You know, hiring great people, integrating them into our culture, trying to train and push them to be the best that they can be.

You know, build out RLP base. Build great relationships with our LPs that I hope are super synergistic. You know, all really build a community around everything that we’re doing. I, I actually think while I, while I knew that I, I was jealous of the people who had done things like this, I probably wasn’t as sure that I would love it as much.

Had, had I known, I might’ve done it a bit earlier. I might’ve taken the leap earlier, although, as I mentioned earlier. You know, you gotta wait for the right person to come along unless you wanna do it as a solo gp, which is not, it wasn’t very common at the time, not something that appealed to me. So. I think doing it as a partnership is, for me, is more fruitful.

Yeah. That’s, that’s, that’s the first thing that comes to mind on that question.

[00:27:34] Nawaz Ahmed: That’s good. And you know, the final, final question I have is what’s a secret obsession of yours that nobody knows about?

[00:27:40] Travis Scher: Oh man. You know, I, when I was a kid, I used to be very obsessive about things. I would like memorize baseball statistics.

I was totally obsessed with baseball and. Memorize all the specs on all the cars that were sold in the us. I, I’m not that obsessive today. I’m much more of a generalist. I, I kind of in, in that sense, you know, I’m obsessed with knowing a little bit about a lot of things. You know, I read very widely, you know, I’m very interested in.

In health and wellness, but I also love to eat, you know? So yeah, I, I would say on the whole, I’m, I’m, I’m probably obsessed with making sure that I know kind of a good amount about a lot of things. ‘cause I think the world is a hugely diverse and fascinating place.

[00:28:26] Nawaz Ahmed: Yeah. No, I appreciate that and I think that definitely makes you better and better as an investor knowing a little bit about a lot.

I hope so.

[00:28:34] Travis Scher: You know, it’s a balance. Breadth and depth is a trade off in this world. You know, I, yeah. I personally just find myself drawn to, to many different things.

[00:28:44] Nawaz Ahmed: Fair. Well, thank you so much for joining, Travis. This was an amazing conversation and I’m looking forward for, for people to hear it.

[00:28:50] Travis Scher: Yeah, thanks, Nawaz.

It was, it was a little different than the typical. You know, crypto podcast I’ve done or investor podcast. I really enjoyed it. Thank you for your questions and yeah, it’s been great getting to know you.

[00:29:01] Nawaz Ahmed: Fantastic.

Thanks for reading The Inquisitive VC! This post is public so feel free to share it.

Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article and podcast constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host and guests may personally own tokens or be an investor in projects that are mentioned on the podcast.

In this episode of Inquisitive VC, host Nawaz Ahmed interviews Lucas He, founder of Tomorrow Ventures, to dive into crypto investing and venture capital. Lucas shares his journey from buying Bitcoin in 2013 to building a crypto fund focused on real-world adoption. With experience at State Street and OP Crypto, he discusses bridging crypto to industries like healthcare and AI, navigating fundraising challenges, and crafting a portfolio for institutional adoption. Lucas’s insights on real-world crypto use cases and portfolio exits offer actionable strategies for investors and founders aiming to drive crypto adoption beyond speculation.

Key Moments

* [00:02:10] Lucas’s crypto roots: From Bitcoin to blockchain investing at MIT.

* [00:04:31] Why leave OP Crypto? Building a crypto fund for real-world crypto.

* [00:07:33] Tomorrow Ventures’ name: A vision for crypto adoption and innovation.

* [00:09:45] Fundraising challenges: Emotional rollercoaster of market uncertainty.

* [00:17:12] LP rejections: Traditional investors question crypto’s value.

* [00:21:23] Portfolio construction: Pre-seed focus for non-consensus investing.

* [00:36:04] Secret obsession: Tech gadgets fueling crypto investing curiosity.

Guest Bio

Lucas He, founder of Tomorrow Ventures, is a crypto investing expert with over a decade in venture capital. Formerly at State Street and OP Crypto, he drives crypto adoption through real-world crypto projects in AI and healthcare, emphasizing institutional-grade blockchain investing.

Keywords

Crypto investing, Venture capital, Crypto fund, Crypto adoption, Real-world crypto, Fundraising challenges, Blockchain investing, Portfolio construction, Non-consensus investing, Crypto’s value

Resources

* Tomorrow Ventures: Explore Lucas’s crypto fund for crypto adoption.

* State Street: Learn about Lucas’s institutional blockchain investing roots.

* Inception (fka OP Crypto): Discover Lucas’s prior crypto investing platform.

Season 1 is Sponsored by Carta:

Carta is the leading provider of world-class software purpose-built for everyone in private capital. We connect founders, investors, and limited partners through software purpose-built for private capital. Trusted by 65,000+ companies in 160+ countries, Carta’s platform of software and services lays the groundwork so you can build, invest, and scale with confidence. Our Fund Administration platform supports 9,000+ funds and SPVs, representing nearly $185B in assets under management, with tools designed to enhance the strategic impact of fund CFOs. Recognized by Fortune, Forbes, Fast Company, Inc. and Great Places to Work, Carta is shaping the future of private market infrastructure. Find out more about Carta at carta.com/sg/en/.

Transcript

[00:00:00] Lucas He: I bought my first Bitcoin back in 2013. Very fascinated about the 12 page white paper. I describe a very interesting, robust infrastructure. I would emphasize here is explain, well, do you think about the portfolio exits? It requires a lot of institutional background knowledge, treating expertise that some of the venture investors are not necessarily naturally trained for that.

Was there any rejection that particularly stood out for you? There are way too many rejections I talk with. Traditional investors, they basically told me, Hey, I like you, but I still don’t understand what’s the value of crypto or blockchain? How do we bridge crypto to the real world, solve some real problems that we’ve seen?

[00:00:51] Nawaz Ahmed: Welcome to another episode of The Inquisitive vc. Today I’m excited to have with us Lucas Hay, founder and General Partner of Tomorrow Ventures, a specialist crypto fund focused on driving real world crypto adoption. Lucas’s journey is particularly compelling from discovering Bitcoin in 2013 to building a comprehensive understanding of both traditional finance and crypto through roles at State Street and Op Crypto.

After years of witnessing the space evolve from speculation to institutional adoption, Lucas founded Tomorrow Ventures with the mission to bridge crypto to the real world and invest in projects that solve genuine problems beyond just token appreciation. In this episode, we’ll dive into Lucas’s perspective on the institutional breakthrough moment in crypto, his approach to building a focus investment thesis around real adoption.

And the philosophy behind tomorrow’s vision of turning today’s what ifs into tomorrow’s what ifs. I hope you enjoyed the episode. Welcome Lucas. Thanks for jumping on. Really appreciate your time. Thank you, NOAs. Thanks for inviting me. I’ve been looking forward to it. Fantastic. I would love to start with, going over a little bit of your background.

So if you could talk through, your entry into venture capital and crypto, that would be great.

[00:02:10] Lucas He: Sure. Very briefly, I have a technical background and gained into crypto. Back in 2013 when I bought my first Bitcoin there, started to dive deeper into white paper. very fascinated about, you know, the 12 page, each paper where I describe a very interesting, robust infrastructure.

start to dive deeper into it while at the same time was working in financial service. Naturally see how the two works can potentially merge together. So I’ve been working on the financial service for six years. In 2016, I moved from Singapore to Boston, pursue my M-B-D-M-B-A degree, MIT, where I get to know a lot more about crypto, not just within financial service, but within other industries.

Healthcare supply chain. A lot of the real world adoption. I think that’s super interesting. Get into the crypto venture space in 2018, when I joined the venture arm of Hobby, one of the largest changes back in the days were any early investors into circle. some of the fun, fun investment to one key x mono coin.

And later on I came back, and work at one of the largest, institutions here in Boston called State Street. I was advising their management team in terms of digital asset strategists from a venture from MIA, but also from an internal building perspective, which gave me a lot of strong foundation, network, and connections in institutional space.

2021, I was invited by my previous colleague and manager, at to, to go find as a head of investments of this new crypto fund called. and, yeah, it has been great three and a half years now I’m in process of transition out from mobile crypto and starting my own fund called TMA Ventures. it’s been fun, but exciting and at the same time, you know, a lot of interesting challenges along the way.

[00:04:05] Nawaz Ahmed: Yeah, no, fantastic. thank you for the background. you know, so you’re mentioning, you mentioned you’re about to, you know, transition out and start a new fund. Can you walk through some of your thinking on, you know, why that I, you know, you are a early founder, early employee at Op Crypto, so why leave to start a new fund?

[00:04:31] Lucas He: Right. I think building a new fund or your own firm is something that most of the investors in the space naturally expired to at some point. So for me, it wasn’t one big aha moment. it’s really a. Gradual realization shaped by all this years experience and personal growth in the industry. So I’ve been in the space since 20 thirteens.

Mission started as a retail investor, then, came to MIT to dive deeper into the technical fields. Forecast three streets to understand institutional assets services better, and build a very strong foundation on venture investments at, cryptos. So over time, you know, I think I’ve gathered all the necessary skills, but also the idea of starting something my own feels very natural and timely at this point.

and that idea is supported by my previous fund as well. So I see some fundamental shift in the space where we have, we witness the starting point of institutional adoption. The space has entered a new phase of growth beyond just. Speculation and with real enterprise and institutional use cases coming to really start to take place.

I think I remember the day when the Bitcoin ETF got approved and that’s the day I, roll over all my retirement money in the retirement accounts into the Bitcoin ETFs. That’s how much conviction I have in this space. But at the same time, that is a inflection point to me, you know, signifying how strongly.

Interested this space has been, to a lot of the new players. you know, I know having this new mindset, investing the next generation of what I call the real adoption crypto projects, be it in within financial service or within crypto ai or within some other industries where we say makes sense.

Healthcare supply chain, even D side, you know, where people talk about how we can help our science project within this new paradigm. So I know with this new focus, this new, investment thesis towards the real adoption, I need a new platform. It allows me to really fully dive into this long-term projects that focus on adoption that has.

Different mindsets, but also set up the supporting network to cater for these experts that can help out. So I would say it has been a fantastic journey starting this new fund. I think there has been great investment appetite towards this new thesis of how do we bridge crypto to the real world? How do we, not just think crypto token is the only product, but rather have this solve some real problems that we’ve seen.

[00:07:23] Nawaz Ahmed: Yeah, understood. I think that makes a lot of sense. what’s behind the name of the fund?

[00:07:33] Lucas He: Well, it’s actually very simple name. TMR stands for, tomorrow, which we have take a couple of approaches of arriving his name. First of all, I started to think from top down, what kind of the brand I want to build, what kind of image I wanna present to the investors.

So it really comes down to a few points where I want to be forward looking. I wanna be innovative. At the same time, I want to give a sense of future. you know, I think around a few names and, you know, tomorrow obviously one of the names that is in that list of. Of a couple. And also I started to think from bottom up approach, brainstorming names that feels very catchy, memorable, and most importantly, we need to make sure that the name doesn’t conflict with other companies in the space, where even within the traditional investment space, ‘cause that’s the area crypto start to get into.

and very technically speaking, we need to make sure there’s a good do domain name that we can afford and a good Twitter handle. Everything’s ready. So that really, that Venn diagram really comes down to, tomorrow we shall feel pretty strongly aligned with and just look up online. Tmr VC is readily available for $20 per year.

I quickly grab it, together with a few other domains that start with TMR, but, it’s, yeah, it’s really about how I wanna build this new brand. I want it to be. Young, futuristic, but also be very grounded. so that, you know, really ties back to my events thesis being very, real world driven.

[00:09:19] Nawaz Ahmed: Yeah. No, great. I think it, it really does align with what you mentioned around your thinking of the fund. I would love to understand, you know, you have started fundraising for, the first fund. could you talk through, I guess, what was the most surprising thing, when it came to fundraising for you?

[00:09:45] Lucas He: Sure. So I think everyone has different experiences. I’m speaking to my own experience in this timeframe. I wasn’t really surprised by anything like majorly, as people have been telling me, you know, this is a challenging markets there, there’s a lot of uncertainty, things like that. But it really hits me differently when I’m start to experience it.

Like in real life. it’s very different than reading about it, you know, hearing about it. ‘cause a lot of times we see, hey, you know, the taglines are big fundraisers. Seems like it’s easy to do, especially with a track record. You know, I have a track record investment preceded deals and we have good returns.

But the reality is there, there’s a lot of uncertainty and emotional stress involved being a, first time manager and people will view you with a different lens. There’ll be more, critical about things that, you know, you like your track record. Why we invest in you investing versus investing in the bigger managers who has stronger track record.

you know, one thing I think I really are getting used to is the emotional rollercoaster. Some days it’s moving along very well. A lot of momentum and some other days is just, you know, you start a self-doubt whether it’s works and you hear a lot of rejections and. Many things are out of your control.

You know, looking at the macros, looking at the cycles, looking at how the LPs are rethinking their investment strategies after the past cycle. So I think that’s the part that I wouldn’t say I’m totally surprised by. But there is definitely a lot more to what I was prepared. And fortunately I think I have strong kind of personality and resilience to this situation.

if anything. In the past 10 years, plus the space taught me is, you know, you need to really be prepared for anything to happen. You know, we go through the whole cycles of cracking down crypto from multiple times. FTX goes down, Terra Luna, and people’s confidence in this industry comes and go, but for me, I have that long-term conviction.

So it is hard. At the same time, I feel like the lack of. Over supply of capital is actually helping us to get into a better period of venture investments. we’re looking at one of the surveys from PitchBook. It mentioned about the fundraising amounts from crypto VCs this year versus in 20 21, 29, 2.

It’s actually 95% down. at first it looks like, you know, it is a very bad market, but at the same time, I look at the bright side. Less capital and more discipline investors really allows the market to reset. Okay. and start to support stronger fund and more reasonable valuations. I think that’s a blessing for long-term investors, like what I’m aiming at, and I believe this vintage actually might be one of the strongest, you know, in recent years.

yep. I’m still trying to deal with a lot of market ing and stress, but you know, I think we’re in a good position to really march along.

[00:13:02] Nawaz Ahmed: Yeah, I think you’re right, like the uncertainty and it’s pretty hard, especially when there’s a lot of things that, you know, as a fund manager you can’t control.

what would you say was the. I guess your process when you started to think about the fund, how did you think about, you know, the fundraising process for yourself? Did you know, I’m not sure, were you fundraising previously for op crypto? but you know, how did you kind of go about, you know, okay, I wanna do this fund now, and what were the steps for you to kind of go down as you started to line up meetings?

[00:13:40] Lucas He: Sure. So there. A couple of angles at OB Crypto where I was a mainly the investment partner, manage the whole team, set up the processes, and relatively less involved in that whole, fundraising and pitching process. Although I did bring some investors on board. I would say that’s one of the biggest learnings I’ve been having and starting my own fund.

It’s different than just running an investment team and doing a portfolio support and do accounting and auditing. And so the way I started is obviously talking with people that knows me, in the past cycles from the old days, you know, the founders that investing to the venture managers that I shared deal flows with, who see me as, a very active player in the space.

And really some of the friends and family who have seen me through all this journey, they started to get more interest into crypto. you know, I talk with people from my previous company at State Street from my, you know, some other friends working at Tri Fi companies that are looking at a space as more legit and they wanna see how crypto and their industries can crossover.

So those are the people I naturally get started. I would say this is forming my initial. Strategic checks and people really believe in me regardless of, you know, what’s going on with the market, what is my investment thesis? ‘cause they trust me. And I think the next sector is what I call, a lot of crypto native institutional investors.

I was inside of, you know, investing from crypto on the venture side. I was also managing. The fund book where we invest into emerging managers alongside some of the largest fund funds in the space. But throughout that process, I got to know most of the as asset allocators here in the States and in the western world in general, likes of the DCG.

Some of those are the previous factors of the crypto fund. So bring a lot of that institutional connections from day one and start to have conversation with them on my unique basis. I think that has helped. A lot in terms of getting some of the initial conversations. And I think going down the route there is, crypto foundations I think are still actively looking at emerging managers to invest into.

But more importantly, the way I deal with it, whenever I talk with investor or potential lp, I’ll get their opinions and their takes on, you know, who are actually deploying, who. Do they recommend I’m speaking with at the same time, you know, you know, I’ve been traveling on the road for the past couple of months.

Really, establish some new connections that are more important. Just reconnect with people who are still active in the space. So I would say it’s there. There’s not a. Single answer to this. There’s not a standard playbook. There are people looking for, external advisors helping them with fundraise.

There are industry conferences you can go. There is data platforms that you can get access to family office data. But you know, this is my approach is go with the people I’m most closely with. Start to hear their feedback, their warm introductions, and start to branch off from there.

[00:16:59] Nawaz Ahmed: Great. No, I think that’s a great process in terms of how you go about it.

You know, as you started to talk to LPs, was there any rejection that particularly stood out for you? Oh, man. There are way

[00:17:12] Lucas He: too many rejections that I, couldn’t count with, with five, within five minutes. but I think there general themes of those rejections overall, I feel it’s not. Actually, personally, a lot of those are based on the market sentiments and how they view the timing.

The cycles are, so one example I can give to you is when I talk with traditional investors from, you know, family offices, they basically tell me, Hey, I like you, you know, but I still don’t understand what’s the value of crypto or blockchain. We have seen you guys working in the space for more than 10 years, but still, you know, there, there aren’t a lot of impactful use cases.

I can really feel as outsider, right on the country. They are investing to AI and they can understand and they can. Perceive AI as very powerful within different industries. They’re using ai. Even my mom used try GBT from time to time just to, you know, search for different stuff. So I felt like that kind of mainstream adoption, similar to AI hasn’t yet come for crypto.

It really reminded me how, niche and how, Misunderstood space still is from the outside perspective. So we take a lot of things for granted, like, you know, the things that we are excited about, but for the outsiders, what they see is a lot of headlines that doesn’t necessarily give them the best impression of the industry.

You know, the hacks, you know, the meme, token pumps and duns and, you know, a lot of other things. There’s a lot of real work that needs to be done to bridge that gap. you know, that, that makes me also, on the other hand, looking at the bright side, very excited because I know this type of people, are the next groups of people that can be onboarded, you know?

So once the real use case is out, once they are, you know, seeing the impact, I think they, they can, contribute a lot more to the space. The other example I would say, I. It is the crypto natives, you know, people who are already starting to play and they are mostly into Bitcoin, right? Like people telling me, Hey, Bitcoin has done five x loss cycle, but I don’t see any kind of returns profile from the crypto VCs, which is fair, you know, it’s a sign.

Of the industry getting more mature in the early days of any crypto VCs can, you know, 10 20 x within two, three years without much of a token lockout, that days are basically gone. Right. But at the same time, I do think crypto VCs are not going anywhere, and the VC is a asset class. They offer a unique risk and reward perspective that should be complimentary to the liquid exposure.

You know, it’s overall. Portfolio construction concept that I think many of the people still haven’t grasped. You know, they have these memories about whichever assets has grow the biggest and therefore the over index on that asset class versus think of this overall portfolio construction of venture liquids, and some alternative asset classes.

So again, that highlights the need for better. Education for the industry. You know, those rejections aren’t unpersonal, you know, they just give me another prompt to say, Hey, you know, there, there’s a lot of gaps in that understanding and that’s something I’m actually doing traveling on the road, talking with people that outside of this circle and trying to, you know, help them understand the concept of this all portfolio construction diversification.

Just all cycles work right from the bear to the bull. but yeah, those, I think those are the rejections that actually helped me to find my pitch and to really find out what’s the gap there.

[00:21:12] Nawaz Ahmed: Yeah. Gotcha. as you’re talking about portfolio construction, I would love to hear how you thought about it for the new fund.

So I

[00:21:23] Lucas He: always in the camp of. You wanna build a very side conviction and conservative portfolio. So in my case, targeting a 2020 $5 million fund. I think I’ll be investing at most 30 portfolio companies so that I can have enough of my energy and time span, which each of them, and ideally the number is lower than that.

I specialize in pre-seed investments, in the earliest stage, the first round or second rounds. I like to lead some of the earliest rounds when they are not at a consensus stage. You know, I think it’s important ‘cause early stage investments all about finding that non-consensus areas you are early, and you can find those teams still at good valuation.

You can have meaningful influence to them as well. Not investing in a very saturated market where, you know, you’re just a very small part of the whole value network. And, you know, especially for VC and smaller investors, that kind of, niche and focus is very important. So I would say out of the previous funds, and the ones who drive a lot of the early investment into new thesis, like wealth to ai, were early investors since 2022.

We’re talking about Z key scaling. we have one’s first track into some of the biggest projects back in 2021 and deepening this area that’ve been following up for the past couple of years. Very early investors into one prominent deepening fund, as well as some of the real strong deepening projects nowadays.

you know, thinking about portfolio construction here, that’s the other mindset that I want to operate with. Very cons and forward looking and finding the narratives that is in the early earnings. Adoption is early, but not too early. At the same time, I will cover some small portion of the fund to invest in, more liquid formats, but still with the venture light returns, you know, talking about.

TC deals that invest into the public markets at a great discounts. You know, sometimes those teams are even treating below their past, you know, private runs. A lot of times if you get to know the team better, knows their future plans. I think there, there are strong fundamentals that is not making the price.

So it’s really about uncovering a lot of the mispricing from the secondary market, which follows the similar investment thesis and framework, the same rigorous, process that we apply to the primary rounds. But those are the deals that more realistic speaking can generate better liquidity. and also I think there are some new trends coming out, like new forms of fundraising.

Likes of Echo. and a lot of fair launches start to really be more popular within the crypto startup space, but I think that’s an interesting trend. I’m still watching and observing and trying to find good place from the VCs perspective, and I think that ultimately gives a different liquidity profiles at the same time, and it’s better aligned with the team, with the communities from day one.

So those are the thoughts around the portfolio construction. and overall I feel, you know, it’s a balanced approach with long-term pre profiles, but also short-term liquidity. the existing formats of fundraising, but also some new forms that we have seen right now where if we haven’t even seen the future, you know, really maintain a very, open-minded towards that approach as well.

[00:25:07] Nawaz Ahmed: Yeah, makes sense. How do you think about reserves? I.

[00:25:14] Lucas He: Sorry, reserves in terms of, the, in terms of follow on

[00:25:18] Nawaz Ahmed: capital?

[00:25:21] Lucas He: Sure. So I’m definitely in favor of investing across cycles or across the rounds. To me particularly it’s the pre-seed rounds and C rounds. So typically what I want to work in here is, you know, identify some strong projects.

Ideally, I can lead the preceded rounds or write a meaningful check. And, you know, start, get hands on with them and. Watch their KPIs and really help them out with that next step of growth. And ideally, we can help structure the next round as well and introduce them to good investors alongside us. and typically we will, and I, it’s my plan to invest in that next round as well.

but it’s sometimes I can say the value of some other investors coming to lead that rounds, versus, you know, I lead all the rounds I would say, you know, there, there are good companies, like I say, more, 50% of them, we will write historic speaking a full on checks, and that’s still my strategy, in this new fund.

[00:26:25] Nawaz Ahmed: Understood. Understood. you know, you mentioned at your last fund you did a little bit of fund to fund stuff, and now you are also founding your, own fund. What would be like the most crucial piece of advice you could give a, new first time fund manager?

[00:26:45] Lucas He: It’s interesting question. I’m being on this different side of the table and now. Just really appreciate a lot of that fund of fund framework, what they’re looking at. I think one of the things I would emphasize here is explain, well, how do you think about the portfolio exits? You know, that’s one of the questions I don’t feel a lot of people are putting to their first priority.

and I think a lot of VCs I’ve seen has make good investments, but not necessarily have a strong. Portfolio management or exit plans. Talking about how institutional this space should be in terms of there are scenario planning involved, there’s risk management framework, there’s you know, stimulation in terms of how the market will go, what price points or sell If this happens, what do you do?

This doesn’t happen, what do you do? So there’s like a whole framework of portfolio access. I think it’s requires a lot of institutional background knowledge, treating expertise that, you know, some of the venture investors are not necessarily naturally trained for that, but I think this is super important, especially given the new matter where, you know, the portfolio getting longer and longer.

Lexuses LPs are demand liquidity. For the fund of funds, obviously they’re long-term investors, but still their LPs are demanding. We’re asking about the equity profile. So I felt this question needs to be well prepared, and really start to think your edge of managing this portfolio companies, what kind of connections do you have there?

You know, what kind of unique value add you can provide. Sometimes increase their value. You’re not just a passive investor. More so the portfolio companies, the invest, the investment you’ve done, they’ll look at you as someone who guide them through the whole process. So that mindset, that rigorous portfolio management and platform approach is also very important to me is capital at the end of day is not the most critical thing for prese stage deals.

It’s the guidance, it’s resources, and it’s a lot of the other support that really matters. And that’s what I’m trying to build in here as well. A very robust framework for platform resources, portfolio management as per network, and make it very scalable as well. So that’s one of the things I would, highlight to any of the first time managers, to think about additional investment.

What are other things that, you know, the investors and, the teams really care about?

[00:29:25] Nawaz Ahmed: Yeah, no, great point. Thanks. is there an example of a company that you feel is a great representation of your thesis for the fund?

[00:29:40] Lucas He: Absolutely. I think of a couple in the category. So one of the companies that I. Lead and invest into, an op crypto. The previous fund is called Naix, network, which is a, pretty interesting company. They are crowdsourcing and decentralizing the collection of autonomous driving data. You think about you can download the app on your phone, you monitor your dash cam and drive around and collect those street mapping data in video format.

And then on the other hand, there are the companies like. the autonomous driving company, they constantly look for different training samples in different regions at different cities, and I think there is a good market for this, especially with the growth of ai. There has been so many different companies come up with different vertical AI products.

I would say the biggest, challenge they have, it’s not a GPS, it’s not a models, it’s the data. You know, how they can efficiently source the data and that becomes their edge. So in this way, I think crypto or blockchain is a foundation layer or payments. For orchestration of, you know, wider public and also be the undo layer for tracking, right?

What contributions everyone’s making is really working well within this new AI and data economy. So this company, their approach definitely is not new, but they’re finding a good niche within that autonomous driving space. and I’m also seeing some other companies looking at different data segments.

But, you know, I think that represent one kind of projects that I. I feel really excited about because it has a very strong business demand from the web two clients, and we see the potential of revenue generation from day one, and we see that potential bring this technology to more people outside of this industry.

And ultimately, you know, if they have a token, which they do, you know, token itself is tied back to a lot of economic value that they can generate from those real business models versus the previous mindset and the practice where token itself is product, which in some project makes sense.

It’s very community driven by retail folks product. But in this case, I think tokens. Some somehow needs to be backed by those real revenues and you know, these real business models. you know, those are the companies I’m excited about and that is not limited within this segment. There’s other industries be healthcare, telecommunication.

There’s obviously the host Stable Coin Payments, RW Space, which has similar operating mindset and instead of the investment criteria here,

[00:32:30] Nawaz Ahmed: great example. One thing that’s different to a few of the other people I’ve had on the podcast for this season is that you’re a solo gp. could you talk about your thinking around, you know, why you decided to, go down that track, of being a solo GP and how different it is, you know, compared to your last role where you had, you know, you were part of a partnership?

[00:32:59] Lucas He: Absolutely. It’s very different, you know, being a solo GP versus being part of a bigger platform. You know, no one has really tells me how, you know, intense. It is, you know, starting this journey. Every decision, every setbacks, every winning, every no, every yes is with you. You know, personally, you could hire a team, you could, you know, have people working for you, but that doesn’t replace the core decision making.

Responsibility that, you know, rests on you as a gp. So at the same time without a platform behind you, it’s really about your value that you can ly bring to people because you don’t have that natural credibility and brand name with you. you have to deal a lot of that from, ground zero. What I’ve been talking with people is really sharing a lot of my thought leadership and my views to help them understand how I work as a person.

It really comes down to if people trust you as a person, like in some way, I. You are the product, right? Like people don’t necessarily invest in a investment fund, especially for solo gp, for a first time manager. They invest in this person who they believe can manage the money well, who they believe can pivot and adapt to new market challenges and paradigms.

And at the end of the day, that’s really about, you know, building your brand as a unique product. And your fund just goes along with you, you know, it’s, it won’t be the same thing, right? As if like you have a very big machine and it’s, the good thing is you’re dealing with the founders who understand you are a decision maker, you make things happen much faster and there’s not a very long process committee and a lot of that process.

So in terms of that level of engagement is actually helping me a lot to, to gain people’s trust and to work in a much more hands-on way. but yeah, it’s, never easy journey. At the same time, I do feel over the past more than 10 years, I get enough in terms of the skill sets, in terms of the network, it’s, only about whether you have the courage you have, you’re seeing the right moment to start things.

I feel all the things start to line up for me in terms of the external environment, in terms of, you know, how ready I am. Yeah, I’m definitely growing this into a bigger brand and a bigger shop. So hopefully I’m not gonna be doing this along, you know, for much longer. and I’ve been talking with good people that can potentially on board while things get into a good momentum.

[00:35:49] Nawaz Ahmed: Gotcha. great points. final question. What’s a secret obsession of yours that nobody knows about?

[00:35:58] Lucas He: A secret. What

[00:35:59] Nawaz Ahmed: a secret. Obsession.

[00:36:01] Lucas He: Obsession.

[00:36:03] Nawaz Ahmed: Wow.

[00:36:04] Lucas He: Okay. So I wouldn’t say there, there’s a lot of obsession. and, but I think I’m generally very geek in terms of technical gadgets. You know, I am the first generation holder of.

The iPads, the, you know, the iPod and a lot of, you know, the Apple vision, a lot of the breakthrough technology products. I still remember, you know, the first time I got hold of the iPads, first generation is very bulky. I spent actually $50 on the screen protect itself, just how excited I was. and I think where people criticize a lot of early stage technology, I see different things.

I see. I. Their future, their, and personally, I have much higher tolerance for imperfection. You know, all these first generations are not perfect. It’s, somewhat similar to how I discover. Crypto or blockchain. At the time it was very slow. I tried to sync the whole database. it takes me hours, but now I think it takes days.

But still, you know, I enjoy and obsess with, just identify some of the new gadgets that can play around what is within crypto instead of crypto in, in tech. Even non-tech space, like to start new things and trying out, I build different stuff. I have a 3D printer at home that I print 7 24 and different gadgets.

So I would say that kind of curiosity, it’s actually helping out in this industry as a early stage venture manager. but yeah, you know, I’m enjoying it. and it’s always a good topic to share with people how many different digital. Gadgets I have, and what kind of the new releases that we’re looking forward to as well.

[00:37:53] Nawaz Ahmed: Yeah, that’s super cool. I would definitely think of myself as an early adopter as well for some of these gadgets. Nice. I find them quite interesting as well.

[00:38:02] Lucas He: Nice. Nice.

[00:38:04] Nawaz Ahmed: Cool. Yeah. Well, again, I think that was, a great conversation, Lucas. I once again, appreciate your time. thank you for coming on and, sharing some of your thoughts.

[00:38:15] Lucas He: Thank you. Thanks again for inviting me and for enjoying the conversations. Thanks for all the thoughtful questions here.

Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article and podcast constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host and guests may personally own tokens or be an investor in projects that are mentioned on the podcast.

We speak about his journey to crypto, how Tribe invests, crypto cycles and narratives, airdrops and more! I hope you enjoy this episode.

Nawaz Ahmed: Thanks for joining me, Boris. I'm looking forward to this interview. Yes. Thank you. Appreciate you having me. Of course. So I'd like to start with understanding your journey, the start of your career from, you know, when you started to get into crypto, to your current role as the managing director at Tribe.

Boris Revsin: Yeah, of course. Let's see. So I was five years old when my family moved from Russia. Both my parents were engineers so I started coding super early. I was never that good at it. But my dad kept hammering away so I went to school in Amherst, Massachusetts, for computer science. But quickly realized that I was getting lapped by the kids at school that had a pretty good curriculum. And so I had to figure out a way to, like, stay in the game.

What I figured out essentially was that people were building web applications at this time. This is like 2006-2007, and it was really greenfield You could build really simple things really quickly and you could get it out to the market, and there just wasn't a lot of competition. And so I started building tools, some that I can't really talk about on a podcast, but just like goofy college kid stuff until I ran into my first co-founder, Jared.

And what we built was essentially this thing called Campus Live, which was a home page for college students. Very outdated these days. But the idea is basically you pull in like all food delivery, all classes, the Facebook API for those that remember, you could like basically poke someone through a third party app that was funny, but pretty much in two weeks all the kids made it their homepage. We ended up expanding to like 100 different schools, went pretty viral. And I remember someone offered Jared and I like a million bucks just to buy it, and I said, No way, we're going to raise venture capital. This is like the day like everyone's looking up to Facebook in the crazy story. So we ended up raising money.

And by the end, this is an eight-year journey. By the end, we would have probably made more money after giving up, I think more than 50% of the company to VCs by just selling the thing for a million or two. So very funny. Kind of full circle of eight years could have been working at like Microsoft and probably done better, but it was a good learning experience. It was like my real college. And so after that, we sold the company and had a little bit of an earnout, I started another company again with Jared and a bunch of other folks’ company now called HQO. It was called Venture Up. I was the founding president and between 2015 and 17 I ran sales marketing, go-to market for this company, which was in the prop-tech space towards kind of like early 2017.

I had started accumulating crypto personally. This was before that big gold rush that happened where everything went to like those local all-time highs went on all the forums and so forth and just got really into it and started paying more and more attention to what was happening in that space. And I've always had an interest in game theory and computer science and business. Cryptos, those three things put together.

So in the middle of 2017, I went to the co-founders. I was like, This is not going to work. I love doing this. And I'm just in your way doing this other thing. By the way, that company with me doing nothing more after I left in 2017 has gone on to be really successful multiple, multiple, hundreds of millions in market cap like they've done really well. And that's in spite of me being there, not because of me being there,

But I actually went and started working in crypto with a friend named Julian, who was also a founder in Boston, and we started this thing called Game Theory Group, and this was like the day of ICOs. Sure, a lot of people listening to this can remember this. And we, you know, we had some money, but nothing crazy. And so we do some of these initial coin offerings, honestly, as a way to figure out what the hell is wrong with them because I knew day one like this cannot be the way that these protocols launched because almost all of them were unfair launches. Almost all of them were pre-mined.

Obviously, all of them were essentially on Ethereum, but it was an interesting learning experience. And so at the same time, we started a blog called Game Theory Group, where we'd send our friends our thoughts on crypto, and we usually did it tongue in cheek and that became moderately popular. Maybe a few thousand people read it. I've since taken it offline because some takes were spot on, some I'm just like, Can't believe I wrote that.

But the point is we went really deep down the rabbit hole and then together in late 2018, we joined basically we're acqui-hired by this group called Republic, which many folks listeners probably heard about. And Republic at the time had a big crowdfund presence and had spun out of Angelist and they wanted to launch a venture group, which is what we did for them. We essentially launched the RIA, which could take in qualified clients, put them into SPVs or funds, and then at the same time my friend Andrew Durgee and some of his sort of co-founders launched Republic Crypto, which is pretty well known today as sort of a consulting group, economics group that helps stand up protocols. So that was sort of my first major formal foray into crypto.

And at Republic Capital, which is what it ended up being called, we ended up deploying hundreds of millions across protocols, north of 100 crypto investments alongside non-crypto investments, grew the team from the two of us to 23, and I was there until mid 2022. So that was kind of the origin story.

Nawaz: Yeah, very interesting. It was great to hear the founder background and then kind of reconnecting with your studies and coming back into crypto right on the CS side. I've heard of Republic, I'm sure others have as well. More recently, I think over the past few years, you joined Tribe. So tell me about that move and I guess a little bit more about what Tribe does. I understand they're a generalist tech fund, but they're doing a lot more in crypto? I would also like to understand the crypto thesis that Tribe has.

Boris: Yeah, sure. So, you know, doing the work at Republic was definitely a crash course in all different parts of the crypto ecosystem all the way through from like centralized entities and exchanges all the way through to like the most degen protocols you can imagine. The smallest check we wrote was $50K The biggest I think we wrote was $40 million. So we went across the gamut

When I was sort of wrapping up my time at Republic Capital, I was thinking about the venture industry more broadly, like, What did I want to do next? And one of the challenges that I saw in Venture was that most funds were still doing the things they were doing ten or 20 years ago, which is like worse. You'll hear pattern matching, gut feel like a lot of it was the art and the science was just kind of catching up. And there were plenty of fantastic people. I mean, there are any number of VCs that are repeatedly really, really good, and I think a lot of them have an intuition for founders, and so they're good at Seed, maybe even getting into Series A, But once these companies start getting a lot of data, like a lot of revenue and call it like in the millions of revenue, many millions or a ton of users, it starts to become more challenging how you break apart their data.

And when I did the landscape of what venture firms were out there, one of the ones that I had already been very familiar with because we were LPs from Republic is Tribe and Tribe really is what we call a quantitative investment firm. We take data very seriously. It's the core of almost everything that we do, macro and micro.

The team is comprised of engineering and data science to a large extent, and it's really seen as the North Star for how we make investment decisions, but not the only way. And I really feel that the entire world is sort of pivoting Open AI and all the other AI LLMs have sort of opened the door to people, regular people sort of understanding.

How important this collection of data is to then make decisions. That's how the AIs make decisions, right? Unique datasets. They synthesize them and then through various methodologies can actually kind of figure out what to say next in a way, that's kind of what Tribe has been doing for a long time without necessarily the big large language models that we are starting to incorporate.

And so I did feel like data and insights from that data is going to push the venture industry forward, and that's what I wanted to do. So I joined Tribe in 2022 initially to team up with the crypto group and help lead that. Our crypto funds about $100 million. We now have a second fund, but the first fund that I joined is just under $100m. We were somewhat deployed so we had an awesome portfolio and my job really was to synthesize what we already had and build on it and create the thesis for, you know, last year, this year, and so forth. So that's what happened at Tribe.

The core of our thinking at Tribe Crypto is this, we want to be early in the process of these decentralized protocols. So we focus almost exclusively on the crypto side, on decentralized or called decentralizing protocols because they rarely start decentralized for any number of reasons we can talk about. And the idea is we want to be early, so call it seed and then we want to continue to participate into the series A's or the private rounds and beyond.

And the way that we do that is by synthesizing the data. We eat a ton of on-chain data using Flipside Crypto, Quick Node, a bunch of other platforms. We built our own framework and we synthesize that data and we create this 50-page report.

But basically the idea is we eat up all this data. We're already investors, and this is what informs us whether or not we should buy, sell, hold, support, introduce whatever. And that data component is really important. Not always that the investing side because some of these protocols will be beat before testnet, but very much through testnet, mainnet, full launch and the data in terms of usage and revenue and fees that happen after the fact.

And so our focus is on those protocols and we really are focusing on the protocols that can generate meaningful fees. Right now we believe a lot of that sits in the infrastructure middle layer and on the consumer front, call it like front ends. We have made those investments, but we really do feel like in order for us to get comfortable, we need to get comfortable with the regulatory aspect of a front end that plugs into a global user base. And I think some of those questions are still unanswered.

Nawaz: Very interesting. You're focusing on projects that are going down the path of decentralization. How do you think about investing in equity versus tokens then?

Boris: Yeah, I'll answer a question you didn't ask first and then I'm going to get to that one here. So maybe with Bitcoin or Ethereum or a very small number of what we'll call fair ish kind of fair launches, there were some that I think you could claim were attempt to be a decentralized protocol right away was because crypto was just not that popular and there weren't as many people trying to sybil, game theory or just straight up hack your network.

And so it could go through this period of like, Hey, we're sort of decentralized, sort of not, but like we want to be decentralized right away. Let the community run it. Like the community. Crypto has a mercenary angle, too. And so without the proper things in place, it's really hard to just do it in theory and like release.

