The $2.2B Bet on Digital Assets' Institutional Future with Guy Wuollet

Transcript

Following their massive raise announcement Guy congratulations. Welcome to the show, man. >> Thank you for having me, Andy. I'm fired up. It's good to be here. >> huh? >> It's definitely a big day. I think for for us and and hopefully for crypto as a whole. >> How do you feel? >> Uh well, I think I'm I'm pulsing a little bit. There's a a great vibe here today. It's It's fun to be with you. I feel like uh you know, this conference in this week really epitomizes what you were just saying that crypto is certainly in its institutional adoption era. I think it's no mistake we're both wearing a collared shirt. >> 100%. >> say crypto has graduated from, you know, the hoodie and the uh you know, the you flip-flops to a collared shirt and you know, maybe a chance to broaden beyond the crypto-native audience today,

bring financial services and new products not just to, you know, the small audience that is interested in On Chain that's watching here today, which we love, but also to, you know, people like my mom and dad, the relatives, uh and you know, hopefully billions of people around the world, especially in developing countries who, you know, need the products and services that that we're building, I think, in a real way. >> Yeah, man. I mean, the part of the kind of raise announcement that immediately stuck out from the headlines was crypto pro uh products or projects that people can actually use. And I think that is somewhat polarizing, probably by design.

Um explain to us maybe what that is at the high level and and we can get into the raise and get into the vision. >> Products that people can actually use is surprising and controversial? >> [laughter] >> I would I would think that products people can use is kind of the point of the product. >> Correct. >> If that's controversial, then I think we need to like, you know, bring the anti-acid up a little bit. You know, people [laughter] maybe need to have more more interesting opinions. I I think if crypto does nothing else uh as an industry and a product, we will deliver stablecoin denominated neo banking to the developing world, and that will offer the opportunity to then give uh wealth management, saving, investing, credit, lending products not just to, you know, people in in the first world, but people in the third

world. And I think as you were uh you know, alluding to, we've seen a lot of adoption and interest from traditional finance to move on chain. I think it's interesting and ironic. You know, I I would have self-described as a dyed-in-the-wool cypherpunk. A lot of the friends I have from that era are maybe a little bit less excited about the modern era. Whereas, most of the people that I went to college with who've gone and done some, you know, investment banking, private equity job, call me and ask me, you know, I keep hearing about stablecoins. I want to get promoted. Like, how do I, you know, use this in our in our business? And so, it feels like we're really in a kind of a market annealing process where crypto has grown and changed a little bit and is really starting to understand kind of

the customer profile of existing financial market infrastructure. And I think with the passage of GENESIS last summer and a lot of the progress we've had both in terms of regulatory guidance and moving hopefully towards clarity, you know, hopefully being passed in the US, that that has created the opportunity for a lot of people that have seen the value of crypto products for a long time to finally start to adopt them in a in a real way. And so, you know, that's a lot of how we're spending our time today. And you know, part of what has fired us up to to raise a new fund. >> Yeah, man. Do you find it that it's slightly boring to actually invest in and build real products, right? Like, we've had this era of 7 years or so, perhaps even longer, that was predicated on a lot of

fun on chain by the by the, you know, by the means of speculation, of trying new products. >> Yeah. >> And in that kind of phase, we unlocked anything from an AMM with a X times Y equals K model, um, you know, kind of like actual model there, perps. We kind of unlocked a lot of, you know, digital collectibles, a lot of these kind of zero to one ideas. And then it feels like the industry is kind of struggling now with like what's that big next unlock? And perhaps it's not boring, but it's actually taking what we've built on the infrastructure side and applying it now to a lot of these real-world use cases. Robbie and I have this thing on the show where it's like a lot of the innovation is actually happening in the institutional sales side, in the regulatory side, and in the

implementation side, and less so on the kind of trying to figure out what the next best TPS kind of mark is, or what the next kind of like execution layer can be. Feels like a lot of that has been built. We have stable coins. We have, you know, privacy being implemented very quickly. We have a lot of what we kind of, you know, need. And so, now we're in this implementation phase. That's That can't be boring. >> No, I don't I don't I don't think it's boring at all. I think, uh, you know, crypto evolved out of an interest in distributed systems research is kind of the underlying academic principles. And that And that's definitely the perspective I came from.

