How Venture Is Navigating Crypto IPOs

Transcript

[Music] I think in my mind, back to memecoins, maybe the speculative activity and all the energy there goes to something that is way more productive, which is real companies in crypto, building real businesses. And now you can have whatever AMC like speculative activity on them, but on chain and with real businesses behind. That would be really cool. Instead of meme coins, we'd be trading like crypto low market cap companies. That'd be much much much more productive. Uh, but it also solves the problem that we currently are talking about, which is can you IPO a company that has under $500 million of run rate. This episode is brought to you by Scale, the next evolution in layer 1 blockchains. Explore the gas-free ecosystem at

scale.space/ecosystem and follow their journey on X atcale network. Thanks to Scale for making today's episode possible. I wanted to take a moment to tell you about Focal by Falcon X, the AI powered insights engine built for institutional crypto. By leveraging AI, Focal empowers institutional investors to streamline research, anticipate market shifts, and make sharper investment decisions. You'll hear more about Focal later in the show. Nothing said on Empire is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of Block Works. Our hosts, guests,

and the Blockworks team may hold positions in the companies, funds or projects discussed. Do welcome to the show. Rob, welcome to the show. We got Empire, we got the app. Santi's joining us. What's happening everyone? How we doing? Doing great. It's crazy. Lots of scrolling, trying to keep up. Yes. Yes. If you want to see a group more egotistical than us, it's tough to find. We were just spending five minutes googling ourselves. So, that is how we like to start. No, we're talking ourselves. I didn't [ __ ] Google myself. We were showing the worst pictures of each other. So, at least that.

Um, all right guys, welcome. Rob is a um uh Rob is a partner at Dragonfly. If people don't know, do is a partner at Han Ventures. Also one of the co-founders of Anchorage. We've had his co-founder Nathan on the show. Um, Diego, what are you doing these days? Lots of investing. Um, lots of stable coins. Even though I guess my feeling is uh now that everybody's excited about investing in sables, maybe I shouldn't be investing in it anymore. Uh, it's too hot. It's too exciting. But spend the majority of my time uh deploying capital. Uh, my description is not of venture capitalist. I am an engineer that uh that deploys capital. I see Rob shaking his head. Rob, why are you shaking your head? Because every time he says that it's like it's obviously not true. He's a venture capitalist. Like I don't know why he's just like he wants

to hate on our whole industry of which he is a part of. Diego just embrace it. We are venture capitalist. It's fine. Never. Rob give me the uh give me this. Let's talk about venture right now. Give me the state of venture because uh the the a lot of the firms Han included Dragonfly included raised these massive funds, right? You maybe raised fund one was maybe small uh fund two was massive. Um, fund three. Everyone's raising right now for fund three. And what's the where are these things going to shake out right now? What's the fundraising environment like? Yeah, it's a little bit and I'm I'll be interested in Diego's perspective here because I know we're kind of um, you know, we're on a later fund than than he is, but they had a really big first fund. What we're seeing in the market is

that it's become a little bit of like a have and have nots situation. So like in 2021, uh, basically everybody could raise funds if they wanted to. So everybody has said, "Hey, listen. I've spent a year in crypto. I can go and raise a new fund. I can raise 100 million bucks, 200 million bucks. And there was so much appetite from the LPS whether it was pensions, high net worth, you know, endowments, etc. that everybody raised in like record times as well, you know, two, three, four months. That has completely normalized now. And so now what we've seen is similar to the regular venture, not just crypto, the large funds are continuing to raise large funds, not as big as they did in 21. are coming down because that you know makes more s makes sense because there's too much capital in 21 but they're still raising relatively large

funds and then there's some you know specialist you know emerging managers who are raising but it's much harder there are a lot less people raising capital a lot of people who raised too much money in 21 are having much smaller funds this time around are struggling to raise and that's caused what I think is a good reset in the amount of capital that's coming into you know venture more broadly and I think it's probably right sizing of the industry and the same thing we're seeing in Web 2 VC. Yeah. Halves and have nots. Who's actually outperforming Bitcoin right now? Because that seems to be the the struggle. And not to dig into it right away, but like I feel like a lot of the funds I mean Santi's an LP in a lot of these things.

I'm an LP in less than he is, but a few of them like not many people are actually outperforming Bitcoin. So, isn't that the core problem? Well, I I think that's true. I can tell you two of our three funds are actually outperforming Bitcoin. Um but uh you know I I think the vast majority of people aren't honestly and like it's it's tough and we do when we have conversations with LPs like there is questions because because all the know crypto now like there it's no longer like oh teach me about like what this asset class is. It's you know why should I invest in you versus Bitcoin? You know why is there not just like better ways to get you know exposure to this asset.

I can do the ETF now I can do liquid funds. Um there's probably ETFs of longer tail assets coming. And so that is a question that we have to answer a lot more today than like we did you know call it 2021. So I think go ahead Santi I was going to say look uh circle just ripped yesterday um and you know no one was kind of expecting that 25 times over subscribed let's see where it checks out like Coinbase had this phenomenon as well. Do you think that that changes like the appetite for LP to say hey listen there is now like a crypto enabled businesses in the public markets like Robin Hood and and you know Coinbase and Circle that I can have exposure to like why would I take the liquidity risk uh you know I would just rather have exposure to that. Robin Hood

in particular like I know like one of your guys Rob Omar has been public public about it. It's like it's interesting has distribution tokenizing stocks stable coins like they're going to capture and reap most of those benefits. Like how do you push back against that? Well, one thing that I'm going to say is that's actually absolutely the case and one thing that it happened this year is like we've had three four over billion dollar acquisitions and plus circle. Um, so to a large extent these things are sort of diverging. Yes, you can buy Bitcoin. Um, you can use it as a as a standard and as a measuring stick if you'd like, but the reality is that the private markets are actually putting out. I mean, we had uh we were part of Bridge. Bridge got sold to Stripe. You know, it really was the starting gun for

a lot of the the the stable coin um mania and you're seeing a lot of markups. So the reality is that the private market continues to be alive and well. There's lots of markups at lots of big companies and Turk is just one one proof point of that. And I do think LP see that. And by the way to come back to the story of LPS, one thing that Rob didn't say is that LPS in general, it's a waiting moving average of whatever has happened um in the 12 months before or 18 months. And so it's kind of like a slow one. But I have to say that depending on when you started fundraising, if you started fundraising on liberation week uh versus not and and you know that that affects because there's this denominator effect um in if all of your assets are crashing which

we've had some crazy movements and crazy volatility then that affects portfolio decisions too and affects the LP's uh thinking through uh deploying specifically into venture capital because it's highly liquid and it's marked up and it doesn't change with the market and so percentage- wise the do denominator effect means that you're overallocated to venture. So you start pulling back whenever the market actually has crashes. So that is very much a phenomenon that is alive and well. Yeah. I think I think on circle like may I think circle is a bit of a its own you know beast. So like you know if you look at you know what has been the only public company for a long period of time in crypto that people have really traded. It's it's been Coinbase right like that's been the exposure. If you look at Circle, like based on where they

were, you know, earlier today, you know, they're trading at like 33 times LTM net revs, right? If you look at Coinbase, Coinbase is trading at nine times LTM net revs. And if you actually were to uh apply that 33 times to Coinbase's piece of circle, so they get about 900 million uh LTM for for of revenue from from Circle. that would imply that the rest of their business is trading at six times LTM networks which is below kind of all the exchanges below NASDAQ it's below CME and so that would imply that people actually aren't that excited about the rest of crypto but they are excited about stable coins so I think that that might be a very specific thing that's happening there and you know to do yoga's point we've seen the M&A

market pickup he mentioned bridge we were also part of a business called Hidden Road that that got acquired um but I I do think that we're just seeing a lot of interest in specific parts of the market, but the broader crypto interest is still very much tied to, you know, Bitcoin. Yeah. On the uh on the investor side, so not on the fundraising side, on the investing side, it feels like the evolution of crypto venture was like, all right, we don't want to invest in these kind of scary crypto businesses, right? So like the ICO, so we'll there's like these traditional businesses being built in crypto and DGO, you built one of the best ones with Anchorage Anchorage BitGo Coinbase Circle. It was like non like onchain businesses. It was kind of the businesses that wrapped around crypto.