That's my take. And so what we typically advise founders is, yes, you want to get to what we would call properly decentralized, which is different for every type of sector, right? Different from an L0, a base chain, a layer two or a game. Right. Like very different needs for decentralization and trust.

So it's going to take much more time these days. You have to be much more resistant to the outside forces. That's one. In terms of investing in equity, in tokens. My belief and we wrote a research paper on this, is that most of the value in things that need to eventually be decentralized will be in the token as the unit of account like it is ultimately what people will be able to own, what people will want to own. And if the protocol is properly designed in some measure, whether through validators or nodes or maybe in some regions direct distributions to tokens, that's where the value will accrue. Now, the problem is we're nowhere near there yet, right? Like even decentralized protocols have a centralized treasury. Right. where often many of the fees will accrue, especially true for exchanges and perps protocols that are ostensibly on chain, but only give up some of their fees through, you know, like GLP or whatever.

You're talking about some of the perps platform. So we're not there yet. But I think that the ultimate goal ought to be that the holders of the token can, if they choose, benefit from inflation or fees. And that's where the industry is clearly going with what you're seeing with Ethereum and everything else. So that's my take of where the value is, where we actually write checks. Yeah, most of them have an equity component that over time means less and less.

Nawaz: Okay. Definitely makes sense and interested to hear your opinion on the value of airdrops?

Boris: So look, it depends on what you're going for. Airdrops are a very easy way to grow your social media account, grow your discord, get people to get or want the token. There are pretty bad way for people to hold it. Retention rates are extremely bad with some very rare exceptions. And part of it is because a lot of projects don't think about the post airdrop marketing nearly as much as they should.

You know, this time is different type of thing. And then the other part of it is like, look, it's a bunch of people that want to make some money. I mean, you can't imagine 60,000 people in a period of two weeks all of a sudden care about you so much. So from a marketing perspective, like a shock marketing thing, I think it's fantastic from retention and usage, I think it's very much up in the air.

There are some solutions. So one of the companies that I'm a board member on an observer on is Flipside Crypto, an investment we made up both Republic and Tribe, and what they offer is this opportunity to earn tokens through an airdrop like situation, but you earn the tokens through doing these things they call challenges, which means if you're an engineer you do some engineering solutions, data science, like you learn about it, you get interested in it, you understand why it's important you create something.

And I think people want to create something and they feel more attached to it. And you can see just in the numbers that Flipside shows is if you do it that way, you get a lot more retention by I think it's an order of magnitude. That's where I think airdrops need to go. They need to become more creative, more long-term.

The hard part is that in a bull market, airdrops tend to really help the launch of a token, and so people will keep doing them. It's a distribution mechanism and it's to build your future distribution arm. You just really people really need to think about the post airdrop component, and I hope we have various different iterations of this, even this cycle, because I think if we don't, you're going to see pretty big sell offs in these new tokens pretty quickly.

Nawaz: Yeah. Now that that makes a lot of sense. I think Flipside is probably similar to a company that I was a small angel in called Layer3 where you essentially do a bunch of activities and you get rewarded token I think that that's a way better way of doing, you know, incentivized rewards, which I think is quite cool.

There's a lot of conversation and excitement around an upcoming bull market. You know, a lot of people asking me what is the potential narrative for this coming bull run and I'm interested to hear what your opinion on that is.

Boris: I was talking to a very smart investor friend of mine yesterday and what he said really echoed with me, which is we have to move away from narratives because narrative-driven bull runs go up big and down big and really have very little staying power.

And so I hope we move to products and fees and revenue. So if you can ask me for my narrative, it would be generate fees, generate revenue and make people want to pay them. That is the only narrative that will give Crypto's staying power. So I'm okay with the speculative premium's like, I get it. You don't know how big something can become.

Retail has access, retail wants to participate. All of that is fine. I'm not commenting on valuations. What I am commenting on is these protocols must find a way to deliver value to either token holders or a centralized entity, whatever it is that they've structured. And I can't think of a better value driver than someone being willing to pay for your product.

That's it. And so when I look at protocols more broadly, even the major base chains like Ethereum generate meaningful revenue, right? Solana does too, But it's inexpensive. It kind of is its own Achilles heel, right? But then all these other L2s and L1s, I think just getting cheaper and cheaper and faster and faster and leaving a ton of empty blocks, It's just like it's really diminishing returns.

We really have to go back to what do people need or what do we think they will need and will people pay for? And that to me has to be the narrative for the cycle. We're not there yet. It's not the narrative right now. Right now the narrative, I don't know. It shifts every few weeks. Modularity, right? And we believe in that. Like I get it. We're big investors in Eclipse, we're big investors of a bunch of other modular plays. And I think modularity is a way to drive revenue to multiple streams and accrue value. So it's super interesting to me, but these things are going to change over time.

Nawaz: Yeah, I think I think that's an interesting point. And going into where you're seeing value for your investment in Tribe investing over the next year. You mentioned modularity are there other areas that you're looking at when it comes to investing?

Boris: Yes, I'll make it really easy if a founder ends up listening to this and we tend to invest in places that can be or in protocols that can become the hub for other people to build on top of. And I think the reason that we do that is we recognize that a protocol that's fully on-chain, fully decentralized, qat the end of the day, it's only as valuable as people that leverage it to generate some sort of fee and or pay a fee back to it. And so to me, it's building one application front end. You've seen this time and time again. People use it for a while, they get excited, but then for whatever reason they move on to the next thing.

To keep people coming back, you need to build a feedback loop that says, I used your tool it had great documentation, good structure, very stable, and we're going to build on it, and then the next person will build on it and the next person will build on it and is going to continue to accrue value. And so it's very important for us for you to either have a developer marketing plan or for you to be intrinsically built for devs.

It's okay if you also have built your own star product. So like let's say you're building a L1 and you built your own exchange, that's fine. I mean, it makes sense. You're eating your own dogfood, but at the end of the day you have to be able to attract developers and there's only so many protocols that are going to be able to do that because they're all sort of fighting for the same group.

So the other part of it is if you can attract new developer teams, either you're abstracting away the crypto element or you're abstracting away something else that brings non-web3 or crypto devs into the ecosystem. That's really interesting to us.

The other component is at least now we're looking for people that understand two things the game that's being played now, which has a lot to do with your you're sort of like V3 crypto ecosystem, right? Devs, market makers, exchanges, whatever. They understand where value sits and how to get it in the now and then we are looking founders that can look around the corner and basically say like, is this really how it's going to be the whole time? This sort of pre-baked marketplace? I don't think so. The smartest founders don't think so, and they're trying to look around the corner to be like, what will be the pillars of the ecosystem in 25, 26, 27?

I'm telling you, it's not going to look like this for regulatory reasons, for liquidity reasons, for regional reasons. There's going to be like lots of change and people that can paint us a picture of what the world will look like in 18, 24, 36 months. That to me is most interesting. And you hear all kinds of different visions, which is why I'm doing this in the first place.

Nawaz: Yeah, okay. No, that's a that's a good point. And stepping a little bit back to, you know, Tribe more generally, Tribe does some interesting things, like incubation and launching products like Termina. Interested to hear what the thinking around that is for a venture fund.

Boris: In many ways, Tribe is a data company with a venture product, not a venture product with a data arm. So like, when we think about what we're good at, we're good at collecting data. We know how to do that both from private and public sources, the techniques, the people, the relationships, the automation, all of that. So like we can get a lot of data and we've built internal algorithms and frameworks and actual software to be able to analyze them quickly faster than anyone else. And I'm talking both onchain and off chain data.

So we're a product shop we can build stuff. We've incubated many things in the past. Termina For those who don't know, is our data product. It's the one that can eat in private data, synthesize it, benchmark it against every other company or protocol that we've ever looked at, and within a day or so create a 60 page report across any metric you can think about, just like LTV, CAC, cohort analysis, revenue saturation, everything, mapped against everything else.

The advantage that gives an investor is basically you can see how well this company is doing, not just in and of itself, but compared to its peers in various sectors and stages. And so we felt two things. One is we need data that not just Tribe is collecting, like we want data in aggregate form from other people in the ecosystem. And two, we felt that with the advent of some of these A.I. tools that made things a lot cheaper, a lot of other people would see what we're doing and basically want to catch up. They would want to build their own tools. And so by spinning out Termina as an incubation, we achieve two things. One is we're able to hire the best engineers that work for equity and not to work for carry or salary, but they want the dream and two we are able to plug in if our customers in Termina agree to data sources from them and they can get data sources from us.

And that combination of both data sharing, it's again, it's often and the ability to hire the best people is why we spun out Termina in the first place. So now we just last four months we've run more of these eight balls. These are the data analysis than we ever have before. They're way higher quality and we're hiring the best people. So it has achieved what we wanted it to achieve. And we recognize it's unique for a fund to take its special sauce and basically open it up to the world. We feel like it'll raise the bar for everyone, but mostly it will make us the centre of the private data investing universe.

Nawaz: Gotcha. That makes sense. And I think, am I right to say Nibiru was an incubation as well? How did that play out?

Boris: Yeah, so Nibiru actually was a real learning experience. I actually started working on Nibiru at the same time as I joined Tribe. It was my first major project here. And, you know, I think a few lessons. One is we absolutely know what we're doing when it comes to incubation. We know how to connect the key stakeholders. We can help raise money, we can obviously deploy capital. I think the key learning is the engineers that we brought around the table at the beginning were amazing and we should have probably let them run without us even faster.

And so we really taken a lot of this feedback in and we've decided like this is what we're good at. We can surround an incubation with all of the go-to market and strategic and data support that we can. But the most important thing for an incubation for us is the engineering and product base. We can not recreate that. We don't intend to recreate that. And the goal is that we partner up with those folks and we can be supportive while also letting them do their thing. Because at the core, you know, the best founders are the ones that are product and engineering-led and they partner up with either co-founders or incubations like ours to drive forward their go-to-market.

So I expect Nibiru to be a huge success, partially in spite of us, partially because of us, and it's been a huge learning experience. And now we have a number of other not yet announced protocols in our incubator.

Nawaz: Very interesting. And so you mentioned, at Republic you were initially an investor in Tribe and I know you have some experience on the LP side, what is general advice that you would give to a new venture manager who's considering raising a fund in this coming market?

Boris: Sure. So I've been raising money in some form or another since I was 20. I'm 37 now, and started raising LP Capital in like 2017. So I'm not, you know, a full-on veteran. But I can tell you the state of affairs in the last few years, up until roughly the first quarter 2022, raising capital was pretty easy because interest rates were low.

Venture returns on paper especially were fantastic. There were a lot of IPOs, crypto was in a bull market. People really felt like they were going to give you money and make money. No problem. Someone always investing at a higher price. The world has changed and it's going to stay changed for some time in spite of this crypto bull market.

I think investors both in crypto funds and venture funds broadly right now, are now really doing the comparison worth of risk, reward and time value. So when you put money into a crypto fund or a venture fund, you know, three, four, five, seven, ten, 12, 14 years later you might be getting distributions. Okay, so who wants to make those kind of investments?

Well, institutions have to, but they might be overweight. Many pensions and endowments are overweight. And the way they basically get overweight, right, is if the private values don't go down and that's up to the manager, the managers to mark these things down. Right. So while publics do all of, go down, all of a sudden what you're seeing is they feel like they're really underweight public.

So they're picking that side up and the private side, all of a sudden they're overweight. Now, the public, the majors have gone up and privates have started come down. So now you have a little bit more room. And I think they're open to managers. However, if you're an emerging manager, like going to an endowment, going to a pension is really hard.

I mean, it's doable, no question. A lot of them have an emerging manager program, but the relationship is long. It takes like six months, 12 months, 18 months, continuous updates, continuous meetings, really hitting what they're looking for, a nail on the head for you to get into that program and then start to figure out, are you one of the seven or eight VCs they're going to pick?

And of those maybe six are platforms, they're going to stick with no matter what, if they can get in like a Sequoia or whatever. So now you have like one or two slots, right? What are the other options? Family offices, spooked. Once that got into crypto, many got burnt. They're coming back. It's a little scary for them. And then the ultra-high net worth, who can make a decision on a dime, but they tend to write six-figure checks. So everywhere you look there's a challenge. One has to realize the challenge is different. How to deal with an ultra-high net worth or maybe a single-family office. That's still the Principals making the decisions are different from how you deal with a CIO-based person who you know is not always paid to take maximum risk.

A lot of them are paid just like maintain the legacy and then institutions who have to deploy but have all the options in the world because everyone wants to pitch them. So you have to come up with a different game plan for each type of group, and you have to be really transparent, you have to have an absolute edge, you have to have an edge.

Ours is data, but that doesn't have to be your edge, it can be anything. And then see, you have to think about what you can do. In addition to just deploying capital. Is it a co-invest program? Are you going to bring them to the things that are important to them? It's different for everyone. What can you do to provide access to something in addition to overtime returns?

That's for emerging managers, right? Like you really have to showcase yourself to be different. And I would also say don't get discouraged. It's very rare with institutional or family offices. Your first meeting, you walk out with a check in 2024. It's just not going to happen. But I also feel like what you can see and this has happened to Tribe like you start getting a lot of no's and nos and nos and nos and you stay with them.

You keep updating them and all of a sudden they see something in your win loss flips. And now you know all of them, you know, people you've built relationships, you go back and you start winning all the deals and that's really when things start to kick off for you. So yeah, and I, you know, I myself am a LP in a number of managers and I think you got to use your network hardcore, ask them for referrals, ask them for references. People tend to trust people they work with for a long time. So here's my advice.

Nawaz: Yep. Now thank you for that. That's some great advice. And coming to the to the end of my questions. To start with, I'm keen to understand a secret obsession of yours that not many people know about?

Boris: A secret obsession that not many people know about.

Okay, so I have two little girls and so I don't have a lot of time after work, which also goes on for a long time at 9:30 p.m., two sometimes three days a week. I jump on Call of Duty with usually three other guys and get absolutely roasted by 11 year olds. And I have been doing this since COVID started. I have not improved at all. And you can tell from my like kill death ratio in Call of Duty, and yet I still do it two or three days a week. And I thought initially it was about the game. But I think it's a way to like connect and hang out with your friends. And I just, my wife told me that and I was like, That can't be it. That's not why I'm doing it. I'm doing it for the game. And she's like, You might be worse now than you were when you started. So that's why I love doing it. And I stay up quite late for that and get less sleep. But it's worth it. I love it. Love it.

Nawaz: And finally, what's your most recent publicly announced investment and why did you make it?

Boris: So? We've had a bunch of announcements just in the last few days. I'll just pick one out of the hat. Blueprint is building this protocol called Concrete. And essentially what they do is liquidation protection. You pay a little bit into a pool of LPs that generate fees from that. And then if you're getting close to being liquidated or margin called them a few different plantations, this thing can save you.

But the reason that I like it at a very macro level was that in the last cycle, deleveraging can happen very quickly, right? The Terra component, the FTX component and I feel like for both retail and institutional, the trading stack needs to be hardened and you need to have tools at your disposal for sophisticated and unsophisticated traders to protect you and stop the on chain primarily here deleveraging of assets because off chain it was mostly scams and frauds. On-chain it degraded fairly gracefully, right. Like it did what it was supposed to do. But my hope is what these guys can make it do things better and safer. And I think that's important to the longevity of both people's balance sheets and also the ecosystem in general. So check out concretexyz I think is the Twitter handle.

But we also just announced investments in Grass, which is built by Wind, in Lava, which is a modular play. In Analog. So we're we're pretty active.

Nawaz: Great. Those are interesting ones. I've seen the announcements. Thank you for joining Boris. I thought it was a very insightful conversation and great to hear your advice about new fund managers as well as your thoughts on crypto right now.

Boris: Well, yeah, thanks for having me. Really enjoyed it. I appreciate great questions.

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Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host and guests may personally own tokens or be an investor in projects that are mentioned on the podcast.

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NA: I would love to start with your background and how you got into the world of venture capital?

BK: I was always passionate & interested in the venture and startup industry, but always thought venture capital is something that I would get into when I'm successful and built my business and have, a lot of different insights to share with the up-and-coming or new generation of founders.

As I started doing more and more, building and meeting people and learning about the landscape, I thought there were many different ways to add value rather than just being that one smart guy in the industry. My journey started in college where I studied robotics and computer engineering at CMU, and I noticed that CMU for how good of an engineering program they had, didn't really have any entrepreneurship or sub-ecosystem dedicated to an undergraduate student. So I told my professor, why is that the case? We should change that. And we started a program called Innovation Scholar Fellowship where the students are future potential founders.

We give them grants and mentorship, and pair them with the alumni founders and funds, to get more exposure to what's outside of the campus. What can you build, and how Silicon Valley is run?

That really opened my eyes to what it's like to be in the venture capital scene. That was actually when I first found out about Bitcoin as well. As part of the program, I think it was my sophomore or junior years that we went to Columbia University and then we visited Boost VC.

He (Adam Draper) was just talking to CMU students for two hours just about Bitcoin. He said his funds are doing sci-fi investments. I thought, wow, this really, wealthy, son of a billionaire doing something really odd. I didn't really pay attention to that since it's something really odd.

And I was studying robotics. I had a high ego as an engineering student that this is like the future. In retrospect, there were many different opportunities early in crypto and in the blockchain space. But you know, I at least started getting myself into the startup industry and venture. During school and after school, I did my start-up in the field, for about a year and a half, and didn't really take off.

I went back to Amazon to get a salary for a couple of years. I started becoming restless and had to do something new, more exciting. I think that's when I fully got into crypto where after I get off work from Amazon at six I just do crypto all the way until like midnight with my roommate.

My roommate was also cruising at Microsoft where he would be just studying different white papers every day after school at the University of Washington library. It just became a full-time thing. I was fortunate enough to be connected to current Hashed partners at the time who were also engineering background founders who exited a few times and Simon who was running the mass education startup funded by SoftBank.

He reached out saying, Hey, we are thinking about making this into a more structured fund, and we were going to scale so that we can build a brand and we can support founders in a scalable manner. I thought this is really interesting for the startup industry where I've always been interested in the venture, but never really seen this passionate group of people, almost religious, in building something that doesn't really have any infrastructure today.

That kinda got me in more. Then when Simon said he was going to build Hashed I ended up moving to Korea and joined the fund in Seoul investing actively since then.

NA: That's super exciting. So it's definitely been like a long journey, but it's great to see you actively investing in crypto now. I guess, could you expand then on the changes that Hashed has gone through since the time that you've joined to what it is now and the general thesis of things that you look at?

BK: Yeah. Our thesis has always been the same in that we do anything to push mass production of crypto we have two main focus areas.

One is web3 infrastructure side and then the second part is gaming and metaverse, the infra side is quite obvious. On the gaming side, we got a lot of questions in the early days. Now, we thought, if you're pushing for the adoption of crypto, we got to find the best channel for adoption, and going to offline stores and restaurants would be too much heavy lifting and we wanted to stay within the digital economy.

When you think about the digital economy there are a few large sectors like e-commerce and others in gaming, E-sports. We noticed that gaming is one of the fastest growing, most engaging, and also the community style and the DNA were very similar to what we see today in crypto, like discord channels of DAOs and all that.

It has a very similar atmosphere and vibe. So we decided to focus on those two. Then on the other thesis, gaming and the first deal that we did was Axie Infinity, in 2018. We were very lucky to meet the team, in Ho Chi Minh, Vietnam at the time we were experimenting with a program called Hashed Labs where we ran one batch of gaming accelerator programs because I mentioned that gaming is going to be our thesis.

But we noticed that there were no gaming founders in the market in 2018, because the only games you see are like Tron bats or EOS and like really sketchy, speculative unsustainable gambling types of founders that are looking for a short exit. We were looking for genuine founders to make our focus more visible to the market.

We ran an accelerator and the Axie guys happened to be the first ones to apply and we became an advisor. Then we became their first check in their seed round. Which led to also inviting Sandbox to our program, which has now become the leading open metaverse Roblox and blockchain project.

Where we are advisors to them and led the seed round. That’s been our early thesis has evolved and we are very fortunate that those early bets became not just products or successful businesses, but became vibrant ecosystems in their own ways that we continuously reinvest back into those ecosystems, to, incubate early teams and build on those acquisitions as well.

NA: There's a lot of conversation about how VCs, crypto VCs, fit into the land of crypto and decentralized networks. What are your thoughts on how VCs fit into the world of crypto and being able to essentially invest early into these projects and end up owning large amounts of, the network? What's your point of view and Hasheds point of view, around that kind of argument?

BK: We're all figuring out, still, what VC means in this space. In the early days of VC in crypto, it was bringing the concept of institutional investing into the crypto space that can write the checks. They didn't really understand what it means to participate in governance or participate in a validator program or whatever.

But the bar is continuously going up and also the funds are learning what the limitations they have and what they are soft at and what they're good at, and also founders are starting to figure out these VCs were helpful, these VCs were not helpful. They had good intentions, but couldn't do it for these reasons.

I think before it was all kinds of macro bets by VCs and also founders. And the founders were going for major thesis on, we were going to replace computing with blockchain or kind of replace contents with NFTs and VCs are also jumping on that thesis that, Hey, we'll invest in these areas that will cover these theses. Rather than going for this specific product market fit, rather there's this kind of momentum we're going to see in this market opportunity. It didn't really happen until very recently. So I think we're still figuring that and Hashed as a fund we've been also learning a lot. Investing in the industry as a crypto native investor, the past five years, what it really means to be invested and I think one thing that we really, learn and emphasize a lot is participation. I think investing in tokens and investing in networks is really the ticket to becoming a major participant in those networks. And I really think about these chains and protocols at launch, as you put it VCs own most of the initial share of the network.

And it's very irresponsible to not utilize those shares. Whether that's staking, validating or utilizing that for liquidity or, building something, you are the major owner and the operator of the network in a way. And if you are just holding onto it without doing anything and just waiting for the appreciation, that's just the web2 model of VC.

And that's how our fund grew as well. Where if we were one of the first funds to run validators for all our major portfolio companies and, whenever I go on like a testnet call for our port cos. I was like the only VC and other people were like Figment, Stakefish and like these guys had asked me, oh, why are you running this?

And I'm like, I used to work at AWS and our team is all technical. We are actually running our validator ourselves and, we can do this cause we operate with our own money, we don't need to get permission from LPs to run it. So that kind of worked out for us. and that was like 2018-19.

And after that, all of the funds started running, through different technical partners on their own. And we thought that's a commodity, right? What can we do more? And we realized that governance is actually getting more and more intense and actually important right before governance was more like something happening, but nothing mission critical, but now actual each vote of governance is changing, and the token model or actual price action of these networks. became more serious and, being, participating as like a responsible, major shareholder, to share our opinion and share our thesis on where this protocol should go, has been one thing.

And then we realized that there are many ways that we can get creative to help our, portfolio. We have a massive capital that we can utilize for our portfolio ecosystem. We realized Hey, these DeFi protocols and others when they launched, struggled to bootstrap liquidity because one, retail didn't know, two, retail is concerned about initial security and, experience because when liquidity is small, they're going to experience impermanent loss or are worried that someone might manipulate it, it just adds a lot of friction points. So we realised that we could utilize the capital to support our portfolio launching. Provide anywhere from 10 to 200 million worth of capital, whether that's to staking or TVL their initial pool, so the end-users of those companies can have a smooth experience where you're not worrying too much about the problem of being early in a DeFi protocol. And our finest team started working with those portfolios on designing, how to design those mechanisms and launch plans on the liquidity side.

So that's been the main thing we learned we can be helpful. So it's like starting with like kind of zero to one, with funding, help them build up their organization, participating in the network, to secure the network as a validator, governance. And then when they launch, we help them with the liquidity so that they can provide a better experience for the market. 

NA: Yeah, I think there are some great points. It is definitely, understanding that there's a lot more value that crypto VCs can provide and it's native to the product into the protocol. that's definitely a really interesting way that you guys go about it. And you guys are quite active, in terms of investors across geographies. So actively investing in Asia and the US I'd love to understand, some of the interesting differences, that you've seen investing across these markets.

BK: There is a cycle that these go through. There's been a convergence and divergence, but I think in Corona times past two years, there have been many divergences between these two economies, and ecosystems, mainly because Asia has been completely shut down and made it really hard for foreigners to enter the country and physically be present to interact and learn about the ecosystem. Also one of the fastest-growing moments for crypto ecosystems, with a lot of new talents to come in, a lot of new capital came in and each ecosystem has grown in its own ways and is global in its own DNA.

And we, as a fund, don't care too much about bringing US projects to Asia or Asia projects to the US, but, we focus on being global while our efforts stay very local. What I mean by that is we go to our founders, start their business and we go to talent experimenting with crypto. So that's why we built, our newest office in Bangalore, India. We have seven people based there physically, all local hires and we have been learning about Indian founders and the market via investing in eight different companies in the past five years, through our venture partner based there.

And we converted him to our head of India and launched the team that. And most of the members are actually, researchers and they focus on people, we have lawyers that help early founders coming in from that space to know how to build web3 organizations, rather than just looking for this different investor opportunity to put in capital, which I think a lot of crypto funds are doing?  But we noticed that it's quite odd to see that still at this point, there are no active crypto funds on the ground in India or any of the Asian markets today.

NA: I think those are some amazing points. And I think to run into some of our final questions, I would love to hear about a secret obsession of yours. That not many people know about?

BK: I think my obsession is being a power user. And this is something that I always ask when someone is interviewed for Hashed or our portfolios or anyone that says they're interested in learning more about crypto or, starting something or, getting a job in the crypto space.

I always tell them the first step to entering the crypto space is becoming a power user because it is an interesting industry. There is a very vague boundary among the three roles that define the industry, one is the user, the second is the builder and the third is the investor. And I noticed that everyone is actually doing all of these three roles.

I am an investor in a professional way, the main job, but we're also building a studio actually launching things. And also I am a power user. I use many of our portfolio ecosystems and products, and, that's how I usually stay on top of what changes are happening in these products. What changes are happening in UX and what improvements are happening via infrastructure that offers a new form of engagement. 

And I think many people, especially those coming into the crypto space, are afraid to waste time, spending time on, the wrong products or, wasting time trying to figure out how to use them, which is not something that you should be too worried about. I think all of those times wasted actually become a way to grow whatever insights you might have down the line as a crypto person.

NA: No doubt. I think being an active user is definitely, it is the best way to learn when you're starting to get into crypto. Finally, could you talk about the latest investment you've made and why did you make it?

BK: Yeah, we made so many investments in early this year, but I think something that really comes to my mind is Everyrealm, that we made the investment, which started as Republic Realm, which was kind of a subsidiary of a company called Republic, which is also in our early-stage investment portfolio. It is it's like Angelist where it democratises investing into private stocks, especially the kind of up-and-coming unicorn startups, and also for crypto where they also offer CoinList-like offerings for crypto projects to raise from the public in a compliant manner.

Republic Realm and now Everyrealm is an interesting holding company that's being the real estate developer in metaverse space and we noticed that they were already working with all of our portfolio companies, such as Sandbox, Axie, Nifty Island, League of Kingdom, Derby Stars on how to buy land, where to buy and if when they buy, what to do with it, whether they're building a museum, building a gallery building unity game on top, they really make each matter of our space, unique and interesting, basically building a new layer of contents on these lands that are purely a speculative trading market today, especially when you look at early days of Sandbox when they did initial land offering, they're making each land unique and have a story and they're doing it in a most systemic and compliant way where many of the efforts have been done by freelancers and, individuals or fans or DAOs.

But we thought the way Everyrealm is doing it is almost like a house, landscape or real estate developers in, let's say like new regions like China and Dubai come in and create a whole land development plan on what it's going to be and why it's going to be big.

So that's been something that I thought was one of the most interesting approaches and something that's been very synergetic with what we already do as investors and builders. So basically when we build games from our studio, they can come on board either as an investor or as a participant to create more content, as a partner and there are people doing that across different platforms and also advising and helping, traditional brands or automakers or fashion brands to interact with our portfolio companies in the Metaverse setting, whether that's NFT collections or designing their own metaverse, or, creating a.one-time event or concert, that can raise their brand awareness among metaverse community, especially with genZ.

NA: That's definitely a really interesting company. I think, owning this space of being the builders and the med versus it's definitely super interesting. but yeah, those are all the questions I had Baek. Thank you so much again for coming on. I really enjoyed the conversation.

BK: It was really great. thank you for having me. 

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Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host and guests may personally own tokens or be an investor in projects that are mentioned on the podcast.

We talk about his entry into VC, the FJ Labs thesis, why they are investing in crypto, problems marketplaces face and more!

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NA: So, I, would love to start with how you got into the world of venture capital personally?

JW: Sure, sure. A little bit about myself. I grew up in New York. I attended university of Pennsylvania where I studied PPE, Politics, Philosophy and Economics. I have always been interested in technology.

I went to computer camp growing up. I used to build computers and I've always been interested in business. My dad worked in finance. I always loved investing. I heroes growing up where instead of the quintessential NBA player or musicians, they were amazing investors. And so, in spite of that, I didn't know what venture capital was until long after I graduated college, actually, I didn't know that there was such a profession.

I think probably because I grew up in New York and back in 2011 venture was still a developing ecosystem in New York City, relatively confined to the Bay Area. So, in 2011, after I graduated school, I joined a small fund of hedge funds where I was working on marketing investor relations. I was there for two years and the fund actually went under. Hedge funds, had a really brutal couple of years from 2011 to 2013 and fund of funds are hedge funds with another layer of fees.

So, it was extremely brutal and. And in the end of 2013, my fund started to go under. And so, I ended up finding an up-and-coming firm in New York called Lux Capital. Lux is a bit more well-known now, but at the time they had just closed on their fund two and they were looking for someone with my skillset of fundraising and investor relations in alternatives.

I joined them in 2013, and I worked there for four years, and I fell in love with the venture industry. I wasn't an investor myself, but I was able to join all of our investment committee meetings. And I was able to see how some of the best investors in the world thought about a company's prospects, what they looked for in founders.

And it was really an incredible chance to learn from some of the best. And so I was at Lux for four years. At that time, I knew I wanted to be an investor and the typical Lux investor had a terminal degree in the hard sciences and were investing in deep tech, that was not my background.

And so I was started thinking about next steps. I got recruited over to FJ Labs, who was looking for someone who had the ability to be a strong investor with a strong financial background, but someone who also could help them raise outside capital. And one thing led to another and I joined in 2017 and it's been a great trip ever since.

NA: Love that. Yeah. I definitely know of Lux, I have a background in biomedical science and I've been really interested in the deep tech side. And, you know, Lux is probably one of those premier funds, like leading it on that cutting edge.

JW: That's right. It was an honor to learn under Josh and Peter and Adam and see some of the most amazing companies in the world.

NA: No doubt. Could you elaborate on FJ Labs? The marketplace thesis of FJ Labs and why that is the current focus?

JW: Sure. So, so quick background then FJ Labs, and that I can talk about why the marketplace business model is so intriguing. We were founded by two serial entrepreneurs, Fabrice Grinda, originally French. He has built and sold three businesses. His first startup was an online auction site for France called Aucland. He raised money from the Bernard Arnault. Who's the founder of LVMH and a bunch of other investors. He sold that. Then he built the world's leading online ringtone and wallpaper business for cell phones.

Sold that, and then last but not least, he built one of the world's leading online classified sites. So in the US we have a business called Craigslist. He built Craigslist for emerging market countries launched in over 40 different markets. Grew it to over 300 million monthly unique users and sold that to Naspers in 2010 and stayed on as CEO until 2013.

Jose built an online auction site for Latin America, which ended up merging with Mercado Libre, which is now far and away the largest tech company in Latin America. So, the two of them have deep expertise in building and scaling online marketplaces. Now online marketplaces are a really interesting business model because although they're very hard to get off the ground, once you can get the business, the flywheel really spinning, the network effects in a marketplace become extremely powerful.

So, you might've heard of the chicken and the egg problem. Essentially, a marketplace is a two-sided marketplace. You have supply and demand. Imagine Uber, you have drivers and you have riders. The Uber app itself, there's not much technical, technological innovation there. What you have is you basically have a marketplace that is facilitating the connection between drivers and riders. So, no one really wants to use the Uber app if there are no drivers or riders. So, it's very difficult to jumpstart a marketplace. You need to get drivers in order to get riders, you have to get riders in order to get drivers.

Now, once you're able to start to build liquidity, which is basically the density of connections on the marketplace it really kicks off because the more drivers on the platform, the better experience it is for riders. Which then in turn attracts more riders, the more riders in the platform, the more business you're driving to drivers.

And so, this kicks off this feedback loop and you can create some of the most scalable business models in the world. And if you look at US IPOs recently four of the five largest IPO's in the US, tech IPOs were marketplaces. So, Door Dash, Airbnb, Uber, Lyft all have in common that they're marketplaces. And so, it's a beautiful business model when done right. And there's no tech risk and there's purely execution risks.

NA: Yeah, that's definitely a really interesting, cause it seems like a hard business model to get going. What have you seen, are the biggest pitfalls a few of the businesses you've invested in encounter when they're bootstrapping that liquidity onto the platform?

JW: Frankly, bootstrapping liquidity is the key challenge for a marketplace and making sure that the supply and the demand are overlapping because depending on the marketplace, you might have to build liquidity on a hyper-local basis.

So with Uber, you actually have to build liquidity market by market. If you have drivers in New York and you have riders in San Francisco, you don't have a market. So, Uber is an example where you have to go scale city by city. On the other hand, sometimes you have international marketplaces where you might have something like Upwork, where you need someone to help you with your website they could be anywhere in the world. They could be in Romania, they could be working on your website while you're in New York. So the supply and the demand don't have to overlap in the same city.

So, marketplace design is very important to think about when you're scaling a marketplace. What are the unique traits for your marketplace and what do you have to do to facilitate the flywheel spinning?

Are you building liquidity on a hyper-local basis? on a local basis? potentially on an international basis? What are your acquisition channels? Is your marketplace supply constraied or demand constrained. Most marketplaces it's usually harder to recruit one side of the marketplace, and so that should be your focus and how are you recruiting that? And then not only that, how are you retaining that? What are your key metrics? Every marketplace has different metrics that matter. You have to distil which ones matter and think about how you, how you can optimize them

NA: For sure. I think that's super helpful. I'd love to hear, what strategy and thinking around investing in the crypto market is for you and FJ Labs?

JW: Crypto is interesting because a lot of the marketplace dynamics that you see with traditional internet marketplaces are amplified in crypto because now you have the ability to incentivize people using tokens.

The network effects work to the extreme in crypto. And that's why you're seeing almost every crypto project has some form of network effects, but it's not necessarily the traditional network effects that you see. Because the tokenization, the element of having a token to coordinate incentives really changes the game.

And there are all sorts of interesting things you can do with token economics to coordinate human behaviour. And so, we think that crypto is extremely interesting. I mean, we've invested in 30+ different crypto projects already. And the different themes that interest me at the moment, we're very interested in infrastructure, we think that laying the quote-unquote pipes of crypto, it's still very early days and it's still extremely cumbersome for normal users.

It's a kin to using the internet in the early days, or even pre the web browser, you can see, I mean, if you just look at Metamask, Metamask has kind of become the gateway to blockchain apps, even Metamask it's still extremely cumbersome to use.

We are investing in different crypto infrastructure plays. We invest in on-ramps and off-ramps. So, we're investors in Moonpay, we're investors in Wyre. We're looking at a number of other companies in this space. Then we're investing in staking companies. We were seed investors in Figment, which helps investors who have Proof of Stake coins, like Ethereum now, stake, their Ethereum for rewards. And so we're very interested in, other forms of crypto infrastructure.

Then we're also interested in exchanges, exchanges, are marketplaces. So, we're investing in centralized and decentralized exchanges all around the world. One of our entrepreneurs-in-residents built a decentralized exchange called Clipper, which is actually a decentralized exchange intended for small trades because often if you use a Uniswap or a Sushiswap, you're not getting the optimal price, if you're making a trade of $10,000 or less. So Clipper has intentionally constrained the size of their liquidity pool so that if you're making small trades, you're still getting the best prices.

And so, we're also interested in the consumerization of DeFi, as complicated as crypto is for normal people, DeFi or decentralized finance is a whole another level. It's like a foreign language to people, but there are a lot of really interesting use cases for people and some of the yields that you can earn in DeFi are staggering, especially compared to the near zero interest rates that you're seeing in traditional finance.

So, we're looking at a lot of different ways to put a beautiful user interface on top of a DeFi project and make it really easy for normal people to use. So, I call that consumerization of DeFi, consumerization of crypto. And then we're really interested in NFTs and not only just the art of NFTs, but also potentially utility NFTs, the concept of having a non-fungible token that you could use for identity, you could be using it for advertising.

I think we don't really know yet what a lot of the killer use cases are going to be. So, we're interested in doing a bunch of experiments to make sure we're investing all over.

NA: Yeah, I love that. So, you'll be essentially investing across the entire crypto sector. How was the conversation you had with LPs when talking to them about entering the crypto market?

JW: It's actually worth noting one thing. We are angel investors, we don't lead, we don't take board seats. We have a very diversified portfolio, much more so than the typical venture fund. We have hundreds of investments that we make a year, our first institutional fund head up at 112 investments. Our second had 500 investments. Our third will probably have around 500 investments as well. That's very unusual for venture capital. We think it's mathematically optimal.

Our LPs are interested in backing Fabrice, Jose and the institution that we've built at FJ Labs. They’ve proven to be some of the most successful angel investors in the world. And a bet on FJ Labs is it is a bet on us, a bet on our heuristics, a bet on our ability to work with some of the most interesting up and coming tech talent all around the world. Crypto was a natural next place for us to invest. So it was never was really a question from our LPs about investing in crypto.

NA: Okay. No, that's great to hear. And that's given me like to two areas I want to pick on. Firstly, with crypto venture capital becoming, very competitive to get into these rounds, they're moving incredibly quick. Why do crypto founders choose to go with FJ Labs as an investor?

JW: The great question. What we have found is that a lot of the network effects expertise and the marketplace expertise that we have from building and investing in start-ups is directly applicable to crypto. And when you're thinking through network effects, token economics, these are all network effects.

Rather these are all these are all highly applicable in terms of how we invest. We're able to make decisions in one to two phone calls. We're easy to work with. We write small tickets, but for that small ticket, you unlock the entire FJ Labs network. And we have relationships with almost every fund in the world.

It sounds like an exaggeration, but it's true. Every fund, I should say every institutional fund, there are plenty of small funds out there that we may not know. But if you're doing well and you're raising your next round, we will roll out the red carpet to introduce you as a founder, to the best of the best funds.

And so we only do this for companies that are doing well. So, it's a warm intro and that warm intro has a very, very high conversion rate. And so, in some we have deep marketplace and network effects expertise. We have the world's largest portfolio of online marketplaces. We are easy to work with. We write small tickets; we decide quickly and we can help you get funded.

NA: Perfect. Okay. Yeah, that definitely makes a lot of sense. And I guess the other part of that was, as you said, doing over a hundred deals a year, what's the process that you employ in order to achieve that kind of fast paced deal-making strategy that you employ?

JW: The pattern matching recognition that we've developed from investing in 700 start-ups, the majority of which are marketplaces, we're able to suss out in two forty-five minute phone calls. I'm not sure if you've ever heard of the Pareto Principle, you can basically glean 80% of the information that you need from the 20% that matters.

And this applies across all sorts of different fields. The key here is that we don't lead, we don't lead. We rely on an institutional VC fund to take the lead position, usually to take a board seat, to set the terms, to do proper diligence. So, if we know that a fund that we like, we respect and we trust is leading, they're doing the diligence, they're taking a board seat, they're setting the price. From there, we can quickly evaluate if we like the founder, if we like the business model, if we like the metrics of capital efficiency and we can make a quick decision.