I think, for better for worse, we've done such a good job that that is no longer the bottleneck. >> Right. >> Uh, to to your point, I think a lot of the bottlenecks certainly are about go-to-market, but are also about understanding, really in a very specific, tangible way, uh, how we're going to change some existing, you know, financial workflow or infrastructure. And I would say that is kind of the opposite of boring. That's incredibly complicated itself. And I feel like, uh, you know, it's something that, uh, the industry as a whole needs to do a better job of of understanding and and have more of a focus on. Uh, I also think the same sort of person that was very interested in mechanism design in kind of a a DeFi, you know, food coin era, uh, the same work you've been doing for years is now incredibly relevant. Uh,

but we don't have kind of the same asset problem where, a few years ago, a lot of the tokens, you know, did not have cash flows, did not have economic rights. Uh, and frankly, probably were not that interesting to people outside of kind of, you know, a crypto-native audience who intuitively understood the culture, uh, which, you know, I love and I think is fun, but I we also have to offer products and services to people beyond, you know, the the crypto Twitter audience. >> For sure. >> Uh, and so, I I think it's it's not boring. It is us taking what we've built very seriously. And instead of saying, you know, this is a fun toy that we get to play with, uh, this is actually the way the world should should work and operate and so I I I think that's absolutely the direction we should be we

should be moving and you know having spent some time especially this week as you were alluding to maybe with some of the more institutional finance people. I think after work that they're pretty aware of how to have fun too. So it's it's not a boring time. >> Yeah, I mean I think this this era of the industry is very much institutional adapt or die from a founder perspective from any sort of company in the industry. How does your thought process around the types of founders that you want to back? How has that changed as you are now also operating in the same understanding of well, you know, there's a real product strategy that needs to be had here. There's a real actual business model. There is a distribution plan that that, you know, needs to be properly executed. There's quite a few factors

here um, going into making a really quality investment into what I would consider some of these new era founders, right? And I it's almost like this web 2.5. It's like a lot of these kind of fintech type founders are having a lot of recent success with their raises. How are you identifying and thinking about the archetype of a founder and a company which is going to succeed in this potentially more difficult and more and certainly more sophisticated space? >> Yeah, I think it's not just about inventing a new piece of technology anymore. It is very much about the ability to bring that to market to really understand your customer very well.

Uh, and whereas I think when crypto was a totally blank slate, uh, it was not a huge advantage to have had a long career working in you know an adjacent field. Today I I I I I think you know we have a really good sense for what some of the use cases will be. Uh, it's still pretty complicated to build a lot of the products that we would like and to kind of fit them into the the way existing FSIs want to consume them or you know to build kind of modern retail exchanges. Certainly I think there's been an incredible amount of you know energy and effort poured in there and it's still, you know, a very sophisticated technical challenge. But, a lot of the issues are, are, you know, largely focused on go-to-market, as as you are articulating. Uh, and I I I think, just to be very direct

about the talent flow, crypto really owned kind of the the researcher for many years, the the kind of computer science academic, or the gigabrain who likes to spend their their time reading white papers. I think a lot of those people have, probably rightly so, gotten AI psychosis. I was talking to someone just outside about, you know, how they're the timing their sleep schedule around when Claude will finish, so they can wake up and, you know, issue the next prompt. Uh, but fortunately, the work that was done over the last, you know, many years, put the infrastructure in a place where I think a lot of the, you know, challenges or bottlenecks for uh, us to really win and kind of get everything that we wanted >> Yeah, exactly.

>> are mostly on kind of the the business and go-to-market side. So, uh, we've seen a lot of people come out of banks, asset managers, fintech companies, uh, and decide to to start their own project, and it's been, you know, an area that that I'm excited about, and if I've just, uh, you know, described you, please let me know, and we'd be very interested in talking about, uh, working together. >> Yeah, guy, and so that's kind of like the founder archetype and the kind of understanding of what that looks like. On the sector-specific kind of thesis, do you guys have a sector-specific or a more broad approach to this Fund 5 $2.2 billion? Obviously, you're looking probably more into the Series A range to actually, you know, deploy maybe 50 to

100 checks out of this fund, not 500 to 1,000. Uh-huh. [laughter] You know, what is the sector-specific thesis that you guys have for Fund 5? >> Yeah, I I think we still view blockchains as coordination layers, and think they're a they're a general-purpose technology. But, I think in in the short term, the products that obviously have product-market fit are stablecoins and perps. And I think a lot of what is working on chain today is a second or a third or, you know, some nth-order effect of either stablecoins or perps. And so that's you know a lot of our energy and interest. I think it's also impossible to ignore the fact that agents are really working and the existing financial system is not built for them.