CFI, right? Fireblocks, copper, those kind of folks. And then it was like, oh wait, equity is actually really hard to exit in crypto and a lot of the returns are made on chain in these tokens. So let's pivot to the chains L1's, L2 phenomenon. Then it became like more dexes, things, you know, lend borrow things like that. And now I'm curious if you guys think that the venture and the venture money got wiped out of the equity uh the the equity investments. Do you guys think the money will flow back into equity investments as there's actually finally for the first time in crypto a way for these equity investments to exit?

Yeah. Well, look, the the answer is yes. I think Circle clearly and all the acquisitions that have been happening clearly show that the the answer is yes. Um one thing to say is that we're relatively new in the crypto venture. We've been around for just over 3 years and we've always have flexibility, right? Equity and tokens and taking equity position with token warrants. And so the reality is that many of these businesses don't know which path they'll take um and in many cases not clear especially at the earlier stages which path is going to be the highest in terms of value capture. So you kind of like take take an option of having of having both. And I do think that there are cycles and clearly tokens in general have had liquidity much earlier. So, you want that profile and that's one of the exciting advantages of venture in crypto

is having earlier liquidity. But I do think that these this is this is cash like cash going to the pockets of LPs and early investors um in major in a major way um after yesterday's um debut from Circle and that's actually going to be you know it's great for crypto it's great for validation of the market. It's great for for LPs to also see some some liquidity back which which didn't happen in crypto. So I think this year specifically you saw the acquisitions happen which hadn't happened before and one IPO that is a an IPO Kendall that I think speaks volumes of stable coins just because if you ask anyone in crypto in general about what they think about the circle business what you're going to get is they are a money market fund that wants to be a payment businesses. So they're trading at payment business um

levels, but they're really a money market fund, right? And so that's what that's what they are. And by the way, a very a very one that burns a lot of money at that uh not not a very efficient market fund. They're like a very heavy weighted market money market fund. So that would be the general gist. And by the way, it was uh candidly my own here, which is um in terms of valuation, I would never expected this to come out to market and reach the heights of $19 billion market cap. It's not something I expected. This episode is brought to you by Scale, the next evolution in layer 1 blockchains. With a gas-free, invisible user experience, instant finality, and robust security, Scale allows for limitless scalability, and has already saved its $50 million users over 11

billion in gas fees. scales, high throughput, zero transaction costs, and powerful web 3 infrastructure make it the ideal platform for gaming, AI, and other high- throughput apps. To explore the gas-free ecosystem, visit scale.space/ecosystem and follow their journey on X at scale network. That's scale spelled with a K. Thanks to Scale for making today's episode possible. I wanted to take a moment to tell you about Marinade, the platform connecting Salana holders with the best staking rates on Salana. Marinade unlocks a high-performance staking delegation platform that brings billions in liquidity and security to the Salana market with solutions for both

individual traders and global institutions from both DeFi and traditional finance. Use Marinade to earn rewards on your Salana treasuries and holdings. Optimize your Salana staking with Marinade's bestin-market features, including user downside protection through protected staking rewards and optimized delegation via Marinad's automated auction marketplace. To learn more about Marinade, visit marinade.inance or click the link in the show notes. As always, investments in blockchain technology involve risk, terms, and conditions apply.

So, nature like like what's next? you're um you know founder Anchorage uh there's a number of businesses that you know could go public now which is like chain analysis anchorages of the world um is is a key pitch here look if you're a traditional investor in like private equity funds like you have not gotten liquidity and you're not in a good spot is the pitch a lot to investors the the do you really emphasize the path to liquidity which is like hey traditionally if you're a venture fun in crypto like you could have there's a very clear path to liquidity via tokens um in your portfolio Um, so like what's I'm I'm just wondering like what is a second order effects of like the circle IPO? Are we going to see the chain analysis of the world go public? How like in your mind, how does that shake

out? And then what does that mean for like are there other crypto companies that are maybe going to think, hey, maybe I'm not going to launch a token. Maybe I'm just going to tap into the public markets. I really hope that's the case. And I don't know because we'll see, but I really hope that's the case. Look, it's much it's a much better world for everything that you just said from yesterday to today, which is companies like Anchorage and companies like Firebox and companies like chain analysis, you know, which are traditional businesses. They don't have tokens, the case of Anchorage, highly regulated, they definitely like the they have a better path for IPO today than they had yesterday. Even if it's in a in terms of perception and definitely in the eyes of the underwriters, right?

Because in many cases the underwriters are actually a little bit of the bottleneck because some of these companies haven't reached the threshold of revenue which right now depending on who you talk to they say $300 to $500 million for even for it to even be interested to some of these underwriters. There's other ways of going public as we all know with spaxs and direct listings etc. But $300 to $500 million is um there's not a lot of businesses in crypto that are doing over $500 million right of of revenue on a yearly basis. So I think that underwriting maybe changes a little bit. That's that's my hope for these businesses. On the other end, let me just also focus on something that Rob said, which is I think we're seeing a sliver here, uh, which is this is the stable coin bet. This is a clean stable

coin bet. That is circle is a stable coin bet without all the confusion that Coinbase has. Coinbase has a cloud business, they have um the trading business, they have an institutional business, they have um, you know, institutional trading business. So all of these different components, you're underwriting them as as an aggregate. And the story here in the narrative is like how do I get exposure to this thing that crypto people keep talking about called stable coins? And now you have a ticker that is called circle that everybody will point to as you know you can do it. You can't buy tether uh which is the largest issuer. So you're going to buy the second largest issuer um the second best right. So you can buy the second best right now out on the markets. So I think that's what's happening here. And in terms of uh by

the way your first question of on the LP basis on liquidity I don't know if we can like overemphasize it but it is a fact that there's early liquidity on tokens. Um and of course look we're venture investors. We're long-term holders. We're not selling these things after we invest. Um, and so we're not not not not doing that, but there is the capability of doing it, especially if you think about things like staking, etc. There's uh there's a different profile of investments if it's crypto. Rob, what do you think about this? Yeah, maybe I'll add one thing and I'll start at the the last point that Diego said, which is the LPs are always like 18 months or 24 months behind the market.