And so, we can pattern match based on all of the marketplace heuristics that we have seen. And so. It makes it easy for us to very quickly make decisions.

NA: Got it. What would be your advice to someone who's looking to get into the world of venture capital?

JW: There's no one answer. There are a bunch of different ways you can get in. You'll see, journalists, frankly, venture capital is often a relationship driven business. That's why you see a lot of journalists who have incredible founder relationships, you can see them break in. You can also see people who are just extremely analytical and build a personal brand for themselves.

I mean, there's a guy on Twitter, Turner Novak. He just basically memed himself into being a GP and raising money for a fund. It's funny, but frankly, it's an edge, being a meme king on Twitter is an edge. I think the best way is to be a founder, is to be a successful founder, is to build deep, deep operating expertise and just try your hand at angel investing.

You don't have to have money to angel invest. It sounds crazy. But now with platforms like AngelList, if you have access to deal flow, you can help syndicate it. And it might take a little while, but with practice and with the right relationships, you can build up a track record through syndicating angel deals prove that you can get differentiated deal flow and take it from there.

I think that this is an interesting trend that we're seeing is the democratization of venture capital. It used to very much be the quintessential old boys club on Sandhill Road. I like to call it like an entrepreneur's retirement home where you'd have a lot of entrepreneurs who are investors who had nice cushy lives hanging out in Palo Alto, and just kind of investing in their friends and not investing... It used to be until pre COVID, the vast majority of Bay Area VCs would not invest outside the Bay Area because they wanted to be within driving range of the founder. That's completely changed and venture is completely globalized.

And so now you can have venture investors anywhere in the world, and you're seeing that traditional venture funds are investing anywhere in the world, which is amazing. I think Turner Novak shouting out at him again. I think he built a fantasy venture portfolio online as part of his tweeting.

He, basically built a fantasy portfolio. He attracted the attention of an open-minded high net worth individual. He ran a fund for him, did very well, continued to build this audience and now he has a fund. It's hustle. It's grit, tenacity and it's making a name for you. And so, you can always do it the traditional way, which is apprenticing at the storied funds.

And you'll see a lot of people do that. Insight is a really famous fund that develops talent. They, attract from the top Ivy league schools and that's usually it. And then you can also, you know, do the traditional investment banking business school route. For sure. That's probably the best way to get in is to get into one of those, hallowed institutions and to compete in these very selective recruiting processes. That's still the norm, but that's certainly not the only way. And I see entrepreneurial driven people breaking into the industry.

NA: Yeah, no, I think that was really helpful. There's definitely so many ways like Turner is definitely a great example of like a new and interesting way to get into that world. And heading into like our final questions. What's a secret obsession of yours that not many people know about?

JW: Distance Running. I mean, it’s a big part of my identity. So if people know me, they probably know this, but I ran track and field in college. I still run track and field. It's been a dream of mine to break four minutes in the mile. I have a baby now, so it's looking a little bit less likely, but I'm still at running 60 to 80 miles a week. Training very hard.

I admire, I don't know if you know of Nick Willis, but New Zealand has a storied running tradition and Nick Willis is a hero of mine. He's still running sub four-minute miles late into his thirties. And so, I am obsessed with distance running.

NA: Super cool. And finally, what's the latest, publicly announced investment you've made and why did you make it?

JW: Well, we have a very high cadence, so I can't tell you what the latest announcement is, but I can tell you one of the latest big investments we made is a business called Mundi, which I'm on the board of. Mundi is a business that we incubate. We haven't touched on this, but once or twice a year, we will actually be very hands-on and help form a business.

And we work with very entrepreneurial MBAs and we will pre-seed them and we will help them assemble their founding team. Mundi is trade factoring for exporters, and the core business is lending to Mexican exporters who trade into the US. They found an amazing pain point. The business is only a year and a half old, and they've grown like 50 or a 100X.

They just raised a $16 million Series A led by Union Square Ventures. And we were able to invest more in this round. And this is a business where we have healthy ownership. Martin is a fantastic operator. He actually used to work at OLX, which is Fabrice’s startup, and he worked at BCG and he is a really just excellent, excellent operator.

And it's been an honour to see him go from the ideation stage when we were just brainstorming ideas in our conference room to now having raised over 20 million of venture capital and growing like a weed.

NA: Very interesting. Yeah. It's cool to know that you are looking into like the incubation model as well, and it's working out.

JW: Yes. Yes. It's very interesting.

NA: Cool. That's all the questions that we have for today Jeff. Thanks so much for joining me. I really appreciate your time. And I think it was really insightful.

JW: Thank you for the kind words. And I hope people found that interesting.

Follow me and Jeff on Twitter here!

Thanks for reading The Inquisitive VC! Subscribe for free to receive new posts and support my work.

Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host and guests may personally own tokens or be an investor in projects that are mentioned on the podcast.

We talk about his journey from angel investing to a fund, state of the crypto VC market, valuations and more!

The podcast is also available on your favourite podcast sources like Spotify, Apple and Youtube!

NA: I'd love to start with your journey to crypto and what that looked like. And when you decided to go full time into it?

RB: Yeah, absolutely. My dream starts about... what I guess a little over six years ago. I moved out to San Francisco to work on the deal team at Angel List.

And so, it was kind of doing traditional venture still was sort of ancillary to what we did, but saw a few crypto deals come through. And then about a year and a half later, we, Angel List spun out this company called CoinList to kind of build a similar business in crypto. You know I knew nothing about it at all.

Like I'm pretty sure, I didn't know what an ERC 20 token was when I started, but my boss at Angel List, Graham Jenkin, who was the COO there was kind of like leaving to run CoinList and he was awesome. And some of the smartest engineers I knew from Angel List for leaving to go and you know, it just felt like there was a lot more sort of blue ocean space to build innovative products like on the capital formation side in crypto, then in venture.

Venture had been kind of run the same way for a long time. and Angel List has certainly done a lot to improve it and built some really cool stuff, but generally, I think it's kind of like just making the existing system better versus something totally radically new.

So yeah, I ended up kind of like running over to join them. I was the first employee, and this is October, November 2017 and then yeah, the market crashed a few months later and CoinList was like a pretty terrible business for at least a year and a half there. But yeah, that was sort of like my dive into it.

NA: Oh, very cool. Yeah, I reckon it was quite a hard time, right? Starting up a business like CoinList through a bear market, but the fact that you kept going was I think pretty great in terms of getting it established. And then how did you start angel investing while working at CoinList? What was the thinking around starting to invest?

RB: Yeah, so when I started at Angel List there's kind of this exposure to venture and I didn't really know anything before about what it was and it seemed really cool. Right, you saw people investing in these cool companies and, you know, there was kind of like a, obviously a financial element as well, and I didn't really have any money.

Like it wasn't really clear to me what the path was to get there. I also didn't like, know, I didn't really know anything about anything, which kind of seems like the table stakes for a company to want to take your money. So when I started working in crypto, you know, I immediately six months in a few people started to ping me and I still like didn't really have much money.

You know, I was kind of able to just like, spin this story of, you know, Hey, I'm in an external-facing role of this kind of company that's sort of like in the middle of everything and you know, I'm just able to give you a market perspective. And obviously at that point, like token launches were really hot and I was kind of able to, spin a story there about like, you know, just kind of having seen a lot of data points about what companies have done.

I also, like, I tended to find it a bit more interesting company-wise than like our customers, like generally by the time teams got to CoinList, you know, they had been working on what they were doing for like 1, 2, 3 years and they were just like a lot more established. And so some of the teams I met really early on, you know the InstaDapp co-founders, the Opensea co-founders, it was a lot easier to relate to. Like they were very early, and they had kind of like these big grandiose visions in many cases, especially in the Instadapp Founders case, they were really young, and I just like really enjoyed working with them and kind of like talking about crypto and what we're seeing.

So I think like very, very small checks in a few early companies. And obviously, I highlighted the ones that did well like most of them and most of my early checks definitely went to zero. Yeah, that was just kind of how I got started.

NA: Yeah, no, super cool. And then what was the thinking and journey to scaling up that angel investing and leaving CoinList and starting Lattice?

RB: Yes. Yeah, it was definitely a long and winding path. The angel investing was like not very high volume or high dollar amount for a long time. And then in like summer 2020, maybe a little bit earlier than that, like early 2020, you know, just talking to a few other people who were sort of like just working in this space.

My buddy Clay Robbins, who was then at 0x, you now is a VC at Slow, and a few other people, you know, it seemed like there was, there were a number of kinds of people who had experienced that I think were relevant to early-stage companies. But, you know, didn't necessarily like have a ton of capital and, you know, couldn't really compete with VCs from a capital perspective. And so we kind of talked about just like forming this syndicate where, you know, we could invest together, we could like write larger checks because we could you know, combine money you would, should maybe kind of let us like spread our bets out a bit. And you know, the idea was really that the sum would be greater than the parts and like working with this kind of, you know, a syndicate of about half a dozen seasoned like crypto operators would be really interesting to founders. And that worked really well for a while. You know, all the people I worked with there, I think still invest, they are all awesome investors. And there were some really cool companies that came out of that, you know, we were fortunate to back like Audius, Dune Analytics.

But once, like the bull market, really started and these rounds started getting much more competitive the model just kind of broke, to be honest. And it was like a pretty sudden change, like. You know, early on, like everyone could get all the allocation they wanted and you know, it wasn't even that much like people were definitely writing smaller than $10,000 checks each generally we could even like take a few days to kind of set up a call with a company, right?

Cause like you were juggling and calendars for, you know, let's say half a dozen people on our end. And then at some point, every single deal started to get much more competitive. And it became pretty clear that like, if you brought an allocation to the group, you were going to get cut back and everyone was going to get.

That became harder. And even like, you know, taking it two or three days to schedule a call with a portfolio founder like that, that timing didn't even work right. That the market just like flipped a switch and everything got so much more competitive. So that kind of like just slowed down and then I ended up deciding to leave CoinList in early 2020, you know I had been there for about three and a half years, really an exceptional team. And honestly, the business started doing much better basically right after I left and is on a great trajectory, but I just wanted to like work with early-stage teams.

And I just kind of wanted to like, try my own thing and explore that more. You know, I think if you're really just like heads down at a scaling company, like CoinList or Coinbase or kind of any large company,  a lot of the business side problems are like scaling the ones, they're not really crypto native ones. And so I was working all the time on that and it made it really hard even to just like spend time you know, in a discord hanging out. So I left, I started working in the Index Coop leading growth initiatives and that was awesome.

Like it was my first time ever working in a DAO and, you know, it was really early and there were smart people and it was very free form. And that was really cool. I did some consulting work for some other companies, including Maple, Cream, Aztec, and then you know for Lattice, the consulting work was really interesting, and I was sort of doing this for consulting for about six months. I learned a few things during that time, one of them is like scaling a consulting business is really hard. And this seems, seems obvious in retrospect, but I definitely learned that the hard way where you know, that business just scales very linearly I think the other one was just, I felt like I was doing a lot more work with these teams, then a lot of their investors.

And it felt like, especially on the growth and go to market side and that could be everything from like token launch and distribution to community building to kind of like driving integrations. It just like, didn't generally feel like investors have a lot of experience doing that. Very few investors really had come from deep operating backgrounds in the space.

And so it kind of just like, you know, looked at it and it's like, all right, well, investing is a much better business model than like I have on the consulting side. And it does feel kind of like what I was selling on the consulting side, you know, you can kind of like sell a fund doing that and that probably just seems like a much better model to do it.

And so, my partner, like my co-founder Mike, ran sales and BD at CoinList. We worked together there for three years and, you know, we'd gotten close and you know, he had also kind of in working on this growth side of web3, but just from like a different angle, and really kind of doing sales and BD.

And so we just felt like there was kind of a wedge in the market for, you know a firm that really just helped companies kind of build moats and, and grow in the space. And so that was really the ideation for Lattice. And so we probably spent like two months talking about it and then set out to raise the fund in May or June and then kind of closed it out and started deploying capital over the summer, more or less.

NA: Wow. Yeah, that definitely sounds like an amazing journey. I could see the thinking around how the fund probably makes more sense over the consulting. Cause you could probably offer a similar service as an investor and not worry about getting paid as a consultant.

RB: Yeah, it’s funny. Like, I was essentially an ICO consultant, which was such like a buzzword during the last bull run. But yeah, I mean, I think there actually still is a really good opportunity for people to just consult and like help projects in the space. Cause I think a lot of teams, much more open to just kind of flexible arrangements, you know, then like relative to a traditional software company and still a lot of companies need help on the growth, go to market, community side.

But I think it's just really, you know, there are not many people who've been doing this stuff for a while on, so it's just hard for these teams to find experienced people.

NA: Yeah, no doubt. And do you want to give a quick, I guess, an overview of Lattice and, and what kind of things you like to invest in and then the general structure of the fund?

RB: Yeah, sure. So we're an early-stage venture fund. You know, we are a hundred per cent focused on crypto. Our first fund is $20 million and we've been investing out of that for about seven or eight months and we've backed about 30 companies. You know, our thesis is really around investing in products that we think could expand the market. And so that is admittedly a very vague thesis. I'd say we tend to kind of look at four categories we like, and they admittedly also kind of encompass a lot in crypto. And that's really like DeFi and NFTs and Gaming, Web3 broadly which I would include like DAOs, I would include token powered networks, like Helium and that, and then the fourth category is infrastructure.

And so, you know, some examples in that I think on the DeFi side, we really like things we view as I call it like patient DeFi, you know, kind of like the opposite spectrum from degen plays, things that are, you know, attracting more professional risk-averse audience. And as that's really where I think the market's going.

So examples of that include Maple, which is building, you know, under collateralized credit on-chain. Sherlock, which is like underwriting protocol insurance. On the NFTs and gaming side, we've tended to invest more in like infrastructure around that. So start-ups, which is a portfolio company is doing really well, like helping indie game developers deploy in-game assets.

We invested in Gallery, which was like an application for people to curate and kind of show off their NFT collections, and to us was just a very natural outcome of what happens after this empty bubble. On the web3 side, you know, we've made a few plays and kind of, DAO infrastructure, tooling, Layer 3 is an example which has sort of built this like decentralized bounties network, basically, just like building a clearinghouse for projects, communities that need to get work done and kind of like allowing them to very easily activate their communities to help out with that work, they're doing really well and we're excited about them. And then on the infrastructure side, you know, everything from Violet, which is kind of making it very easy to bring real-world identity on-chain to Keystake, which is building like liquid seeking derivatives for Cosmos based chains. So, it kind of really is like across the gamut. I think we're constrained more than any specific category is really like stage and timeline.

You know, we are 100% focused on the earliest stages. Every crypto fund has gotten really big. And I think that that can make it hard for them to play at the earliest stages. Right? If you have a $400 million fund, you probably shouldn't be writing half a million-dollar checks. It's probably not a good use of your time, but we think for like a lot of really early teams, actually, they probably should just raise half a million, a million dollars.

These tend to be pretty capital efficient businesses. And so we're a hundred per cent focused on working with teams at the earliest stage. And then you know, on terms of timeline, we're a venture fund. We don't trade tokens. We've never sold a single position. And so I think, any you know, investment that would require a timeline, like a clear timeline for us to exit, for example, we think it's going to be hot and in the next year or so this is going to pump when it goes liquid and we're going to sell, that's just like outside of our purview. We really want to back founders that we think are going to be doing this through multiple cycles.

I think some of the successes we've had personally. OpenSea, Dune Analytics are good examples, like really no one cared about those businesses for a long time. And when I say no one, I mean, you know, they had a really core engaged community that loved the products, but they could probably measure their user numbers and hundreds for like at least a 12 month period.

And generally, like investors wrote them off, at various points in their lives. I definitely don't think the market just keeps going up. Right. I think that generally anything worth building, it's going to be really hard for a long stretch of time. And so for us, I think probably the thing about anything else when we look at investment is, you know, is this team incredibly motivated?

Did they have the resilience to build this? You know, are they not purely mercenary? And yeah, that kinda tends to be how we think about things.

NA: No, super interesting. You recently tweeted that crypto VC LPs are in for a rude awakening around the funds. Could you expand on your thoughts are around that tweet?

RB: Yeah, absolutely. So you know, I think maybe make a good place to start is just like how people sort of see the manifestation of this problem. And then we can kind of go back to like what the actual root cause is and what's most relevant to that tweet.

I think you see people talk on Twitter and you see a lot of these fund announcements, you know, teams are raising seed rounds that are really high valuations, right?

Probably the best example is I think it's called SuperDAO which raised a $10 million seed round at something like a $150 million valuation a few weeks ago. You know, in general, there's a lot of money sloshing around and there's a lot of money chasing deals. And so the rounds get bigger, and the valuations get bid up and, you know, I think a natural question is like, why is that? And the answer is, you know, crypto funds are getting bigger. People are deploying more money faster. And so there's just kind of like a supply and demand imbalance. There are more and more entrepreneurs entering the space.

I don't know that it's increasing at the same rate at which money is sort of flowing into private deals. So then it's like, all right, well, why is that? And it's because there's a huge amount of LP interest in these funds. I think, you know, there's a few things that drive that why like institutional money, which kind of tends to be the money behind, you know, venture funds wants to enter the asset class. I think just from a kind of background macro perspective, you have a world of very low-interest rates. People want risk assets because there are not that many ways to generate yield and so they really need to go sort of further along the risk curve. You also have this narrative around inflation and drives interest in Bitcoin.

You have this NFT boom that sort of captured a lot of mainstream interest. Just broadly there was a lot of interest in crypto. I think it's just become a lot more apparent over the last year how well crypto funds from the last cycle did. I think there are like a few things there.

I mean, one is, you know, their return numbers probably didn't look that good in the bear market. Right. These things were probably not marked up by the market at a very high rate, but I think specifically like this bet on Solana, which has kind of, I don't actually know whether or not this is true, but this has sort of entered lore as like the best venture bet ever.

Which MultiCoin is kind of the most like public-facing. That's captured a lot of attention. And I don't know if this is true or not, but like you hear rumours that that Multi Coin fund is marked at 50 or a 100X, which, you know, from like a return perspective and a three or four-year timeline is just like absolutely insane.

So I think every LP, you know, sees that and it's like, well, even if I can get 20% of those returns, right, that's probably way better than I'm getting them in most of my portfolio. And so you know, that drives a huge amount of LP interest that just wants to go into these managers. So anyway, setting the stage here, where there's a lot of money that wants to go into these funds and naturally they get bigger, right?

So why do I think LPs are going to be disappointed. I think the first thing is it has never been harder to be a venture investor in crypto. You know, I look at some of like the angel bets I made or things I did personally, you know, for Lattice. So, like a year and a half, a year ago, everything has been repriced, probably 5 to 25 X up from 18 months ago. So, you know, every return you see today, right, would be cut pretty meaningfully because the entry prices are just going to be way higher. The second is just like, it's never been more competitive. These deals get done faster. There's like more and more money chasing them.

Investors are getting cut back. And so it's just like much harder from an access perspective. You combine that with the fact that like funds are getting a lot bigger. And it's just like statistically a lot harder to really move the needle in a big fund. And just statistically like the larger, the capital base, right, the harder it is to multiply that to a large degree. I was talking to someone who works at a $500 million venture fund. And, you know, from his point of view, right. That means any investment he underwrites right there, let's say they invested in like $5 to $10 million to buy, you know, a certain per cent of the company in many cases. They need to be able to underwrite that to like a five or $10 billion valuation outcome in order to move the needle on the fund. And that's really hard, right? There's like, not that many of those companies a year and it also just means, you know, generally, any kind of outcome you have means less and less in the context of the fund.

If the overall fund size is getting bigger. So, I think you just have this kind of combination of it never been harder to do really well in venture and crypto and fund sizes is getting bigger and I think any LPs that are expecting, I think these kinds of like Multi Coin style returns are going to be disappointed.

That said I could be totally wrong, and the market just like grows a 100X from here over the next three years and we're all really happy. And like, that would be really nice. But I definitely am not planning around a world like that.

NA: Yep. No, that makes a lot of sense. So how do you feel about the valuations? And as an early-stage investor, how comfortable are you with the current range of valuations that you're seeing?

RB: Yeah, I think it really depends. Crypto has matured a lot in the last year and a half where I think now you actually kind of see like sectors starting to get divorced from each other.

So, a good example of that, the whole market have slowed the last few weeks, but in general, right there's kind of been this like Gamefi boom, led by Axie Infinity where, you know, you have pre-launch games like Illuvium trading at 3 billion fully diluted. At the same time, like Compound, Aave, Synthetix all of these DeFi blue chips, which in general usage is actually going up are trading at like 80 to 90% off of their all-time highs. So I think valuations on the whole, on the private side, continue to go up. But it's hard to look at the market and kind of just say like, all right, we're in a bear market, we're in a bull market.

I think a lot of these sectors are a little bit less correlated than they used to be. We've slowed down a lot, to be honest, this year. I think we made 20 investments in Q4 of last year like we were really busy and we made maybe three or four this entire quarter. I think like we've seen valuations continue to go up on the private side and continue to go down on the public side.

And, you know, it's to the point where you look at some like DeFi seed rounds and they're getting done at say $50-$70 million fully diluted. If Aave or Compound trade at say a billion and a billion and a half, right? Like the jump up from a seed round to the market leader should probably be way more than 20X.

Like, I don't think there's a 5% chance in any given seed round that this is going to become like one of the foremost consequential DeFi apps. So, I think they're just like, there is this dislocation in the market where there's so a lot of money chasing these private deals and, you know, it's kind of just like disjointed from what's happening in public markets.

So, to answer your question, we've gotten a little bit less comfortable with them and we've slowed down.

NA: Got it. Yeah. No, that makes a lot of sense. Getting into our final questions. What's a secret obsession of yours that not many people know about.

RB: Secret obsession? Good question. I don't know if this is … obsession would be a strong word, but I'm like nerdily into venture history. And you know, I studied history in college, I tend to think there's like a lot of lessons we can learn from the past. And so especially as we've gotten Lattice off the ground like I've spent a lot of time reading, just books on the history of venture.

So, like starting with this one called E boys, which is this like very in-depth account of the eBay IPO and specifically like Benchmark, which is one of its biggest backers in the early 2000s, right now I'm reading this book called the Power Law. That's about kind of the history of venture and, you know, have tried to like make everyone on our team, read these books.

Hopefully, we learn from their mistakes.

NA: That's quite interesting. What would you say is the most interesting, I guess historic fact you've learnt?

RB: Most interesting historic fact. So, I mean, in general, it's kind of wild, how much venture has changed, where like in the seventies and eighties, even nineties, like funds would just like always replace the founders, with a professional CEO.

And that's obviously like very much changed in the last 20 - 30 years. I think for me, the biggest lesson I've learned, which is probably the one I'm going to remember best is, you know, this book E-boys, like Benchmark, was kind of a lead investor in eBay in the early 2000s. And I think it was like a 2000 or 3000 X return.

It was like by far the best venture bet in history. And after that, you know, they raised much bigger funds. I think they went from like 150 million to a billion. And those funds actually did pretty poorly. Right. And you know, it's what, what's that like standard kind of like, disclaimer, you see on every financial product like past performance is not indicative of future returns, but you know, clearly like these really pretty incredible investors and this was like, as the.com bubble was heating up and they raised this massive fund. And then, you know, despite literally being like the best in the business, their next two funds kind of sucked. And so, I think I try to distil that internally that, you know, we can never rest on our laurels. We should, like, we need to play this pretty conservative on, on the fund structure side.

And, you know, the market can change really quickly.

NA: Yeah, no, that definitely is an interesting point. And so, you mentioned a couple of your investments earlier but the final question is what is the latest, publicly announced investment you've made and why did you make it?

RB: Yeah, I think the latest one that was announced was a company called DAOFront. Really young, compelling founder based here in San Francisco, who's building the sort of like QuickBooks for DAOs. It's like a very brilliant problem I think to many people but you know, it's kind of crazy like for example, we run a conference and we sell tickets in USDC.

You know, we literally like try to like manually tie transactions to a given like purchase, like in a Google sheet, right? The state of accounting software is really, really bad. And you know, I think the market for crypto native companies, whether that's DAOs, whether that's like just, you know, web3 companies that kind of run their business on-chain is growing really quickly.

And a lot of these companies, you know they need to pay employees, they need to like pay taxes right there’s just a lot of overhead that comes from running them. And so, this was kind of the first company we'd seen and really just like an incredibly passionate founder about solving this very specific pain point.

In just making it very easy to build an accounting system and understand like where your money is going, what your P and L is and all of this if it's on-chain. So, we've been really, really excited about it.

NA: Oh, super cool. No, it definitely sounds interesting. But that's all the questions I had Regan. I really appreciate your time and I'm looking forward to seeing what else Lattice does next.

RB: Thank you. Yeah, I really appreciate you having me on and hopefully, we have some good stuff in the pipeline.

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Thanks for reading The Inquisitive VC! Subscribe for free to receive new posts and support my work.

Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host and guests may personally own tokens or be an investor in projects that are mentioned on the podcast.

We talk about his journey to crypto, how DeFi Alliance formed, why DAOs are hard, what he is excited about in crypto, incentives for teams and more.

The podcast is also available on your favourite podcast sources like Spotify, Apple and Youtube!

NA: Super keen to start with you know, how you entered the crypto world, what really got you into it and that process that you took to start going full time?

IK: Yeah, I got into crypto roughly around 2013 and it was primarily driven by, there are a few handful of key people that had started to advocate for Bitcoin. One of those leads was Marc Andreessen and he used to tout Bitcoin all the time on Twitter. In fact, he came out with an article that talked about the value proposition of Bitcoin and how it can change fundamentally for the human good. And so, I started diving deeper and realized, you know, Bitcoin is something that could really solve some of the key issues that we run into globally. And so started to invest in Bitcoin, participated in the ETH ICO. I was lucky enough to do, you know, I went out and interviewed and did a project for Coinbase.

It didn't work there but did a project there and that really kind of gave me the understanding of where we are in the space. And since then I went joined Microsoft, worked within Microsoft there, and then after Microsoft, we launched Volt Capital with Soona and then after that was Alliance.

NA: Gotcha. And then how did the concept and idea for DeFi Alliance come across and how did you go about executing on it?

IK: Yeah. The biggest problem back in 2017 was, you know, many of the DeFi startups were looking for product market fit, and product market fit and DeFi can mean many things, but one is, you know, ample liquidity.

Two is products that actually scale and three is being able to grow resourcefully. And so, on the liquidity side, this is actually a big challenge in DeFi one because smart contracts were unaudited. There wasn't really an incentive to provide liquidity which Compound engineered in early 2020.

And so, we're in this period where DeFi was there, but it wasn’t growing. And I live in Chicago and we're home to 60% of the market makers globally. So, we have Jump Trading, Cumberland and many others that are very active in the crypto landscape. In fact, if you look at all of the industries globally market makers were one of the first to adopt crypto as early as 2012-2013.

And so they were pretty savvy to begin with. And so speaking with them gave me a lot of insight into why DeFi wasn't on their list of opportunities and started to like work with them, connecting them to DeFi start-ups over time. And it turns out appetite grew both ways and we had enough demand from both sides that we launched a Chicago DeFi Alliance in early 2020.

And since then, we've created an incredible program that helps DeFi protocols, scale, connect with market makers, think about regulatory concerns, thinking about product feedback and then ultimately help bootstrap your network and community. And so that's kind of how we started.

NA: You recently went through the change of becoming Alliance DAO. How did that come about and what was the thinking around, becoming a DAO and, and how exactly is the program, any different, if it is compared to how it was when you were DeFi Alliance?

IK: Yeah. You know, transitioning to a DAO, you know, it sounds easy, but it's actually really, really hard. And the reason why it's hard is because, number one is regulation. So, a lot of the activities that we do in crypto, it's considered in some sort of like regulatory framework.

An example of this is investing out of a DAO, you have to have a structured fund in place that's compliant, and if you don't then investing out of a DAO just means that you're taking investor capital and you could use it in ways that isn't mandated by a fund and it's not validated or within the regulatory landscape that you reside in.

And so, there's a lot of work that goes behind what a DAO would look like from a perspective of jurisdiction and the regulatory landscape there. And then number two is how is it sufficiently decentralized? What we're seeing today is if you look at the DAOs in the space, many of them, they look like DAOs from the outside, but on the backend, they tend to be, you know, structured products.

They tend to be just like funds. They aren't, you know what I call what DAOs should look like moving forward. And I think a lot of this is on the regulatory side, which we are, I would say on the bleeding edge in regard to how we think we should design it. So, I would say number one is regulations is one of the biggest problems that I see in our transition to DAOs.

And then number two is what defines the community and how does that community interact with the core engine of the DAO? And what I mean by the core engine is that every DAO should be a product first DAO. If you're running a DAO with a discord, a multi-sig, those are great tools, but those tools aren't going to set you apart from another DAO.

And ultimately, so the DAO should have a superpower and that superpower is what allows it to do in terms of monetization. And that monetization will allow the community to grow because there's you know, kind of an area of focus for the DAO and the type of community that you bring on board based on that superpower is also very important.

And so, like just opening the door, allowing anyone to join your discord for us, it's a very big no-no. We should be hyper-focused on the community that you want to curate and then how will it enable your product to prosper? And so, we think a lot about the types of community members that we allow into our, into our program.

And I'd say finally it's about the way to incentivize and grow the community over time. I won't go much into details here, but there's a lot of work that needs to be done in a way that both helps the community, but then also it's done in a way that works well for the jurisdiction that you live in.

NA: Got it. No, super interesting. And I guess this builds upon something you tweeted a couple of days ago that you've come to the conclusion that most DAOs will probably fail. That's based on, you know, the points that you mentioned before, but how do you think that will come across and how quickly do you think we'll start seeing like these DAOs starting to fail?

IK: I think we won't see any spectacular failures. And the reason for that is because like most of the DAOs that are out will... So if you look at, like, if you read a Cobies article regarding web three attention. Attention fades in and out all the time. Maybe exciting one period may not be exciting and people forget about it.

When I ask people about yearn finance and the success that it had in early summer people have already forgotten about it. And so, to think about like the speed of iteration and product development in crypto is probably a 10X compared to any other industry and with that also is attention.

And the way I think about DAOs is similar in that nature, which is, you know, we'll all remember all the DAOs that were launched. And then the next phase, we'll all forget about all the DAOs that launched. And so, I think over time will fizzle out on its own and we'll think about whatever's hot on next.

NA: Yeah. Gotcha. I guess on a personal level, what areas are you currently most excited about?

IK: There's so many. The first for me is If you, and this is at the prescient with where we are the types of the living environment, where we're in right now, which is the fact that, you know, governments all across the globe have access to pipes, right?

Internet pipes, financial pipes, that could allow dis-allow people to participate in the global economy. And, and I think this is important because products should be built and it should be given to people. It should be accessible to anyone across the globe. It shouldn't be up to the governments to think that they can allow their citizens to use certain types of products.

It isn't up to the governments. It should be up to the people and I believe all of what happened the past two years, three years since, since COVID is the continuous stress test of why governments shouldn't be allowed to take control of people, you know, their citizens lives when it comes to financial decisions, whether it's product decisions, whether it's DNA decisions and I think more and more founders think this.

Yeah. And so the types of products that, that I'm most excited about is, you know, product design around users first that's accessible at any point at any time without any censorship resistance. And we're starting to see that today. There's a company called Glass Protocol that allows you to upload any video that you want without any censorship resistance. So you can upload a video and you don't have to worry about, you know, it being at taken down now there's opposite concerns on the other side of the tech content. And this is where I think community is incredibly important where they can vote in the type of content that you want or disallow content that is inappropriate for the community.

It should ultimately be up to the community to decide the type of content that you want. That's just one example of how I think about the types of startups I'm most interested in. There's obviously a lot happening in the NFT space and if you think about NFTs generally they create this interesting element on the internet that allows you to collectively own parts of content or ownership of different aspects of culture. And so an example of this is music.

Music for a long period of time has been ultimately owned by record labels. And now if you think about where we are in the kind of music industry space is a fact, a lot of that power is concentrated to streaming platforms. And I think the next iteration of this is going to be creating incentives in a way that allows artists to formally connect with the community directly while incentivizing both to continuously participate in the content that's been derived out of the creator in a way that's aligned with the communities as well.

And so, we're going to start to see interesting dynamics there, whether it's DAOs that kind of purchase music, DAOs that ultimately own the infrastructure that enables artists to create music and then also monetize music. Whether it's just, you know minting platforms like Catalog that allow you to mint NFTs as a way to create alignment.  But we're going to see a lot of cool things that are gonna be coming out of that space.

NA: Yep. No, I definitely agree, there's a lot of interesting things happening there. And what about DeFi? What are you seeing in terms of new development within DeFi?

IK: I think where we are in the DeFi space is, you know, DeFi has been around for about two years now, right?

It was one of the first sectors to be explored and within that mindshare went to all of the different areas that started to explore afterwards. So, with DeFi, you started to see like NFTs, then you started to see, you know, bridging infrastructure. Now you're seeing DAOs, now you're seeing it back into like music NFTs.

But ultimately what's happening with the DeFi landscape today, it's getting more complex. And so, you starting to see more and more DeFi protocols are either looking to aggregate many of these experiences into one protocol or creating exotic products that mirror products that we're seeing in the traditional market space. We're starting to see capital efficiency being worked on.

And what I mean by capital efficiency is if you look at like Aave, Compound, you know, you need to post collateral to take a loan out. And, you know, many of it is like, between a hundred to 300% collateral needed to take out a loan, but imagine if you could take collateral out on 50% of what you do. So, there are many start-ups that are working on this space. One is Spectral and Spectral ultimately is a start-up that will read your wallet history and assign a score of some sort, right?

And this score will allow you to take you know, what I would call loans that may be risky for anyone else, but for the person, for this person, he may have great repayment history and so he can take on a riskier loan knowing that, you know, he has paid off loans in the past and capital efficiency, I think can unlock a lot of interesting things.

And so like, if you look at like Aave, you know, let's say it has $20 billion in total locked value. Imagine if you only need a 10 billion to achieve the same goal. And I'll kind of make one more example, which is, Uniswap V3. V2 to V3, huge fundamental change, right?

You're able to provide liquidity on concentration bands, right? Between different price points, which requires less liquidity in order for you to achieve the same efficiency or slippage and that's huge, in my opinion. They went from like 50% in market share to 80% in market share of trading volume.

And so just imagine unlocking capital efficiency in regard to all of the other DeFi protocols you can achieve scale. And so I think that's one area that I'm most excited about.

NA: Yeah, no, I think that's a really interesting point. And when you're looking at lot of these crypto companies coming through the program, how do you, how do you assess the best ones that you start to admit in? Is there like specific core things you're looking for or is it a very case by case?

IK: There's many areas that we look for when we think about the types of founders that we want in our program. The first is founder’s resiliency. We do like a cultural test to understand the types of founders that would most align with our programming.

And what we found is, you know, those that are most resilient are the ones that will continue to succeed without any issues. And the thing is in crypto, let's take Andre as an example, he's been building in crypto for, let's say four or five years. Right. And he started receiving a lot of success after the launch of yearn and then all the subsequent products afterwards and he left.

And not saying this is a bad thing, but resilience is needed in order for you to continue building products, because, and I'm actually going to write a tweet about this, but if you look at like web3 founders versus web2 founders, they're fundamentally very, very different composites, right?

Web2 they don't receive liquidity for all the hard work they put in for ten years, if they're lucky. Customer feedback loop is very, very long. Like for them to just get feedback on a product could take them a year, six months a year. Right. If you think about like the community, we call it community, but it's actually not community, they're also your investors. And so, like not only do you have to like, make them happy as an investor, but you also have to make them happy as a customer. And it gets very emotional. What I call this as customer acquisition strategy on leverage because it can either help you 10X, or it can kill your product 10X.

And so being that close to the sun or to the customers can be very daunting on a founder because it's just noise for them and they have to be resilient. And so what we look for is resilience number one. Number two is, what we look for is creativity. And creativity can be, you know, out of box.

You know how, like in order for a founder to succeed in crypto, you have to be creative and creative can mean many, many things. Right. But it means like, how do you take something that could be very like, let's talk, talk about regulations. Regulations obviously is one of the hardest areas for a founder to build for, because it changes, every day it changes and your life is on the line. You could be jailed, you could be, and that's happening and nobody wants to be subpoenaed. And so, you have to create ways where your product is justifiable in the jurisdictions that you live in globally.

And then at the same time is able to be successful and that's very hard to do. And so we look for creativity. And then when it comes to the product itself, obviously we look at product and the type of product they're building and it, whether it fits within the overarching narrative of where we are headed towards and along with that, whether or not the product itself can be validated.

And then number four, I mean, there's many, but I'm just giving you high level of four points. And number four is the team because the team is going to be very important in regards to how you achieve your goals. The way I think about team is, the types of people you bring onto your team can ultimately dictate whether or not you're able to execute and solve the problems that are at hand, whether it's hurdles that you're going to be going to through as a team whether it's leadership, can the team ultimately source clarity in regards to where are they going to be building and how are they going to be building and can they cohesively build quickly enough so that they can get product market fit, speed execution, all of that matters. And so, team is like number four. So those are the four areas that we look for when start-ups apply to our program.

NA: Very interesting. And then I guess of the four points, one is about founder resiliency, fourth about team. How do you think about, you know, incentives when you're talking to founders and teams building out these projects. They’re in the early days? If you're trying to design like a token specific project, how do you really think about those incentives? You know, now when we see someone like Andre also leaving like crypto within a short timeframe, right? If we are comparing to web2 and the development times of having companies and exiting, how do you think about those incentives and having long-term focus, builders and teams?

IK: Yeah, I think we're quickly learning that, you know, incentives need to be given from a long-term perspective. Tokens are great.

But fundamentally, if you look at what happened in the 1999-2000 bubble or the internet bubble, people that IPOed, IPOed after building company within one to two years, and we had this burst. Anything familiar with that, yeah. So what happened? Well, the SEC came in, everyone else came in and decided that there needs to be a prolonged period, where products companies have to, and there's certain element of like checklist of the types of start-ups that can IPO. And over time that grew, right. So it went from two years to IPO after burst. It took four, six, now we're at like 10. Right. And I think that'll kind of scale into like more to that, 6 to 10, 7 to 10.

But that's what happened and because fundamentally, if you want to build a company that lives on for decades, then you have to create incentives in a way that aligns with that type of structure. And that can only happen if the founder is in it to win it for the long-term. And the only way you do that is prolonging the incentives.

So in fact, in our community I would say within our programming, every time we get asked this question, we tell all of our founders to do it as to create incentives as long as possible. And so, we've seen startups that have said two years, six months and we decided, you know, minimum is four years, minimum is four years.

And so, every founder that joins our program that did that, designed it have done at least minimum four years. And look, I'm an investor, right? Like you say, that we're investors and we all have our own alignment, but for me, we want to build start-ups that live on beyond our time period. Right.

And in order for us to do that, we have to create incentives in a way that can do that. And we want to build multi-generational start-ups and inner for us to do that we have to create the right incentives.

NA:  I'm interested to hear like running into our final questions what would be, I guess the biggest advice you could give a new founder coming into crypto?

IK: I would And I'm going to say it because I think we're in the phase where we're getting a lot of web2 founders and FAANG employees coming into crypto is to one before you start a startup get involved in a community. Talk to other founders in web3, find pain points that you see fit that could be solved. It's very easy to build, you know, I want to join web3 and I'm going to build a product and the product is going to be, you know, what's missing, you know, DeFi for everyone.

So, I'm going to build a DeFi app. Funny enough, this is actually I get pitched us a lot and that gives me a signal, right? The signal is like you haven't and not saying this is bad, that you haven't spent enough time in crypto or web3 to understand all the pain points there are because there's so many pain points in crypto today.