And so you know much of our time and energy has been spent thinking about you know how agents will be productive economic actors. And I would say this is the one area where we see a lot of I would call them AI people not crypto people coming to us and kind of understanding the value proposition intuitively. As opposed to I think there have been you know some attempts in the past where it's crypto trying to solve an AI problem and now AI is saying you know I have a problem. We really need to to get this fixed. And then I remain you know interested in things like physical infrastructure. We have another team at the firm called the American Dynamism team and we you know spend a lot of time overlapped at the the intersection of things like compute markets or energy markets. Obviously we've had incredible

capital investment in data centers and GPUs. And I think you know the market there is relatively immature and is probably a pretty good fit for building you know new especially things around spot markets or derivatives for compute and energy on chain. So that that's been you know an interest area of mine. I think we're still pretty optimistic in the fullness of time about things like creator platforms and new consumer applications. We had a pretty big shift from a regulatory perspective where a lot of the products that the founders we worked with wanted to build were just not possible. And then almost overnight with the new administration you had an open season. So I think that's why we've seen you know some of the more financial use cases do really well in the last year or

two. And we've gotten you know some pretty positive signs out of the CFTC and the SEC recently. I think we're pretty optimistic about where where clarity is going. And so I'm hopeful that we will have not only success in you know the current explicit financial context and that we will fulfill our collared shirt era but also that you know in the fullness of time, the products and services we talked about for, you know, creator economies for things like NFTs will also, you know, come back. I have a card game sitting on my desk called Burn Rate, which is supposed to be farcical.

It was released in 2004, and the idea of the card game is to run a startup. You actually can't make money because the idea of a startup in 2004 was so heretical. And all of the idea cards were things that were supposed to be, you know, intentionally hilarious horrible ideas like magic internet money, an online butler, a pet food store, or grocery delivery. And you'll notice this became, you know, Bitcoin, ChatGPT, Chewy, and Instacart. They they all became at least decacorns. And and so I think we'll, you know, perhaps have a have a similar thing happen over the next few years. You know, I'm I'm certainly optimistic about that, and and I I keep the card game as a reminder that, you know, an idea that was once compelling and and didn't work the first time usually comes back and

and has some some great success. >> Boy, do I have some deals for you guys. [laughter] I'll tell you that much. I've got a couple of them that are looking great right now, especially in in the more sophisticated TradFi experience realm. Like here's how we're going to improve something materially on chain, right? Like very the the pitch decks have materially changed [laughter] as well. I'm not sure if it's Claude or if it's just different founders or what it is. >> You know, where it's uh it certainly an interesting experience. You know, I I I think the value of spending time with people in person could not be higher.

>> Sure. >> So, you know, it's wonderful to to be here with you to to kind of be here in Miami for Consensus. And I think especially thinking of finances, an industry that operates on trust, you know, the idea of blockchains is to build a a trustless system. Kind of the the importance of that human connection, especially for the the founders and partners that we get to work with, I think is has never been higher and will continue to be to be very very important. >> Yeah, in in the in the previous answer, you kind of laid out this track that I've been thinking about which is very much like as a project a a company in the space you kind of have two options and what we're kind of seeing is this bifurcation here where you're going full institutional RWA stable coins, tokenization, that's your big kind of

like track and honestly a lot of these companies are kind of pivoting there as a means to basically grow their, you know, on-chain capital markets, etc. Or you just completely ignore that and you go fully on-chain retail, consumer maximum focus on everything that is going to be the future of what on-chain commerce could be or on- on-chain kind of trading and you kind of just completely ignore this track with with all of the work and the KYC and the institutional load and all that and and you just kind of focus and and these two tracks I think are equally investable and equally interesting, completely different idea sets, completely different thought process on how the space is going to evolve, but I'm finding that there's