And so right now what we're seeing is that the um the venture capitalists are actually much more interested in equity again. And so like starting with bridge and then all the M&A that we've had, you know, over the last, you know, call it six to eight months, we're we actually have three equity only businesses that do not have tokens, do not have token warrants that are getting priced up right now. Significant markups. We've got other uh significant in the private markets like they'll be able to raise series D or in Okay. Okay. Yeah. series series B's. Who's investing? Who's investing late stage? because that's been one of the problems historically is like there's no latest stage growth like like the growth round investors in crypto. Yeah, there's there's not a lot of us to be honest. What I will say I'll

say two things. One is you know where we'll get involved there sometime. You know there's Paradigm, there's Drezen, there's Han. Um there's you know maybe you know a couple others that will get involved there on the equity side that are cryptonative. What we've seen is if it's stable coins uh or maybe an exchange because of Coinbase, we will see traditional like web two investors are back in. I was talking to one entrepreneur. I was at Money 2020 this week and I was talking to one entrepreneur um you know uh I guess it was yesterday who who did a had raised for a stable coin business and he talked to 83 venture capitalists you know during his race which was an outstanding amount to me because you know it's a in crypto I don't I don't even know 83 venture capitalists but all of the

traditional VCs wanted to talk to him and he he was telling me he's like listen I talked to all of these venture capitalists and probably like 10 of them had any idea what was going on in like our business when we talked about you know RWAS and tokenization more broadly and what we wanted to do over you know the long run with our business it was you know people looked at us with like a blank stare but you know there was you know a middle group of like 50 or 60 who were saying oh stable coins like this is really interesting like we need to get some exposure to it and we're seeing a lot of that interest like across the valley and so again it's it's a really a a bifurcation between the two but um those people are coming back but they're coming back for that specific silver

yeah Okay, let's play a game. Who are the Okay, outside, we'll talk about the corporate treasuries. Um, let's get that out of our head for a second. Who are the next three to five crypto companies that IPO? It's tough. I So, I agree with Diego that um you're really like most of the crypto companies today are really smaller than your than what would be ideal to go. But there's some there are some folks that are big. So, like let's let's I'll throw out some names to start. It's like you got Kraken, you've got there's like people who do more than 100 million in revenue. I don't know like Fireblocks is probably around there. Anchorage, I don't know if you guys are around there. BitGo might be around there. But like I think historically I've thought these guys are a little too small. But I I think

talking to people, everyone's looking at this circle IPO saying, "Oh my god, there's insatiable demand in the public markets. Maybe we should actually do it in 25 and 20 instead of 26." So I want to get your guys' takes. What I would say is is is I think that is people's perspective. I'm not sure that I'd buy into that perspective and yeah, the IPO market is definitely open. Coreweave has done really well. We're seeing a lot more of the traditional fintex come back to to the market who had previously shelved. Obviously, Circle is incredible. Um I expect a lot more people to try to IPO more broadly. This is not a crypto specific point. And to your point, you know, there is the Fireblocks who has been, you know, wanting or thinking about an IPO for a long period of time, but you know, relative to what, you know, if you went

and talk to somebody at Goldman, what they would tell you is ideal profile for a public company, they Fireblocks is not there, right? And that's true of chain analysis, which is a great SAS business. That's true of most of the other people we talked about. Kraken is a different story. And, you know, I expect we'll see them public. Maybe not this year, uh, but maybe next year because of but, you know, I'm sure that's a moving target. And and I think some of the exchanges are maybe different stories and some of the brokerages because they scale with the market really quickly. But for the the other guys, they might force themselves public. And I actually I expect that we'll have a number of less than ideal people that we're not even talking about who will just say I need liquidity. And like what do you mean

force themselves public? like like spa or something like that or they might spack or or they might you know talking to their underwriter and the underwriter is like listen I don't know if there's you know a lot of demand for your business but like we can get you public we can do direct listing or we'll just have like a you know we'll raise a hundred or $200 million instead of the billion dollars that circle raised in the IPO. I expect we'll see a number of those. Um because again like I'm not sure that this circle story is transferable to the rest of crypto. That's fair. And one of the things that ends up happening is for you to be public. One of the things that you want and actually this was very clear with Exodus. So Exodus is actually maybe a good example because it's a crypto

company that has a wallet that went public and I think the story there is I think it sits at $800 million market cap. It was just over a billion but it had what 50 to $80 million run rate. So clearly under $500 million. And then it's interesting because the price sort of languished post IPO until they actually got covered by analyst. And then after the analyst things start picking up a little bit and so it's just are you included in the category by the analysts of crypto companies that you can get exposure to. I think it's a little bit of that story and are you going to be covered by the analysts and are you interested enough and it turns out if you have under a billion dollars of market cap and really three which is where the $300 million like 10x just call it a 10x multiple that's where the

the $300 million $500 million comes from right you know like3 to5 billion valuation if you're much lower than that analysts are not going to take their time to cover you and if analysts are not covering you then people aren't really the large institutionals aren't really going to deploy capital which means that there's very limited liquidity and then the the price may languish and things you're not you're just not getting the price that you deserve So exist wallet now maybe is a good example of what it actually looks like for you to have a subscale IPO which you know it wasn't a terribly amazing success but it wasn't a failure either and so I don't know maybe that can be emulated but I think the question is if you want to go the traditional route will the underwriters um actually like take you out and maybe this um this

multiple on circle um and I agree with Rob is not the same thing but maybe it will kind of like weten their appetite. I would say that there's three categories of companies that would be next. Number one, something that already has an equivalent in terms of trading to a public market and has scale. So, Kraken, a great example. We already know how Coinbase works in terms of trading multiples. The second one would be things that actually have recurring revenue and you know look a lot more like a SAS product. So, a Fireblocks, a chain analysis, recurring revenue, attach rates, churn, you can sort of measure these things and it's not really dependent on the market. Then the third one are actually businesses that are highly dependent on the on the price of of Bitcoin and on the price of cryptocurrencies um which you have variable revenue and you really don't

want that amount of volatility and not to have been diversified before you go public because otherwise you're just going to be uh strictly correlated to Bitcoin and nobody's going to give you the value that that that you deserve and they're just like you're buy volatility, right? You're just a Bitcoin tracker uh publicly listed and you don't really want that. Uh you don't want to be CEO of publicly traded company that only has like direct exposure to the market volatility. Yeah. Do can you take us into like the board meetings of Anchorage right now and uh divulge everything? No. And can you uh and tell us everything that happens in them? No. Can you tell us like in in the room because this must be a conversation. It's like look we're maybe a little small to IPO but we've got a phenomenal business. Um like great

customer set. Do you start making acquisitions right now? Do you wait until the next cycle to IPO? Are cycles dead? Are you waiting till 27? do you go raise a late stage like how do you make a decision like this? So for Anchorage is very different. I think Anchorage I think we all know that it has this long-term um goal of being public. The only thing what we sell at the end of the day is trust. That's why we're the first and still only fedally charted bank in the US that does crypto custody etc. But the only thing that is more trusted than a federal bank is a publicly traded federal bank. Right? And so the path to trust adds a lot of value to the business. And I think that is the path that we're on. It's always been the path that we wanted uh to be on. Um and

and so that that that to us is slightly different than another company that made state private for much much longer because we do have a goal and that just benefits the business in general in terms of trust which is what we sell. um you know to a lot and another reason why Anchorage is potentially a great candidate is also being a bank means that you already have all of your financials in order. You already have stuff that is audited. You already do reporting. You already do a lot of the heavy lifting that is necessary for you to go public. Um you know you know I was at Square when we were preparing to go public and through um you know the IPO and how how crazy that setup was and you know it's intense but getting a bank charter is also very intense. So maybe