And so, spend time in crypto, learn, talk to other founders, that have been building in the space for a very long time. Find an area that you're most excited about, don't just build crypto because everyone else is building a crypto, build it because it aligns internally with your north star.

Everyone has their own north star in terms of excitement. My north star is ultimately building for a civilization that doesn't rely on, intermediaries and ultimately allows them to access financial products, services across the board without any intermediaries. And I think that's very important moving forward.

But yeah, find your north star and then validate your idea and build out an MVP. And the MVP will guide you to the rest.

NA: Right. No, I love that. I think there were some amazing points. And finally, and I think this might be a little difficult for you, but could you talk about the latest investment? You know, you or Alliance DAO have made and why did you make it.

IK: The latest investment that we made. Ah, I will give you one. It's not public yet. But I'll say it anyways, Paper.xyz. They are essentially building an on-ramp/off-ramp for NFT marketplaces. And, and if you look at what's happening with OpenSea, OpenSea is an incredible marketplace.

It offers you know, NFTs from a to z. But there's also a lot of issues. And the issue is obviously is because of its growth, right? Everybody is depending on the same level of support, but when you have, you know, let's say 25 million people that all want access to the same product, obviously there's going to be, you know, some disruption in the product that's being delivered which is a great problem to have in my opinion. And so over time, the way I see that NFT marketplace or NFT space is that it will unbundle. They'll unbundle in a way that is going to bring NFTs in different verticals. It's going to bring it to life.

So what I mean by that is if you look at all, if you look at the geography across the globe NFTs mean very, very different things in many different regions. And here’s a cool signal that I saw, which Azukis, right? Azukis in parallel attracted east Eastern investors and Western investors.

That was quote unquote, the first NFT that brought both communities together. And it also tells you something else. It also tells you that most of the NFTs that had success, didn't attract the Eastern communities. Why is that? Well, they have a different culture, right? They have different visual aesthetics that they're attracted to. They have different values. And if we're talking about NFTs being cultural phenomena, then obviously culture is going to become a large part of how we see NFTs. And if that's the case, then we can easily deduce that and like OpenSea could become unbundled and we'll see different geographic marketplaces.

And then we'll also see different verticals. You need a checkout solution that allows anyone to buy NFTs. And so that's what Paper solves. Paper will allow anyone to create a checkout solution that allows them, their customers to purchase NFTs and checkout in two to three steps.

And this is a big problem today. Like you need on fiat on-ramps/off-ramps you need, certain types of licenses, you know, different infrastructure that's provided and being able to create an easy out of the box solution that allows any developer to write a few lines of code and create an a checkout per space is very powerful.

And so Paper is one of those investments I'm very excited about that we did recently.

NA: Very cool. No, I definitely see it and it sounds super interesting. And that's all the questions I had for today and run thanks so much for coming on. Really appreciate your time. And I think we've learned a lot today about, you know, Alliance and your thinking around a lot of the interesting things happening in crypto. Where where's the best place that people can find you online?

IK: Yeah, you can find me on Twitter at Lmrankhan. It's an L instead of an I because the I was taken. So I ended up capturing that Twitter handle, but you could probably type in Imran Khan Alliance DAO, and you’ll see me come up.

NA: Okay, fantastic. We'll put those in the, in the notes as well. But yeah, thanks so much for jumping on.

IK: Yeah. Likewise. Thank you.

Follow me and Imran on Twitter here!

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We talk about her journey in crypto, her time in China, investing in crypto and more!

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NA: We've been trying to set this up for a while, so it was great to finally have you on.

DOH: Yeah, I'm so excited. I'm sorry, it took so long. It's just been crazy and the market's been booming, so there's just been a lot to do.

NA: Yeah, fair enough. I'm keen to start with your background and your journey to crypto?

DOH: Yes. So, it's been a very long journey. I feel like I'm 85 years old, to be honest. I have been in crypto technically since I graduated college, I went to Columbia undergrad, went to Columbia College. I studied comparative literature and human rights. So, I was really interested in working for social good.

I did an internship with the UN. I thought that I would actually be a lawyer, probably a human rights lawyer, kind of like Amal Clooney and I was prepped to do that. I mean, I'd taken the standardized test to do that, the LSAT etc. And then I had a very good friend, a close friend actually, who works in crypto still, who was an early Bitcoin investor and an early Ethereum investor as well.

And so, he turned me on to crypto and told me that I needed to buy Bitcoin ASAP. I just became enamoured with everything he was saying, my mother was a computer scientist and my brother studied that in school. And so, I felt like I understood the value prop for crypto pretty immediately because in my family that kind of technology had been really emphasized both through their work experience and then through what they had wanted us to study. And even though I didn't major in it, I did know how to code and so I could read the white paper and understand it, like the lines of C.

But anyway, I started going down a rabbit hole. I started reading everything I could. Trying to actually go to meetups and meet people in New York at this time in 2016- 2017, it was really not cool. Like I would tell my friends that I wanted to do this for a living and people didn't understand what I was saying.

And so, I figured I should just start a small meetup to try and meet other people because crypto is a very peer to peer business. So, started doing very small meetups and then through that met a lot of other people that were really, really interested. And through that ended up actually meeting once a week on Saturdays to read new white papers that had been published.

Think about crypto and talk about it both philosophically and academically, cause some people in the group were academics. And through that group actually started publishing research papers that got published by CUNY, City University of New York. And then another one that got published by Ledger, which is Carnegie Mellon's blockchain journal out of their computer science department.

And then people started reading those papers and so when they started reading those, they were, you know, kind of interested in chatting about having us work with them more formally. And that's how I kind of started in advisory, but very organically at first and as did my close friends. So that ended up coinciding perfectly with the ICO boom. Because it was, at that time, a lot of people needed help with their white papers or their code, etc. Or even just marketing and like knowing who to talk to, or which meetups to go to. Since everything was still relatively insular, even when there was like this huge uptick and people that were interested in the market, of course as well.

But I knew I didn't want to do that forever, that wasn't a long-term goal to have an advisory. It was more like a very medium-term goal to get to either a project that I thought I would really enjoy being an early person at or to do something else and I'd always been interested in VC, but I didn't want to do trad VC. Right?

So, I kind of was more interested in doing some sort of like formalized crypto investment. But again, at the time, you know, there were firms that were raising money, there were accelerators that were coming out, you know, every few weeks but it wasn't like a career path, right?

It's not like I could've called a Columbia alum and just been like, “oh, Hey, like, you know, that crypto VC firm you've been out for 10 years.” Right. Because the space is just so early. So, I actually decided to move to China, which sounds crazy, but I've been to China many times through my undergrad. And I really came to feel that China and East Asia in particular, were going to be really important for crypto.

This was mostly a gut hunch, but everyone was saying that a lot of the volumes were coming from East Asia anyways. I knew nobody who lived in Beijing, but I applied for Tsinghua University to get my MBA and then I got a full scholarship. So I figured, okay, this will be a good opportunity. This was around the time the Schwarzman had been created also a few years prior.

So I thought, okay, like more and more people in the west are gonna understand that Tsinghua was this amazing school. And I really felt like in my life, I wouldn't just want a really good degree from the west. I would want a really good degree from the east because there are just so many more people, you know, China's the most populous country on earth.

I figured, okay. I'll just hedge my bets. Things have been going well, but let me actually just uproot my life, move to a city where I know exactly zero people and see what happens. So, the week before I left to go to China, I actually ran into an old friend of mine called Maomao Hu, he'd been in crypto for years.

And so we had actually just met it like meetups and through friends. He said, what are you doing? And I said, oh, I'm moving to Beijing. And he said, oh, I moved there last month. Why don't you come work for me at Eigen Capital this crypto hedge fund I'm now a partner at?

And I just said, okay, great. And like the day that I moved there, I like went to the office, got lunch and just started immediately. And it was like just unbelievable, kind of how seamless that whole situation became. Because I kind of left what had started in 2018 as like a bear market left, like this bull market advisory side to work at this crypto hedge fund that was kind of pivoting to focus on doing OTC.

They'd had a lot of different lines of businesses, but own tons and tons of Bitcoin for various reasons. And so, most of the employees were actually getting paid in Bitcoin. The firm was headquartered in Hong Kong, OTC was the main focus for what I was doing, but we had a market-making desk for altcoins, and then we had an advisory business.

So, got to work on those sides as well. And at the time there was this other small, like upstart that's doing market-making in Hong Kong called Alameda, Alameda Research as you know. And it was just a really interesting time to be doing like that kind of work in Asia, mostly because it was a little bit scary because so many people fled, right? Like a lot of people, I knew that have been working in crypto, left and said, this is a scam, and the government wasn't very friendly about crypto at the time.

I mean, even within Beijing, there were laws for different city districts that you couldn't even speak about crypto or disseminate information about it.

So, you know technically it wasn't legal to sell Bitcoin at that time. I thought a lot about the future and thought, you know what? I should probably go back, go home back to New York because I finished most of my courses. I love the people I've met. I love my professors. I love what I learned. I love the Chinese language. I love the food. I love the culture. You know, it's just that the government is making this a little hard.

But it was the best experience I could have had because I realized that it doesn't matter how hard the government tries to intimidate people.

People will be selling Bitcoin in Beijing and there will be lots of people that will be buying it. And so that was the biggest, like if you wanted a signal to hodl, that to me was like, I just remember people would come to our office and they would talk about how they would, and we can sell, we could sell a Bitcoin with very high fees because people were so desperate basically to just not hold their RMB.

And when I was a student there, the RMB was actually fluctuating enough such that like my first month, I remember if I had converted my cash to RMB, like one week prior to the time that I did to like to get my money into my Chinese bank account that I would have had like 17 to 25% more worth of it or something like that, do you get what I'm saying? Yeah. It was actually so volatile for certain weeks, Bitcoin was more stable, which is absurd to think about, right. Because China's the second-largest economy, well, depending on how you view it now, probably the largest and people were willing to basically break the law to hedge because there was lots and lots of talk about how in 2020 there was going to be this depression level event.  

And so to me, it was so hard not to just be bullish and to feel like I knew something that other people didn't know after leaving China.  It's interesting too because people in the US didn't understand yet because I was chatting with some friends Saturday about this, who are crypto investors. The part of the reason people from developing, and China's not a developing country, but a lot of people who got really wealthy hodling Bitcoin or holding Bitcoin are people who have at least a heritage or background in countries where the currency isn't stable. Right?

So like Andreas Antonopoulos as an example, right. He bought after Greece had to be bailed out. Right. So, you know, he's Greek. So, he has first-hand experience, you know, I'm half Nicaraguan. So, for me, like Bitcoin makes sense, but if you're totally like true blue American, I can understand why you just don't understand why you don't want your dollars. Right? Because everything worked out for you. I returned from Asia being like whatever was going on there I think that's the future and I'm always bullish on East Asia. in particularly like Chinese and Singaporean projects.

NA: Yeah, that's an amazing experience. And I can see how you think that you have this secret insight that probably not everyone understands and like how you mentioned people in the US probably don't get it as much as other countries who have faced currency situations, that's an example. I use a lot as well to explain it to people in New Zealand because the currency here and the financial system is so strong you don't really get why you need Bitcoin.

DOH: Yeah. And you know, it's interesting too, because these aren't just currencies. It's like, you're actually appending capitalism and you're upending a certain type of capitalism. That, to be honest, the US and a lot of Western countries have been desperate to keep, and you're totally redefining paradigms for like, even how things like how investment occurs or how value accrues within entities and who gets exposure to most of the value.

Right? So that's why I love crypto because it makes a lot more things egalitarian that weren't before. And that's in contrast to the reputation that we have for being very insular and only wanting to chat with each other. And, it’s very interesting that we have that rep, but then this is all about making society more equal.

NA: So, you came back to the States after an interesting experience in China and then what happened?

DOH: Yeah. So, I ended up working at Iconic Holding, a German crypto asset management firm that Michael Novogratz and Christian Angermayer and Allan Howard had invested into and or have actually and was very excited about working with that team because they had been known to be a very like marquee accelerator in the space.

And they still, I believe hold the best hit rate out of a European accelerator for blockchain. I'd have to double-check it you know, that was about 10 months ago, but yeah, I mean every single investment they had pre-seeded or seeded raised a Series A except for one. So, I think the hit rate was 96%.

So, I loved their model. A lot of the things that they were about to start doing I was very, very excited to work on. So, one of those things was a crypto hedge fund platform. So, we found that there were a lot of like traders or young, usually young men, to be honest, that were trading crypto.

And they wanted to start a fund because they were approached by people that knew what the returns were. They just didn't have expertise in fund admin audit like anything, most of them couldn't even get bank accounts. And so, a lot of what we started doing was realizing that we could create this place for people to come and we would do all of the setup and do basically just service them.

I was there for almost two years. And I really loved the team. I think that they're awesome. And yeah, it was great. And you know, still, actually, chat with them quite often, so, yeah.

NA: Yep. Okay. So that I can definitely see how that experience would have been super helpful in your career as an investor. Especially after meeting a lot of interesting people and understanding strategies. So, I think following Iconic, you got more actively involved as an active investor. And so how was that experience?

You know, your first time being a more active VC style investor.

DOH: Yeah. So, after Iconic, well during Iconic, I was a founding member and researcher. I wouldn't necessarily say co-founder, but I was one of the first researchers at a lab at Stanford called the Future of Digital Currency Initiative.

I started to realize not just while I was at Iconic, but also through Stanford, that I now had this network that I could go and utilize to be a really active VC. And so I really was excited about that prospect because to me and I just, decided to start doing a lot more active VC and ended up working at Struck Capital Crypto, which was a hedge fund, but they did early-stage crypto VC and found that to be so educational because it was like the first time that I could get my hands wet in terms of cutting checks and meeting founders and doing diligence and learning paradigms for investing from both trad VC because there is a traditional venture firm called Struck Capital, that's managed by the same individual, Adam Struck and ended up finding that I really enjoyed the work that I was doing. And so by spending so much time, like trying to find other companies and, and kind of being astonished at the pace of how things move.

I mean, crypto deals, the round is oversubscribed, like that night yeah. I have friends who are founders in the space and they have stated that half of the investors in their round, didn't even get on the phone with them and just sent them money and I've had founders tell me that people like DM them on Twitter and were like, “Hey, where can I send my USDC?” Like, you know, peoples diligence seems to have gone by the wayside. It's one of the reasons these deals are moving at lightning speed, but the more I was in the market, the more I realized that being an aggressive investor is the only, well, it's not the only way to get the highest upside, but it's a very good strategy.

So, I left Struck last month and actually started this month as Head of Ventures at Advanced Blockchain AG, which is a public company headquartered in Berlin and we are very, very aggressive.

We've been around since I believe the founding team has been around since 2013, and they're basically as OG crypto as you could get.  Through this new role, I'm actually going to be very aggressive And I'm very excited also because we have an incubation side, we have a research arm of about 10 people.

We have a content team; we have an in-house auditing firm. We have all the tools. We have 56 engineers that are full-time staff that we deploy to our port co's. And everyone in the business, well, the vast majority of people have been doing crypto for a very long time. So, it feels very much like the perfect storm of both resources and strategy to make the best possible bets that we could.

Our goal is to actually keep incubating, keep iterating, and I'm hoping to cut. Like we cut, you know, almost this year, thus far, we've cut almost 20 checks actually.

But I'm hoping to double that or more in the next 12 months. I'm really grateful. And yeah, I mean, we can talk through that if you'd like, and if you have any questions about some of the stuff that we've incubated and some of the stuff that we're excited about specifically because the brands of Advanced Blockchain AG has been to do decentralized finance and interoperability plays.

But now we're actually hoping to do plays like that, but in the metaverse or in NFTs and gaming. And so you know I'm kind of leading the way for us to start investing in gaming companies and we might do some JVs with other funds and we're investigating that, but we've been really grateful for the investments we've been able to make, both on the token and the equity side. So, you know, equity investments we've done zCloak, which does zero-knowledge proof as a service for Polkadot. We've done Peaq which actually helps businesses that have well basically helps like IoT to become like web3.

And on the token side, obviously DOT, but Arweave, Fractal, Manta Network, Fei Protocol, Sentinel, Apricot Finance, Element Finance. Obel, which is a staking infrastructure provider for decentralized staking. Yeah. And, you know, we incubated a lot of companies as well, so yeah,

NA: I love the resource that you are definitely able to provide portfolio companies that's super helpful. I'm keen to kind of talk a little bit more about specifically, what areas that you're going to be looking at and what's exciting you. I know you mentioned you'll be focusing a bit more on gaming.

What does that really look like? I'd love to hear your thoughts on the current landscape that you're seeing around crypto games.

DOH: Yeah. So the one thing I've always said is I didn't want to invest in a game because I don't have expertise in which games are going to be good. Right? Like, I don't understand how the people that invested in Axie Infinity just like understood that what they were gonna do was gonna work.

And so, to me, I'm actually much more excited about investing in say like a gaming studio. And those have been popping up for blockchain games.

So, I do think we are open to also investing in games, but I think we'd have to think through the strategy of okay, let's assume 99% of these won't work. Whereas when we invest in DeFi, like a DeFi protocol or something, we never assumed that because we do so much of our own research and we have subject matter experts, even though most startup investments fail on average we don't feel that way about companies we're incubating right.

So I think part of the reason I don't want to do the games is because then we'd have to just admit that we don't necessarily know why one game is better than the other, which is a very slippery slope as an investor. And so, I think also I really like tools. Like, you know, I'm looking at a lot of YGG competitors, but trying to figure out why, like what would make, and it's not a zero-sum game, right? Like, I think YGG will be around forever, but just trying to understand why so many people have onboarded on to you know, one platform versus the other, and trying to look at what's driving the growth.

The one thing I've learned in this business is to, well it's kind of threefold first that the team is really important. So it's more important than in traditional VC, I think because things are a lot more nebulous and pivots are a lot more common and things are so competitive that they quickly get crowded.

So, then you have to have people that are creative and can think on their feet and can change. And there's also so much money that gets flooded in, but actually to be honest, don't believe as much in moats, like, and so in trad VC, you'll hear people say, oh, well, like what's the moat for this product?

I don't think in crypto moats matter, I think that what matters is people that can iterate quickly and have a lot of momentum behind themselves market themselves, get a critical mass of users and then find a way to use those users for either the same product or a different product down the line. Because crypto is just evolving so much more rapidly than other businesses that to try and use, like paradigms that have been successful in other industries or, you know, is impossible.

So for me, you know, we're hoping to invest in a gaming studio. We're going to announce probably in the next few weeks and a large part of that wasn't just that I went through the competitive landscape with the team and ask them to explain why they were better or how they were different or explain if they were going to work with that company, how they would do so and why, but it was because of the people that were on the team.

And also the way that they were like responding to those questions. Right? So, my biggest pet peeve is when people say that there aren't competitors or that they don't know of them, or if they really don't know of them because if you do this 20 hours a day, you should have as much info about who you're competing with.

And then second, when they get defensive and don't actually see the competitor as the competitor. Because to me, it's like, nobody's special, talk about egalitarian right. I mean, the playing field, is so level, really young kids can compete with people who've been in crypto for 15 years because that's just the nature of this business.

So, then it's very hard to not feel like the person that's so aware of the market, they know every intricacy of their competitor is going to do better than someone who like say may have more experience, etc. So, I think, and a lot of people, you know, if you're deligencing a team, right?

Like a lot of them don't even have LinkedIn anymore. They just have Twitter. A lot of them are anonymous now. And so, a lot of that has to be based on the conversation.

NA: Yeah, completely agreed.  Everything is just so different in crypto. It's hard to bring, I guess, that traditional mindset or how things used to be done and apply it to crypto because it is so different.

DOH: It’s so different. I mean, like we could do a whole another episode about, you know, once, once I start putting out more of my own stuff we can talk through.

A lot of things that I think are going to change like the future of labour and already have, and why like the type of capitalism that we've had just has not worked for the vast majority of people that have lived in it. And I'm so passionate about that. I mean, like on my own I’ve written a full book about crypto and capitalism and thought about publishing it.

And, you know, I'm thinking more seriously about maybe putting it out as like bits into a medium article because it's very long and just having parts and, you know, just kind of having that to be integral to help people understand how I see crypto.

NA: Love that, I think we should wrap it up there, Dylan, I'm super keen to probably have another long conversation like this at some point to keep this conversation going. But I really appreciate your time and appreciate you coming on.

DOH: Thank you, Nawaz. I'm so happy we finally found time and you're a great interviewer and I like your podcast too, so yeah. Thank you so much.

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Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host and guests may personally own tokens or be an investor in projects that are mentioned on the podcast.

NA: Thanks for coming on. And I'd love to start with your background and how you kind of find your way to venture capital.

NG: Yeah, sure thing. It's great to be here and happy to talk about it. I don't know that anybody has a super straight line into venture capital. I think a lot of people come from a lot of different directions.

Mine was not a straight line at all. I started out my career working in urban planning. I was always interested in cities and how cities get built and designed and changed. And my first job was working at urban planning, consulting firm, like helping cities, you know designed public spaces.

But I was always interested in technology and design and products, just like I was interested in cities and places and through a bunch of twists and turns, I ended up really focusing more of my career on the tech side. I was a self-taught developer. I did a lot of work, like local, small businesses and startups doing web development eventually ended up in a leadership position at a tech company in New York that was doing software development and sort of media focused on urban issues and urban infrastructure.

So it was kind of the connection of my two interests. I did that for about seven years and during that time I learned a lot about open source and open data and kind of I guess the politics of technology in addition to you know, the mechanics and issues of running a company. And after doing that, I ended up working at USV.

And my initial role at USV was not focused on investing. It was actually focusing more on the policy implications of startups and tech companies just as kind of like a side project and you know, over a period of time, I got more and more involved in the operating side of the fund and the portfolio.

As USV got more interested in crypto this is going back maybe 2012-2013. I realized that crypto is a kind of an amazing intersection of all my interests too because it takes the public infrastructure of like digital platforms and reshapes it as sort of an open public Democratic system as opposed to something controlled by a single company. And so that was conceptually like really this joining of my interest in cities and places and like governance process and open technologies and like the internet. And so, I really got drawn into that as we did as a firm and have been pursuing that line of inquiry among others for the past 10 years at USV.

NA: That's super interesting. Yeah. I think it's such a different journey, as you said, everyone has quite a different journey, but I guess urban planning to VC is quite interesting.

NG: Yeah. I think it is and I guess I think of interesting and maybe different I kind of think of all of it as public infrastructure, right? The streets that we drive on, the trains that we ride on, the power that we use, the utilities that we use are not that different than the switches and routers and packets and databases and apps that underlying digitalize. And so, you know, for me, it all kind of blends together as like a physical world infrastructure and digital world infrastructure and you know, looking for opportunities to build new and interesting and good things on top of it.

NA: Yeah. I think I'm getting ahead of myself here, but with your urban planning experience, how do you see DAOs and how they're kind of functioning right now?

NG: Yeah. DAOs are fascinating. You know and crypto in general, it brings a sort of democratization of governance to technology platforms and that predates DAOs and that was a very flexible term.

But if you think about DAO as a group of stakeholders, you know, governing a technical system it can be formed in any way. It can be formed to look like a company. It can be formed to look like a representative democracy. It could be formed to look like a direct democracy. It could be formed to look like loose chaos.

And so, I think there are many structures that can be implemented using the DAO. What's interesting is that you can implement any of those structures natively on-chain. Which just, I think opens up a lot of design space. You know, I think you could argue, people do argue that you know the financial side of crypto is just reinventing finance and using different words and that the kind of group organizing a part of crypto DAOs and governance is just reinventing the same governance concepts that were the bedrock of politics over the last of thousands of years. I think there's some truth to that.

To me, I think the just what's getting everybody so excited is that it never was possible before for a group to manage a technical system where that group wasn't either a company with like, you know, a closed corporate structure or like a really loose affiliation of contributors, say around an open-source project with no economics and no like binding stake. So, I think it's just kind of fascinating that there's this new space in the middle of those two things.

That's why I'm excited, I guess, but there's a lot to figure out.

NA: No, for sure. And I think as far as I've seen, USV has invested in about 3 DAOs, right now, can you talk about if an investment in a DAO, how it is different from an investment in a company and how you think about that?

NG: Yeah, I mean, I think there we’re still like figuring out the right way of describing the landscape of DAOs. DAOs fall into a couple of different buckets. There are DAOs that look more like investment funds. There are DAOs that look more like you know, sort of protocol governance there's, DAOs that look more like companies where they're building a product.

And so, we are members of each kind. And if you just take those three kinds of and the, I think the protocol DAOs and the product DAOs are kind of potentially very similar. And then there's also ones that look may be more social. So there are many kinds. We're part of collector investment DAOs, like Fingerprints and Flamingo.

And those are, they resemble investment funds in that the main activity is okay, let's build a thesis and let's go acquire some assets and be smart about what we acquire. It goes beyond what most funds do though because there are all kinds of activities around activating those assets and building.

You know, experiences around them and, you know, the culture around them. And so I don't think it's right to just think of them as investors. And then on the product and protocol side, you know, I think there are DAOs that well sort of resemble companies, building products, whether those are really wide open protocols or more narrowly focused products.

And I think the, you know, in each case, there's a question of like, what's the best way to organize people, to get the most benefit out of the DAO structure as something different than a traditional corporate structure. And I think that's still in the super early innings of getting figured out. But I think our, I guess our thesis on starting to invest into DAOs directly is both, this feels like the future and we want to understand it so, we want to be involved. We want to be hands-on and, I think there are going to be opportunities to unlock broader coordination participation, like community involvement, whatever you want to call it, leverage, you know, in a project to this, through this format that feels, I don't know about obvious, but that feels like the promise and we're excited to explore that.

NA: Yeah. And you compared some of the investment DAOs and USV has made a handful of investments into crypto funds earlier. Is there a similar kind of thinking when looking at the more investment DAOs and being an LP in a fund?

NG: Yeah, it's a great question and as an astute observation, you know, our mandate is not to invest in funds.

Our mandate is to invest in operating companies. And that's generally what we do. In our 2016 vintage, we made five investments in crypto hedge funds and venture funds. And that was as there was this explosion of investing in tokens, and our sense was that there's a new set of skills that is emerging among managers who are figuring out how to invest in tokens.

We want economic exposure to that, and we want to learn from folks who are really all in deep on that. That I think it was a very timely and good decision at that time, and then now in NFTs and with sort of collector DAOs and NFTs, it feels kind of similar where, this year was a breakout year, the end of last year and this year in terms of NFT was, and their cultural relevance and the sophistication of teams that are growing around to buy and hold them and collect and cultivate these things. And, you know, the level of depth and sophistication and know-how in these collector DAOs is just stunning.

And, so it's kind of the same story where we want economic exposure. We expect and hope, there's a lot of economic opportunities there. And we also, you know, want to be there to learn from the folks that are, you know, really doing this in a deep way. So, you know, who knows if we'll keep doing this in the future as other sorts of moments click but it's been a reasonable strategy for us so far and so a relatively small one, you know, in comparison to the whole fund.

NA: Yep. That's a great point. And I guess now being part of a handful of these DAOs and, you know, experiencing how they work, do you see any limitations or certain things that you're looking for, maybe from an investment point of view around DAO infrastructure and how things can really get better?

NG: That's a really good question. I don't think that we have a fully formed thesis yet on all the things that are needed or, you know, should be built. Lots and lots of teams are building out tooling around knowing who's working on what, how do you reward people you know, sort of reputation, communications kind of managing funds in a more elegant way.

How to handle decision-making in a more distributed and scalable way. I don't know that there's yet a playbook. That is there absolutely is not currently a single playbook. And I think a lot of teams are building a lot of pieces and I think over the next, you know, couple of years, we'll start to see the ones that really seem to click for different use cases.

You know, as an initial observation it can be hard to parse everything that's going on in a chaotic busy DAO, especially if it's a big one with a lot of more casual contributors and so I think making these things work is going to be the process of harnessing that scale for benefit while like cutting, figuring out how to cut the noise in a reasonable way.

And also, I think another vector is about how do you form in a group that is more transient than other kinds of groups where, you know, people are coming and going, it's not a company where someone's necessarily making a long-term commitment. It's not an investment fund where, you know, there's an eight-year vesting period, you know, as a GP to venture fund and I think that's another interesting challenge to solve.

So lots of challenges and I don't know what the answers are yet, but I can't wait to see.

NA: Yeah, but I do think with especially your background, urban planning would be a really interesting way to look at some of these things and see how it relates to, you know, real-life communities and cities. So, I'm looking forward to seeing what you do there.

NG: Yeah. Thanks. I'm excited about it too. And I kind of suspect that it will be a lot like local government where there's a handful of people who really have the time and effort and dedication to participate fully and deal with the hassle and the headache and the angst and all that.

And then there's going to be a lot of people who don't want to do that and want to, you know, just be a citizen and not a politically active citizen. And you know, I don't think we've figured out how to do local government in a really good way in the United States in a couple of hundred years. And so maybe, you know, may take a couple hundred years to get that governance right to.

NA: I wanted to get your thoughts on venture DAOs specifically, and, you know, there's always a lot of talk around how they would impact traditional VC models. What's your opinion around that?

NG: I mean, I think Venture DAOs have a lot of things going for them in that the people in them are really close to what's going on. And so, I think there's a real sense of what's relevant and what's important access and, you know, connection to emerging opportunities, the ability to be there early.

I think there's going to be the existence of more venture DAOs is definitely going to put pressure on the overall funding ecosystem. And, you know, make it probably harder for everybody including VC's and including other DAOs to put big checks to work into opportunities. We're already seeing that play out.

And then in a lot of ways, I think venture DAO is probably will have some of the same challenges to scale as venture funds, which is as you grow in size there's more pressure to put more money to work. The decision-making process on how do you do that can get a little bit more complicated.

You know, decentralizing the ability to invest and make decisions versus bringing everything into a big committee. Just like we were talking about a minute ago, you know, DAOs are kind of reinventing governance. I think a lot of venture dollars probably will end up rediscovering a lot of the challenges in traditional investment funds in terms of how to organize them, you know, effectively especially as they grow over time.

And this is one where, you know, the VC industry is constantly changing its model on how to do that too. It's an unsolved problem generally. So, I don't know. I welcome them. I want to work alongside them and, and invest in them and, you know, learn from them. And I think they will play an important part of the funding landscape going forward.

NA: Yeah. No, those are great points and taking a small step back from crypto and talking about USV in general, I've seen that USV makes, you know, a handful of investments every year.

How do you end up doing that? So, what are the key things that you're looking for when you see all these opportunities to come to that conclusion of this handful of investments?

NG: Yeah, so it's hard cause we see a lot of good things, especially now. The pace of quality opportunities that we see is kind of astounding.

The way that we always approach this is to have a thesis that we stick to and refine over time. And that we try and use that both to guide us as we go looking for opportunities and also to help filter out things that do and don't fit and over time I think we've had pretty good success using our thesis to quickly be able to say this is interesting, but it's not for us, you know, and we have to be totally comfortable that this approach means that we will say no to things that are like perfectly good, if not fantastic investments, but aren't the kind we're looking for and get comfortable saying no to those, you know, all day long.

That's been pretty important for us. And at the same time, you know, right now, it seems like everybody's pace is picking up and I think it's due to the effect of Zoom on fundraising. It’s just opportunities come faster deals get done faster.

And so, where we used to have a month or two months to evaluate an opportunity and meet a team in person you know, now maybe you have a day or a week or two weeks, you know if you're lucky and again what does it means for fundraising? It means that it's easier to get money quickly. It can be a little harder to sort of test out a relationship, you know in the process of making a match.

And so that has definitely sped our pace up. I think it's probably that everybody's pace picks up. Even though we continue to try to, you know, be deliberate and apply that thesis, that we've always applied to everything.

NA: Yeah. So, with that increase in pace compared to, you know, previously taking a few months and building a relationship, how do you come to that conviction to make quicker investments?

NG: We can always go the fastest when we've done work on a category. And so, if an opportunity comes in, that's interesting, but it's not an area that we've done dedicated kind of thoughtful research on it doesn't mean we won't do it, but it's harder for us to immediately jump on something.

Whereas if there's say a category that we've identified previously and spent time trying to understand and landscape and come to a more sharpened point of view on the kind of thing we're looking for there, then when we see it, it's like, Bam. Yes. Easy. And you know, that happened last week on the deal that, that we committed to that, you know, as we were talking to the entrepreneur and like understanding it better, all of a sudden, we're just like, oh my God, like this clicks, like this thing and this thing, and this thing, and this thing that have all been the things that we've been looking for in this category.

And it was like the easiest yes ever. So sometimes that happens that way. But usually only when we've had a chance to do work on our category, You know, prior to seeing this specific opportunity, right.

NA: And then within crypto, the work that you've been doing, is there something that you are looking for there?

NG: It's a great question. We've been spending a lot of time on sort of DAO infrastructure I think for obvious reasons. We're making investments there and we're still developing our thesis around that. We've been spending a lot of time looking at identity and authentication and all the infrastructure around that as web3 becomes more mainstream.

So, what is it going to take to get wallets into the hands of the next, you know, hundreds of millions of people, where's that going to come from? What are the pieces that are necessary to make that really smooth and good? So that's been a big area of focus. One other one that's a little more different, but I think interesting is we also have a dedicated climate fund and we've been starting to look more closely recently at intersections of our climate thesis and our crypto thesis.

So as an example there are a lot of efforts to represent carbon credits on-chain and use those as collateral, you know, in DeFi and other things like that. And that feels important to us. And so that's one where, you know, we've been kind of glancing at it for a while and we're starting to look more thoughtfully at it.

So, and then as we get these ideas kind of shaped up, you know, generally speaking, we like to make one or two, maybe three investments along each kind of general, you know, sub-theme.

NA: Fair enough. And then circling back to how you mentioned, you guys have gotten comfortable passing on some great opportunities. I guess just an interesting question is what does the anti-portfolio portfolio look like? Are there some highlights?

NG: Well, I guess if you, there's a couple of different ways of looking at the anti-portfolio like things that we, you know, wish we had invested in but didn't. Things that we pass on because they weren't in the thesis that turned out to be huge we don't even really count that as anti-portfolio, because if it's outside of our thesis, it's outside of our thesis, you know.

The classic USV anti-portfolio was like Airbnb. You know, we were in the pole position for the seed or Series A back in like 2011 and didn't see it. You know, we passed on Uber at the Series B this was us more on the web2 like mobile era.

I don't know if we've done a lot of work to look at an anti-portfolio in crypto.

I mean, so many things have, well, Solana maybe, I guess. Like we had plenty of opportunities to invest in Solana early on and didn't do it. And that has turned out to be, you know, a grand slam, at least from our financial perspective. So far, so, you know I think there will always be misses and we try and design our fund structure and our fund sizing such that it's okay if we miss things that turn out to be really big as long as we get some of them.

NA: Yeah, no, that's fair enough. What is it a secret obsession of yours that not many people know about?

NG: Oh, good question. No, the one, this is maybe not that interesting, but it is the, well I'll give you two. One was maybe not that interesting is sleep. I've just been super fascinated with sleep lately. I'm wearing an Oura ring, which I've had for about a year and reorienting my habits to like sleep better and feel better when I wake up in the morning has taken up a surprising amount of my attention. I guess is and then that one's kind of standard VC style, you know, quantify itself garbage, but I love boats. Maybe not everybody knows that about me. I have a little sailboat. I love, I've always loved being on the water and whenever my kids and I play 20 questions in the car with my wife the joke is that I always, that mine is always sailboat.

NA: I love both of those. How often do you manage to get out on the boat?

NG: A fair bit during the summer

NA: Okay, fair enough. And finally, what's the latest, publicly announced investment you've made and why did you make it?

NG: Oh, good question. Publicly announced we have a ton of stuff that hasn't been announced yet.

One that we made a couple of months ago was in Dune Analytics which is a crowd-powered analytics platform on top of blockchain. It's an amazing community of people who are building queries to analyze and understand what's happening out there in crypto and the thesis there was that, you know, there's just so much going on in so many directions that it can never hopefully be captured by any kind of central editorial entity and that the only way to possibly make sense of it all is to harness sort of crowd power to do it.

And they've built this just incredibly vibrant community wizards, building charts about every new thing that happened in crypto. Now they've launched a newsletter, that's kind of shed some light into it and like it's you know, it's been amazing.

So that that's one where I can't, I, we may have, I may have announced an investment that I made more recently, but there's like six or seven that are in the Q a that'll come out and the next and the next quarter. So

NA: Got it. No, super interesting. But that's all I had, Nick, thanks so much for coming on. Really appreciate your time and I had a great time talking to you about all this.

NG: Yeah. It's my pleasure. Thanks so much for having me, really appreciate it.

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Thanks for reading The Inquisitive VC! Subscribe for free to receive new posts and support my work.

Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host may personally own tokens or be an investor in projects that are mentioned on the podcast.

We talk about his journey from tradfi to crypto, Parcel, fundraising, the future of virtual real estate, Meta and more! The podcast is also available on your favourite podcast sources like Spotify, Apple and Youtube!

NA: So great to have you on Noah. Been a while since we've been trying to set this up, so it's cool to finally be able to talk I'm keen to start with. Yeah. I'm keen to start with you and journey from Tradfi to crypto. I think it’s super interesting how you got to crypto. So I would love to hear that.

NG: Yeah, sure. And again, thanks for having me on yeah, this did take a while to get set up finally, but I'm glad to make the connection and appreciate yeah, you featuring me and Parcel on the show. So, my journey. I became very interested in financial markets, really in college and started learning about stocks and derivatives.

And I think I always had a very entrepreneurial spirit and sort of liked the idea of, you know, maybe being self-sufficient or being able to invest you know, for a living. Not be relying on maybe like a large institution, which I guess is kind of in the spirit of blockchain. So right after college, I became a proprietary trader, which is basically trading, you know, for our firm, you know, the ferns firms, own pool of capital.

It's not like trading on behalf of a client at a large institution that job proved to be extremely difficult and stressful, and it was very entrepreneurial. Like, you definitely only, ate what you killed, but it wasn't sustainable for me at that time. So, I then transitioned into more of a corporate role.

I was an internal consultant in the brokerage industry. But still, on the side, you know, I was like very interested in investing and trading, saw the markets closely and, you know, thought about all kinds of side hustles and other ideas which could ultimately make me kind of like independent and have some career freedom.

So, my first exposure to Bitcoin was like 2013 when it started making the news, like TechCrunch and I dove in a little bit, I kind of understood that there's something interesting there it wasn't entirely clear what it was if it was a currency if it was a technology like I didn't fully wrap my head around what blockchain was at that time. And then I started to look into custody solutions. There weren't many at the time, there is one called Mt. Gox which seemed to be the popular one. And very luckily before I put any money there that hack happened. I mean, lucky for me, unfortunately for other Mt.Gox users.

So, you know, I think that the natural thing at that point was just to step away and I kind of forgot about it until early 2017. I think it was rallying during Consensus week here in New York. And a co-worker came up to me, asked me if I had heard of something called XRP. And that completely sent me down the rabbit hole. Obviously, I learned what Ripple is all about, but that just sent me down the rabbit hole of blockchain altogether, learnt about Ethereum and everything else out there.

So that was kind of like a really big turning point. Because obviously it was interesting as an investment, but I kind of saw the technology as being so much more pervasive, it had so many bigger applications and really disruptive to the whole financial system as we know it. So, at that point, you know, the switch flipped and I went all-in on crypto, like financially. And just in terms of where I wanted to go with my career, that was like my first foray into crypto.

And then beyond that, yeah, I left the corporate world. I travelled a little bit. I ended up in Tel Aviv, Israel worked there in the crypto industry for about eight months. In more of an advisory capacity, like consulting, blockchain start-ups doing fundraising, ICOs, token design and things like that.