kind of a messy middle now where if you're kind of like, "Yeah, we have some retail stuff and we're doing a little bit of of institutional stuff and here's, you know, it doesn't really work as well I think as as having a very clear direction in one of these two tracks. >> Yeah. Well, I I don't think it's a radical idea to say you should understand your customer really well, know what they want and give it, you know, precisely to them. And and to kind of I I agree with what you said. I think you tweeted this the other day and I I was a fan of that articulation, too. Another way of putting this is, you know, crypto or blockchains are a general purpose technology and you can sell them B2B to kind of an enterprise audience that is adopting them or you can go direct to consumer and be B2C. I

think for a number of years the only path is really B2C. >> Yeah. >> Uh and so perhaps it's been, you know, part of why uh so much of the kind of discussion or narrative is about B2B is because this is a new opportunity that I think is really opened up after, you know, genius was passed specifically around stable coins. And part of the hope is that uh you know, that this will not just be focused on payments and stable coins, but will broadly be transformative for for finance and for capital markets. I think uh you know what one thing that has kind of surprised me but I I think has been a useful analogy is that in a very similar way that that cloud wrought a digital transformation on almost every single business.

In many cases financial firms were a a bit isolated from that and have been you know much slower to adopt cloud solutions than I think you know your your traditional enterprise. And so I think there's a real chance that blockchain's kind of become a digital transformation moment for Wall Street and for finance as a whole. So I think you see a lot of consumer experiences leapfrogging from you know no product or a very bad product today you know directly to the future and then in between you have you know big enterprises with much stronger distribution and in many cases you know serving commercial clients as opposed to to retail clients who are going to take a little bit longer to to upgrade you know much longer sales cycle but I think we'll

have a similarly meaningful meaningful impact. And in many cases it seems like big enterprises are looking at blockchains as an excuse or a shelling point to upgrade their core ledger. And I I think maybe we take for granted because a lot of the kind of consumer internet experiences are so good today and you can you know vibe code in a few minutes on cloud an excellent software experience and then you go and and you talk to someone that works in a bank and they have a server running on Cobol. >> Yeah. >> It's it's a massive improvement even just to go to something that that we think of as being kind of kind of table stakes.

And so I think adoption here was really delayed for a number of years because of of regulatory reasons and finally that aperture has has opened and and it seems to be to be working really well properly. >> And as you mentioned kind of the B2B enterprise side was a bit slower to get adopted and it was almost because there was also this focus about ownership right? Your colleague Chris Dixon wrote read write own right? There was this very libertarian, this very ownership, this digital property kind of pitched towards the average person who wants to take control of their digital identity, their digital finances, etc.

And then now that's kind of being applied to the more enterprise institutional land. I'm curious, you know, Chris obviously wrote that book, you know, what, 7 8 years ago or so, maybe a little bit more, a little bit >> Uh I think that was 2023. >> Oh, sorry. Jeez. Okay, so it's 2 3 years ago. >> Listen, it it feels like every year in crypto is a dog year. So we're we're we're on the same page. >> more recent. Um you know, with the with the lens of read, write, own, how do you think about that as it applies to fund five? Right? Do you guys carry a lot of those same principles that Chris kind of articulated there as for the core ethos of what we're doing in in in the space and and you apply that to your investment thesis?

>> Yeah, for sure. I I mean, if you actually read the book, about 70% of it is explaining how blockchain infrastructure works from the perspective of a normal person. Uh and then, you know, the end of the book is trying to articulate some some use cases, which hopefully will, uh you know, grow and scale over time. Uh the, you know, one that has worked best today, I think, has been for financial services and and specifically if you go back, uh Chris has an excellent articulation of of stablecoins and and kind of the value of uh digital currency for for payments there. Uh I I still think, you know, a lot of that applies and I was uh uh it was very fun to get to go to F1 this weekend and we we got to spend some time talking with someone at a big asset manager

who's, you know, now running digital assets for for her team and her comment was, uh I was trying to get my team to understand that crypto is not cryptocurrency, it's not an asset class, that in fact, you know, uh crypto or or as she would put it, blockchain is a fundamental technology that will reshape how our business works. Uh and her comment was, I bought, you know, read, write, own, I gave it to everyone on our team and, you know, finally they understood what I kept talking about in the meetings when, you know, I was really pounding this idea that we need to be a block adopting blockchain as a technology. Uh, and so, you know, again, I think maybe we are very deep in the trenches and take a lot of this stuff for granted, but there's still a wide world of people uh, even