in that in that sense we're also also further ahead. But the questions still maintain which was are what uh you know John and um the Cullison brothers um kind of like talk about about publicly which is why what do we have to to gain? And if you have a an amazing balance sheet um you have more money um than than you need. You are growing uh you are diversifying your business model. You are becoming more and more attractive each month that goes by and you can do all the partnerships and you're really like leading the pack on all the areas that you want to lead. you know what is the what what is this going to really get you like what is having access to the public markets really going to get you like do you want to issue debt do you want to have some

strategy that the capital markets are required for that and then at the end of the day the answer is no there is no specific strategy there and yes the trust would be amazing um but you know it's something that we're walking towards and making sure we're ready for and think about optionality we want to be in a situation where if we think it's the right thing at that moment we're ready and we can immediately do it uh but not something that is kind of like a big mandate that we must do it. Um it's it's how we think about it and how the conversations go. Yeah. And by the way, the other thing is that obviously as part of our board, there's venture investors, Mr. Investors like liquidity. And so there's always like nobody's pushing us, but you know, there's a little bit of like Anchorage, it would

be great to see this publicly listed. But like isn't there also the benefit like for your business, you talk about trust. There is more trust if you're a public company. That is exactly right. And that is one of the biggest benefits uh for Anchorage and one of the biggest reasons why that would be good for us. But that doesn't apply to the general crypto company on its own. I mean, it does, but specifically for our business, trust is really the thing that that that we sell. Maybe switching gears a little bit to the other side of the public markets right now. You have all these corporate treasury vehicles. And I've actually noticed um you guys have mostly been absent from some of the it's like I see like Pari, Galaxy, Panta, Electric, like the same name. Uh maybe Coin Fund like showing up on some of these. Rob, I saw

your tweet the other day. He said, "As you can tell, I'm not a fan of these public crypto treasury strategies, which are clearly just point- in time solutions that have no reason to exist over any reasonably mid to long-term time horizon." So, maybe you can expand on that thought. Yeah. Um, so that's why we call him Spicy Rob. I didn't know I didn't know we did call him that, but I can start. As a matter of fact, I did not know that. I wish I knew that. I didn't either. We're all learning on this. We can make that stick, Rob. We can make that stick.

Yeah. Okay. I can't can't wait for that. Thanks, Diego. Um, no, I listen, I they they make perfect sense for the right pool of capital who wants to trade into these things. And what do I mean by that? I mean, you you're you're very likely to make money because you trade into the you you know, you give these people $300 million and they lock you up for 40 days, 30 days, maybe 60 days, very short periods of time. They go out and they say they're going to buy, you know, an asset that you are maybe long that asset anyways. And in some cases, they're taking inind contributions. So, it's almost a way to like monetize like your ETH or your Bitcoin or whatever else because you can send that to them and then and then take this um you know, lock up. And you know they're mostly

trading today at you know some premium to nav anywhere from you know uh a little bit over one all the way to I think espet when I looked yesterday was like 10 times uh premium to nav and you this usually has something to do with you know what what the exact capital structure looks like but also um you know who's on top of it and if there's a lot of excitement around you know a specific person or a specific group that is running this thing. Um, but over time these are going to trade back down to NAV and in a distressed market they are probably likely to trade below NAV. many of them are anyways and you can get yourselves into a situation where you know it depending on you how you finance

this thing especially if there's debt involved where you may need to sell the underlying to pay off your debt and which means that you may and because then your value will go down and you may have also people converting into equity and diluting the broader shareholder base. you get into this situation where you're in a death spiral and that's going very likely to happen for some of these vehicles over you know certain types of of market cycles and so I don't think they need to exist but I understand why people are doing them to make money I don't think it's right for our pool of capital which is why we haven't invested in them Rob we could have been sitting here talking about the exact same playbook happening for micro strategy two three years ago and it didn't so so like that would be the push

back that someone would be like wait a minute like this clearly hasn't played out for micro strategy. So, what would you say to that? Like I I ascribe to your view, which is like 99% of these vehicles unwind really nasty and trade below NAV in a in a down scenario. We're not there yet. Uh but what would you say to someone that's pointing a micro strategy that has clearly defied gravity? Listen, I I think if you if you point to a single example and then you abstract that out to what is happening now, which is significant amount of new vehicles that are all capitalized somewhat differently that are loosening the lockups that are, you know, in many ways they're usually the offerings are kind of looser and are um more or they're more punitive on the actual

equity holders like like it's it's clearly there's like a mania and people are just trying to to monetize. By the way, you know, people had the same conversation about the GBTC trade, uh, you know, way back when, right? And there was many people was like, hey, listen, the premium has existed for two years. Like, why would it ever not exist, right? And then all of a sudden it blew up three arrows and, you know, a couple of other funds and we know what happened then, right? And so I I think it's it's the wrong conclusion to look at what Sailor has done and and, you know, incredible like he deserves all the the everything we could say about him. That's good. Um and then say okay well like all these other people can do it on all these other assets and all these other ways and that we won't have

adverse selection. Yeah. Well by the way my view here is mimics Rob's but it's I think it's simpler which is it's a trade and I'm a venture investor even though you know I'm not really but there capital investor but it's a trade and so I think we we have to tell ourselves the real story is the right holding period for Bitcoin was 15 years. the right holding period for Solano was uh through FDX all the way to the other side. And so as a venture investor, we're not looking for trades. I I do think in crypto, you get early liquidity and maybe you have holding periods that are not 10 to 12 as a private markets are kind of like aiming towards maybe like closer to 7 to 10, but but still you're taking a long-term position and you're

working with these teams and you're trying to help them out. At least that's like, you know, the that's the the pink view uh rose tinted glasses view of venture that I very much subscribe to. That's what I have fun doing, not really doing trades. I think in crypto because everything trades, everything becomes a trade. Uh but I I do think that that's there's different vehicles for that. There's people that are going to make money out of it. There's hedge funds. Um there's there's all these things as far as we're concerned. We're we're venture investors and yes, we have a liquid portfolio because a lot of the value capture happens in liquid tokens, but we still look at holding periods that are venture holding periods. So, I was like talking to Yan about this in a and um two the two last week the roundups were

like, "Hey, listen, look at the NAV on these things and it's telling you like there's clearly appetite in the public markets to get more crypto exposure via traditional methods." How do you like translate that into how you express your views into investing in the private markets? Like what type of companies like you mentioned like the stable coin trade's kind of over. Uh Rob, I don't know if you agree with that, but like no uh clearly like people want to go long stable coins. Like the the left curve was like circle is synonymous with stable coins. USDC long the [ __ ] out of it and that's like the market express. Like is that going to hold TBD? Um, but like clearly this is like I don't know if it's the same set of investors that is like punting the NA like pushing the NAV of these vehicles higher that is

going to if you have more real crypto businesses that IPO like a Fireblocks or Anchorage or chain analysis do you think that it's the same type of investors or is the investor that is like going along soul strategies in some of these vehicles like just pure speculators? I'm trying to understand like in from your perspective, how much demand is there really for more crypto businesses, not crypto trades, because I think there's a lot of like sophisticated hedge funds that are, you know, doing these trades and like are cleaning up the Jane Streets of the world. I'm trying to understand how much is it retail, is it institutional? So, before I answer that, let me just say that both uh myself and uh Spicy Rob over there mid-curved circle. Um we were we were