I was sort of the bust part of, of the market after the boom. So, it wasn't the most exciting time to be there, but I was still very long-term bullish on the fundamentals. And then I came back to New York to get my MBA at Cornell Tech, where I actually ultimately met my current co-founder Ian in our MBA program.

NA: Oh, very cool. It’s interesting how many people I've met that have fallen down the crypto rabbit hole starting with XRP. But that's great to hear. Following that journey which was super interesting how did you go down the path of deciding, you wanted to start at a company in the crypto/web 3 space?

NG: Yeah, it's a good question. I mean obviously, you know, investing really interests me and even advisory is really interesting cause you get to sort of like work with founders and investors and have like a good purview. I think at the end of the day, I felt that web three enables everyone to do everything.

So, you can be an investor and a trader and an advisor, and also a builder. And I just felt like, yeah, I can manage my personal portfolio, maybe not as actively as if I was doing it full-time but I could still do that. Plus, I can build and I can build great consumer products with great user interfaces.

And it was just sort of like a burning desire. Just kind of like a screaming need that there's so much poor user interface in web three. I don't even want to say it's poor, it just like has even been addressed, to begin with, which I think happens, you know, at the beginning of most technologies. So, it just seemed like there was just enough need for more great products to be built.

That's really what I wanted to do. And it also allows you to bring in some more of like the creative or artistic and like psychological side of things beyond you know, purely trading.

NA: Yeah, right. No, I hear you. And so, let's talk about Parcel a little bit. How did you and Ian come up with the idea and what exactly is Parcel?

NG: Yeah, so Ian and I actually both started different companies coming out of grad school at Cornell tech. There was like a startup incubator there. So he went in the direction of a web 2 gaming platform. It wasn't a crypto native and I went more of the DeFi payment space. I was working on a project that I'm just basically non-custodial on and off-ramps.

So, a way to connect your metamask wallet to your bank account without having to go through a large, centralized exchange. And after we had both been working on these companies for about a year, and neither of them were really blowing up at that point. And Ian on his own started going down the rabbit hole of NFTs he's, you know, he's very creative.

He's done a lot of graphic design and other kinds of arts. So, he started making his own NFTs and really fell down the hole. And then we just started having more and more frequent brainstorms and chats and mostly just as friends, but then we started brainstorming like other project ideas with another one of our classmates as well.

And one day we had only been doing it for a few weeks and then one day, yeah. Ian was like, oh, I've been trying to buy land, in this game Ember sword, it's really difficult. There's not a lot of information out there. Everything's fragmented. Open Sea is not giving me everything that I need.

You know, what if there was a need for like a land aggregator and, and to his credit, it was really his idea. He mocked it up,  basically what it could look like in a very crude and MVP and threw it on Reddit on r/decentraland, and it was the top post of the day. And we're like, wow, we actually might have something here.

So, we actually just started sprinting on it and we're like, okay, let's give this. We were both pretty exhausted from our last start-ups. So, like, all right, we're going to give this you know, two weeks, see if it really has legs. And then if it has legs we'll give it another two weeks, etc.

And we ended up having enough momentum that we were able to shift to it full-time and yeah, we've been full-time on it ever since. The grand vision of Parcel, you know, so we're an aggregator of virtual real estate and we just released our marketplace for virtual real estate users.

And we have price estimates and, you know, like a portfolio view. So right now, we are addressing sort of those low hanging fruit UX things like, yeah, we have, you know, the interactive maps, so you can sort of see the listings next to the map. Right. You can see how much that Parcel may be. A much better experience for buyers and sellers versus the generalist marketplace.

The grand vision is really much greater, and the marketplace is just the first step. So, the grand vision is to be, you know, a one-stop-shop for virtual real estate users of all kinds. You know, so that's, of course, the buyers and sellers and brokers and agents and the metaverse, but also, you know, architects and property managers and, you know, plumbers and electricians, like whatever the version of that is in the metaverse, you know, they're going to need resources as well. And then of course like communities, all the NFT and other communities too, that are going to want a presence in the metaverse. So, whatever they, those users may need, whether it's like financial services, if you want to get a mortgage on your virtual home, or if you want to Airbnb out your virtual condo or if you're a landowner who wants to build his or her dream home, and you need an architect that will help make that match as well.

NA: Got it. And would love to hear your thoughts on, the future of virtual real estate and where you see that going and how you think it will play out?

NG: Yeah. So, at Parcel, we view virtual real estate right now much like physical, real estate in our approach and our philosophy around it. So, you know, we think it is fundamental to the existence of VR, virtual worlds possibly some AR virtual worlds as well. It's kind of, you know, it's the foundation on which everything else everything will need to be built on top of and the way to price it right now we think it's pretty similar to the physical world.

It's like location. Are you near anything interesting? Are you near water? Are you near roads? You know, is there anything interesting about your parcel? And then also like what's on top of it, is there a unique piece of architecture or art on top of it? Do you have a billboard that could generate revenue for you? So like right now, I think it's very much parallel to the physical world and in the future, there will be many new things, many new inventions and applications that might change that. But, most of those have not been invented yet. So, I think this is kind of the best we can do at the moment. But you know yeah, we do it as absolutely fundamental NFTs for the metaverse, which is the evolution of the internet.

It will be, I think we won't say internet anymore. We probably won't even say metaverse anymore. It'll kind of just be assumed that you're always plugged in. We view this whole class as utility NFTs. Like these are NFTs that can earn some kind of passive income or yield for you, or, you know, they can go to work for you.

And that particularly gets us really excited compared to like a static piece of art or, you know, static image NFT that might not be as useful.

NA: Yeah, for sure. Have you guys come up with then I guess an easy explanation for people not in crypto or web three to understand virtual real estate and the metaverse in an easy way?

NG: That's a great question. Basically, I think the thing that clicks with people, I usually start by saying like, okay, picture like a video game, you know, you've seen a million before, or you have an avatar running around in some kind of virtual world. Most people understand that. Like, cause they've played games or they've seen their kids playing games like that.

I think the point is that I think the blockchain element clicks for people. And you say, well instead of a company owning that world, you can own that world. So, you can own a piece of that world, or the community owns it and governs it and makes decisions as to the future of the game.

So, all the value that's generated like in that economy, if you think of like, it is helpful when they have some kind of analogy. If, you know, if someone's kids play Roblox, for example, or Minecraft or something like that, you can say like, there's this bustling economy they've seen, they've probably even paid for assets in those games now.

You know that economy can be owned partially by you as an individual. And that seems to be the best way to describe it right now. Without too Sci-Fi or too abstract on people.

NA: Yeah, no, for sure. That's definitely pretty easy to understand explanation. Do you have any thoughts on Facebook and Meta entering this metaverse space?

NG: Yeah, definitely. You know, we've talked about it a lot, obviously internally and with other metaverse projects. My opinion is, this is fine. Like they're actually going to do a lot of the heavy lifting. They're educating potentially billions of people on the idea of the virtual world and the term, the metaverse. They're going to get people acclimated and accustomed to it.

And my hope is that the blockchain-based metaverse and virtual worlds will have such greater incentives than Facebook's virtual world that they won't even be able to compete. So hopefully they'll sort of onboard everyone to the idea of a metaverse, but the blockchain ones will prevail because it'll just be such a greater opportunity for them to earn and to profit and do probably all kinds of other things and socialize and play and work and you name it.

NA: Yeah, no for sure. That does make a lot of sense. You guys raised your first round of funding for Parcel. I'd love to hear your journey on how that was and how your experience raising the funding was?

NG: Yeah, sure. So, we raised, yeah, we raised over the summer. We knew we had kind of a good thing going, but obviously, we need to scale the team. Ian was building away on the product. And I put together a deck over a couple of weeks and I got some good advice from a friend.

Who’s just like don't drag it out. Just say you're doing this in two weeks. Tell everyone you're wrapping it up in two weeks and just do it which is great advice. Cause it could drag on for a long time and we just started blasting out to every which way by, you know, warm referrals, cold emails, friends of friends, like you name it.

We just started pushing it out there and what we found was actually, I think every investor who ended up participating in the round was referred by a different investor and many of those ended up passing. So, you know, it's not always bad. If like, if you get passed on by an investor, it just means you're not the right fit for them or the thesis of their fund or what stage you're at.

But they all know, you know, investors are closely knit, and they often refer projects onto their friends. So that was kind of an interesting learning.

Yeah. I mean, you know, we managed to find some really great people who have supported us in kind of in different ways through whether it's through like publicity or recruitment or making other connections within the industry. So yeah, they've been a great asset to us and I think most importantly, we were able to scale the team and the business. And now we're up to six full time, a handful of part-time and still growing pretty quickly.

NA: Really cool. I like the learnings you got out of that. I think those are quite interesting for people to know.

NG: Yeah, as a first-time successful fundraiser, I tried unsuccessfully in the past.

It was all new and every day was scary or nerve-wracking or exciting. But so yeah, you know, whatever wisdom I can pass on to other founders going through the fund-raising process very happy to.

NA: Yeah, that's great. Finally, what's a secret obsession of yours that not many people know about?

NG: Good question. Well, I think my close friends and family probably know, cause I was screaming about it that like during COVID I got into like the whole alien and like UFO thing and I don't want to say full-on conspiracy theorist, but there are certain things that I find very compelling, like such as the existence of aliens or UFOs.

So yeah, that's something I don't necessarily tell everyone upon first meeting, but I have kind of become a believer.

NA: That's a good one. Yeah. That's super interesting.

NG: I mean, if you think about just the probability, right? It's where it's almost a 0% chance that, that we are alone in the universe and also probably 0% chance that we're the most intelligent in the universe.

And the US government has acknowledged, there are things they can't identify in the sky. So, put two and two together.

NA: Yeah, no. Fair enough. And finally, can you tell us where, where we can find you online and in the metaverse?

NG: Yeah, definitely. So, on Twitter, we are @meetparcel, that’s also our website meetparcel.com. From there you should be able to link out to everything. So, we have discord, which is a pretty active weekly virtual real estate, weekly newsletter. Which we've been having a lot of fun which is only about three weeks old and we're starting some giveaways as well that you can find through those social channels.

So definitely check those out. Personally. I'm @noahgaynor on Twitter and my co-founder is @roomakdoteth on Twitter. He's the more creative and an interesting one for sure.

NA: Okay, cool. Well, have all those links as well in the transcript. But thanks for jumping on it was great talking to you about Parcel and your thoughts on virtual real estate. Super enlightening.

NG: Thanks Nawaz, this was great. I hope to see you at a conference soon.

Follow me and Noah on Twitter here!

Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host may personally own tokens or be an investor in projects that are mentioned on the podcast.

Nawaz Ahmed: I'd love to start with your journey to venture capital. I know you did startups. I know you worked in a startup, so it would be great to hear that story.

John Henderson: Yeah, sure. I actually I mean, I started out in management consulting where I learnt to make slides and pretty excel files. But I think the beginning of my startup journey was working for a 16-year-old called Nick D’Aloisio with a machine learning company called Summly we had some NLP technology that could take, long articles and reduce them down into very short paragraphs back when that was an unsolved problem in 2012 and 2013.

And the vision of Summly was really to take the news in long-form and bring it down to an iPhone screen. This is when it was really an open question about how content would be consumed on phones. It was before the responsive web necessarily. And you know, our vision for that was you would just summarize everything and we started out with the news. That was a pretty incredible journey, we ended up getting acquired by Yahoo in 2013 for $30 million, which sounds like nothing today. But back in 2013 was a decent acquisition.

And I got into venture capital straight after that, actually with my old boss at, at Facebook. I'd been at Facebook prior to Summly and Christian, who was my boss there and the Head of Europe for Facebook had left after the IPO and was going into venture along with frankly a lot of his ex-Facebook colleagues doing similar things for different funds. So, I hooked up with him and I guess I was a Founding principal at a firm called White Star Capital, which has now raised three funds.

The last of which was $350 million and they seem to be doing pretty well. So yeah, I got my start at White Star and spent whatever it was four years doing seed and Series A investing in London and New York.

NA: That's amazing. And then how was the journey to Australia and joining AirTree?

JH: It was kind of natural for me. I was in London at the time, but kind of knew that I wanted to raise my kids in Sydney and come back here at some point. And venture is one of those businesses where it's still in large part and network business. And so I guess the longer I spent offshore the longer I was growing and perpetuating my networks there, but arguably making it more difficult for myself to come back into a senior role.

So, when the AirTree team was raising their second fund and were recruiting partners to come and join Daniel and Craig, it felt like far too good an opportunity to give up. So, I moved back with my family and haven't looked back since. I've been at AirTree since 2016 and I work with, gosh, it must be a dozen of our companies from Employment Hero to Linktree all the way down to some of our smaller, but promising ones like Inquisitive and Joyous. So, it's been a great journey.

NA: Yeah, no, that's great to hear. You worked four years in VC and UK, and then I think just over four years now in Australia, how different are the founders that you've met and the startups compared to the UK?

JH: Yeah, it's an interesting question. So I was, in between the UK and New York. And I think the comparison between British founders and New York and East Coast American and therefore West Coast American founders kind of holds true for Australian founders as well. I would say Australian and Kiwi founders bear a lot of similarities with their British counterparts, which is that they tend to be understated for what they have done.

They tend to be much more matter of fact, far less capable of selling a colossal vision. And maybe on balance a little bit less charismatic. I know that sounds brutal, but, I think if I'm to massively generalize, Americans are just better at selling the dream. And I think the other side of that knife is that they're slightly more prone to exaggeration on what they've actually achieved so far.

So, I would say for a like for like business, an Australian or a Kiwi or a British pitch for that matter is materially worse than a US pitch. And I think that's partly reflected or partly reflective of the amount of capital that US founders can raise.

NA: Right. Do you think that like changing, so in your four years in Australia, have you seen that change?

JH: I think founders from this region now have credible examples of globally relevant and globally iconic companies that they can look up to and model themselves on. So, when I moved back Atlassian was the watershed moment. It's now I think in the top five biggest Australian companies of all time, it's more than a hundred billion in market cap.

Similarly, in our portfolio, we led the Series A of Canva. That's now a $40 billion US private company. I think it's in the top handful of private companies globally. And so, I think the existence of companies like that has made Australian and Kiwi founders realize that building iconic companies from this part of the world, is realistic rather than just a pipe dream.

I think they've got, again, I'm generalizing, but if I look at someone like Alex pitching Linktree it's a much more audacious pitch than perhaps I would have heard from an equivalent SaaS company in 2016. But that being said, I still think on balance we have a ways to go. I still, I mean, obviously in this role, I still speak to a lot of Americans and we have US companies in our portfolio.

And again, pitching the identical business, Americans are a lot more convincing, and I guess salesmen like in their pitch. And there's something to that because pitching to an investor, you know, I think a lot of people turn their noses up at this notion of pitching to an investor. And certainly, in 2021 it's often the other way around, but I do think we look for the ability to sell a vision, not necessarily because we need it to invest in your company, but certainly, I think your customers need it to buy your product and your employees definitely needed to kind of come on an improbable journey with you.

Most of the companies I work with are trying to recruit people from places like Google or Atlassian or any of these software companies and if you're gonna leave a high paying, safe software engineering job at a company like that you really need to believe in the future that a founder is painting in front of you. And so the ability to evangelize a mission, I think is as important as it ever was.

NA: Yeah, no doubt. I find that super interesting. The differences between the two types of founders. You probably been looking at pitch decks for a while now. How has your ability to analyze these pitch decks over time changed, If any, and what tips would you be able to give to like a new VC or angel?

JH: I don't know if I have any great tips, if I'm honest with you Nawaz. One thing that we focus a lot on an AirTree is the removal of cognitive bias. And I think the longer you've been an investor, the more bias you bring to the investment table and to your analysis of pitch decks.

And so we talk at AirTree we've got, we've now got five investing partners at Air tree, and they sort of span three generations. Craig, who was one of the two co-founders of the firm worked with a venture firm prior to AirTree and has worked through a couple of economic cycles.

James and I both returned from offshore to join AirTree in 2016. And then Jackie and Elicia may partner with us in 2021. And we deliberately, when we hear a founder pitch, as a group, our when we look at a deck together, we deliberately have systems and processes in place. For example, we write down our reactions to the pitch before discussing it, and we score it before discussing it to try and remove some of the historical biases that we'll bring because we've looked at sectors and they haven't worked in the past for example and therefore we don't think they'll work today. That has been a really effective tool in frankly removing some of the sorts of pattern matching that people talk about and think is a good thing. I actually think is a terrible thing. Most ideas in software will work. It's just a question of timing.

And so, you know, the perspective that Jackie and Elicia bring with a different age bracket and a different set of experiences often leads us to make better investment decisions. So, circling back to your question, do I have any advice for kind of aspiring VCs, not really other than to try and be aware of your biases and keep an open and curious mind. And I think the longer you've been in venture, the less likely you are to do that.

NA: Okay. No, I think that's a great point. I'd like to circle to crypto. I know you've been around and known of crypto for a while. How did you first get into it and then where are you now in that phase of exploring crypto?

JH: Yeah, I got into crypto in early 2013. I was in the angel investment round of CoinDesk, which was, I guess the OG crypto news site. One of my mentors in London actually founded that, a guy called Shakil Khan and I became an advisor to the CEO of that company for a few years in its early days.

Which was a really interesting first exposure, obviously, you know, I got into Bitcoin at the same time, but by being really close to CoinDesk, I was there for really close to most of the OG Bitcoin entrepreneurs who were looking for coverage. So, it was an interesting insertion point and I spent a lot of time at my previous venture fund in and around the Bitcoin ecosystem, looking at building smart contracts on Bitcoin, looking at colored coins on Bitcoin, all kinds of ideas that now seem very passe, but in sort of 2013, 14, 15 were kind of cutting edge. Through that community, I met Vitalik Buterin and in 2014 and was lucky enough to be involved in the first days of Ethereum and the presale and all that kind of stuff.

And so, I've been on the smart contract journey, for quite a while. In 2017 and 18, I kind of stepped away a little bit from the crypto ecosystem. That was obviously as you know, during the phase where there was a whole bunch of ICO's and not much else. And if you'd been in the sector for four years, which I had at that point, it really felt like we were still in the installation phase for blockchain.

There was no use case that was working other than maybe digital gold many of the sort of apps and concepts in DeFi and things around provenance were tried back then and failed. So, I became kind of jaded and moved on to web two, to be honest, and went and did a bunch of SaaS investments and other things that AirTree is done.

And it was only in sort of early to mid-2020 that I really got back into crypto in a meaningful way. When one of my friends pinged me on telegram and told me to look at DeFi Pulse and all of a sudden, some of these early protocols like Maker and others were starting to attract material TVL.

And that was interesting to me, A, because finally, we were getting some use cases beyond digital gold, but B it seemed to me that those DeFi use cases, were onboarding a whole bunch of actual users into crypto. So, I started paying attention to that AirTree started making investments in crypto in late 2020.

Because I guess my view was that we were finally through the installation phase and at the beginning of the deployment phase. And that's sort of how we think about new technologies. We try and figure out when a technology is going to hit an inflection point within the sort of 18 months to three-year runway that we fund them for.

So we started investing in late 2020, obviously, JPEG summer kind of only served to reinforce my conviction, that we were getting real consumer usage and something was different in crypto this time. And so we've been investing fairly aggressively against the picks and shovels of both DeFi and NFTs.

NA: And what areas of crypto are you most excited about now?

JH: We've taken a fairly broad view, to be honest. I mean, some of our investments are unannounced, but I'll give you some examples of ones we have put out publicly. Immutable is a good example. As you would know, that's a layer two scaling solution for Ethereum based NFTs.

So that felt like picks and shovels to us. It had a gaming component and I think I'm a big believer in play to earn gaming and crypto. Plus, it was a scalability tool for other gaming platforms to come into crypto. So, there was a lot of macro trends in its favour. I was a big fan of James and Robbie and they're actually based in Sydney.

So, there was a whole bunch of reasons that made sense for us. That's an equity investment into a company. So that's kind of on one end of the spectrum right through to we've invested in Zeta Markets, which is a decentralized options exchange built on Solana, and that's a token investment. So, you know, that's an investment in a new primitive on a different blockchain.

And, you know, I guess my view is that the performance of Solana, I mean, that is the best suited to an order book which is sort of a prerequisite for options trading at speed. So, we've done all kinds of things in between most of them in DeFi but that probably gives you a sense of our range from a token investment in, you know, a Solana app right through to an Ethereum scaling solution for games.

NA: To hear. I understand that both of us are ohmies. How did you wrap your head around what Olympus Finance is doing?

JH: Well, so there's to be clear, this is a PA investment rather than an AirTree investment. I think it was this concept of protocol owned liquidity that got me excited about Olympus. I invested in OHM on a PA basis in June, I suppose. So I wasn't quite early enough to be in the IDO, but one of my friends was, and he started telling me about this kind of concept of bonding rather than just buying on the open market and staking.

And I thought the idea of protocol and liquidity was really interesting because clearly liquidity incentives are, you know, they're an interesting bootstrapping mechanism for DeFi, but long-term, you've got to question their sustainability, and I'm not sure how many apes are really thinking about that.

And I think you're seeing that today in the outperformance of DeFi by ETH in, in the early days of DeFi summer by some, everybody got excited about the incentives and, and started farming them. But the performance of the underlying tokens would suggest that that's not a sustainable model. And so I think I kind of knew that I was trying to figure out what the answer was.

As with everybody when I saw Olympus, you know, the APYs were enough for me to have another look I have a second look. And then when I sort of read up, read about the bonding mechanism and this notion of protocol owned liquidity, I got the conviction to invest and I think the release of Olympus Pro and the extension of this to other DeFi protocols is very, very powerful.

And, you know, I think it makes Olympus kind of a black hole, for DeFi liquidity, which if you want a currency that is DeFi native is not pegged to stable coins, it feels like a pretty good way to set one up.

NA: Yeah, no doubt. And what about the forks like Klima do you have any thoughts on those?

JH: Yeah. Well, so I'm very, very bullish on Klima actually. So, for your audience, Klima and takes the same token mechanism as Olympus, but instead of backing the tokens one for one with DAI it backs them with BCTs based carbon tonnes which are essentially a carbon credit. And I think the idea is that if you can suck as many carbon credits into the protocol as possible, then you raise the price of carbon and therefore you do your bit to contributing to mitigating climate change.

I just think the mechanism itself Olympus is showing is working really well. And if you're looking for an underlying asset with which to back your tokens, then I think carbon credits being naturally inflationary are a really interesting asset. So I'm maybe even more bullish on climate than I am on Ohm, to be honest.

NA: That’s pretty interesting to hear. I think it's a great idea, the fact that you create like an on-chain sink for carbon credits, it's a great idea. But it will be interesting to see how it actually plays out.

JH: What about you, Nawaz? Is what about you looking at, or investing in any of the other forks?

NA: No, only Klima and for me. I looked at Time for a bit but didn't really get into that one. Did you?

JH: I'm interested in Time mainly because I think it's hard to bet against Daniele Sesta. He's doing incredible things in DeFi. The thing that I'm waiting to see with Time, he keeps making references to some kind of a gaming use case for the token, but I don't exactly know what that means.

So I'm waiting for that to be laid out, but I'm certainly interested in.

NA: I guess circling back to how you perfectly described JPEG summer you have a smiley Punk and a few nice art blog pieces. How do you go about finding and deciding what NFTs to purchase?

JH: Well, yeah, I was very lucky to get into punks reasonably early.

My first JPEG purchase was a Punk in, I think February of this year. And then I cycled through a few to get to the one I wanted. So, I've actually gone down in rarity in punks, but I've got one that I feel like it hits my vibe. And fortunately, I was in early enough that the profits from the previous ones paid for that one.

So I've been very lucky there. More broadly look, I think, and it was actually Snowfro that got me into Punks, to be honest. So that's sort of why I got into art blocks as well because I think he's one of the luminaries of our time. And then the JPEG that I own the largest number of are his squiggles, because I'm a huge fan of Snowfro what he's done, both in the punk community and Artblocks.

Beyond that, I think, what do I look for? I look for something with a story or some kind of technological novelty in it. And so if I could afford one, I buy an Autoglyph in a heartbeat because I think the first generative project, fully on-chain on Ethereum is. Incredible. And you know, that would be the grail NFT one day.

I bought Punks for the same reason because, you know, they were the original and the community around them was astounding. And layer onto the fact that by having one, you get access to not just the punks discord, but a whole bunch of other communities where you instantly have firstly access, but then secondly, social credibility, which is weird, just because you own a picture. That access into that group has been amazing for me. I've made a whole bunch of crypto investments, both NFT and DeFi through connections in the punk community. So, I think I looked for some kind of technological novelty, some kind of community that's interesting for some reason.

And then something that I'm sort of proud to put in my socials or associate myself with, and for me, that's led me down the path of a few artists. It's led me down the punks path and Artblocks and it will keep, will keep taking me different places, I imagine.

NA: Would you say your dream and NFT that you don't have yet, is that and Autoglyph?

JH: Oh, a hundred per cent. Yeah, I would trade the whole collection for an Autoglyph.

NA: Fair enough. What would you say is your favourite one from your collection now?

JH: So, the squiggles are my favourites because they mean a lot more to me than the art itself. I see them as one of Snowfro’s signatures and they've kind of got hidden surprises within them. I don't know how many people know that squiggles, they're actually a gif, if you click on them the colours move around, which I didn't realize when I bought them and then I kind of discovered later. So I like them a lot.

I've also got a Singularity by Hideki, a Japanese surname that I'm going to blank on basically cause I think they're beautiful. So those are probably my favourites from the Artblocks collections.

NA: Did you get his latest drop? The Fusion?

JH: I got a Cipher, which is the one before his latest drop and then I missed his latest one.

NA: Circling back to venture a bit, finally, what is the latest, publicly announced investment you made and why'd you make it?

JH: I think the latest one I announced was probably Immutable, which we've just talked about. The one before that was also in FinTech but in web two FinTech a business called Frankie One. And they are doing an aggregator for AML and KYC checks and processes. If you're Westpac or a large financial institution, you have to do hundreds of thousands of KYC checks a year.

And you probably have some service agreement with someone like Experian or Equifax. The problem with that is Equifax doesn't actually do the best checks for everybody in the population. There's a whole bunch of their competitors that, you know, some of them will do immigrants better, and some of them will do old people better, and some of them will do teenagers better just because their data sets come from different places and they specialize in different things. So, what Frankie does is it essentially aggregates all of those service providers and provides a single API into Westpac, which basically gives you the best coverage of all the possible AML KYC checks.

And the interesting thing for Westpac is they only have to deal with one service provider and their pass rates on the test becomes higher. And so, in Westpac's business, they spend a whole bunch of advertising and marketing dollars, acquiring people into their funnel and losing them through KYC is a disaster for them.

So, if they can increase their conversion rates, it's a big impact from the bottom-line perspective. So Frankie One is solving that problem across the world.

NA: Really interesting. It's great how you're able to move between web two and web three. That's all the questions I had, John. Thanks so much for your time. Really appreciate hearing your thoughts across the spectrum.

JH: My pleasure, Nawaz. Thanks for having me.

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Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host may personally own tokens that are mentioned on the podcast.

NA: I'd love to start with your background. I'm quite interested in how you got into the world of VC?

JP: How I got into the world of VC. Okay. So I started on the operator side.

So when I was still in college, I actually joined a startup. I was going to college at the time in LA and I joined a startup that was in the Bay Area and I'd fly every week from LA to the Bay Area to work on this company. So I'd go to school Monday, Tuesday, Wednesday, and then I'd work Thursday, Friday, Saturday, Sunday, and rinse repeat.

And that was a super high flying company. That at one point it was valued at $700 million and came crashing down to zero. So I learned a lot about what product-market fit doesn't look like and the importance of going to zero to one around that time, I also got super burnt out and very sick and had, you know, a mini-crisis about what I was doing with my life and decided I only wanted to work on things that were going to make people happier, healthier, and quit that startup and joined a nutrition coaching company called Rise, where I ran growth and revenue for them. 

That company was then bought by One Medical, where I launched their telemedicine practice. And so I saw these three very different companies. One Medical for people in New Zealand is now a publicly traded primary care practice with a strong telemedicine arm. I saw these three really different companies, three different stages, a high flying rocket ship that never had a product-market fit, a company that was just going to zero to one, and then it got bought and then pre IPO. And I realized that across those experiences while I was running growth and eventually product revenue teams, what I really loved was helping the founders make their dreams a reality. 

I was always advising my friend’s companies, I was always just chatting with new founders about startups and I really loved just learning what was new and interesting. And so after One Medical, I took a bit of a sabbatical and after the sabbatical, I started consulting, consulting, turned into angel investing and angel investing turned into starting a fund.

NA: That's a great journey. It's great, how you went through phases of different startups and then you got to angel investing. What was the change from going from angel investing to raising a fund? How different are the two?

JP: So my first fund was very small and so I almost consider it like a friends and family fund where it wasn't like I went out and raised from big institutions.

It’s something that I'm now doing with fund two, but the change wasn't so much around, oh I need to go raise a big fund, the change was really around the mindset, right? As a fiduciary, I feel different about deploying capital, when it's my capital versus someone else's capital. And when it's my capital,  if I like someone, I don't totally understand the market, but I liked the person, I liked the story, liked the video, yeah, I'll take a flyer. When it's someone else's capital, I feel a responsibility and therefore am much more diligent and much more thesis-driven. I'm much more structured in my investment process than I would be with my own capital. 

I think that's something that people don't necessarily think about when they go from angel to fund manager, is that it is psychologically different and add fund admin on top of that, add LP relations on top of that, add the fact that you have an LPA, so you need to invest against certain things. Add that against the fact you have a deployment appointment timeline, so you have to be investing. It is quite different.

NA: Yeah, no, that definitely makes sense. I'd love for you to talk about the thesis that you came to after doing your angel investing and raising your first fund. What is your current thesis now?

JP: Well, I invest in a couple of different themes that I'm most passionate about. There are the web 2 themes and then the web 3 themes. And I basically invest in things that I'm passionate about and that I know. And so in web 2, that's a lot of the health care stuff, wellness stuff, tooling, remote work tools, a lot of the future of work tools that were previously built-in web 2, I think will actually be built in web 3.

So most of my future of work investing and most of my creator economy investing has moved from web 2 tooling to web 3, just because I think that's where the breakout companies are in those spaces and that's where the models work best. And so we talked about a bit how in web 2 healthcare, climate, B2B, SaaS, tooling. Web 3, I'm very interested in DAOs right now.

I think they hold a lot of potential to unlock new types of development, and new types of financial access, new types of frankly companies and ways of working. And so a lot of my investments in web 2 are in web 3 right now are around DAOs and community.

NA: Exciting. Yeah. That, I guess that leads to your journey from going from investing in web 2 and healthcare and SaaS to web 3 and the difference that is like, do you have to have a different kind of mindset when you're looking at web 3 companies?

JP: Well, I think it's really different, right? Like you can have a B2B SaaS tool that is, there's B2B SaaS tooling in both ecosystems, right? You have like payment infrastructure in web 2 and payment infrastructure and web 3.

But what's interesting is in web 3, the economics are so different. So if you look at a web 2 funds returns, and you look at a web 3 funds returns, the web 3 fund is going to on average, outperform the web 2 fund, by orders of magnitude. Right? So I have friends funds in web 3 that have like 30X, 50X their funds in three to five years.

I don't know anyone who has done that at the fund level in web 2, and part of that comes down to just the way that these companies are structured and the tokenomics, and the fact that right now, in a bull market, you have these projects, where if there's a token associated with the project and some path to liquidity just has a tremendous amount of upside in comparison to the web 2 companies.

And so what's the difference? I think part of it's the deals and the companies are fundamentally structured differently. I was talking with some people who I'm in an investment DAO with earlier today and they just categorically don't do anything that doesn't have a token because where they're getting their returns are on these tokens.

Right. And so how is it different? I think the structures of the deals and the economics from an investor standpoint are fundamentally different. And I also think the people who are successful in web 3 as founders are different because most web 3 companies require some sort of protocol or DAO or something that encourages community participation.

The importance of distribution and creating something that's valuable for a community is way different than in a B2B company. When you can have a really top-down approach and just nail an enterprise sales motion. To summarize the structures of the deals are different, but the founders are different and the way that you build one of these companies is inherently different.

NA: And when looking at these deals at this point, have you come to a preference yourself, like token or equity?

JP: Most of the stuff I'm doing is equity with a token warrant. I personally haven't drawn a hard line. It's hard, right? Because even the B2B SaaS tools in web 3 would outperform the B2B SaaS tools in web 2. So it depends through what lens.

NA: Yeah, no. Fair enough. And what, what are your further thoughts on investment DAOs? Like where do you think that they will actually disrupt VC? Or is that just a story?

JP: I do. I think it's going to take a lot of time. There's good reason why right now investments are centralised. Historically to build a venture scale company required a very specific type of founder with very specific domain knowledge with a very specific tech stack, but in the last 10 years, a lot of that has changed. And so a lot more people can recognize what a good product or company is, as opposed to being a small subset of people.

But, there is good reason. Many of these tier one funds have worked years on perfecting what we would call governance. Right? How do they make investment decisions? How do they structure their org? What's the relationship between Analysts and Principles and GPs and how is ownership split between the fund who has carry, who doesn't?

There was a lot of thought that went into the design of that structure. I think we will also have to put a lot of thought into the design of an investment DAO. I don't think it's the sort of thing that's going to just work right off the bat. And I see this in some of them I'm in now where I've developed a belief that not everyone should be voting on every deal.

There's probably some sort of collective based or squad-based system, based on expertise to know how and what part of the investment DAO you're contributing to, where members of the DAO should participate on that squad or in that collective?

I think what will happen is you will have, and you see this already, you don't necessarily have the GPs that are only committed to their fund, right? Like I'm in multiple investment DAOs where multiple people in each DAO are in a bunch of other DAOs right? And so you don't have this notion of owning the GP and that being your full-time job, it's more, you have a bunch of people who are investors, but investors are like any other contributor and they're contributing to these DAOs in the ways that they can best contribute to the DAO.

And so I think you might have centralized like leadership teams for each DAO, but it's going to be much, much more flexible than right now. In the investment world, you have these walled gardens, siloed, big firms, and I think that's going to get broken. And I do think if you look at who has the best insights, especially at early stage it's people who are using these products, it's people who are in the community, it's customers.

It's the people on the ground floor that look the exact opposite of an old school, General Partner at a tier-one fund. And so if I had to bet on who's going to find these deals and pick winners in web 3, I would bet on the people using the protocols and in the DAOs all day. And therefore, if we think that they can find the best things first, I think it's fair to assume that with the right structure and system, we should be able to collectively make good investment decisions.

NA: Yeah, I hear you. I think there is definitely a little bit more time until it plays out. And I agree with you that I don't think everyone in the DAO should be making the investment decisions. My most recent guest used to work at a fund of funds investing in crypto funds. And I asked him a similar question and he had some great insight.

He said it's quite difficult for investors to have contrarian views and it's even more difficult for investment DAOs which usually have a hive mind to make contrarian bets. So it'd be interesting to see how they perform in a bear market compared to the current market where nearly everything kind of is a hit.

JP: I agree and I think that's the other thing. I'm starting the process of decentralized Awesome People and I thought a lot about how we're going to do this, and I've been really grateful to study with a lot of the best web 2 investors that have been through multiple cycles. And one of the things that I've taken, especially from the team at Floodgate, Ann Miura-Ko and Mike Maples, is the importance to have certain investment frameworks and I think that is something that's going to be important to our investment DAO as well, as opposed to like, here a quick pitch, everyone gets to vote, you know, sign a multisig and like transfer money from one wallet to another. I think there to make world-class decisions, there has to be a little bit more structure to survive a bear market.

NA: What are your thoughts on one of your most recent investments, Syndicate Protocol, regarding what we just spoke of?

JP: I mean, I love Syndicate. I think I'm talking to them right after you. I think the opportunity to decentralize the private markets is huge and I'm not even going to say like, just decentralized, early-stage investing because you can imagine you and all your friends, forming different syndicates and different friends, you know, managing, you know, DeFi, managing NFT buying, managing angel investing and it's really anything that you can invest in the ecosystem. It could be a startup. It could be like a plot of digital land, right? But this ability to pull and invest money together in a really fluid way is a huge unlock, especially because this is the part of the market that has the returns.

So previously markets with the highest returns have been inaccessible to people. Whereas now anyone with an Opensea account, if you've been riding this NFT wave can outperform top tier venture funds.

NA: Yeah, for sure. Have you been buying many NFTs yourself?

JP: I can't say I'm super deep down the NFT rabbit hole. I'm trying to stay focused on building Awesome People, but it is very tempting. Then again, I think any time there is a bull market and quick money somewhere, it can be really tempting. I just am really passionate about building Awesome People.

And so I'm trying to stay focused. I'd say my one side project, which is become more than a side project is probably DAO Masters, but that's, that's just so core to the things that I care about and ladders up to being helpful for Awesome People as well. I'm learning a ton.

NA: Yeah, no, I love that. What's a secret obsession of yours that not many people would know about?

JP: I'm really obsessed with watching the sunrise and sunset. I try really hard to see the sunset every day. It's a bit hard right now. My calls are all during the evening time because I'm in Europe, but I think it is the most grounding, centring, beautiful part of the day.

NA: Yeah, I love that. What's the most recent investment that you've made that you can publicly speak about and why did you make it?

JP: I don't think this team has announced, so I won't say the name, but I can say why I made it. There was a product that I saw in the wild that I loved and it had the easiest UX of any web 3 product I'd ever engaged with, and web 3 products are notorious for having terrible UX and terrible onboarding.

And so I started playing with it and then realized, not only was it a cool thing to play with, I actually had a use case for it. And so then I wanted to become a customer, this particular tool isn't paid, but at which point I wanted to get onboarded. So I met with the team and ended up in their telegram and could just see all the activity and see the community they were building.

And then at that point, I was like, this is a fire product. Clearly, this team is thinking differently because they've really prioritized UX in a way that's hard. Great community, great team, great product. If I can use it, a lot of people can use it because the barrier has to be quite low and I was in their telegram so I could watch them iterate.

I was seeing how fast they ship. They ship so fast, and so that combination, I was like, yeah, can I write a small angel cheque.

NA: Yeah, that's fantastic. That's all the questions I had Julia. Thanks so much for jumping on. I really appreciate your time.

JP: Yeah. And you, and your morning, I hope your day is super exciting and fun

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Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host may personally own tokens that are mentioned on the podcast.

NA: Thanks for jumping on, I appreciate you taking out the time. I wanted to start with your time at Accolade. How was that and what would you say were your biggest learnings?

BK: Yeah, so for a little bit of context joined Accolade when I was actually an undergrad, so that was 2014. I was studying Economics at George Washington University and was spending pretty much half of my week at Accolade. And at the time they didn't have a dedicated crypto effort.

So, I was spending most of my time on the venture side of things, but also on growth equity and traditional lower middle market buyout, across technology and healthcare in 2017 in the firm made its first fund investment in a crypto fund, it was Andreessen's first dedicated crypto effort.

And that sort of earmarked my foray into the space because I started to just pay attention to it recreationally on nights and weekends. In 2019 we had been following the space passively and it became very clear that there were a number of changes from 2017 to 2019 that made it apparent for us to enter the space with a dedicated So the number of funds that were focused exclusively on crypto had increased massively. There was a massive talent migration from traditional Web 2.0 to Web 3.0. From a regulatory perspective, there was a lot of clarity. And so, we came to market with a $125 million fund of funds with the thesis being institutional LPs, want diversified exposure to a nascent asset class, and a fund of funds is a great tool for them to do so.