who are, you know, working in very sophisticated financial roles uh, who I think have a bit of a misconception about crypto. >> Yeah. >> You know, crypto usually means cryptocurrency. If you look at the titles of people running crypto teams at big financial firms, almost always they call it >> digital assets. >> Yeah. >> That is the new framing. >> I think that highlights the fact that in many cases existing financial assets are literally not digital. Like, it's a spreadsheet that references a piece of paper that someone holds in a bank vault. Uh, and so, when you think of that as the current incumbent status, uh, you know, I I I I think uh, maybe we're letting perfect be the enemy of good.

>> Yeah. >> It's very easy to say, uh, you know, we're not making progress at the rate we'd want. I I think we're actually getting a lot of uh, what we would have wanted 5 or 10 years ago. >> Yeah. >> And uh, I think it was maybe Has- Haseeb was tweeting that, you know, >> I was going to ask you about that. >> revive Satoshi and said, you know, is is USDC or is stablecoin uh, you know, i- i- is that a cypherpunk product? I think the answer would have to absolutely be yes. >> Yeah. >> You know, you you you maybe look at uh, the evolution of open source software as another comparison which started also as a very ideological movement.

>> Uh, and eventually, you know, became mainstream uh, largely through GitHub which got bought by Microsoft. >> Yeah. >> I think maybe a lot of the initial open source uh, devotees were a little disappointed by that outcome, but it was an incredibly positive shift towards open source and I think is one of the things that made software successful is, you know, the composability of open source code. Uh, so I I feel like we wake up every morning and I feel like I'm winning, you know, to to parrot the the Jensen quote, I did not wake up this morning a loser. Uh, and I think maybe too many in crypto uh, too many people in crypto have have a bit of that mindset today and, you know, if if there's one message I'd I'd like to convey it's that I feel like we're winning and and you know, we should uh

be be doubling down on that that win, not not capitulating. >> Definitely. And I think one of the big things about this announcement also, Eddy, the CTO of a16z crypto, who's been working his ass off to build, to probably do do diligence on all these founders and all the technology and all of this has now been also promoted to general partner. So, he is also winning. Any words on kind of what that means for uh a16z crypto and kind of the firm at large? >> Yeah, I think that's just an acknowledgement of uh the work Eddy's been doing for many years.

Uh one of my favorite people, one of my favorite Twitter accounts. If you do not already follow him, I'd highly recommend it. Uh I I think Eddy and Chris are both similar in that they're kind of philosopher kings, so to speak. Uh I I I feel like Eddy, you know, kind of both understands the literal uh technology and also, you know, how how it gets adopted well in in society and I I I think, you know, if you talk to the founders that we work with closely, uh all of them will will sing his praises. So, I I could not be happier for Eddy and and, you know, one of my best friends and uh a treasured colleague.

>> Beautiful, man. Last thing for you guy. What When you think about, you know, going to deploy this capital over the coming years, you know, the average fund lifespan gives you quite a bit of time here to to kind of allocate properly, but we are in a bit of a slow market right now. Sure, today, you know, things look great, but tomorrow and next week, they could be back down and people are like, it's all over again. It's It's the worst of back, it's all over thing Yeah. Right now. Um When you think about kind of timing, when you think about founders, when you think about allocating this capital, what are the core the core understandings and considerations to have as a team and kind of how do you think about getting this out there into the market?

>> Yeah, I mean, the the goal is to you know, invest this next fund over the the next two or three years in in kind of a a traditional venture cycle process. Uh I think there are a lot of interesting opportunities out there today. Uh, you know, the we're so back is so over cycle. I feel like it's maybe amplified and trying to kind of tamp down your emotions is is maybe that the correct approach. Uh, I think the world does not work in that way. I think you make a little bit of progress every day and eventually you look back and and there was, you know, some some great conquest involved in that. But kind of the the nitty-gritty process, I think a lot of venture capital is actually just a a shoe leather business to to use Chris's phrase where you have to, you know, take the

time to meet with with every single founder you can and and try to, you know, understand their vision of the future and then and then support them. So, that's you know, that that's what we focus on every day and I I couldn't be happier to do it. >> Day by day, guys. Got congrats on the raise, man. Awesome stuff. Great to be with you.