straight up like, "No, but it's a money market fund, you know, whatever." whatever. So, we need to curved it. Uh, that's absolutely the case. Um, and either for now, you might you might be in a year's time be very correct. So, that's right. Uh, either we're wrong or the markets are wrong. I don't know which one is likelier, but uh, we'll see. As far as what you're saying, um, as venture funds, and I think it's the same for Rob, RLPs are looking for a particular type of product. And in particular, it's kind of interesting because to the private conversation, they dislike trades and they don't give you tons of benefit for a trade. you might do a trade or might do an investment that they feel like it's a it was a gamble or it was a trade and they're not actually giving you that uh

for the next fund in terms of credit. So, it's kind of funny because they don't give you credit or as much. Obviously, if you return 100x DPI forever more doesn't doesn't really matter what what happens. Um but if you have a trade, you got a lot less credit than if you have a consistent portfolio of hits because they're re-underwriting every new fund. And what they want to know is that there's method to the madness. and these large LPS. We have sovereign wealth funds. We have foundations. We have the largest, you know, highest biggest uh uh LPS. And what they're looking for is I don't understand this market. I want exposure to this market. I know the market plays in two ways. It plays in equity and placing tokens. I'm going to give it to the professionals. They can actually decide which one is the best or both or

at what times and how to actually manage liquidity and manage the portfolio and help these companies get to successful outcome. And what they want is professional managers to kind of like come into the space and and help them through it. And if they wanted exposure to just liquids, there's those products. And if they wanted a hedge fund that is just taking advantage of the trades and is doing some kind of high frequency trading or just arbitrage then those also exist. But our clients the LPs um you know two sets of clients. You have the LPs and you have the the founders. But on the LP side our clients really want this product which is um professional view over the over the space in a repeatable process that works over multiple funds so they can continue backing you over time and not really trades.

Yeah. Santi, I'll I'll answer your part of your question kind of more directly too, which was just like who's trading these things. And you can see in the filings uh you know as they come out not all of them because they haven't been out long enough like who's actually buying these things and it's not the same investors that you would expect to see or you see in strategy or you see in Coinbase or you see in um I'm sure you'll see in circle you know you it's not the T-RO it's you know not the black rocks it's you know people like you're talking about who are you know uh doing some sort of like you know arbitrage trade or they're maybe you know long and short one area or the other that they're trying to figure out you know how to make money on on this product, but

they're not people who have like fundamental view on, you know, where this asset is going over the long run. I think you're probably seeing some of that in maybe like a soul strategies because there are people who don't want to touch spot and, you know, want to be long soul. Um, but like the Bitcoin vehicles, I I don't think you're seeing any of that. It's entirely people um that are, you know, kind of long one, short the other and that are trying to figure out ways to ek out some sort of, you know, kind of arbitrage trade. This episode is brought to you by Scale, the next evolution in layer 1 blockchains. With a gas-free, invisible user experience, instant finality, and robust security, Scale allows for limitless scalability, and has already saved its $50 million users over 11 billion in gas fees. scales, high

throughput, zero transaction costs, and powerful web3 infrastructure make it the ideal platform for gaming, AI, and other high- throughput apps. To explore the gas-free ecosystem, visit scale.space/ecosystem and follow their journey on X at scale network. That's scale spelled with a K. Thanks to Scale for making today's episode possible. I wanted to take a moment to tell you about Marinade, the platform connecting Salana holders with the best staking rates on Salana. Marinade unlocks a high-performance staking delegation platform that brings billions in liquidity and security to the Salana market with solutions for both individual traders and global

institutions from both DeFi and traditional finance. Use Marinade to earn rewards on your Salana treasuries and holdings. Optimize your Salana staking with Marinade's bestin-market features, including user downside protection through protected staking rewards and optimized delegation via Marinad's automated auction marketplace. To learn more about Marinade, visit marinade.inance or click the link in the show notes. As always, investments in blockchain technology involve risk, terms, and conditions apply.

How does Hyperlid and the success of Hyperlid impact the venture strategy? I mean, I don't know if it does, right? Um, Hyperlquid's incredible. Um, well, here maybe I'll I'll add context to that, which is I think you'll end up seeing even outside of crypto, right? You'll see more and more successful with I mean, Diego, you and I talked about this in Dubai. It's like you can kind you can just get a startup off the ground now with like very small amounts of capital, very low amount of human capitals, you know, financial capital and human capital. You can get like these three person companies live that can get to, you know, tens of millions, hundreds of millions in revenue. How does that impact the venture landscape?

And I use Hyperlid because I mean I know I don't know if you guys tried to throw money at Hyperlid. Most of the venture firms I've talked to have tried to convince Jeff at one point or another to take a term sheet and he said no. and they're one of the biggest success stories, arguably the biggest success story of the of the cycle. How so with that context, how do you guys think about it? Yeah, maybe I'll I'll take a a a certain view here that I think is is also helpful, which is that if you look at what's happening in AI, that is also true, right? So like what is happening with cursor, what is happening with AI tooling, the amount of uh companies that are going from, you know, zero to 10 million of ARR with like somebody vibe coding and like, you know, maybe one or

two people is just it's incredible right now. I don't think we've ever seen anything like it, right? And so the same thing is happening in Web 2 VC that has happened in Web 3 VC, which has always been true in Web 3 VC, is it's it's capital light. It's also light in terms of the amount of, you know, people that you need to build a really good protocol. And that kind of convergence has I think what what's really incentivized people to do is go earlier stage, right? And so more and more people are fighting for seed and preede checks. And uh that's also meant that seed and preceding have gotten very expensive and on a relative basis and a historical basis. And that's probably the biggest change we've seen and we've seen a lot less people to your question earlier yall know be willing to um you

know fund people at the you know BcD stage. Um, but I also think that's means that there's opportunity there because there's going to continue to be capital needs for companies at that stage who want to accelerate. And uh, this I think this like getting really early if you're really big fund, you know, the math doesn't really make any sense. You know, you can do a $1 million check on an $800 million fund, but you you know, your best result in that thing is probably nowhere near returning that fund. And the math doesn't work and the time spent doesn't make sense. And so it it's it's incentivized people to do this thing that I think is actually somewhat illogical to the way like venture math actually works. Also, I would say there's you have to update the models.

There's another decor in crypto and one that rose extremely fast at that. And so that actually is extremely positive to continue investing in these companies. And sure, in this particular one, there wasn't as many venture dollars as the venture community would have liked, but that does mean that you're going to change your strategy. you're going to go earlier, going to have better relationships, and you're going to see whenever you're underwriting your models, you know what the outcomes are um are higher now. You know, your your $10 billion outcome was very unlikely, and now it's a little bit more likely. The same thing that Rob is saying in uh in in AI, one of the things that is changing is that you can't invest in a seed round at a billion dollar valuation now because there's a hundred billion dollar outcomes. And before there was no

credible path to hundred billion dollar outcomes because there was essentially no hundred billion dollar companies even market cap out there publicly traded really. Uh there were very few of them. There was like five or 10 um 10 years ago. And so now you now you have them and you have lots of them and you have the the growth and traction revenue that actually justifies it. And so if the pie if the if the the prize becomes much higher then the entry valuation that's an interesting insight is that this is going to end up this dynamic will push seed stage early stage valuations much higher. That's interesting. What do you guys think about I mean Santi and I were talking about this on the roundup the pumpf fund uh fund raise. I'd be curious to I don't know if either of you guys participated in that or if you're