That product was impeccably timed because we made most of our early commitments right before the market started to take off right before DeFi summer happened in 2020. And a lot of different things started to find product-market fit in the industry. So, I was spending more and more of my time on that product and less and less of my time on some of the other efforts at Accolade.

And my nights and weekends started to be consumed with spending time in and around a lot of the communities that are really popular today, principally within DeFi and just figuring out ways that I can get involved beyond just being kind of like a passive investor. During DeFi summer, obviously, that meant just being an active participant in these networks, but over a longer period of time, that also meant just finding ways that I could help on the qualitative side of things, whether it was putting out content or connecting with the core contributors and doing so I realized that there was a lot broken about the contribution process within DAOs and a lot of that has to do with the fact that DAOs are relatively new and the tooling to service them hasn't really matured in the same way that the actual DAO ecosystem has.

So, there are way more DAOs than there is sophisticated tooling to manage them. And that was kind of how I got excited about the problem space that my now co-founder and I are pursuing.

Just quickly on kind of how I came to Layer3. I had connected with my co-founder in the spring of this year, at the time he was building under the same branding, a growth marketing effort for DeFi and what that meant was taking traditional web to growth marketing efforts and applying those to DeFi communities. And he had started with the Rari Capital community, which was, a project that I had been excited about and been following from afar. What he was doing really resonated with me, and so I just reached out to be an advisor. One of the concepts that he dropped was this thing called bucket-list as a service and the, the acronym was BLAAS. And the basic concept was to do things in the real world and then get rewarded for governance tokens as a result.

It became very clear to both of us that you could productize that into a coordination tool for DAOs and it also became very clear that we would make a very good team, so we decided to pursue this together. Super long-winded, but I thought that would be a helpful context.

NA: No, that's great. Why DAOs? You've been around crypto for a while now. What do you really see in the DAO space that got you really excited?

BK: Yeah. I mean, I think the dirty little secret about, about DAOs, is that the coordination model doesn't really work in a lot of places. I mean, a lot of communities taunt themselves as DAOs but in the true essence of being decentralized and open communities, they really aren't.

In many instances, it's kind of just friends, sending other friends stables or Ethereum to write blog posts or push for the community. And it's actually more of like a girls and boys club than like certain elements of traditional tech or traditional finance. And so, I think a lot of that has to do with the fact that you have kind of this barbell of contribution that exists within DAOs

On one side you have s**t posters who just spend their time on Twitter and they're kind of evangelizing the brand, but they're not really getting anything out. And then on the other side, you have core contributors who maybe are paid on a quarterly or monthly basis from the DAO itself.

And I think there is a lot of idle human capital that sits in the middle and that's where I sat, where you're a passive investor in these communities. You're sophisticated enough within crypto to understand what it is that they're trying to accomplish, but you just don't have the tools to participate.

You're not going to spend the time and effort to actually figure out what the contribution process is. Like I often will say that contributing to a DAO is the virtual equivalent of climbing through barbed wire. You have to get into discord, you have to then connect with the core contributors. The tooling is a combination of Airtable, Notion, Google Sheets.

So just a really broken process, and most people aren't going to spend the time to do that because if they have a few hours in the evening, the turnaround time on that process is just too long. So, it's just a very soft part of crypto that I think there's a lot of room to build really creative things.

And I think what we're building at Layer3 will help solve the coordination side of DAOs but also help enable a lot of folks to get off the sidelines and start participating in this asset class.

NA: Fair enough. I think it's definitely an exciting space. What are your thoughts around coordination in DAOs and how final decisions are made compared to traditional tech companies? What I mean by that is you've probably heard of the Synthetix DAO and how Kain left, and then he came back saying that he wants a seat on the council to create, you know, a better direction for the DAO. How do you think that kind of plays out for DAOs over the long-term to have one leader?

BK: Yeah, look, I think there are a lot of people, much smarter than me trying to solve DAO coordination with respect to your question. And I think the honest answer is that none of us really know. You're creating like an open-source system that's trying to accomplish a lot at a ridiculously fast pace and in some ways, you do need to have a core contributing team that's sort of steering the ship.

I think over time, alongside the growth of DAO tooling, we’ll come to a place in the ecosystem where you can have folks like Kain or Robert Leshner still be kind of the figureheads of their communities, but for them to really have no formal decision-making power, it's basically them saying, Hey, this is what I think the community should do.

And then the community looks to folks like that to actually pursue it. But by no means, can that person be sort of a stopping force on the progress of what they're trying to accomplish?

NA: Yeah, sure. That's fair enough. What would you say is the vision that you have for Layer3 over the next five years? Where do you see it going?

BK: Yeah. So, I mean, our go-to-market is creating a marketplace where on one side you have DAOs and we're starting primarily with DeFi DAOs, but we do hope to expand you know, NFT community, social communities. And then on the other side of that marketplace, you have contributors like you and me who have, you know, maybe an hour or two after we finish our day jobs or on the weekends where we want to get involved and basically earn our way into governance.

And those contributors come to our marketplace, they complete, and claim tasks and they earn these governance tokens for doing so. Over time, what we plan to do is begin decentralizing elements of this. So, in sort of six months, what we hope to do is say, well, if you have contributed a certain number of tasks, you can now validate tasks on the Layer3 platform.

And so now you're creating an environment where peer validation occurs. So, you come to the platform, you complete a task. I, as a validator, can also come and earn crypto by validating that you actually did that. And then in the final state, what we hope to create is a protocol where anyone can come to Layer3 post an atomic task, another person can come, claim and complete that task, and then it's validated by a third party in a completely decentralized permissionless way.

So, you're creating an environment where you can validate very bespoke, very atomic off-chain behaviour on-chain, and that can then be coupled with an on-chain resume to allow you to do other things in the ecosystem.

I think right now when you look at sort of the landscape of projects that are going after something like this Rabbit Hole is doing an incredible job of building an on-chain resume. So, you do on-chain behaviour and you earn governance tokens. We are trying to create essentially the same thing, but you're doing off-chain behaviour and you're earning governance tokens and I think that's powerful.

NA: Yeah, definitely. The whole on-chain resume thing is definitely going to be the future of hiring, in Web 3.0, no doubt. You've been on the other side of this world where you are investing into funds and you've seen how venture funds work and now you've seen how DAOs work. There is a range of investment DAOs in this space, actively making investments. There's a lot of talk about how investment DAOs are the future of venture capital. What are your thoughts on that?

BK: Yeah, I have mixed thoughts on this because I think one of the beliefs that we had at Accolade is that if you are a truly incredible investor, you have independent thinking and independent thinking, and contrarianism is a very hard thing to foster in a DAO by pure virtue of the fact that you need consensus to make investments.

So I think in a market environment as we've seen over the past 18 months, those communities will do really well because you're enabling folks to participate in the upside when everything seems to be doing well.

But, in a bear market, it will be interesting to see how they go about sustaining because when you look at some of the best crypto native venture firms, they were making very contrarian bets in bear markets. And those bets, they were only able to make because of the structure that they were operating in, which meant that they were a traditional fund structure and their investment committees had built in the policies that enabled people to make investment decisions without broader consent.

And I think that over multiple decades and multiple asset classes has always been a recipe for success within those types of firms. And so, you're going to have to figure out a way to implement the rules within investment DAOs to enable that same type of decision-making.

NA: Yeah, that's a great point. What about the point that most DAOs will eventually become investment DAOs because of the treasuries that they manage?

BK: I think there is a massive white space for sound DAO treasury management and that's why we're building what we're building. DAOs today can't find enough productive places to put their treasuries to work.

That has a lot to do with just poor coordination tools and poor treasury diversification tools. Yeah, I mean, the fact that there are some multi-billion dollar, market cap projects that have billions of dollars in the native token on their balance sheet is very concerning. And I think it's one of those lessons that unfortunately we're going to have to learn when the market turns and the price of those assets capitulates, and then the balance sheet kind of capitulates alongside that. Then from that, I think people will be forced to think a little bit more quantitatively and rationally about how they go about allocating those funds.

NA: After spending a long time investing in venture funds, you ended up raising money for Layer3. How was that experience being on the other side of the table?

BK: Yeah. I mean, I think it's no secret that it's a great time to be a founder in the current market. There are a lot of funds being raised and I saw that, and I felt that at Accolade and we were kind of in the pole position to be one of the first calls that a lot of those funds made. So, I was in a fairly privileged sheet and understanding how they think about things.

And then when I was on the other side, I mean, like, you know, anecdotally what I'll say is that the funds that had the best reputation from the LP side certainly match that when you're on the other side of the table, pitching them, they have a great way of just connecting with founders, asking the right questions, adding value, whether they invest or whether they don't and just continuing to develop and invest in that relationship.

So, yeah, I mean, generally speaking, I think for the next few months, until, you know, whether regulation comes out or something causes the market to cool off, it'll be just a great time to be raising capital. So, for me, I kind of came out of the gates with just a good Rolodex of folks to call on, and I knew exactly who I wanted to spend time with and it ended up working out in a pretty painless way.

NA: Is there any advice you could give to founders who are pre-product, pre-revenue trying to raise right now?

BK: Yeah, look at the end of the day, you want to construct a round of folks that you think are going to be there when, as I said, I've mentioned this a few times in this interview, but when the market turns, you want to make sure that you have folks that are in your corner.

I think you see a lot of founders from time to time, go and race for maybe one or two funds and, you know, funds who shall remain nameless will typically try and take the whole round. And I think that's a really bad dynamic. You want to construct a round where you have a healthy balance of funds where their check size is meaningful relative to their fund size, but also you have angels there because both of those types of investors can really be valuable when s**t starts to hit the fan.

So, my primary piece of advice is just to be patient. Make sure you get the optimal round construction. Don't go with the first person that offers you a term sheet. Then the second thing is that if you don't find success early on, just be persistent, you know, continue iterating. There are plenty of ways to raise money in crypto today, you can get grants committees to fund you with $25-50K checks, just to bootstrap your way until you get to a larger seed or a larger series a.

NA: Yeah, that's some great advice. And is there any advice that you could give someone new to crypto? How they could probably handle wading into the waters since crypto's quite a big thing now there's a lot of different areas to look at the DeFi, NFTs. How do you as well personally, keep track of what's really going on?

BK: Yeah. I mean, for me, I think the best way to do it is to start paying attention to just a handful of communities. So, from an investment perspective, you know, don't try and get fancy, set an allocation that you think makes sense, and is going to kind of capture the upside regardless of what happens in certain pockets of the ecosystem.

And then from a participation perspective, find a few projects that really resonate with you and just spend time in their discords. Founders and core contributing teams are incredibly accessible, so ping them, ask them questions, find ways to get involved. And then from there, you will invariably find what it is that excites you most about this space.

And maybe that'll end up pushing you to leave wherever you are currently, whether it's like a Web 2.0 tech job or traditional finance and enter crypto full-time. So, kind of the generic advice, but I do generally speaking think that that's the best approach.

NA: No, that's a great point. Finally, could you talk about what is a secret obsession of yours that not many people know about

BK: Is this within crypto or outside of crypto?

NA: Anything, whatever you think might be interesting.

BK: I don't know if this is a secret obsession, but I will say that. I think spending time, like COVID in particular forced people to spend a tremendous amount of time in front of screens.

For me, one of my biggest hobbies is endurance sports. I'm forced to unplug and spend two hours getting a workout in. So, I like to do long-distance running, long-distance biking, swimming, those types of things.

And I think a lot of people don't realize the clarity that comes from having just two hours, not looking at a screen or just not having any type of input. And so, yeah, that's kind of like an obsession of mine. And so, I always try and carve out the time to make sure that I have that.

NA: That's a great point and a great reminder to take a little bit of a break.

BK: Yeah, exactly.

NA: That's all I had Brendon, thanks so much for jumping on, I had a great time talking about the details of DAOs and how Layer3 is going to make things very different.

BK: Yeah, no, this was a great conversation and I appreciate the questions.

Follow me, Brandon and Layer3 on Twitter here.

Disclaimer: The Inquisitive VC is provided for informational and educational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any persons or a solicitation to buy or sell any tokens or securities or to make any financial decisions. Do not trade or invest in any project, tokens, or securities based upon this podcast episode. The host may personally own tokens that are mentioned on the podcast.

We talk about his journey to investing, Solana, his anti-portfolio, art and more!

The podcast is also available on your favourite podcast sources like Spotify, Apple and Youtube!

NA: Thanks for joining me. Really appreciate your time. I've been following your work on Twitter for quite a while now.

CM: Cool. Yeah, no, thanks for having me. And I'm excited to come on the show and by the way, I love the name, cause I feel like as a venture capitalist, being inquisitive is usually one of the most important traits.

NA: Yeah. Thank you. I, yeah, I spent a lot of time thinking of one and that seemed to fit quite well. So I'd love to start with, I guess, hearing about your background and going from being an entrepreneur to investing and then how you essentially fell down that crypto rabbit hole?

CM: Yeah. Let me give you a slightly longer context, but I'll try to keep it a little bit brief to give you a little bit of the arc. Sometimes I feel like things always make sense, looking at them from now and looking behind the scenes, all the dots connect.

But looking forward, sometimes it's always a little bit harder to see how these things would go. But yeah, I guess I first got started when I moved to the Bay Area, San Francisco Bay Area, in 2009 after I graduated college. I threw all my stuff in my car, I drove up to Palo Alto, no plan, no idea and no job, no anything.

And the first place I went to was this place called University Cafe in downtown Palo Alto and I was eating brunch there and I heard two guys talking about Facebook next to me. And so, I look up and I look over and it was Mark Zuckerberg and Michael Arrington. Michael's the founder of a TechCrunch.

And I was like, wow, this is incredible. Like, literally it was like my first day in Palo Alto, like my first meal. And at that point, I decided that I didn't know how I was, but I was going to be here in Palo Alto. That was my plan. And so long story short, this eventually culminated into the first company I started, which is called Startup Digest.

It was a tech newsletter, mostly focused on a lot of, events, activities, news, and all the things that were going on in this local area. And then we eventually expanded it to other cities. So, at its peak Startup Digest, was covering basically every major metropolitan city in the world. 550 cities, had about a million subscribers and then was eventually acquired by TechStars.

It is still operated and owned by them today. But. I guess it's easy to talk about it now, cause everybody understands tech newsletters, and they're like this really big concept and Substack and all this stuff, back then nobody was doing tech newsletters. This was not a thing. This was not a category.

Nobody understood any of this stuff. We were one of the very early users of this company called MailChimp. So, we were one of the first major publishers on their platform when they were first starting it. And like, literally like none of this stuff existed. So, I love that this is a sub-industry now, but yeah back then was not the case.

And then after that, I built with Startup Digest we actually built a whole bunch of internal tools and stuff for ourselves to manage our community. And we tried spinning this out and turn into its own company. It was called GroupTie. I ran it for about two years.

We were trying to sell community tools that businesses and stuff like that, kind of like Slack and Discord is doing now with these bigger external groups. We're trying to do a lot of that stuff back in the 2012-13 timeframe. Nobody understood any of this stuff. Super hard to get any companies to actually buy into this.

Our largest group that was using it was the Thiel Fellowship, the Thiel Foundation. And they used it for all their mentor communication and all their mentees stuff and all their events and activities for everything. But we had a really tough time getting other companies to take this more seriously and seeing kind of where it fits in.

Cause you know, at the time, none of these big groups, communities, none of this stuff really existed back then. And maybe, I guess this is the repeated pattern that I always see, that it was just a little bit too early. And so while we were winding down that company one of the early users within the Thiel Fellowship, this guy named Dan he pinged me wanting to learn more about the product and stuff.

And at the time he was a partner at Greylock. And so we met at Greylock's offices at Sand Hill Rd and I was giving him a demo showing him, but also telling him the story of why it didn't work and all the lessons learned. And then we started brainstorming about how Greylock itself could use communities and networks, to support portfolio companies find new investments to, you know, do all this kind of stuff.

We had a super long brainstorming session and at the end of it, Dan said, do you want to do this here? And I was like, what do you mean? He's like all this stuff we just talked about, do this here. I was like, okay, that sounds good. And so that's how I ended up at Greylock. Not your typical path into a venture capital fund.

But yeah, I ended up starting and running all the community and network-based efforts and activities for the fund itself, which eventually tied into a lot, emerging market sectors that we're looking at, but yeah, that was my entrance into VC. I initially thought I was just going to be there for a couple of months and probably leave and start something else.

And a couple of months turned into almost five years. So, I was there for quite a while. Working with practically all the partners, all the areas, all the people at the firm itself. And then yeah, after five years, I left did a bunch of angel investments. Some of which I'll probably talk about later.

And then met one of my really good friends Edith Young, we started brainstorming about what we wanted to do next. She was a GP at 500 Startups, and we pulled in two of our other close friends, this guy named Phil Chen and Alfred Chung and we all decided to eventually start Race Capital together.

It's our own fund, our own image. Focus mostly all early stage, so seed up to Series A. More core infrastructure layers are the things that we did. So again, I guess in hindsight, this all sounds really logical, we did a company sold it, VC, started my own fund, but in hindsight, I honestly I was making most of the stuff up half the time.

Like a lot of this was uncharted territory that, you know, I always just weave it in, turning my way, kind of through.

NA: That's really interesting. And great to hear that you were, I guess, pioneering some of these areas before they really existed. And I guess that's why I'd love to hear about how you found crypto then?

CM: Yeah. So yeah, the extended, but truncated version of this is so back in the 2014-15 timeframe, Greylock made a handful of investments in this space, mostly Bitcoin companies, because at the time the crypto industry was really Bitcoin. There, really was not anything else. So, you know, Greylock invested in Coinbase, Zappo, Blockstream a handful of other companies, mostly again, all Bitcoin centric.

So through that experience, I actually got to meet a lot of the really early, core developers of Bitcoin itself. A lot of the core contributors, a lot of the people in the ecosystem, and it was just a, it was a fascinating, very different market subsector than any other thing we were looking at.

I remember at Greylock at the time, we were looking at a bunch of things in AR VR, autonomous vehicles, robotics, all kinds of the newly emerging areas, but the Bitcoin and crypto space as a whole had such a, it was so different with such different considerations. And I had very different assumptions, than everything we took for granted mostly in the tech area.

I was also I guess right place right time. At that time, this was before I was married before kids, I used to live in this big hacker house in Cupertino. And one of the people living there, he was not a founder, but he was like a really early core developer for Ethereum itself.

He kept telling me you need to do the Ethereum ICO, you need to do the Ethereum ICO. But then when I asked him, like, can you tell me a little bit more about this, Ethereum thing. The way he explained it,  he's like smart contracts are going to automate lawyers, and I was like, what do you mean you're going to automate lawyers?

It’s going to write all the rules and contracts and code, and it's all going to be enforceable or whatever. It was such a confusing thing at the time. But I listened to him, not enough, but a little bit. And I participated a little bit in the Ethereum ICO. And then I guess like through that experience and knowing a bunch of the kind of friends and people, he knew that that was kind of like what led me down this path.

And I, I guess right place, right time when I left Greylock, this was right in the like 2017 ish timeframe. When a lot of the stuff was also picking up steam. So in 2017, I didn't make a ton of angel investments, but I made a few. In 2017, I was one of the earliest users and investors for this very tiny exchange called Binance, which is just starting. Basically end of 2017, early 2018, I was one of the very first investors for Solana back when Anatoly was first starting the project. I got to know him through a lot of the other previous work that I did.

He was a super talented individual. Really just an impressive person. And then for the fund itself, when, when we formed Race in 2019, we were one of the earliest investors for this other exchange that got started called FTX, which Sam Bankman the founder their also similarly super impressive individual and person.

And so, yeah, I guess going back to the inquisitive theme, some of this is just for self-learning different areas. I want it to be exposed to this stuff. I wanted to use it in, try it, not just talk about it. I feel like a lot of the time people love to talk about all these big, broad concepts of self-sovereignty and your own money and DeFi all this sort of stuff.

But very few people actually use this on a daily basis. Like I've always tried to be more on the usage side of it. And so like, I've used a lot of these things. I've been LPs for a lot of these things. I've farmed a lot of these things. I've created NFTs. I actually like to get into the weeds and use a lot of this stuff.

But yeah, that was, I guess the journey of how I initially heard about it and then kind of how I got sucked down the rabbit hole, so to speak.

NA: No, that's, that's really interesting. And I'm glad you mentioned Solana. Like it's been on an amazing run, I guess, over the past, possibly a bit. I'd love to hear your hindsight view as well, but why you are so bullish on Solana and what really, I guess, drove you to make that initial investment?

CM: Yeah. So as I just mentioned, Anatoly, who's one of the main technical co-founders of the projects himself. He's a ridiculously impressive individual. And so when I met him, I basically told him whatever you do, I don't really care what it is I'm willing to back you and whatever. And then he eventually sent me an email that eventually would become part of the first version of the initial white paper for Solana itself.

Keep in mind back then there was nothing built, no test then no code written. Like literally this thing was a concept, idea. There was nothing built at the time. But I guess what intrigued me so much about it is, 2017-18 this is about the time period when crypto kitties were really taking off, transaction fees started to kick up a lot and there was this big question on if these networks are going to be highly used the transaction fees being so high would really start to be a detriment to the ecosystem.

And so how do you solve the scaling problem? So, a lot of people started coming up with sharding, layer two solutions, roll-ups, zksnarks was kind of in their early days. A lot of these concepts and theories are being talked about and Anatoly, you know, before Solana, he was an infrastructure engineer at Dropbox, and before that he was an early core developer at Qualcomm, mostly working on very low-level protocol type stuff for CDMA chipsets is how we relay all the phone calls back and forth to each other.

I guess Anatoly his insight was when he looked at the scaling problem. He wanted to solve it in the method that he had used before, where he's like, the way you do this, is you pin it through time you know, you don't try to create these super complex networks or whatever, but if you can create basically a clock that everybody can agree upon we can use this to basically order transactions.

There's a very similar concept in the Centralized server world called Google true time. It's a very sort of similar concept idea, but this is applying it to a decentralized, not a centralized network. And so the initial pitch was this, I want to use this time-based sync clock idea to boot shop its own blockchain.

I guess context was, he was not sure if this was going to work, but if it did work, this did have the potential to greatly lower the cost of transactions, greatly increased the amount of transactions that can be handled by the system itself and really scale this for actual internet-scale usage on both sides, for users and for developers.

So, it was one of those, if it worked technically this could be a big thing with a ton of open questions outside of the basics of, could this be built? Could it work? Could it scale? Could this not be centralized to the other marks existential questions of even if you could build this, would anybody actually even care?

Well, developers actually build upon this to do anything with it, cause there was a whole bunch of these layer one scaling solutions or layer two scaling solutions, all being started all being heavily funded. But there was always this question of what anybody builds upon this thing, these new things that you're doing because you can build the best system in the world, but if nobody uses it, it doesn't really matter.

And so yeah, I guess this is contextually where it came about how I met Anatoly and at least like the asymmetric bat that he was going for at the time.

NA: Yeah. That makes a lot of sense. And then recently I saw on Twitter, Dylan from Saber HQ mentioned you decided to lead the round a day after meeting them. How do you form such conviction to lead around in such a short timeframe?

CM: Yeah. So, again, I guess, contextually since I told you this part, like, you know, I've been involved in the Solana ecosystem, literally from the start. In the beginning, you know, they had to build a network, to begin with, and then once it was built, they actually had to find developers and applications that people to build stuff upon it, which by the way, it was no easy task in the early days.

The first, really big break for them was when they eventually got FTX to build Serum, a central limit order book on top of Solana. And after that, that's when you saw a larger proliferation and developers start to take Solana seriously.

Cause before that it was still very much an oddity or like kind of this different path that they took outside of the space, but there was no real concrete usage or use case from it. It was hard to see but FTX team picking it and building Serum on top of it gave a lot of people, an example, to look at a team to follow and, and, and something to really kind of point to, as an example.

And so shortly after there was the very first hackathon that, that Solana put together back at the time, there was really no emphasis on the hackathon. There was a bunch of teams and stuff that got formed, but nothing like we see today. The second hackathon, had a much kind of bigger, wider scope and a lot more people started paying attention to it.

But Saber and Stableswap were really born from the first one. So Saber was initially called Stablewap. They built the Stableswap contract written in Rust and Dylan and Ian, they don't talk about this as much, but they were part of the .. there was an initial core group of about six or seven companies and people that created the word DeFi and this concept of decentralized finance and Dylan and Ian were part of that conversation back then.

So, they had been doing a lot of stuff in this space since again, before it was recognized before it was, you know, cool or whatever. Then Dylan went to go on to work at OKEx for a while and then both of them were very early engineers at Pipe which is a super, highly regarded company in the sort of traditional startup space.

And so we actually happened to know his former boss at OK, And then we knew some of the early team members at Pipe. When we asked them about Dylan and Ian, both of their responses were resounding, what are Dylan and Ian doing? Can I invest? I'm in? What is it? I don't really care. Like I'm all in like these two are ridiculously impressive.

Almost like my reaction to Anatoly, they had the same reaction to Dylan and Ian. And so yeah, we had been looking to make a more significant bet from the fund side on the Solana ecosystem This is the perfect team that we could find and they were really building one of these core infrastructure layers for Solana DeFi, that can be started to use by other protocols and ecosystems in the system itself.

And so yeah, a lot of it was, if I had to sum it up, I guess it was prepared mind, high reference and I greatly appreciated their very clear idea of what they wanted to do and very tight conviction on when they want it to do it. They didn't have a loose broad concept of what they wanted to do.

Like they already had a very tight roadmap, a roadmap and deadlines of what they wanted to hit and by the way, they hit all those at play and way more than that. So we love to find these teams with a high execution sense to them. Cause I feel like a lot of times in the crypto space, sometimes it tends to be more about these big ideas and less about the execution and we tend to kind of bias the other way around.  

NA: That's great. I see the similarity in the two stories of Solana and Saber. But yeah, I could see how you could be able to find conviction at that point. What would you say are some highlights of your anti-portfolio and what you've learned from it?

CM: Anti-portfolio that's a good one. I mean, maybe I'll highlight one. There is this company we saw in the pre-seed, seed, seed extension round multiple times and multiple times we said no, Axie Infinity. Again, it's easy in hindsight to look at this and say, this is such a huge success of why was this not so obvious, much harder in foresight.

I guess it was a little bit easier for us, because again, we don't tend to focus as much on the gaming side. We're more core infrastructure, low-level transaction systems, plumbing type stuff that tends to be our sweet spot. We don't tend to do as much on the pure consumer-level applications. So, whether that's games or creator type stuff or social apps or anything like that, it's just not our sweet spot not to say that these things won't work or be successful.

Obviously, they have, but it's just not, it tends not to be our emphasis. But yeah, at the time Axie Infinity, was these cute little characters that you can battle that you could have and that you can own. And the artwork and design were always really well done, but I did not have the foresight to see how this would turn out to be significant scale.

And again, none of the play to earn concepts were baked in back then. None of them were even really explored or whatever. But you know, I really should have been more inquisitive and learnt about that space, despite my scepticism. And then my partner Edith used to be at 500 Startups and one of her other 500 Startups counterparts, this guy named Binh Tran.

He did invest in their seed round when they were first starting, and it's been a huge multiple fund returner for him. So again, I think in the venture space, you can't win them all. There are certain sectors you do, certain sectors you don't do. The other thing, which I try to emphasize too, is you should find and source and pick companies that you are actually genuinely interested in, and you're going to use in some way.

So, even though it's part of the anti-portfolio, it's only like, I just wouldn't have been the right type of person for that at the time. Like it was just not my thing. Where you really want to find an investor who ideally, you want to find an investor who genuinely likes what you're doing.

Not just because they think they can get a return from it, but like, they actually are like into the product, into how it works. Again, they don't need to be the number one user of it, but they should actually use the product in some form or fashion.

NA: Yeah, no, I hear you. That's a great one, actually, especially with the run, it's been on. What's a secret obsession of yours that not many people know about?

CM: I'm not sure how many people not know about it, but yeah, outside of the venture world, I also have a family and stuff. I have a pretty big hobby. I've been doing photography for a really long time. Since before the Bitcoin Genesis block. And it's always been more, just like a kind of hobby passion thing to kill time if you will. But I tend to get pretty hardcore about it, I guess.

And then in 2016, I was the national geographic photographer of the year which is kind of a crazy thing to win. And so after I won that, I started to do a lot more of these galleries, exhibitions, showings commission type stuff.

So, I've done a lot of stuff in that, I guess, the more traditional art world too. And so, when all this crypto NFT stuff came about, I had always been, trying to find a way of how to use more of this artistic, creative side to try some of these things. And kind of like what I was saying before is, I actually like to use the stuff, not just talk about it.

And so one of the things I tried is, I want it to go to the full end-to-end process of actually taking a photograph and actually creating, minting an NFT through the whole thing, again, not just in theory, but to actually do it myself. In the Ethereum space, I've been an early launch partner for a handful of these new NFT marketplaces.

And then I guess most recently is I guess my love for Solana. I've been trying to see how I can do this in the Solana space. And so, I have again, it's more of like an art thing, but more of like an art project generative artist side, then I'm going to do a called Playground within the Solana space.

Again, this is more for fun, for the experiment, for playing. Like it not as serious for me. Like, I guess it's my own artistic outlet for a lot of the stuff, but I don't know how many people know this, but I guess it's out there now.

NA: That's really cool. I'll be looking forward to that one. What's the latest, publicly announced investment you've made and why did you make it?

CM: The latest publicly announced investment. There's a whole bunch of them that have not been announced that I probably can't talk about. The latest one that I guess one of the things that context, so Race Capital venture fund, we're not like a pure crypto fund, so we definitely make investments in the space, but we do a lot of other general things, too, anything on the infrastructure layer.

And so, our most recent investment, we publicly talked about was we were a very, very small part of the most recent round that Databricks just raised. Databricks is a super well-known company in the data infrastructure space. My partner Alfred, was one of their early seed investors.

So similar to me in Solana, he has his own story with Ion Stoica there and how he got involved with Databricks when it was originally Spark. And so we did a small participation in that one, that's probably the most recent one we announced.

NA: Okay. Thank you. Now that that's a really interesting one. It's good to hear that you're actually quite more across general tech as well. Not just crypto.

CM: Yeah. Crypto is one of those specific subspaces that like you have really have to get into and know about and kind of be part of the ecosystem. But at the same time, I also think a lot of crypto people would benefit a lot from knowing kind of what's going on more in the general tech world. So, we tend to straddle this much more than a lot of other firms out there.

NA: Yeah, no, fair enough. I feel like it's getting quite hard to stay across crypto at this point as well, with all the things happening.

CM: Yeah, maybe one other comment to that is you know, back in the 2014-15 timeframe, crypto used to be such an easier space because it was just Bitcoin.

Even in 2017-18, it was a much more manageable space. Now it's so wide-ranging like crypto isn't like a singular thing anymore. There's all the way from layer one protocol, transaction systems up to DeFi financial related content, to NFT, artistic related things to creator economy, to social. to on and on and on.

Like, it's actually a much more horizontal sector than I think most people give it credit for. And so, there's definitely certain people and firms and stuff that tend to focus on others like certain subspaces versus the other. And so, yeah, crypto isn't like the singular concept either it's like this actually multifaceted space and yeah, it'd be almost impossible to try to keep up with every single thing going on. Like it's impossible at this point.

NA: Yeah. No, I agree. And I've been working full-time in crypto and I always feel behind. That's all the questions I had Chris. Once again, thanks so much for coming on. Really loved talking to you.

CM: Cool. Yeah. Thanks for having me. And yeah if any founders are out there building anything in the crypto ecosystem or specifically the Solana ecosystem, I'm just chris at race dot capital.

So feel free to reach out anytime.

Follow me and Chris on Twitter here!

Disclaimer: The Inquisitive VC is provided for informational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any person.

We talk about how he got into crypto, starting Alpha Impact, how to balance token and equity investors, DeFi and more!The podcast is also available on your favourite podcast sources like Spotify, Apple and Youtube!

NA: First of all, thanks for jumping on. Appreciate your time. I want to get started with talking about how, and when you got into crypto and the story behind that.

HH: Sure. Boy, it was a long time ago; it feels like several lifetimes! So I'm a lawyer by training and finished law school and didn't really want to actually practice law. It didn't seem that appealing to me. I started working in Venture Capital, and I remember working on a small transaction and I came across some entrepreneurs who had done an ICO and raised $15M in minutes, in mid-2017. They later did a public sale for $80M and it occurred to me that given the scale of funds being raised, crypto was here to stay. So I started going to events in New Zealand, where the landscape is dominated by just a few companies. I ran into some execs from one of the large companies including my former employer, Techemy. Techemy is a regulated investment bank that raised $500M USD in 2017/2018. I had the chance to join the business and I was tasked with building a due diligence framework for the many token transactions we were investing in and syndicating. I knew nothing about crypto and had impostor syndrome… but given the number of deals that were coming through I had to learn very, very quickly. Before long I was running deals and they moved me across to Asia in 2018. So that's the abridged version of how I got into crypto.

NA: Nice. How did you move to the other side from being on the side where you're helping companies raise money and investing to going towards and starting your own crypto company?

HH: I mean, I've never really left crypto, right? I moved on to start my own advisory business and later joined a large crypto exchange.  I always knew I’d start my own crypto company, and I just didn’t feel like I had a use case or a strong idea. In 2020 I was actually making more money trading than I was at my day job. I had a vague ambition to start a company and joined the Antler accelerator.  Antler is a really great place to go in that situation because you don’t need an idea. My Co-Founder is an engineer and evidence driven, and had done thousands of hours of research on 20 tokens including DeFi and NFT coins like SNX and DeFi. He had a thesis that seemed too good to be true. I asked if I could send some money and have him invest for me, and the idea was born to build Alpha Impact. We sent a survey to 100 people asking if they could generate a 2000-3000% annualized return, would they want to copy a top trader. More than 80 of the respondents asked us then and there if they could send us money so we knew there was demand.  

NA: Got it. Yeah. That's a great story. What would you say would be the biggest challenge that you faced setting up this type of business compared to your previous experiences?

HH: Well, one of the challenges has really been people. We've made a conscious decision not to go remote with our development work. What that has meant for us is that we have local developers here in Singapore and it's been extremely difficult to find.

It's easy to find offshore devs, but we've decided that we don't want to deal with different iterations of codes, backdoor codes, and a lack of bonding.

I think the most difficult part has been scaling the tech capacity. We have seven local developers in Singapore. It has been hard bringing foreign talents to Singapore. Getting a work visa approved for a foreigner is tough on new businesses.

It gets easier over time, but COVID hasn't made that scenario easier. The real big challenge has been scaling the tech team. 

Surprisingly, one thing that has not been challenging for Alpha Impact has been funding. We're solving a really important problem in crypto, and we're really grateful to have had investors who share that vision, solve this problem with us.

NA: That plays really well into my next question, which is how was the journey fundraising for your token round?

HH: The idea of raising capital for any business is really centred around, “Can you find investors who share your vision? Can you find investors who understand you as a founder?” When we had our first capital raise, it was an equity round. We did it with Antler and raised $100K. 

We had nothing. We had zero lines of code built. As you move forward, you have more of something, but you're still not there yet. Investors want to see some form of traction, users and growth and revenue, stickiness and customer acquisition costs, and channels and unit economics. It's very difficult for investors to evaluate a very early-stage opportunity. 

Imagine, if you're copy trading me, you're some university student, you have a hundred dollars. The fee might be less than a dollar, right? We're not going to charge your credit card 82 cents and split the fee to traders, insurance, and company treasury. The transaction costs would be very high.

I think the interesting thing about doing this in a bull market meant that we were able to create IMPACT token, which would accelerate payments within our ecosystem.

We had the opportunity early in the market cycle because we saw what was happening obviously. Having worked in this space for many years, I had some existing relationships and it really started with a conversation with our lead investor.

I can't say the name of that lead investor because of confidentiality, but it's an international high-frequency trading firm that has an interest in crypto. We had the chance to chat with those guys and we shared what we're doing, and they really believed in us.

They have a big-name brand, and after that conversation, we had done due diligence and they said, “If you do decide to go ahead with this token, we'd like to be your first investor and we'd like to give you some cash.”

After we had them on board, it was easy. Before that, we were having conversations with a few people. There was some hesitation but as soon as we had that big name brand on board, everyone fell in line quickly. We were actually in a position where we could, and I know it sounds crazy, but we could choose who we wanted.

You know, you have only so much allocation left and you're saying, okay, well, what could you do relative to what that investor can do, which is perhaps a sign of the interest in crypto.

NA: Yeah, that's always a great position to be in. And you mentioned you did an earlier equity round. So how do you think between the two, having token investors and equity investors? How does the alignment between those two different investors work?

HH: It's a great question and we're kicking off another equity capital raise. We just had the Antler demo day and dozens and dozens of VCs reached out to us. So, we're just kind of going through that process and answering this question almost on a day-to-day basis.

One of the things that we said early on with Antler, who is our founding investor, they didn't give us a ton of cash, but they believed in us and they gave us something when we had nothing, we had a pitch deck and no lines of code yet. We wanted to make it fair for them and we actually didn't think clearly at the time of equity investment what the crossover would be.

We decided that we would include them in the tokens that we have. 

Now, we're raising a seed round, kind of a pre-series A. Those investors will have some exposure to the token.

There are different ways to do that, whether it's some kind of a conversion. So, if you buy X dollars’ worth of equity, we'd give you Y dollars’ worth of tokens or you just hold a lot of tokens in your balance sheet and then you’re on the company's balance sheet which gives investors who are uncomfortable setting up wallets and undergoing compliance because it is a complicated process to hold crypto.

It still gives them economic exposure without the risks of doing all those things or at least risks that they see. So that's the token to equity value accrual.  

In the other direction, we're using the token in our ecosystem too.

For every dollar of sales or fees that we generate, there's one to two thirds that gets given to the trader, 5% goes into an insurance pool and 5% into a long-term liquidity lockup. Then the rest goes to us. If you think about it mathematically, the long-term liquidity lockup and the insurance pool creates a framework where every dollar of transactions is having a net deflationary effect on the supply of the tokens.

We're engineering the token to increase in value. The theoretical approach that we've taken is that more transactions, more customers equals more scarcity of the token. A way that the token will do well is if we succeed in solving our mission: we’re making crypto trading accessible for everyone, whether you've got $25 million or $25 dollars. That's something that's not possible today.

It's very hard to find a trading strategy if you're someone who's new, or if you're someone who doesn't have a lot of money.

We really saw an opportunity to build this as a social media play, which I'll get into maybe a bit later, but I guess the value upside for the token investors is that they have the ability to hold those tokens until such a point that they mature. They could sell them if they wanted. 

The equity investors have some exposure to the token plus the equity itself.

NA: Yeah, that's an interesting model. I'm interested to hear what piece of advice you would give someone who's looking to start a crypto company now?

HH: Have a solution to an important problem. 

In 2017, it was easy to raise funding and that created an environment where we have people who are raising for the wrong reasons. I have people messaging me saying, “Hey, you guys did a token, teach me how to do a token.” The difference that I would observe between the 2017 market and this market, anything could get funded in 2017. Not anymore.

You could be doing a weather prediction algorithm. You could be doing bibles on the blockchain. The raise sizes were much bigger. It was like 50 million, 30 million, 20 million, 10 million. 

In the 2021 market, raises have been much smaller and they've been really focused on three use cases. If you’re not in one of these spaces, you can't really get funding.

Number one has been crypto trading. Is there a more efficient way to trade? Can you improve the crypto trading landscape? Number two has been DeFi, DeFi refers to decentralized finance where smart contracts can execute autonomously. So, you can design a contract, for example, Nawaz, if you deposit Bitcoin in my smart contract, I will allow you to borrow another currency. If the value of your Bitcoin decreases, I will ask you to pay back the other currency that I've loaned you, or I will start selling your Bitcoin at cost.

The interesting thing is that this and it's never in terms of, what we call the loan to value ratio, it's always very conservative. If you're giving me a million dollars of Bitcoin, I'm only giving you 200K or 400K worth of whatever it is.

So what we saw with Bill Hwang and Archagos Capital is that the banking system actually does this very inefficiently. They say, “Okay, Nawaz, you seem like a good guy. We know you well, we've known you for a long time, here's some money you don't have to give us any collateral but please pay us back.”

And it turned out that Mr. Hwang was borrowing from all these different lenders to essentially go long on a very small basket of stocks and the concentration risk was very high. This would never happen with a smart contract. A) It must be collateralized B) The collateral always covers the outstanding loan.

And for B), if the collateral starts decreasing value, that collateral gets sold. That is a margin call. Something Bill Hwang failed to make and caused Goldman, and a few other banks to famously pull the rug on all the other banks.

The lenders got together, and they said, how are we going to fix this situation? Goldman sold everything left of Bill’s holdings and covered their own base, but smaller banks were left holding nothing. This scenario would never happen in DeFi.

Sorry, long tangent, but just coming back to the question, I think the three use cases are: Crypto trading, DeFi and NFTs. Those have been the only three that we've seen getting funded. You have to solve business problems in those 3 categories. Also, I think it's very important to have the credibility to solve one of those problems if you're wanting to raise in crypto today.

NA: Yeah, great point. Would you be able to talk a little bit about Alpha Impact and what is your vision there? 

HH: Sure, great question. Austin and I started the business to solve a problem most people face when they start investing in crypto.

Austin and I started this business and we started with a very simple problem most people have when they get into crypto: it's very hard to find a trustworthy source of information. When we're learning about crypto, we talk to our friends, we go online, we look on Reddit, we look on YouTube, we look on Tradingview and there are all these sources of information, but no transparency. No transparency.

There are crypto influencers on YouTube that don't hold any crypto. You would assume that, if they're talking about Ethereum, they hold it. But, they could have sold all their Ethereum last night and you'd have no way to know if they're credible as a source of information. We thought about this from the perspective of transparency.

The information that we do find is often conflicted and everyone has a conflict of interest. The model we settled on is a social media network. Our platform feels like a less noisy, educational Twitter.

It's a place where people who are new to crypto or want to better learn crypto, or even people who are in crypto can come and find a good trader to follow. There are two things they can do: 1) They can get information from that person and see what they're thinking. 2) They can copy that person's portfolio.

The way that it works, we assume that another issue on top of this knowledge barrier is trust. 

We've built this as a plugin to an individual’s exchange account. If you are our customer, you would be prompted to join the platform and share what's called an API key, which would give us the ability to execute trades from your account in your exchange.

That way, you always keep the funds in your account. The other part is you will never have to send money to us. 

We're trying to solve a trust problem. We're trying to solve the information problem. We're trying to solve the access problem. We have the ability because the trader shares their account activity with us in real-time via this connection.

We can make a leaderboard that updates in real-time. There is a leaderboard of top traders based not only on the traditional metric, like the top returning trader but also based on the interests of individual people. For example, you could find the top trader who's trading Bitcoin, you can find the top Proof of Stake trader.

Another area that we thought about innovating was around how we can cater for people who don't want to take so much risk?

Austin and I have 2000% to 3000% higher returns, but that return is generated by taking an incredible amount of risk and in the worst months of an 18-month run, my portfolio value has gone down 50%.

A lot of people aren't comfortable taking that risk and want something that's safe, not volatile. We've built in some financial metrics for risk. There's a leaderboard that people can find. Maybe you want a very low-risk consistent trader who's maybe only returning 1%, but they're returning 1% every month.

There's a newsfeed where you can see all these traders, what they're doing. The leaderboard is a way to actually find traders and get access to all kinds of different people who maybe are different to you know the traders I would want to follow, but maybe they’re what other people would want to follow.

That's kind of the principle we started with and we're just finishing our beta now and gearing up for launch. It's very exciting.

NA: Yeah, it does sound exciting. I like the fact that you're playing, taking like the social media play. Thanks so much for joining me, Hayden. I had a great time talking about your journey building Alpha Impact and the fundraising.

HH: Thanks so much, Nawaz. Feel free to join us at alphaimpact.fi - we’d love to welcome you to our trading platform.

Disclaimer: The Inquisitive VC is provided for informational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any person.

The podcast is also available on your favourite podcast sources like Spotify, Apple and Youtube!

NA: Firstly, thanks for joining me. I love Red Beard Ventures portfolio. I think it's one of the most exciting funds coming along.

DA: Thank you, buddy. Thank you. We got a lot of good stuff still coming out, man. It's we're dropping fire right now.

NA: They definitely are. I thought it would be great to start with how you entered the world of crypto and NFTs from your background as an entreprenuer?

DA: Sure. Yeah. Well, I started investing in Bitcoin in 2013. Actually. I remember I bought my first Bitcoin, I was in Long Island and where my family lives and I had to meet someone in a car, scan their QR code and hand them cash. We met on local bitcoins.com or something like that, and that was the first transaction I ever made with Bitcoin.

And yeah, so I've been following it ever since. I got really interested in the concept of scarce digital collectibles from the day I heard about the blockchain. I'm a collector like I collect action figures, autographs, sports, memorabilia, sports cards, art, everything. So the concept of digital collectibles just made total sense to me. So, I always paid attention to the space. And then around 2018, I found out about SuperRare and I bought my first piece of art there.

So that's what got me into NFTs and that really sent me down the path. Started buying a bunch of art. 2019 bought a bunch of pieces. And then really started expanding my NFT collection. NBA Topshot was the, was the next project that I really dove deep into. So NBA Top Shot I got in early and just built up a really big portfolio and got some great assets before, the real movement hit and, you know, it became probably the most valuable investment I've ever made.

Like legitimately, you know, it was like a 100x investment for me. Then from there, I got very deep into Zed Run. That was another big investment that I built up a stable on and really truly believe in, from a long-term investment perspective. So yeah, that was kind of my crypto approach. And then, you know, from a venture perspective, I’ve been a founder since I was 19 years old. So I've always been a CEO and a founder of different companies and most recently I just sold my last software company which was an AI recruitment process automation software platform for enterprise organizations.

We sold that company to Pandologic, which then recently sold to a publicly-traded company called Veritone. That all happened within the last three months or so, but about a year ago, I knew I was going to be moving. I was going to be like going through the process of selling the company and I knew I wanted to get into venture next.

So I started up a venture capital syndicate on AngelList. I knew a bunch of friends that were in the space, that were founders and were also balancing doing venture investments through AngelList. So I thought it was something I could handle and then from there I started the VC syndicate and it just took off.

SuperRare was our first deal. We literally are at 12 months this week, where the syndicate has now been around for about a year. We have about 1900 LPs, we did about 45 deals over $20 million deployed capital. It was really crazy first 12 months. So it was really exciting.

I didn't even realize how much it would take off. And then now we're going to move to build up a fund. That's the next step, we're gonna go from there.

NA: That's amazing. Yeah. Those numbers are incredible for a one-year-old syndicate. So congrats on that. 

DA: Thank you. Thank you.

NA: For the listeners who are still quite fresh with NFTs and you've been doing it for a while now, can you give your best explanation on why NFTs matter and how they actually have value?

DA: So NFTs, I guess the number one reason why they matter is because they create scarce, transparent, assets out of content, out of digital content, and that did not exist before this. So the fact that we can now create transparency, in the amount of supply we produce of a digital asset just changes everything. Now supply and demand comes into play with every piece of content that's produced and tokenized.

So to me, that just opens up an entirely new monetization path for content and it's pretty exciting.

NA: When you're looking into some of these new NFT projects, what are the key things that you're looking for? Because there seems to be massive growth in that area. How do you pick out the gems?

DA: I kind of take a venture approach to it almost in some. So, the way I approach it is I'm very comfortable taking a speculative bet, like, hey, let me go dabble with this one, buy a couple, don't make a huge bet, but get exposure to a wide broad approach. But then once I get my hands dirty in a project and I start to get into the community and understand the vision and speak to the team and all of those kinds of things.

That's when I'll decide if I want to go deeper. So, you know, that's been pretty much the way I've approached all of these NFT projects. So like, you know, Top Shot, I started by buying a few moments, and then the more I got into the community, the more I learned about the team, the more I spoke to the team, the more I understood the vision and the more I believed in their ability to execute over the longterm.

So, you know, my approach has really been like, I primarily want to invest in projects that I think can sustain longer. If it's more of a project that I think is more of a speculative bet, and I just want to get exposure to it and learn I'm more comfortable trading in and out of those. But the ones that I feel have long-term legs and are doing things uniquely and paving the path and innovating, with great teams behind them and great creative and great tokenomics etc that's what I'm really looking for.

So, I think things like for example, Crypto Punks, to me it was a no brainer. Crypto Punks were a no-brainer because of the historical value and the legacy of what they've done as one of the earliest NFTs or one of the earliest Ethereum NFTs that really rose the ranks and led the PFP movement. 

Bored Apes, for example, I didn't mint Bored Apes. I actually held off on that, cause I thought at first it was another knockoff of Crypto Punks because I was seeing a lot of that. And then I got in very quickly after I think the first ones I bought were like about 0.2 ETH. I got in quickly because I saw how powerful and how strong the community took to this concept of giving out commercial rights.

The fact that it was that they gave commercial rights, and they were the first ones who really kind of made that a big part of their narrative. You know, then I realized I wasn't just betting on the Bored Ape team, I was betting on the entire community to create projects and to create businesses and create initiatives that are going to build the brand of Bored Apes.

So to me, that took a life of its own. I kept my finger to the pulse and realized it was time to make a bigger bet. So, you know, at that point I bought more of the Apes. You know, for example, Gutter Cats is another project that I took early. You know, simply because I thought that they took a different approach on the supply side.

They kept their supply low, copied a lot of what they've seen in terms of what was working in terms of community development and the avatar project. And I saw the community take a real passionate approach to it as well, but with that lower supply number, you know, being 3000 instead of the normal 10,000, that a lot of these other projects were doing.

I felt that, that, that with that community and that path, and kind of really kind of filling a spot as number three in the avatar space you know, I thought that was also a nice bet to be able to make, and it has turned out well.

And then, you know, I look into other projects. I think the art blocks project has been transformative and bringing in new technology, as a new art medium I'm always looking for new art, new artists that I think are either up and coming or have already built a prominent brand. You know, there's just a ton of artists that I follow that I try to collect as much as I can and acquire the assets.I think the next biggest thing that's going to be out there is play-to-earn, you know, I'm really looking for that gaming assets as well. I think that's going to be the next big movement.

NA: That's really interesting. Have you managed to wrap your head around the Loot Project and what's kind of about people hyped about that?

DA: Yeah, I mean, listen so it took me a while as well. I didn't jump in right away. I missed a lot of the bull run there and I think I got in, in the middle, so I'm probably around even in that project. Cause it's spiked up like crazy and now it's back down. So overall I'm probably even, I don't think I've made much on that, but like.

I thought it was interesting. So it took me a while and then one night I kind of went into a black hole, really just trying to understand it all. I started to realize that this was interesting from a couple of perspectives, it became almost like an infrastructure to build games on top of.

So by using these like shared attributes and using a shared currency people can build all sorts of games by leveraging that type of foundation. The reality is though is like, listen, it's first and maybe it holds its place through time and the fact that they came out with something new and different, I don't think a lot of people will get it.

And I think that's going to hold it from getting mass adoption until I think third-party developers or third-party creators can really build some meaningful projects out of it. And then that could take it to a whole nother stratosphere if they decide to do that.We really quickly saw a lot of knockoffs. So like, Beanie came out with Bloot which immediately, became almost like a competition in a weird way. And I took a little stake in Bloot as well, just because I could see how people that have lots of projects and lots of initiatives can incorporate that into their world.

So that kind of made sense to me. You know, overall, I mean, this is a lot of experiments. Like I'm not going deep in either of those projects like those are scratch the surface for me, get familiar and start to understand them a little bit. There are other people that are going much deeper into those.

I'm not ready to do that yet, because I can't tell if it's just a craze and a frenzy around this new idea, but then the idea could very quickly evolve. And another version of that can really take its place pretty quickly. I don't think they've built a moat yet out of the developer community yet. I think it's pretty much a portable community at this point. So to me, I think they have something and I think they've created something groundbreaking from that idea at the foundational level. But you know, it's easy to fork. It's an open-source project and as we can see, other people are already mimicking it.

So I don't know if there's enough of moat yet. We'll see.

NA: Yeah, I hear you. It's definitely an interesting one. What are your thoughts on NFTs on other chains like Solana and Tezos and even Flow? Most of the activity is still only Ethereum but you think like, those are the ones who start to pick up soon?

DA: Yeah, I do. I think a couple of things. I think one, I think Ethereum's gas fees are astronomical and becoming a huge problem. Unless we figure out new solutions to do these NFT drops, the drops are gonna start to fail completely. People are gonna stop doing them unless we come up with a new way to mint and except cause these gas wars are just, 

I mean, you just saw Seven. I don't know if you saw the Seven drops. You know, 1000 of their NFTs went to one person, gas was hitting $8,000 someone saw $12,000. I mean, luckily we're basically all playing with monopoly money, most of us who have been in the space for a while. So the whole thing is ridiculous, but like, this is not scalable.

This is going to completely inhibit adoption and it's gonna open a door for someone like Solana to come in and to be able to take some market share and to takes some headspace from people which is almost unfortunate in a way, because like I believe in Ethereum. I believe in its long-term vision and what it stands for.

And I do think that everything will ultimately tie back to Ethereum as like the store of record in terms of the truly decentralized minting blockchain. When Zed Run moved to Polygon and Matic that was what opened up the game. No one used it until they moved to Polygon.

So because you know, you can't have every transaction be charging you more than you can make money in a race. So right now Ethereum is completely not yet suited for scale. It's still the leader, but I do think that there's a lot of room for opportunity.Listen, the team that built Flow, Dapper Labs, they saw firsthand with the first widely adopted NFT project in Crypto Kitties, what all the limitations were and they went and they set up to build their own blockchain. They built Flow, and I think Flow is going to be another major player, especially in consumer applications.

So, you know, Ethereum was built more for DeFi, whereas I think that Flow is really targeting more of a consumer application and collectible market. What I'm wondering is will the consumer care.

Will they care if it's on Ethereum or Flow or Solana as long as there's transparency and scarcity and the concept of the blockchain takes place. I used to think they would care, but now, because of the problems Ethereum is showing, I'm starting to see that more and more people are willing to take bets on some of the NFTs and that myself included like I have some Solana NFTs, I have some Flow NFTs. Solana and Flow are the only ones I really have right now, outside of Ethereum, but the fact that I have those and I collect them and I have them and I'm storing them. And I feel like I have an ownership feeling of them means that it's transferable.

It's not like it's not going to feel genuine if it's not Ethereum. And if that's the case, then that does open us up for some disruption and I think that's why we're seeing the Solana token go crazy right now.

NA: Yep. No, I agree with you on those points, I think gas is just ridiculous at this point. A little bit to your venture side, I'd love to hear what kind of companies you're looking at for Red Beard Ventures. It's not just NFTs and crypto, I imagine it's a lot more than that?

DA: Well, our venture capital syndicate is open to the public, if you're an accredited investor and you want to invest in startups, I think it's a great way to do it.

It's all on AngelList, I think for us, you can go to redbeard.ventures and you can check it out. It's free to register for it, it's free to back the deal, to see the deal flow, and then you can choose which investments you want to make and you get to invest in the companies at the earliest stages, which I'm a big believer in that.

I think we're all heading towards a path of becoming alternative asset investors. I think the whole world is becoming an angel investor. If you think about it, we kind of moved from the customer economy to the subscriber economy now to the shareholder economy. That's what this whole movement's about. 

So that's first, I think it's a really exciting time for angel investing is that we have now, you know, the ability to get into deals that, you know, only the top VCs would ever be able to get into in the past.

80% of our deals have been blockchain-focused, 20% have been frontier technology, things like robotics and space and climate and biotech etc.

But then the other 80% of it, blockchain focus. We’ve invested in a lot of different metaverse plays because our approach right now is to stay broad on the metaverse side. We've invested in Sandbox, we've invested in Super World because of their AR component, I think there's an element of that. 

I think Sandbox on their virtual real estate side of the gaming component is going to be really big. I think that we're going to see a lot of other interesting progress. We’re invested in Upland, were invested in Green Park Sports.

One, I'm really excited about that we're invested in is Wilder World, which did like an unreal engine, photo-realistic metaverse that is just absolutely stunning. So there's a lot of really interesting stuff going on there. We're invested in different NFT marketplaces, like Dapper Labs that's built NBA Top Shot.

We're investors in SuperRare, we are invested in Genies. We're invested in some you know, crypto DeFi plays as well. We're invested in some things in the DAO tech stack, like Parcel that's doing the treasury management. So yeah, it's a lot of everything that's helping us drive adoption. 

You know, my belief right now is that we’re in the early days of this movement, but I'm watching the internet get rebuilt from the ground up. And it's exciting to be on the ground floor of it helping fund the companies that are building.

NA: No doubt, those sound like some great companies. What's a secret obsession of yours that not many people know about?

DA:  Well, so it's funny. I used to be a huge action figure collector, nineties and eighties action figures and autographs and memorabilia, but now because of the digital collecting all my attention goes there. So, and because it takes up a lot less space and in Brooklyn, space matters.

So that's one thing. I spend every night pretty much after my kid and my wife go to sleep. I'm up from 9 PM until 3 in the morning, just exploring this whole NFT landscape and learning about it.

And that's really where I spend most of my time right now. Honestly, there's so much to understand so much to learn. To me, you really got to get your hands dirty and get involved in the community to really learn this stuff. So, if you're not obsessed with this right now, you're probably not getting it because the minute you get it you become obsessed. And it's just an obvious obsession.

NA: Yeah, no, I hear you. It took me a while to wrap my head around NFTs. But once I got it, I've been spending a lot of time between Discord, OpenSea, and Twitter. So yeah, that all we have, thanks so much for jumping on. I really appreciate your time and I enjoyed talking to you.

DA: Awesome. Thank you so much, buddy.

Follow me and Drew on Twitter here!

Disclaimer: The Inquisitive VC is provided for informational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any person.

We talk about her interest in VC, Seed to Harvest, founding a venture fund, Pallet and more!

NA: Thanks for joining me. I know we've been trying to schedule this for a bit. So, I'm excited to have you.

PFD: Of course. Yeah. It's an honour.

NA: I thought, you know, I'd love to start with essentially what sparked your interest in getting into venture capital?

PFD: Sure. I kind of fell into venture is the honest truth. I like to joke that I got into venture because managing rappers didn't work out. I spent a lot of time at school with artists and creators, and I really just enjoy being around people that had this spark and curiosity and creativity about how they viewed the world and what they wanted to create in it and that vision.

And I saw that shared by a lot of early-stage founders. And so junior year in school, I competed at a venture capital competition. I was just really interested in spending time with people that wanted to build stuff. It was really interesting to me and I never knew exactly what I wanted to build, but I felt an entrepreneurial spark myself.

And I think I found the answer to that when I talked to more and more emerging fund managers who are running their own funds. And you know, as much as investing is a very large part of what you do as an emerging fund manager, it's also about building the business and thinking long-term about building a firm.

And so that has kind of satiated my entrepreneurial longing, and I feel really lucky to be able to support early-stage entrepreneurs at kind of the intersection of the future of work and the future of play. I just love hanging out with really, really talented people, asking them questions and helping them grow businesses that I think will make the world a little bit better.

NA: For sure. Is that the reason you decided to start your own fund rather than joining a fund and working for a fund?

PFD: It was actually something that I really heavily considered. I applied for a bunch of funds, I got rejected from a bunch of funds, honestly as a state school kid with like, no, you know, it wasn't like, if you saw me on paper, it might not have been that I would have automatically stood out in like a resume reader.

But I was really passionate about it and I knew that that passion would shine through. And I got the opportunity to actually a partner track role at a firm in Boston, and obviously love the team. I did an on-site there but ultimately ended up deciding to stay in San Diego, to be with my family.

That's really important to me. I think through that decision, I realized that I would have to make venture work for me because of my passion for venture, but my value framework of staying close to my family, but I thought that they were conflicting, but they actually work very well together and harmony. I just had to listen a bit deeper to you know, what my intuition was telling me to do.

NA: For sure. You’ve launched Seed to Harvest which is a really cool book. I'd love for you to talk about, you know, why you decided to pursue that and thought you needed to write a book like that?

PFD: Yeah. So, Seed to Harvest is an illustrated guide to venture capital. Although it looks like a kid's book, it's definitely for adults as well. My main goal with Seed to Harvest started out as a way to explain to my parents across the dinner table, what I was like nerding out about, cause I would spend all this time on Twitter when I was in my senior year during COVID learning about all this interesting venture stuff and telling my parents.

My mom's an artist, my dad's an engineer. We didn't really come from a big tech family. I'd have to explain all of these interesting, overarching concepts. And I realized that there wasn't a great way to do that already. I started writing Seed to Harvest just as a guide with really terrible stick drawings and I spent about three months writing it and then with the encouragement of a few well-placed and loving comments about my drawing ability ended up hiring my younger brother, Owen to illustrate the book and his drawings just took it to, like, I would say the highest level of the vision that I had for the project.

It kind of catapulted my start into venture as well. It's how I met my business partner, Josh for Behind Genius Ventures. That’s how I met the founder that I made, my first syndicate investment in. I met a bunch of syndicate LPs from it. So, it was really an incredible experience that I grew a lot over that book, but it started as a way to explain things. And I think the final goal started to become more, a goal of representing diversity in an industry that traditionally hasn't had a lot of diversity.

So, for some context, 11% of venture capitalist with check writing power are women. Less than 5% are people of colour. I think that this has also reflected in the disparity of companies, getting funded. I didn't like write publicly about this, but I just made all of the drawings in the book really diverse.

And so it didn't matter who was going to get the book, they would see themselves represented in this industry and see that as a future for them. And that was really important to me. So, it's been inspiring to hear about venture capitalists that have reached out to me and said, you know, Hey, I never had a way to explain to my daughter what I did before.

And I'm really excited that you provided me with that avenue to speak with her. So yeah, it's, it's been cool to see that grow as well.

NA: For sure. And so yeah, you mentioned Behind Genius Ventures. I'd love to hear the story on how that formed, how you decided to pursue you know, raising that fund alongside Josh and coming up with this interesting thesis.

PFD: Absolutely. So, Josh and I met through Seed to Harvest. We were introduced by a fellow Twitter mutual of both of ours, who's now an LP in our fund and he just said one day like, Hey, you should really meet this guy, he's working on syndicates. He's interested in same types of companies. So, we set up a weekly deal flow call and that turned into like daily text messages.

We've bounced different ideas off each other. At the time, he was recruiting for startups, and so he's seeing like a lot of really interesting early-stage startups. Got to know each other on cap tables as well and teamed up late last year to work through the vision of building the next generation venture firm.

I'm 22. Josh is 24. You don't often as a founder, get to see your peers across the table. And for us, that's a position of honour and one that we think through with a lot of intentionality. And so, Behind Genius Ventures is an early-stage venture firm. We invest at the intersection of the future of work and the future of play.

I think one thing that's funny to me is my dad always said like, you know, work hard, play hard, but that's kind of become more like our firm motto is we want to invest in, you know, not only dev tools in the creator ecosystem but also media, gaming and entertainment. We think that there's this return to a really like holistic life seeing a lot of the effects of burnout.

And so, we also invest in like wellness as well. And. So, yeah it's been a pretty incredible journey. I can't, unfortunately, speak on an open fundraise, but it's been an incredible journey so far, and we're so lucky to be supported by, both tenured investors, and first time LPs, I think that's been one of my favorite parts of the process is working with folks who you know, didn't come from generational wealth and didn't, you know, this wasn't an opportunity that they thought that they would get to have is like investing in a venture fund.

And it's a very like educational process for both of us. So that, yeah, it's just been a joy and I went full time on the fund a week ago. Yeah, it's been pretty crazy.

NA: Yeah. That, that flows really well into my next question. And in terms of how, how did you manage to work your full-time job, do Seed to Harvest, do these syndicates, start raising the fund? How'd you do all of that?

PFD: Yeah. So for some context I started at WorkOS as a developer success engineer, in May of 2020. I started writing Seed to Harvest in July of 2020. I started doing syndicates in November. I deployed a little over $300  in early-stage syndicate deals.

So, I think I'd done six deals in a very short amount of time. So, lots of nights and weekends and it was definitely a lot. And I'm still kind of refactoring my life to not work that many hours and have like a more healthy work-life balance. I think one of the things that came out of me working so hard on nights and weekends was that I needed to make time to prioritize myself because I can't support founders or, you know, collaborate with other investors,  fundraise, you know help others like go through the like fundraising process with founders well if I'm not a hundred per cent and so that became a lot more important to me.

So yeah it kind of just like falls into place as you do more things. And I've just sacrificed a lot of sleep.

NA: Yeah. Fair enough., I've seen you grow your Twitter following over the past year. How did you know Twitter play a part in your journey? How big of a part did it play?

PFD: Twitter played an enormous part in my journey. I think I wouldn't have been able to express my passion for venture and get to democratize a lot of the opaque terms and things like that in venture without it.

And I also wouldn't have met you know, my best friend, Josh, who I'm now building Behind Genius Ventures with. I wouldn't have met a bunch of our LPs. Wouldn't have met a lot of the founders that we've invested in and it's really given me the opportunity to participate in the Silicon Valley-style business without being in Silicon Valley.

And to me, that was one of the biggest concerns when I had this growing passion for venture is you know, I want to be with my family in San Diego and I want to live there, but I also want to like participate in this economy and being online and being on Twitter has allowed me to do so. And now I feel lucky to be able to invest alongside the folks that I once looked up to a couple of years ago, just not knowing much about the industry.

NA: For sure. I met you through Twitter as well, so that was interesting. Would you be able to talk about the most challenging thing you faced as you've started doing your syndicates and investing?

PFD: Okay so, this is a big difference between managing a fund and making angel investments or syndicate investments is when you're doing syndicate investments, you're finding folks who have an incredible idea awesome background, charisma, storytelling, ability, grit, hustle.

All of those things, and you're not really considering like fund construction, which is really important when you're running a fund, because then it kind of is more a conversation of, okay, how does this company play into our overall thesis and strategy? How does it fit the stage we invest in when you're running a syndicate or you're angel investing, it's much more of a personal decision.

And so I think one of the challenges has been, an exciting challenge to go through, is you know how that investment process shifts as a fund manager versus a syndicate lead or an angel investor. And I think it's added a constraint that has brought richness to my decision-making, which has been really exciting, but definitely, I would say you know, a big transition to make in a small amount of time.

NA: Yeah. That's, that's very interesting point. I like to also talk about a secret obsession of yours that not many people know about?

PFD: So I'm pretty obsessed with plants. Like really obsessed. My mom loves variegated plants, which are like these, they have different colors on the leaves. It goes on with listening to my intuition. I used to kill a lot of plants, like there are a lot of dead plants in my backyard from me not taking good care of them. And this year I really started investing time into learning and like listening to how plants were growing and taking care of them. And a lot of it was just like listening to my intuition and being like, “Hey, you know, you only can a little dehydrated today, you need some water.” And it honestly made me take that again myself. Cause I was like, oh, if that plant is dehydrated, like I should probably take a drink of water as well. So, I'd say plants, I have at least six plants and then also spatial audio has been a topic that I've nerded out on over the past year.

One of my favorite classes in college is speech processing, I'm really interested in how you know, communication works as a whole, but also the physical logistics of transferring sound. Audio is always been really cool to me. I've loved music. I've loved everything about audio. So that's, I think that's one of the only textbooks from college.

I go back and re-read 

NA: I love it. Those are very interesting obsessions. Is there a specific investor or, you know, a couple of investors that you really look up to?

PFD: There are a couple. Andy Weissman at USV in his thoughtfulness and holistic approach has always really inspired me. I felt really lucky that he became an LP in Behind Genius Ventures. Feel really lucky to, you know, he'll respond to an update and be like, Hey, How did you make this decision? And what do you think about that?

And it's not coming from a judging place, it's more honest, curious, and interested perspective, which I really appreciate. And I think he's made some incredible investing decisions before.

I also have really enjoyed getting to know Brianne Kimmel. Bri more recently she's been a role model for me, both as a solo GP. I'm full-time on the fund and Josh's, part-time so semi-solo GP, but we make decisions 50:50. So she's been really instrumental in that, how to carry myself in the investing world and thinking through building a firm, also in investing in great companies, defining the future of work and the future of play, she's been great to like jam on thesis with.

I think that Eric Bahn and the team at Hustle Fund has been really interesting to watch and see how they've been able to sort of go about a very different portfolio construction route you know, writing smaller checks and then following on later and supporting a wide variety of founders and focusing really heavily on that like hustle aspect of how people run their business and execute. I really look up to Eric and admire him and couldn't be more grateful for his continued support in our journey Behind Genius Ventures as well.

NA: Yeah. Those are some great investors for sure. Finally, are you able to talk about a publicly announced investment that you've recently made? And why did you make it?

PFD: I'm not going to announce anything publicly quite yet, but I will talk about them in more depth in a future podcast episode.

NA: Okay. Sure. Are you able to talk about any of your syndicate deals?

PFD: Yes. I can talk about those. Sure, I'll talk about Pallet, which is an incredible company. It was my first syndicate deal and I met Kai when he texted my community number and was asking some questions around community and content based on my experience on Twitter.

And I was like, Hey, do you have any like allocation left? And he was kind of like the angel part of the round is closed. Like we're taking like selective checks, we’re pretty oversubscribed. So, I ended up raising like $60K in two weeks when I had never raised this syndicate before, and it was really scary.

But Pallet is this incredible platform that allows content, creators and community builders to build job boards and help their communities hire great people. One thing that's really separate via LinkedIn is that the job search is traditionally very one dimensional.

You go on LinkedIn and you apply for a job, you like, never hear back. You're like, okay, do you guys just forget about me? Or, and then as a recruiter and you're sorting through all of these different applications, no one really like, you know, it's a bit harder to pull out people who stand out that might be from non-traditional backgrounds.

Pallet really offers the opportunity to have a community curated both like talent pool and then also jobless. So it's like, oh, Hey, like I follow Packy McCormick, and I really enjoy his writing, I think he'd have a great curation of different companies to work for. He has a Pallet board, so I can go and apply for those different jobs sorted by like my interests and my level of experience.

And so I think they've been obviously crushing it and allowing creators to monetize in a way where they used to have to pay like $300 a month to like host job boards. And I speak for my fellow community builders, when I say you don't often make a ton of money, or any money at all for that matter in the beginning days of growing a community.

So it's providing a really valuable stream of income for a lot of these, I would have to say like medium-sized creators as well. They have some large creators on the platform, but I think the income stream is really, really, really important for kind of like that middle class of creator folks that might be able to go like full-time if they can monetize that community.

NA: For sure Pallet is definitely an interesting company. That's all the questions I had Paige, thanks so much for joining me. I enjoyed the chat.

PFD: Yeah, me too. Thanks so much for having me

Follow me and Paige on Twitter here!

We talk about his learning from deploying a fund, investing in crypto, how he determined his value add and more!

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NA: I would love to start with a little bit about your background in terms of what led to you leaving your product role at Tinder and going to start your own fund?

JMJ: Yeah, definitely. It was definitely a long transition. The quick story is I was always investing. Pre-Tinder, I was doing a lot of angel investing and when Angel List came out I was a syndicate lead.

And then while at Tinder, I was a scout for Next Ventures. So, investing just became everything I thought about in the morning and at night. I would go to Tinder and of course, I was still interested in what we were doing at work, but it was just so obvious that my passion was becoming more and more focused on investing.

The course of doing seed deals, being an SPV lead, and a scout for Next Ventures, that progression just gave me a lot of repetition in terms of knowing how to source deals, how to win deals, and then also support companies. So, I was really confident by the time I raised fund one that I could go do this full-time. 

I raised the fund towards the end of my Tinder career and ended up not knowing if I wanted to do the fund full-time and ended up actually going to another operating role for a bit. So I went to Lambda School where I was the Director of Growth, but again, I just found as I did this through a fund vehicle and I had LPs, it became increasingly difficult to do both operating and investing.

I noticed the quality of my deals was starting to go down a little bit because I just didn't have any time. There was a fork in the road where I needed to choose between the two, and it was pretty obvious that investing for me was what I was more passionate about, and really haven't looked back.

It's been I guess since I raised fund one, it's been about two years and I wake up every day, just loving what I do.

NA: I love that. I'd love to dig into the part where you mentioned learning how to best source and win deals. I understand that's probably one of the most important parts of venture. What would you say are, I guess the key insights that you've learned over these past few years of sourcing and then actually winning an allocation in the deal?

JMJ: Yeah, it's a great question. I think the thing that I was just unclear of when I was early in my investing career was why founders would want to work with me.

So it was kind of knowing what my value was on a cap table. We live in an era where there's an abundance of capital and no shortage of choices for founders. So you really have to be clear and self-aware with what you bring to that relationship. So, I just started asking more and more founders why they wanted to work with me.

And the answer I kept hearing was they didn't have a product person on their cap tables. So, operating at Tinder, a lot of people were just generally impressed by what we were doing on monetization, which is what I was focused on. And so it was pretty clear, like my role on a cap table would be helping with product.

I think the sooner you can become self-aware, I truly believe that everybody has something they can add to a company. Even if it's just like pure energy, like going in and helping advocate for the company and finding new customers. So, that's part of it and then I think another part of it was just understanding what made me happy as an investor in terms of what I want to do.

And, it turns out that what I was good at and what makes me happy are directly aligned. It's like the perfect intersection of my interests is investing in products. So it was just a really natural way to position my fund, in terms of what services we wanted to provide the founder.

NA: Got it. That makes a lot of sense. I think your fund has a great portfolio. What would you say is the key thing you look for in the teams and companies you invest in?

JMJ: Yeah, I'm constantly reevaluating what that is, but most of what I do is really early. So it's pre-seed and seed investing, and really at that stage, it just comes down to the team and people.

So increasingly I care a lot about the team dynamics, what motivated the team to form to solve a problem. Has this been like a passion for that founder or founding team for a long period of time? So it's kind of like the idea maze analogy. Have they gone through the idea maze and really validated that whatever market and whatever problem they're bringing to solve that solve some problem, at market actually, is something they want to do for the rest of their careers.

Have they done kind of the upfront work that it's easier than ever to start a company right now, there's just so many tools that founders have at their disposal, whether it's Webflow or no-code tools. So it's really easy to actually form a company, but I find that the founders I tend to work with have been obsessed with some problem just for a long period of time in their lives.

It kind of feels like it's their destiny to be the single team to solve that problem. You kind of know it's a feeling you can't really describe when you meet a founder, but you just sort of know, it's like founder market fit or that authenticity of why they want to actually go build that business is really clear during, during those early pitches.

NA: Yeah. Got it. And is there a key characteristic that you've seen across your portfolio founders?

JMJ: I think for the founders that have succeeded, it's this grit it's like, I won't back down from anything type of attitude. And there's just kind of a force of nature element to how they approach solving problems.

It's not a personality type, some are introverts, some are extroverts, but it's like every time you hop on a call with them, they've made so much progress since the previous call, it's like, they're constantly learning something new and applying it to their business. 

I talked to a lot of founders that haven't even left their company. Like they have some idea they're thinking about building and you can tell based on the time between calls, whether they're actually going to go solve that problem because it's just like they can't stop thinking about it, and every time they talk to you it's a new lesson or new learning.

And then beyond that, I think I tend to work with a lot of founders who care deeply about product and product has obviously many pieces, but the actual kind of go to market building piece is important. And then, look increasingly for founders who have some distribution advantage.

Whether they've, maybe they've worked in SaaS and they've been in the market, so they know all the customers. Or on consumer, maybe one of the founders has some just like a large following in a certain vertical that allows them to just reach escape velocity before their competition. So yeah, I do look for kind of product expertise and also just a unique point of view on distribution.

NA: Interesting. I'd love to hear the story of what happened with the Page Zero Fund, and then also why you have decided to focus a bit more on crypto again?

JMJ: Yeah. So in 2017, Index Ventures ran a scout program, and this was my first pool of capital that I managed. The explicit charter of the fund was to invest in digital assets and web three projects.

I guess the reason I was so excited about that fund was because I was investing a lot of my personal money in crypto projects. I'd done the seed rounds of projects like Dapper Labs, which became an NBA Top Shot. I did the seed round of Compound Finance and a bunch of others, but I became just generally obsessed with the market.

Page Zero, ended up investing in projects like The Graph which was kind of the standout, but the fund itself ended up on paper, it's like a 25 X fund and the more, so I was just curious about digital assets. 

I worked on subscriptions at Tinder and all we were selling were digital goods. So I was pretty in love with digital goods. When I saw Crypto Kitties, as an example, it just kind of clicked where, it seemed pretty silly on the surface, but people were spending money on these digital goods that had zero marginal costs. There were real marketplace dynamics that were starting to develop around the CryptoKitties ecosystem.

And then beyond that, I became just interested in DeFi and I went to raise my first fund in 2019. At that time my crypto portfolio wasn't looking that good because Compound Finance had not kind of gone to market yet. The Graph was still not released. Dapper Labs had not hit its inflection, Blockfolio had not been acquired by FTX.

And so there was actually, zero chance I was going to go raise an institutional fund from the investors that I raised from, with crypto as the focus. I was still very focused on crypto from just an intellectual point of view and then luckily with DeFi summer and then also with NBA Top Shot, doing so well, in Q1 2021, suddenly LPs were asking me based on my track record to spend more time investing crypto. 

Not that you ever need any kind of LP permission to invest in any given space, but it was just the reality of the fact that I wasn't going to be able to raise a crypto fund, and so now I think the products are much more mature. There are real use cases for different crypto ideas. And it's just something I love and I'm passionate about doing for the rest of my career.

NA: For sure. you invested in Dapper Labs and obviously talked about, non-fungible tokens. How do you feel about the current market and seeing that play out and did you think it would come the way it has come now when you first invested in Dapper Labs?

JMJ: I had no idea that the market was going to explode so quickly. And it was also really it kind of all happened at once. And so January, I think caught a lot of folks off guard, but the NFT market, beyond NBA Top Shot has so many exciting projects happening.

And I think that the public narrative right now is that NFTs, have like there was a bubble and suddenly the assets aren't valuable. But if you look at the Opensea transaction volume, they actually have the best month in their existence in June. And so the market is just getting started. I think there was a period in February, March, where everybody was trying to figure out every creator, every musician, every entertainer was trying to figure out how they could be a part of the NFT market. I think a little bit of the initial excitement, it's just been tempered a little bit in a good way where we're now back to kind of reality, but there's definitely a new baseline for NFTs and the projects that I'm seeing right now are just really exciting.

Especially the kind of social token NFTs where it's unlocking community access and real-life events. Friends With Benefits ($FWB) is a good example. It's just such a cool community that could it have existed without NFTs? Potentially, but the crypto native nature of the groups and also the fact that an NFTs exists has just unlocked, so many new use cases for community building.

NA: Yeah, no doubt. You've been investing in some great companies. Do you have an anti-portfolio that you can talk about and is there's anything you've learned from those mistakes?

JMJ: Yeah, I have a ton.

I mean, I think probably my worst crypto mistake was Filecoin. I talked to the team in 2014. I was driving to a wedding, I was on the five freeway, which if you live in California, you know, it's like really spotty cell phone reception. Honestly, it was like one of the worst calls at the end of my career.