investors in pump but uh billion dollar rumored raise at a four billion valuation give give me your thoughts on the deal. I think it's an interesting fundraising mechanism. Um my impression of it and the way that it works is that retail actually gets an advantage over institutions and that institutions don't really get a big advantage over retail in this particular one. They kind of came in at the they come in at same price. Um and everybody is on equal footing here and everything if I recall correctly all the unlocks are are basically the same for everyone and they they barely explain this how how do they structure it like this? Um so institutions come in you can buy I believe from them directly but you buy this in valuation that they're going to be selling it. I think the structure that they have is they went to all the

exchanges or they went to many exchanges like by bid uh etc and pump. Fun and they can sell directly to the market to both retail and institutions um directly there on the exchange and you can buy and then I think the original plan was there was going to be a little bit of an auction at certain increasing valuations but then everybody else uh every day there's going to be an auction um and um and you can buy at whatever clearing price. So there's an equal footing of institutions of the original idea. I I believe the implementation is actually going to be the same. We'll see. Um, but there's an equal footing here that hasn't existed in the past. One of the criticisms of, by the way, the founders of Pot fund was that in many cases, many coins are VC coins. Why? Because Rob and

I have advantages of investing at seed and then a series A and series B pre TGE, right? And so when it comes to market, we already have our positions and hopefully our blended um valuation is lower than the valuation that actually the markets um give it whenever it comes public. in here in lies uh the venture investor and holding for the long term and helping the teams that is that is the value right but then the criticism on the other side is that this is not publicly accessible to every retail investment investor and so they don't have the advantage of u investing in the private markets and so they lose out on the majority of the appreciation because when UTG you already have the majority of the multiple that is the potential criticism and part of the reason why that team is consistently railed against uh what they call quote

unquote PC coins and so it's kind of interesting that they do a mechanism of fundraising that is in their view um more um more fair uh to retail and that is um equivalent for investors. Robert, are we a fan? Yeah, I listen I think it makes sense and I'm not I guess I wasn't aware of all the things that Diego said. I think as I understood it was basically just one big ICO at a billion. I wasn't clear that there was like an auction happening. The mechanism may have changed. Um you know when I was talking to the team these mechanisms were the ones they were talking to and you see in the team the passion of equalizing the playing field. I think it b borders on nihilism of crypto in many cases. Um but uh but there's there's this there's attempt at kind of like

having an equal footing in an equal playing field between retailing institutions that has been legit. And I think whether there's an auction or not that the point is the same which is that if it's a it's a $1 billion ICO uh and as I understand it like you something like you know 80% of that is actually meant to go to retail. And so like in a lot of the institutions who you know put out allocation requests actually got like jammed down. And so like if that's the case, right, it's it's the same thing which is that they want everybody to be on equal footing. They want a lot of retail exposure. They want people um to and everybody's unlocked uh as I understand it. Everyone is participating in this ICO. And so like if if that's broadly true at $4 billion for how much revenue they've done, it doesn't seem

crazy to me, especially on you know the the crazy multiples that you know crypto generally trades on. And so I you know I I I I am not investing personally but you know I think that um they've clearly done a or they've offered a business that people have wanted and people have been insatiable in using it and you know continuing to to to just trade on top of it and to you know launch new tokens and that service is valuable and it's probably worth the $4 billion if not more considering the way people have used it. So I I think it's it's totally fine to be honest. Yeah. Well, let me just say that I think I've discussed this on stage in an Oxford style debate, but I I still maintain that meme coins

are net negative for crypto as an overall. I think all of the attempts at saying that they actually have a positive impact um just, you know, fail any kind of rationality. Um the testing, the infrastructure, the obviously these markets are free and you can do everything and so you could always do memecoins and that's nothing that we can do to stop them and that is part of the part of the bargain of having a decentralized system. But I just don't see that they have utility. Imagine that you have a funnel of people into crypto in which the first thing you do is punch them in the face. You just like you get a new user, you punch them in the face and that's their first experience. That's hasn't that always been the case though. Uh it has not to this negative Eevee. I think memecoins are even more

negative Eevee. I think when you were investing in whatever was the ICO governance tokens, I guess. Yeah. But even those it's kind of like you can say that they're memecoins and then we're back to the same thing. Those were also bad. And I would agree that those are also bad. But legitimately what I'm saying something start as meme coins and then they I guess gravitate towards something else. But uh but I guess uh I think in the purest form memecoins do not have any goal whatsoever in it purest form. Yeah. In its pure form which is what they trade on. My impression is that there's no no attempt at ever upgrading a memecoin into something that actually has any kind of underlying governance mechanism or or any kind of value capture in the future.

What is worse include like all of the AI tokens? Well, that's like where do you draw a line like what is worse? Something that does not pretend to be anything else other than uh you know fartcoin uh and and you know people are 100% aware that it's just that or things that sell themselves and paint a grand vision but have no substance behind them and and and um you know I'm just kind of curious. So the the the worst are the scams are the people that promise you one thing that it will have value that it will have governance rights that it has some amount of value acrruel and then obviously does not have it and it's a scam and there's a rugpool. Obviously that's the that's criminal, right?

That's that's that's just outright way worse. And I do think memecoins in their interation are pure in the sense that there's no attempt at telling them or telling people they're a gambling instrument. There's no attempt at telling that this is has like long-term value and these are trading wars and you're just trying to get out before the the next person. So in the in the ranking they definitely rank above in terms of clarity you're telling what people that does not mean that they're net positive. They're still net negative. Both of those things are below the line of uh of EV. They have negative EV for the for the user to have negative EV for the space itself. I wanted to take a moment to tell you about Focal by Falcon X. The AI powered insights engine built for institutional crypto. With Focal you can create charts and generate answers to

questions in seconds. used by over 80 funds with more than $10 billion in assets under management. You'll feel like you have a team of analysts at your fingertips. Ask focal questions like, "What's causing the uptick in liquidations? How much Bitcoin did Michael Sailor buy last year? And what is crypto's correlation to traditional markets?" Focal pulls data from trusted sources like Coin Gecko, Token Terminal, and the tie with enterprisegrade privacy and security. Learn more at askvocal.com or check the link in the show notes.

Thanks to Vocal for making today's episode possible. Hey everyone, earlier in today's episode, I mentioned Petra, a top non-custodial wallet developed by Aptos Labs. They just launched Earn, a new feature to access DeFi with just one click. Earn lets non- US users deposit USDT directly into Aries Markets lending pools to gain interest and rewards and manage it all directly from the Petra wallet. Petraearn was designed to make DeFi more accessible for everyone. You can manage your balance, claim rewards, and deposit directly from the app. This is of course not financial advice.

Participating in DeFi carries risks. To learn more, visit petra.app/earn app/earn or by hitting the link in the description of today's episode. Ever wish you could access cash without selling your Bitcoin? Leen, the global leader in Bitcoin backed lending, makes that possible. Since 2018, they've issued over $9 billion in loans, and not a single Satoshi of client funds has ever been lost. Here's what makes a letin loan different. With custody loans, collateral is not lent out to generate interest. No credit checks, funds in less than 12 hours, and no monthly payments. Repay whenever you want with zero penalties. And they don't just talk security, they prove it.

Leedin offers proof of reserves reports verified by a top accounting firm every 6 months. Leden is 100% focused on doing one thing better than anyone else. Giving Bitcoin holders a secure, transparent way to unlock liquidity without selling. Click the link in the show notes to find out more. As always, investments in blockchain technology involve risk terms and conditions apply. Let's talk about the positive. Like what do you I mean you talked about the stable coin trade being over. What is the most exciting thing in crypto? Where are you guys spending most amount of time and where do you see the most amount of opportunities? So I think you know the other one that is um still to come to fruition but will probably have

a stable coin like moment is obviously we've been talking about RWA for a long time. I hate the term RWAs because you know real world assets. What other world do we have in the real world? But sla generally tokenization. And in fact, we would all make the claim that civil coins are the success of tokenization. They're tokenizing the US dollar. And so they're an instantiation of the generalized tokenization and a great one at that. And in fact, if you think about it, there's very little difference between tokenizing a dollar in terms of infrastructure and architecture and you know all the routers than they're tokenizing other things. And so the same structure actually works. the same wallets, the same layer ones, the same principles and architectures and APIs, they kind of work. And so we're actually making progress on stable coins, making prog progress on the generalized

tokenization. Overall, we haven't quite seen that happen. The two things that I'm spending a lot of time on are, you know, two things. People call it internet capital markets, but I'm calling it also onchain IPOs. I do think that we've had a big problem with IPOs. Coming back to our prior conversation, what if there was a way for us to not lower the bar of quality but just lower the bar of revenue for a company to go public and there was something intermediate between, you know, um, a pink slip or an OTC trade and an actual NASDAQ listing. What if there was something in between? Something that you could do on chain, something that would help you with the compliance. You'd have two years of audited financials and you can list your $50 million run rate company. This could be like list being able to list um, okay, maybe Anchorage

is a bad example. Yeah, like let's use Anchorage. Instead of Anchorage waiting to go public on NASDAQ or NIS, Anchorage could go public on on chain directly on chain. And by the way, wouldn't it be awesome if by doing so this is this is the future. That is that is a very exciting idea. And then and by the way, these do not have to be one or the other. I think it's um I think it's Robert Lesner that says um these these things can exist in a superp position, right? could have a token on chain and listed token and basically they exist in a superp position where they have both thrice and you can interchange for one another and I think the cooler version of the world is where you start by going onchain when you have low revenue and then that allows you to upgrade into

NASDAQ on a one-click button. Imagine that. Imagine you can one click after a few years in a onchain um traded um token um and then all of a sudden you're in the NASDAQ because you've already reached whatever threshold and you already have historical views of the of the business. That would be really cool. I think that's really fun because it solves two problems. it. I think in my mind, back to memecoins, maybe the speculative activity and all the energy there goes to something that is way more productive, which is real companies in crypto building real businesses and now you can have whatever AMC like speculative activity on them but on chain and with real businesses behind. That would be really cool.

Instead of meme coins, we'd be trading like crypto low market cap companies. That'd be much much much more productive. But it also solves the problem that we currently are talking about, which is can you IPO a company that has under $500 million of run rate? Why why don't we just solve our own problem? That would be amazing. Yeah. Yeah. I I hate when Diego and I agree, but I we we definitely both agree about like broader tokenization. That's That is not the spicy rub I know. Uh I I will say that um I don't think the stable coin trade is over. I think like stable coin infrade is over, but there is so much more to do in terms of getting stable coins in people's hands, making them usable, figuring out ways to add value to that end consumer uh with

stable coin related finance that there is actually a lot more and a lot more things that we're interested in investing in in around that space. Am I am I likely to invest in the you know uh fourth chain that tether uh you know backed? No, I'm unlikely to do that. But am I likely to invest in things that are using stable coins as a core piece of providing value to you know an end consumer like absolutely and we're still by the way right now the value capture in stable coins is very much an inverted pyramid or no it's it's a pyramid and it's about to be an inverted pyramid.

It's a pyramid because the issuers make all the money then you have the routers and the infrastructure providers that make some of the money and then you have the apps that make no money and eventually that has to invert. the issuers get squeezed. The middle layers that add value continue to have some value capture. Then the apps make all the money and and right now we haven't I mean there's there's apps out there. They're now actually like some of them having very exciting markups equity companies you know the global VMO etc. They're taking advantage of the fact that stable coins actually give you something which we have a shot at the first truly global fintech. Fintexs have generally not been global. Revolute doesn't exist in the United States. The American companies don't exist in Europe. And part of the reason is because if you want to be in 150

countries, you have to go to 150 countries. And stable coins invert the onus of integration. You already have a shelling point, an integration point for all 150 countries. And in fact, we've all seen these pitches. You have in every single one of these countries some local on-ramp actually doing the FX and local exotic to whatever USDC or USDT trading pair and then giving you that hook. And so you can truly have a global fintech that integrates with one piece of technology and just operates in all the countries from day one. And I think that's truly exciting as a venture investing. So I totally agree with Rob. I want to disagree on principle because um it's way spicier when I disagree with Rob, but but I agree with this. The apps are very exciting in the next wave.

Go ahead, Rob. Well, I was gonna say it sounds like a pitch for for I I heard invert three times in there and so you paid them to do that, Sante. I did not. They they passed on the round. That's cool. Uh but uh that's cool. You know, not everyone gets it immediately. Um I will I will say um like you go long stable coin issuers I think that's like a tough business to be in like uh you know but on this point I go back to public companies like would you rather like like user aggregation theory I think will continue to be a thing like you c if you own the c and customer relationship you will dictate terms and you should be capturing more value and exchanges have proved that in crypto anyone that disagrees I think just

doesn't really understand how the world works. Um so like would you rather invest in a startup that is trying to build distribution or would you rather buy something that already has distribution i.e. Robin Hood and and and just you you take the view that these guys if they're sharp if they're founder le organizations like Vlad and the Collison brothers, they're going to immediately say, "Holy [ __ ] I can leverage this thing to go border like basically just cut costs." And and and so Robin Hood's like not not necessarily cheap in the public markets, but it's growing faster. And you could say, you know, the difference between Robin Hood and Western Union, a Western Union is not founderled organization. It's a guy that's getting paid $10 million a year, sit on his chair and has his cronies on the board and has no incentive to

innovate and just wants to reap 10 million a year versus Robin Hood and it's a very different type of organization. Uh I know you guys are venture investors, but like I don't know like how do you think about like this idea of distribution? Like would you rather because crypto I think has struggled with like getting into the mainstream like it's really hard to convince normal users to use this stuff. It's like tough in places like Latin America. Like people I think oversimplify the stable point thesis cuz there's very few people I think that understand payments really well. Rob, we keep referencing in the pod. This is why we are having this with you. But I'm curious from your standpoint like where is the stable coin like where are the things that you see the most amount of disruption happening for like company like large companies

because I think people just have this grand statement say stable coins are going to rule the world but that's not necessarily like true on um so anyways a lot there but I'm just kind of curious. Yeah. So I think you said two things and and I agree with both of them. So the first is you know I wrote an article um last year about you know kind of where like value acral sits and like the stable coin payment stack and I talked specifically about like consumer fintex. So you know these brand new fintexs that were starting that were saying okay well we have you know stable coins on the back end. We have non-custodial wallet we have you know card issued by rain. like these things are are very easy to put together today because like all of the infrastructure providers you can piece them together pretty quickly and