I just wasn't prepared and probably sounded remarkably uninspiring to the team. So I didn't end up investing in Filecoin at that time. Since then there's been, especially in fund one that I've deployed,  I think there's been a lot.  I had a chance to ... I had known Paul Davidson at Clubhouse for years and, and saw Clubhouse really early in its life cycle all the way back to the seed round.

You know, there's been other companies that have raised at high valuations, you know, Mainstreets raised at a high valuation, Public. I mean, there's just like this huge long list and it grows, it grows every day. I've learned, not to, you know, I think, I think the kind of lesson that I'd love to live by is to not to be mad if you pass, but to me be mad at yourself if you didn't see it.

So I at least know I'm fishing in the right ponds, but obviously, I'm always trying to question how I can improve my decision-making process. There's like no end to that self-evaluation process and trying to become a better investor is for me, probably going to be a lifelong journey.

NA: Yeah. Fair enough. You also recently mentioned that fund one has been, you know, officially deployed. Could you share some of your biggest learnings from deploying that fund?

JMJ: Yeah, I think I wanna write articles about this because I learned a ton. But I guess starting with the fundraising process was when I raised the fund, I was still at Tinder and I had expected the fund to be about 3 or $4 million and that ended up being nine and a half million dollars, which again, isn't a huge fund, but it does change, some of the decisions I made in terms of sizing of my checks. Perhaps they should have been a little bit bigger. You know, I think I, as a solo GP or a smaller fund, you have time constraints.

And so the portfolio size ended up being 50 plus companies and obviously, we are in the service business, you have to provide a great service to founders. And once you invest in that many companies your service level can, can be challenged. And so you know, probably the power of concentration doing a little bit less companies in future funds would be a learning.

I think part of, part of the evolution of any fund manager is becoming confident in your own picking abilities. At the beginning of the fund life cycle, I was really, I think, relying on other people's signal to inform my investment decision-making process. There was some turning point in the fund where, and I haven't quite pinpointed that exact moment where I just kind of became disenchanted with that form of investing in wanting to become the signal. 

I think a part of it was my peers and my LPs and other people that just began to trust my tastes more. And that helped me trust my tastes more as a result that I think you have to eventually make the transition to thinking for yourself and having your own reasons for investing or not investing. If you pass on a bunch of companies where they've ended up raising money from tier one funds, you have to live with those decisions and just be confident that you actually went through your own process to come up with your own decisions.

So I don't think there's enough original thought in investing right now because there's just so much activity in the rounds happening so quickly, but slowing down and making your own decisions is a huge part of what I keep telling myself to do more.

NA: Yeah. That's incredibly insightful. Are there any investors that you would say are your role models or who you look up to?

JMJ: Yeah, I think that's a great question. There's kind of a long list, but one of the early people who helped me at the start of this fund was Mike Maples at Floodgate. What I love about Mike is he really doesn't change a lot of his strategy over the years.

He's been consistently focused on being a great seed manager, and for me, having a stage focus has been, it just kind of put me at peace, like knowing where I sit in the ecosystem and what makes me happy. So I'm also a seed manager and that's where I love investing. Beyond that, you know, I'd say I don't have a ton of role models in investing.

I do have people that I really respect and whose opinions I value, but there's not a ton of people who I point to and say, like, that's my role model. And yeah, I should have a better answer to that though. But yeah, I would say Mike's definitely one of them.

NA: Yeah. Fair enough. What's a secret obsession of yours that not many people know about?

JMJ: That's a good question. I think for me, I've always just been really attracted to finding new things before everybody else. So in college, as an example, I ran a music blog where it's kind of like a Pitchfork type blog where I was trying to find new musicians before everybody else.

And I maintained that music blog through college and it became like, I've always loved being a taste-maker. And so, from that, I worked at UTA, which is a talent agency in Los Angeles in their digital department for less than a year and my whole job was trying to discover YouTube talent before everybody else and transition them to become, either TV or film stars. And so I was scouring YouTube to find those folks, and that was again a lot of digging, you know, kind of like hanging out on the deep ends of the internet, trying to find things that nobody else is identifying.

I think that's extended to how I invest is that I try to find communities or people that before, before anybody else. And probably like the canonical example from fund one is Roam Research. You know, I got really involved in the diligence process with the Roam Research community. And I didn't feel like they were, I was in the slack room, so I knew that there weren't a ton of other investors in there hanging out.

And so I find the more you can authentically immerse yourself within subcultures, as an investor, that's where you tend to find the most alpha just because you're able to discover things before anybody else and actually understand market dynamics before before other folks do.

NA:  That's pretty cool. What's the latest, publicly announced investment you've made and why did you make it?

JMJ: That's a great question. Let me see publicly, publicly announced. I guess a deal that I led pretty recently was a company called Fanhouse, which is a creator economy platform. They're basically enabling subscriptions for TikTok influencers and also Twitch influencers. But the kind of group of creators they've targeted is female creators who have really big personalities who want to monetize just like that.

It's a combination of s**t posting, but also just kind of like thoughts that you'd send your close friends, but won’t share on the internet and I just found that it was a really interesting group to build. I see a lot of creator economy pitches, and it's pretty generic in terms of how they qualify like their group of creators. They just kind of use the word and it's a catch-all for many different things. 

I really appreciate how Fanhouse have identified this specific niche. Beyond that, the team was just insanely talented. Two of the top Stanford CS grads of 2020 started the company with an amazing founder from Wharton who left finance to solve this problem for herself.

So yeah, Fanhouse was a recent investment that I'm really proud of. We did that deal in the pre-seed and they've just been kicking butt. So I am really fortunate to be working with them.

NA: Exciting. Yeah, I did see you tweet about them. Jeff, really appreciate you joining me and taking out the time.

JMJ: Yeah. Thank you. And look forward to the episode and appreciate your time.

Follow me and Jeff on Twitter here! 

Kinjal is an early-stage investor at Blockchain Capital, working with founders building the future of crypto. She is also a founding member of Komorebi Collective, a DAO making investments exclusively in female and nonbinary crypto founders. Previously, she spent time at Fidelity Investments and Tufts University.

We talk about Komorebi Collective, crypto consumer products, DAOs, access to information for new users and more!

NA:  I thought it would be great to start off with your background, how you got into the world of crypto and venture capital.

KS: Yeah. So, I joined Blockchain Capital about three years ago, and prior to this, I had a very traditional financial services background. So, I worked at a bank or not a bank, but an asset manager, Fidelity Investments in Boston. They are known for being pretty progressive in the crypto space and have done a lot of work on blockchain and more broadly.

So I got introduced to the space when I was actually working at Fidelity on a project and just fell in love and felt like this is the future of finance and even more broadly the future of just a lot of different industries around the entire world.

And so I wanted to do this full-time. I actually came across Blockchain Capital when I was on vacation in San Francisco, visiting some friends, I got connected. And yeah, ever since then, I've been on the investing side, which has been really a really rewarding experience.

NA: Fantastic. And how has the experience been with Blockchain Capital compared to life at Fidelity? How has the difference between the two worlds been?

KS:  Yeah, I mean, it's very different. So I think at Fidelity, I was more focused on strategy and as it relates to different product launches so as much more of like a consulting model, whereas in investing, it's just a completely different model, but I think like the biggest change was just how you know, independent the work is in terms of, you can kind of decide what you're interested in.

You can pick areas to kind of dig deeper into. Basically design your days to learn and meet with some amazing people and, and research what's happening in the crypto ecosystem, which really, felt like a complete change coming from Fidelity. And then I just say like the other piece is just, I'm working a lot closer with smaller companies and with protocols themselves, and so that's definitely an experience that I think is unique

NA: For sure. I'm quite interested to know about your story behind the Komorebi Fund and how that came to be?

KS: Yeah. So, I've been investing now for three years. I always want to see more women when I'm in conversations with founders. I really just felt like it's not just a crypto problem, I think it's a broader tech and VC conversation around getting more funding for female founders, you know, and non-binary founders. So, I started hosting female office hours and just having people come drop in and schedule time with me just to chat.

Eventually, this turned into what can I do to like, take this even further? And I linked up with Syndicate Protocol, which is a new project, that's basically DAO infrastructure, and we started working on the idea of Komorebi with She256 and Women in Blockchain. So those are two organizations that are trying to further education and sort of awareness specifically for females and non-binary, either founders or engineers or operators or wherever or whoever it may be.

We decided to launch a DAO. I think launching a fund comes with a lot of paperwork, it's expensive, it's somewhat inaccessible. Raising with LPs is certainly its own endeavour and what we really wanted to do was could we just come up with a really passionate group of people who want to support this mission and start putting some dollars behind it and spin it up relatively quickly.

Within a matter of weeks, Komorebi was founded. And now we have about 30-35 members who are contributing to the DAO and we're kind of making investment decisions.

NA: That's quite exciting. And have there been investments made already?

KS: Yeah. So we actually are in the process of making our first investment right now. I can't disclose it yet just because we haven't closed on it yet, but yeah, we're targeting you know, four or five investments, I think over the course of this year.

NA: For sure. I've been thinking a lot about how projects that form as DAOs how they will scale without having, you know, a clear leader compared to a lot of these traditional tech companies, which are led by founders.

I don't know if you saw, but Kain, the founder of Synthetix, had stepped back into a passive role once there was a governing council set out. And then he recently published his intention to run for the council now in return as one of the leaders of the project. So, I'd love to hear your thoughts on, you know, what you think about how DAO leadership should function and how it would help scale.

KS:  Yeah, it's really a question I think around like how humans self-organize and like what we can do when we break down hierarchical structures versus when we have like a little more hierarchy in place. So my mental model for it, the way that it is right now is we're unbundling the organization. We're saying, we're going to develop these like DAOs that are more grassroots, where you can opt-in or opt-out depending on your skillset and you can kind of build something from there.

So that's like, step one and then I think step two is going to involve some degree of hierarchy or some degree of rebundling. But I think the manner in which it re-bundles is going to be different. And I think it's going to be based on proof of work, like literally proof of work, right? I think it'll potentially be more of a meritocracy in terms of folks who are contributing to a DAO can prove themselves into more of a leadership role.

I also think that there's going to be voter delegation. Where there will be some decisions that the entire DAO might be voting on, but once those decisions are made, then they're kind of signing off and delegating. But the decisions under that particular you know, whatever that broader decision is, they're saying, okay, anything related to this is going to be in the hands of XYZ, which is what we're starting to see with committees being formed.

Whether it's like the grants committee or some of the other committees that are being formed. So, I think we're naturally going to see some more rebundling, but it really is just a question of how you rebundle, what checks and balances are put in place, how reputation is measured. And I think from that, we'll start to see more scalable DAOs.

Then the last piece here, I know I just said a lot, but the last piece here that I would think about is; the concept of DAOs scaling can mean many different things. On one hand, scaling can mean that there's a lot of people contributing, right? We can think of a massive organization.

The second way of scaling is just thinking about the revenue generated by the DAO and the product that they're actually working on. So, I would argue something like Uniswap is a DAO at scale when you think about the amount of trading volume that they process on a day-to-day basis. But I imagine, you know, they have a hundred employees or something like that. It's a fairly small organization when we think of the DAO, of folks who are working on it full time.

That being said, Uniswap token holders, that make up the entire network and that might be thousands and thousands of people. But my point being is that the scale might be measured in terms of the reach of the actual product itself or something else, you know, whatever, whatever other measures might come along.

But I just think those metrics of what a DAO scaling looks like might change and might not just mean you know, it's the number of people involved.

NA:  Yeah, that's quite insightful, definitely something that's very interesting to see how it's going to play out. And as a VC investing in this space, what are you looking for in terms of DAO infrastructure that you think is quite necessary at this point that you haven't seen?

KS: Yeah. In terms of things that I haven't seen yet, I think we're starting to see a lot of the major gaps that I had personally highlighted start to get filled. Some of those I'll just name off a couple; first is like treasury management. I think that we're starting to see a lot of teams build better products and tools for treasury management.

I think what you'll start to see is within treasury management, there's like a bottom-up and there's like a top-down version. And the bottom-up version of treasury management is how do we pay our contributors? Like, how do we basically do payroll?

Then the top-down is, maybe top-down is not the right phrasing, but the top-down version is okay, how do we take this massive treasury that we have and ensure it meets our objectives as a protocol or as a DAO more broadly? That might mean, stabilizing into some sort of stable coin or that might mean increasing yield opportunities or incentivizing participation through token rewards or whatever that might look like. I think those are kind of the two ends of the spectrum there.

So that's kind of more on the financial side. And then the second side is all about coordination and what coordination will look like within DAOs. I think we're starting to see tools like Collabland. That's done really well.

Even protocols like Orca or Colony Protocol or Colony’s interface for DAOs, which is, you know, all about coordination and how DAOs will organize over time and communicate with one another. And how users will communicate with one another. So I'd say those are the two biggest areas that I see right now and then moving forward I think there's going to be this gap of, okay, now we have all these DAOs, but how do we maintain new users, like make sure the funnel of new users coming into DAOs is strong.

That people understand how to contribute to a DAOs, that DAOs can sort of last for whatever extent of period of time that they want to last for. Then also just like scaling infrastructure, so things that we're already starting to see with, like Polygon but also just how do we kind of let these things scale?

From a tech perspective. So those are some of the areas that I'm thinking about right now. And I think what we're, we're kind of in this moment where I think everyone is building based on pain points, which is great. I think that's really a great way to start building a new product in the governance space is what's your pain point? And then how can I solve it?

Then over time, we're going to start to see the evolution of the stack either horizontally or vertically as a lot of these integrations kind of, kind of join forces.

NA:  Yeah, it's definitely an exciting time. What about protocols and platforms like Syndicate, essentially building those interesting protocols that allow those specific use cases for DAOs. Are you seeing a lot of that kind of specificity?

KS: I would say on the investment side, definitely we're seeing multiple, but I don't think we've quite seen it in other regards. I think the reason being is, right now, at least, you know, the biggest DAO categories to start off with had been in the protocol world with the rise of all of these DeFi DAOs. And from there, we've kind of gone into now the more social DAOs, investment DAOs, NFT related DAOs, but I would say that's like very much happened in the last 12 months or 16 months.

I think we'll start to see more specialized infrastructure, but it's still pretty early, I would say right now.

NA: Yeah. And I saw earlier today, you tweeted:

“I worry a lot about crypto feeling like an insider game a few years ago, it felt like anyone and everyone could become a part of the community. Nowadays. There are so many ways to go astray.”

Could you elaborate on that and what you mean by it?

KS: Yeah, for sure. So when I joined the broader crypto ecosystem, you know, it's been basically three and a half years, and really it felt very consumable, all the content that was being created.

There were very few folks who I think had these massive media empires built around crypto. There was a lot of openness like people were really willing to chat. It just felt much smaller. I mean, I think this is just like the growing pains of any industry. It just felt a lot smaller.

What I'm starting to see today and what I struggle with is there are so many new folks that are trying to come on board and there are so many different ways that they can get their information, that the quality of the information diet is not as high as I think it used to be.

By that, I'm not thinking of anyone particular channel, but we're starting to hear it more and more of people investing in things that they don't fully understand, or people joining particular projects that they haven't like come up to speed entirely on and it just feels hard.

Like if I were to put myself in somebody else's shoes today, who's like, I want to get involved in crypto, it just feels really painful and kind of intimidating. You know, it was intimidating to me back then, so I can't even imagine what it must feel like today. And I think like sitting on the insider side of things and I don't mean insider in the lens of like, I wasn't pointing to any one particular group and obviously, you know, I'm an investor, you can say that I'm an insider. It's more just the idea that sometimes you're so deep, you can't really like to put yourself in the shoes of a completely new person in crypto, right?

Yeah, I think it's challenging, and I've been having a lot of conversations lately with women who are wanting to get involved and asking for resources and asking for ways to do so and I just don't want to lose that ability to bring new people in.

NA: Yeah, I'm definitely seeing that as well. A lot of the conversations I've been having with new people entering crypto is where is the best place to access the good and easy to understand information.

KS: Part of the challenge there is, you know, I can send you a list of articles. I could probably send you like 50 hours of reading. But I think sitting in a room and reading for 50 hours is really tough. For saying like, oh, you want to get involved? Here's like a month's worth of homework.

I think there needs to be a better way to get people, to start using products, to test them out, to actually play with them and have it not feel like we're getting you know, like an overwhelming amount of homework to do.

So yeah, I think that's like a little bit of the conversation I'm having as well. It's like, oh, I can find all these lists, but that doesn't necessarily mean that it all makes sense to me.

NA:  So, what do you suggest apart from just reading?

KS: Yeah, so I think a couple of things, I mean, I think you definitely have to take a learning mindset for sure.

I do think crypto takes work to get involved and I think that's okay, but I would say, if you can think about having your own little education fund, maybe you can put like $50 into it or $100 into it and start playing around with either like the NFT space or DeFis or whatever it is that interests you, but actually start like trading and using some of the products.

That's what I would say is number one, and then number two; DAOs are actually a really cool way to make friends in the space. I think they're relatively accessible and welcoming and warm. So, if you can get involved with a DAO or do some reading on DAOs and start one yourself with a group of friends, but basically find people who you can talk to crypto with.

I think those are like the top two things I would do, in addition to reading. But, you know, I think without having the second piece of socialization or trying out products, it's hard to sort of internalize what you're learning.

NA: For sure, definitely agree on that. In the 2021 Crypto Crystal Ball Halftime Edition, one of your predictions was:

“The industry will see its first true social consumer application take off with the non-crypto audience”

I'd love to hear more about that, what part of crypto do you think will bring this to reality?

KS: Yeah, so, okay. I guess there's a couple of things that we can talk about in my prediction there, one, like, what is the consumer application, two what is mainstream, three, I would argue like NBA Top Shot did it to a certain degree.

You know, I was having conversations with friends who do not know anything about crypto, who are pursuing their NBA Top Shots, and were really excited about the product. So, that was like a retail-oriented product that was fun to use that got a lot of my friends to purchase their first NFT.

So, I would say like maybe NBA Top Shots might've been like that consumer hit that we've seen, but really what I'm starting to see more and more of is I think where we have the infrastructure in place or we have infrastructure that is going to be in place soon that will allow for social interactions within crypto to scale a little bit more.

That can mean like social trading, that could be like DAOs and just how people join DAOs and talk to one another, it could be just, you know, NFT platforms. It could be using NFTs in a gaming environment or using NFTs in some sort of metaverse environment. I think there's so many different flavours, but we've had a lot of discussions in the past six months in crypto about all the things that I'm talking about right now.

It feels this is the time to build a consumer-focused application in crypto. And it just wasn't as feasible the past few years, it was much more financial services heavy.

NA: Yeah. Agreed. I think the past year has been so interesting in terms of the growth of NFTs and gaming as well in crypto. That's what I'd like to pick up with Axie Infinity. I'm sure you must've heard of it. I guess it would probably fall in with one of those potential consumer applications in crypto taking off.

KS:  Absolutely. I love what Axie is doing. I mean, I think as of yesterday, maybe they became like the top, or maybe not yesterday as of like this past month, they became the top-grossing dapp on Ethereum and especially like the work that they're doing with play, to earn and in making it feasible for somebody to earn their income, which is so cool. If we extrapolate what happened with Axie and zoom out, I imagine in 10 years, there's going to be a cohort of people who can make their entire income online.

We've talked about this a lot like you wake up and you go to work in the metaverse and what that might look like, but I really do think that we're going to start to see like right now, it's all what we call knowledge work, where you have to be like an engineer or a designer, or you know, like whatever, an investor, somebody who's going online to work every single day is typically regarded as being a knowledge worker fast forward 10 years.

And hopefully, it's accessible to anyone around the world who can participate in online economies, whether it's through games, through DAOs, through crypto more broadly. I just think that this is going to change the way that labour works around the world and I think Axie is a great example of what that could look like.

I would say between, yeah, you're right, between Axie and NBA Top Shot, those are like true consumer use cases. I think that we've seen one is more playful with the collectibles and Axie is a great game, but it's also like changing the trajectory of lives of people, working in the Philippines.

NA: Yeah, I find that so interesting and fascinating. I think over the past, I guess a few years, crypto's really grown in terms of applications and use cases as we've discussed, how do you personally stay across everything, you know, as a crypto VC. My understanding is Blockchain Capital is a generalist crypto VC. So how do you stay across the entire spectrum of stuff that's happening?

KS: Yeah, so we are definitely a generalist. And I would say it's increasingly more difficult to be a generalist in this space. You know, it used to be that I felt I could wake up every day and read all the news that's happening in crypto and now I can't keep up.

So, it's definitely like a tougher conversation and the way that at least at Blockchain Capital, we started to sort of divide up the industry into areas of focus. I, myself, spend a lot of time thinking about these consumer applications, looking at NFTs and DAOs. Thinking about gaming and some of the infrastructure associated with all of these.

That's really where I spend the majority of my time. I'm still like keeping up with everything happening in DeFi and I'm still like wanting to, understand, but I kind of know what my primary focus is going to be versus my secondary focus and then vice versa other team members are more focused on DeFi, or other team members are more focused on governance or whatever that might look like.

So yeah, that's kind of the reality is that, you know, you kind of need a team of people now to keep up with crypto and then make sure that you're sharing learnings across the table. So it doesn't feel like you have to go do all the reading yourself.

NA: For sure. And if you had to pick one sector to actually go after, we mentioned a few DeFi, NFTs DAOs or consumer-focused applications, what would you pick?

KS: Yeah, it's a great question. I think right now I would pick consumer. What I mean by consumer is anything that helps onboard the next, you know, 10 million users of crypto. So whether that's some flavour of doing something in the DAO space or in the NFT space, like that's still up for debate. But I'm really excited about helping scale crypto to more global markets, more global user bases making it open and accessible.

All of the things that we've been talking about for quite some time, but then actually turning it into a reality, I think is probably what I would want to spend most of my time.

NA: For sure. That is definitely exciting. I think applications like Lolli really help that as well.

KS: Yeah, absolutely. I think the question, or maybe not the question, the framework is products that require a change in user behaviour versus products that require that don't require it. They can kind of be put into the flow of what you're doing. So, I love Lolli as an example, where if I'm shopping, like it doesn't require too much of a shift in my behaviour to have a Chrome extension plugged in that just gives me a Bitcoin every time I do an online purchase versus like requiring someone to open up an entirely new product to like shop online.

NA: Yeah, exactly. So just wrapping up here with a couple more questions.  A secret obsession of yours and not many people know about what, what would that be?

KS: I really love painting. I love painting all sorts of things. Recently. It's been painting sneakers, so I've been slowly going around my family and making everybody custom Nike's so that's what I do in my spare time.

NA: That's really cool. Have you been making them into NFTs as well?

KS: I haven't. No, but I would love to release an NFT collection in the future. Definitely on my wish list of things.

NA: Yeah, that's pretty cool. And what's the latest investment you've made and why did you make it?

KS: Yeah, it's a great question. I'm not sure about the latest in terms of what I can like actively disclosed, but I will talk about an investment that we announced earlier this year in a protocol called Upshot.

I'm really excited about Upshot there, basically doing NFT appraisals and NFT price discovery. It's a major problem. I think two of the biggest problems in the NFT space right now are price discovery and liquidity, right? Like being able to actually deliver some sort of reasonable pricing mechanism.

The second is around IP and digital rights management. So yeah, the CEO, Nick has come up with a really interesting protocol design to be able to basically crowdsource price estimates based on a fun, hot or not app where you're rating NFTs based on the subjectivity, but within a large enough sample within like the entire group, you can kind of come down to what would be a relative value for an NFT compared to something else.

So yeah, really cool product interesting, design space and Nick is awesome. So, I'm really excited. Yeah.

NA: Yeah, that I saw that as well. That is definitely interesting. I've seen a handful of other projects trying to go down that space in terms of appraisals and valuing NFTS.

So, I think that's going to be super interesting to see how that actually ends up. Thank you so much for joining me.

KS: Yeah, same here. Thanks so much for having me.

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Madusha is the founder and CEO of Expo Labs, an Auckland-based venture studio. Currently, Expo Labs is building and scaling in-house brands but will soon invest in and help grow other products and technologies.

Previously Madusha was a founder of EMGN.com, an entertainment, media and gaming site which in 2015 was the 15th most viewed mobile website in the USA. After successfully exiting EMGN, Madusha went on to grow a range of successful e-commerce businesses.

We talk about his journey scaling EMGN, bootstrapping vs raising VC, crypto, e-commerce and more!

NA: Thanks for joining.  I thought it would be great to start with how you started EMGN and then started to essentially go into that full-time and start building it out as a proper business?

MA: Yeah, sure. So, with EMGN, it was a site that I was running from quite a young age. I was in Intermediate when I first started it, so I would have been about 10-12 years old. It just started as a little gaming blog that I was running, after school and started getting quite a bit of momentum. I was seeing actual money coming from it for the first time, which was, you know, quite a thing at that age.

I sort of started getting into that world of online advertising, monetizing websites, you know, SEO at the time was big, still is, but not as relevant, I would say. But it was one of those things that just started growing because it was always something I was interested in.

To give a background on what it was, EMGN was basically a viral news site. If you're familiar with Buzzfeed, it was quite similar to that. What we did was we created, basically any news that was out there, we created short-form, easy to read digestible, viral pieces on them.

We monetized it through Google ads on different platforms. We promoted it quite heavily through Facebook ads and influencers. It was generating quite a lot of traffic. We were seeing 10 million a day at one point, which is some pretty insane numbers, and in our best year, we did close to $20 million.

So it went from this thing that I did after school to something pretty massive.

NA: How'd you decide to get into it full-time and start building it like a real business, rather than a side blog thing that you started to do.

MA: Well, I got to uni and I wasn't very impressed with uni. I was studying programming at uni and it was just not really what I wanted to be doing. I always had this passion for the news area and publishing in general. So, that’s sort of what led me into saying, “Hey, let's give it a shot, let's try give this more time and let's see if I can make this work”. That was 2013 and, yeah, it exploded from there.

I mean within a year we had, I think five full-time staff and then within two years we had a team of 15.

NA: How did you get towards the stage of thinking about, if you want to grow this into a bigger business, think about raising funding or, eventually lead you to the sale of the business? What was your thought process on how to decide which way to kind of go forward with?

MA:  Yeah, the funding route was something we were always looking at. Basically, we were seeing a lot of the companies around us that raised big numbers. I think Buzzfeed raised about $20 million, so it was something we were considering. One thing that we thought about was, we'd like to have to relocate to the US if we were to do that. Again, back in those days, I mean, especially with that industry in New Zealand, there weren’t many investors in NZ that would have been too keen on it.

That was sort of where we decided, an exit might be something that we'll look at. I mean, we ran it from 2013 to the end of 2016, so a good three years. That’s sort of when we were deciding on the exit because things were changing with Facebook. Along those times you'd basically have zero organic reach. You would have to pay Facebook if you want anything out.

There was also a whole bunch of things with Facebook, sort of filtering certain things, right? For example, only CNN will be seen on your feed and the smaller sites wouldn't really be seen. So, there was a lot going on that side of things.

We could see the writing on the wall with how that was going. We were sort of in this area where we had to be paying Facebook for traffic to our site. Right? It was sort of a no brainer at that point with seeing where it was going and we'd say, “Hey, look, now is probably the best time to exit.”

Looking back on it, it was a really good decision. A lot of the sites, a lot of the competitors were wiped out completely, or they are still in that sort of route towards trying to raise more funds and just trying to survive at the moment. So, there was sort of a good decision looking back on it, and it was probably the right time.

NA: It's great that you went through that whole process in an accelerated time period, three years is quite quick for you to go from, you know, from a really early-stage company to ending up exiting it. How did you essentially deal with that speed of growth? You know, in three years you said you hired five full-time staff.

How was that process from, you know, not really running a business before to hiring, managing, and then eventually negotiating exits?

MA: Yeah, at our peak, we had 15 people actually. Most in the writing department or full-time writers. I mean, it was pretty crazy. We never went into it thinking it will grow that fast, from zero to $20 million a year, which is insane. and it was completely bootstrapped. We didn't raise a single dollar funding. We didn't really go into it expecting that, it was quite a surprise to us.

NA: For sure. Let's talk about what you decided to do after EMGN. You ended up selling it and then how did you decide what to do next?

MA:  Yeah, that was interesting. I wanted it to stay in digital marketing. I mean through EMGN I had racked up about, close to $12 million in Facebook ad spend.

Just myself, managing the ads for EMGN. So, I had quite a bit of experience behind me. At that time, E-commerce was booming, right? E-commerce sites for everywhere. There was a big thing with dropshipping as well back in those days, when that was all just starting and growing, on Facebook.

So that's sort of where I transitioned into e-commerce, it's sort of an extension of what I was already doing and it just seemed like the perfect fit.

NA: Yeah. Fair enough. And how have the businesses you've built in that space over the past few years being, what are your experiences with it?

MA: E-commerce is so a massively growing area. There's still a lot of growth left. I think the, I mean the latest stats, I think more than 50% is still offline transactions and retail. So, there's still a lot of growth left, and this whole COVID thing has accelerated all that thought. There's still a ton of high growth there.

In terms of my businesses, we've had a lot of success. I mean, some of the biggest ones, Slick Lane, which grew to 30,000 customers within its first two years. Right now we've got, EzToned which is a at-home fitness brand, we've done within the first year, just over $2 million in revenue, New Zealand dollars. Pretty good, again these are all bootstrapped brands, and there's a lot of growth potential left in all of them.

Yeah, it's quite an exciting time and there's a couple of new brands we have launched as well. One being Turbist, which is a hair towel brand, and that's also had a great success. We have sold out within the first couple of months and now we are looking and grow that a bit further. So, it's an area that I think has a lot of potential and growth left in.

NA: Could you just quickly give an overview of what Slick Lane is?

MA: Oh, yes Slick Lane, is a men’s streetwear brand.

NA: Me and you were discussing a while ago about the future of digital advertising and how that's really changing now with people being able to, you know, block tracking from websites like Facebook and how that impacts advertisers.

I'd love to hear your thoughts on that and how you think that is going to impact advertisers. And then what is the future of digital advertising?

MA: Yeah, it's an interesting thing because Facebook, well, not Facebook, sorry. Apple is really trying to restrict what information advertisers have access to. So far they started rolling out, on iOS, I think 14.4 I think it is. What it does, essentially it stops Facebook from being able to track you as an individual user. So you just sort of be put into a basket and you'd just be known as any other Facebook user. Whereas right now they can sort of see almost everything you're doing, and they can also track outside of the app. They can see more and they know what you're buying, even if you're not using the Facebook app. So, it's basically just a restriction on all of that.

While I think it will namely affect small business, you know, people that just jumped on the Facebook platform, you know, they’re not too experienced, they are just looking to grow their business online. I think those are the people that are going to get hit the most in this.

The ones that have been in the game for a while, I don't think it will impact. So, it's really just, it's going to be an interesting thing to see how it plays out. We haven't seen the full effects of any of this yet, with Apple and the changes they're doing.

It's a very interesting time, but I think the way you get around it is doing what I believe is what you should always be doing is producing great content, right? Putting out great ads, that really capture peoples attention. That is what we've always been focused on and what we're going to continue doing.

An example of a high-quality piece of content produced by Expo Labs and EzToned

Right now, there's a lot of arbitrage, you know, people, just jumping on the trying to make a quick buck on Facebook ads. There's been a lot of opportunity where people are just capitalizing on all the information Facebook has. They can jump on there and launch an ad and it just works, because of all the data Facebook has, they just click that publish button and, “Hey, I've got four sales, five sales. “It just works.

Whereas that is now going to change and it's going to become a bit of a content race. Better your content is, better your ads are, that's how you going to have to stand out. Whereas before businesses were really relying on the information Facebook has.

So that's why I'm saying that it's really going to impact small businesses that are just, you know, they've just got a banner ad they've done through fiver or whatever. They just launched it; it's not only going to work. But the guys that know what they're doing is not going to impact.

So, it's sort of a bad thing for small business really.

NA: Yeah. And what do you think about, you know, there's a lot of conversation about how it's important to build a community around products, and businesses. So, what are your, what are your thoughts on building a community versus creating great content?

MA: I mean with, community, I think content plays a big part of that. Cause content is how you communicate with the audience, right? So, that's sort of how you speak to the audience and that plays a big part in building that.

Definitely, I think building communities around brands is a big thing. It's something that we’re focusing on big time right now with EzToned. We were putting up these, 12-week fitness challenges and, we've got a bit of a Facebook group going, getting people into that. We've got this competition that we've been started to run. The best transformation on there will win cash prizes.

So, things like that, just building community around your brand, building a good following around your brand is always going to be a big thing, but the content definitely plays a big role in building that.

NA: Let's talk about Expo Labs and what you plan to build with that side of the business.

MA: Expo Labs is the newest venture, we launched it last year. At the moment what we are doing with that is that we are building a good team of talent to support the businesses that we're running at the moment.

For EzToned, for Slick Lane, for Turbist, for Fly as well, we didn’t actually touch on Fly. So, it's really just building a pool of talent to help grow our brands a lot faster at the moment. The eventual goal of that is to turn into a venture studio.

We are essentially going to be looking for stage startups, early-stage to begin within the e-commerce sector. What we want to be doing is investing early and then using our machine, which consists of, you know, the talent and the team and the processes that we built to help grow those companies a lot faster.

That's really the big goal with that, but right now it's, it's helping power our current brands because that's the focus at the moment.

NA: When do you think it would be open to new startups?

MA:  Well, I was saying Q2, and we're now just getting into Q2, but, we're probably going to push that back a bit further because we are focusing a lot more on, growing EzToned at the moment, growing Turbist at the moment, which have a lot of growth potential left.

It might be more close to the end of the year. It's already something that I’m starting to look at. Me and you had had a few discussions around this as well. It's one of those things that I really do want to get into quickly, but our current brands are the priority

NA: For sure. Being a founder who's built a bootstrapped business has done that again with your e-commerce businesses, what kind of advice would you give a founder thinking about bootstrapping their business versus raising funding.

MA: It's interesting because it depends on what industry you're in as well because with some things it's hard to bootstrap. But if you're looking at e-commerce you can achieve profitability fairly quickly with a low budget and that's the beauty of e-commerce. But yeah, I guess it really does depend on what they are doing?

I'm quite lucky to be in an area where it can be done fairly easily.

NA: What would you say is the hardest thing about identifying what kind of e-commerce business to start as in what product to sell, how do you come to that decision?

MA: We do a lot of research in any given area that we are looking into. What we do is that we jump in and we see what ads they're running. It's as simple as that.

We go in and go, “Hey, are these guys doing their ads properly?”, and it comes down to that. let's say with Turbist, I'll give a great example. We had looked at the market, there was basically no one that was running ads for this particular kind of product and scaling it through Facebook.

Like there was one brand who were selling it through TV, but other than that, we couldn't find a single brand that was able to create a winning ad and scale through Facebook. We saw it as an opportunity, we jumped in, we had a great product, it’s a very unique product and we do believe it's the best in the market as well.

We spent a lot of time building it and we were able to scale and scale-out through Facebook when it looks like no one else is doing that. So, we mainly look at the ads and what were people doing already and then we try to improve on that quite significantly.

NA: What are your thoughts on dropshipping now? You mentioned at the point that you started getting into e-commerce it was a relatively big thing. Is that still the case or it's kind of dying down now?

MA: I mean, yeah drop shipping comes down to just a method of fulfilment, right. So, it's still something people can do and make big money on, but it's not something I would recommend, these days and that's mainly due to how much of an importance Facebook puts on customer satisfaction.

They have things like feedback score that they've introduced. So, the main thing we look for is to make customer satisfaction is as good as possible and that means fast shipping times, right? So, with drop shipping, traditionally you see 30 days, 40 days shipping times and that is something that we think is no longer sustainable in this current market and how quickly things have changed.

In 2016, even big e-commerce brands didn't have great shipping, right? If you were in New Zealand, and you were buying from a US company, most of the time it will take 20 days. So it wasn't a huge difference, but now everyone's got access to these third-party logistics centres, that you can just jump on with zero sales.

What that's done is it means everyone has access to fast shipping. You don't have to be Amazon to get fast shipping, you can just jump onto one of these logistics partners and access fast shipping.

So, the competition has evolved completely. So, if you are still drop shipping and providing your customers with the 40 day shipping times, you are going to get left behind and what's normally going to happen is those customers are not going to come back to you. It's not a long-term sustainable thing with those sorts of shipping times mainly.

NA: That's a great insight. I know you've gotten into crypto recently. I'm keen to hear if you've thought about how crypto is going to impact e-commerce?

MA: Yeah. It's interesting. It's a sector that me and you have discussed for so long, and you're quite deeply involved in as well. It's something I've just gotten into recently a lot more, even though it’s something you've been telling me to get into for quite a while. In terms of e-commerce, it's hard to say.

I mean, mainly because at the moment the adoption isn’t, it's there, but it's not huge adoption. There's PayPal that's getting into it now. I'm sure you've heard of this, but PayPal’s launching their merchant payment system and what that allows is for any e-commerce brand, they can basically just click a button and start accepting cryptocurrencies.

I think they're launching with Bitcoin, Litecoin and a couple of others. That alone is going to be quite big for it, but it's still a case that most people at the moment, prefer fiat currencies. So, at the moment I'm more sure, but there are projects that are sort of changing the game in this space.

I’m not sure if you heard of GDT, they are called Guaranteed Access Token, and what they do, it's NFTs for event ticketing. They have sold 600,000 tickets online so far, through their tokenized tickets. It's sort of taking on Ticketmaster, right?

Because with Ticketmaster, there are scalpers that can jump on and just grab tickets and resell them. With this system, they can't do that, because your tickets are tokenized, and there can really be one owner. It's a very cool system. So, things like that are coming in through the blockchain that are interesting, but there isn't a massive shift just yet, I think, but it's definitely coming,

NA: As an e-commerce business operator. how would you decide if you would accept crypto as payment or not?

MA: For me personally, it's a no brainer. I think like, why not? We don't see any downside in it. So, I guess it does come down to personal preference and if the business can take that risk because they can be a little volatility. For us, we'll be on board as soon as PayPal allows it.

NA: Fantastic. To kind of wrap it up, I have a couple of quick questions. One is, what's a secret obsession of yours that not a lot of people know about?

MA: It's an interesting question. I guess it’s ads. I obsess over ads. I almost religiously follow, the sort of the top directors and what they're producing. I'm always sort of looking to up my game that, cause I'm a strong believer that's sort of the big thing that separates brands. So, it's something that I'm always looking at to see what sort of ads are these brands producing?

How can we get to that sort of level? What can we be doing to improve on those things? That's something that I obsess over a lot.

NA: That's interesting. What advice would you give a first-time founder?

MA: I would say these days, there's a lot, especially on Instagram of these sort of overnight success stories of people just, you know. There’s so much, there are so many gurus out there promoting this sort of get rich quick sort of mentality. I feel like that's sort of a downfall of a lot of entrepreneurs these days.

Especially young entrepreneurs that sort of jump in and they're just looking for a quick buck. I would say that's, I mean, that's the mindset coming into it you're probably gonna have a lot of problems to start off with. I would say it takes a long time, it takes a lot of grinding, takes a lot of work to create something that's long-term and sustainable.

So, I would say stick to it, find some value adds you, love, right. That's the first thing and stick to it. Just keep doing it, don't ever give up on it. Just keep doing it. Because those breakthroughs will happen. You might be sitting on a billion-dollar unicorn, but you know, if you’ve given up too early on it, that where the problem is

NA: That's some great advice. Well, that’s it, thanks for joining. I’m looking forward to putting out this episode.

MA: Cheers bro. Good to chat!

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