then you're really just in a knife fight to go and like win local distribution in geographies that are not monolithic and that are hard to compete in. And so um I think it is really really hard to start a new call it consumer fintech with the pitch being hey I have stable coins right and I think that's especially true because you already have people who have distribution like a revolute or like a you know a Monza which is back from the dead or you know like a an N26 or you know a bunch of others right a new bank for instance who are going to probably just rip out some of their infrastructure or going to add a non-custodial wallet on top of that or as a another product which then has the same benefits. And so I would much

rather find something that has distribution and rip out the current existing infrastructure and sell them something which I know Santi is is the thesis that that you have and and I think it's the right one because it's um much easier to put new technology in front of a captive user base than it is to build a new consumer fintech and in a market that is really all about just distribution. there's no there everyone kind of has the same you know the same tact there's no there's no mo there so I think that's number one I think to your second question which is like where we see it affecting like the large companies you know we've seen things like you know it being used for you know payouts for employees and for um contractors and that being you know really popular um I think maybe one area

that we um haven't seen pick up yet but I've started to see some evidence of is like crossber treasury management so like the treasuries at these like large fortune 1000 thousands like it's a disaster trying to move money across their subsidiaries and you know across maybe their suppliers um and you know you know depending on the corridor it might take seven days for you know something to settle it's really capital inefficient um and you know things get lost right I was I was talking to somebody this week at at money 2020 who was saying I was trying to move $2 million to an African subsidiary to just you know pay a a supplier and you know I'm you know it's a really big company a known company And I you use JP Morgan and JP Morgan lost my $2 million for 14

days and like it just a it's it's a company that is doing this all the time and that type of thing continues to happen. And so if you have stable coins and that people can actually use that are in an easy way to manage them. That's not going to happen. It is on a public ledger you know what where it sits. You are have uh the ability to track it really quickly and to go past the correspondent banking system. But beyond that, a lot of those guys, they they want yield. They want other products within their treasury and they want to be able to do things like instantaneous swapping with like B, right? They want to be able to do that with, you know, other type of yield bearing products and they can't do any of that. It's they if they um in their their their current treasuries and so I

think that's probably an area we'll start to see people um or we start to see like Fortune 100s and Fortune, you know, 1000s start to actually adopt stable coins and tokenized assets broadly. I've got I've got some breaking news to share. Shoot. What is it? Yo, we got a we got a nice little Twitter post. X is joining forces with Poly Market as the official prediction market partner. Any any thoughts on this one? Nice. I'll I'll chime in as a a Poly Market shareholder. uh that um this is um you know I think pretty excited but but I think more more broadly like they've just done an incredible job uh with being in like the mind share of uh you know the election but even outside of the election with things like you know

the superconductor chip and when Sam Alman was fired and um you know people were speculating on whether or not he was um like whether or not he was likely to come back like they've been in the forefront of just the conversation and Twitter is at the forefront of the conversation And bringing those two things together is, you know, a no-brainer in my mind. Yeah. I mean, I I remember meeting Shane way back in the day. I was a pairy and we led or we were uh co-invested with uh what is it Nick Tamayenos fund one confirmation. Y we were and I think I think Parfy is the largest holder now at this point. Um and Shane was one of those guys was like listen there is a possibility to um change how information gets surfaced.

And mind you, this is coming from a point where like Augur didn't go anywhere. And it's I think it's a classic example of like you ought to revisit ideas that have been tried before at a point where the infrastructure was not ready. Going back to stable coins, Augur like you cannot have a prediction market when you have when you're not settling with stable coins. It just introduces so much noise into the equation. And you could have argued other reasons why the Augur like team wasn't like, you know, maybe the best one. They weren't like fully allin. Um, and and you could have just like passed immediately on poly market because you said the prediction market is never going to go anywhere. But I really respect the team because it's one of those like super grand visions and ideas of how prediction markets are like really fascinating. I would encourage

anyone to just go read about like just the the potential to really transform media and how like informations get surfaced. And I mean it's it's really amazing what they've done to be honest. It's like one of the few companies in crypto that it's from the bottom up like has like surfaced into the mainstream has like captured a lot of attention and yeah it's really cool to do that. I I wonder if the next step is like for Twitter to like get more and more into like stable coins and payments like natively because they just rolled out chat right so they if you roll out chat like the next thing that inevitably comes is the ability to send payments to someone. So yeah. What does this look like on the on the on the timeline? like is it like through their they don't have it yet.

It's not it's not live yet. But you gota have you guys seen what they're doing with sports. So you can actually like they have these separate sections for like the NBA and NFL games where you can like watch the games inside of your app with different licensing deals that they have and then you can comment on the games and you can talk and I think I've heard they're going to roll out betting inside of the app too. Um you got to imagine you'll be able to just like bet like will will Elon stay with Trump through June? Boom. prediction markets embedded inside. So, um, all right, switching gears to another company that has done a good job of penetrating mainstream, but is also a little controversial is Ripple. Um, Rob, you guys were, I think, shareholders of Hidden Road, which they sold to. That's right. I would love to

hear your guys' take on the Ripple strategy and if you think that they can build a dominant business just on the back of this like weird strategy of accumulating a massive treasury and maybe buying their way into a good business. I would love to hear Can I uh can I just interject and say that I hate uh uh talking about Rob's portfolio? Uh I just wanted to make sure that that's clear that this should not be a trend. Uh the only thing worse is too many my portfolio companies that are doing well. I'm sorry. Dude, you could just start copying uh Dragonflyy's investments like that.

Maybe it's always a possibility, D. I promise. Do you like I'm not having fun anymore. Um, no. So, so listen, I I think to that point, Yano, uh, I think absolutely, right? Like I I think there is no doubt that if you have a lot of capital that you can buy yourself into a, you know, an actual business, right? And like it's hard. It's not easy. You have to be able to, you know, pick the right businesses. You have to be able to integrate them. You have to have a good vision and and understand where distribution comes from and value acral comes from. But you can absolutely do it. And, you know, I think if you um if you talk to Brad today, like they're really focused on RLUSD.

They want to become a competitor in the stable coin space. Um, Hidden Road is a a very, I think, savvy buy for them in terms of wanting to, you know, distribute RLUSD. It's a business that is very capital um intensive that you have to it requires a lot of collateral, requires a lot of debt capital. You end up actually distributing a lot to a lot of different counterparties. And so I expect we'll see billions of dollars of new RLUSD uh issued just through Hidden Road. Now, you know, add in, you know, things like, you know, they bought Medicico. I I know that they're looking at a lot of different type of businesses right now. like I expect that they'll be able to distribute their stable coin through those businesses and that all of a sudden we'll be talking about them as

you know a major player as a top three to four stable coin issuer potentially you know within the relatively near term. You think Ripple could be you think Ripple in the relatively near term would be a top three stable coin issuer. I think uh that is their goal. I think it is certainly possible if they execute really well. I think they'll be a top five stable coin issuer probably almost certainly uh in the next you know call it 24 to 36 months if they are able to execute the things that they are saying that they are doing the transactions that they've um uh that that they've executed so far and you know other ones that you know I think they they'll probably continue to be um pretty active. I think it's very possible that they essentially buy themselves into

that business and and I'm a believer and Diego might disagree with this and Santi now you might as well but I'm a believer there will probably be like five to seven stable coin issuers that actually matter. Um I don't think it'll be that much less than that. I don't think it'll be two like it is today but I also don't think it'll be a thousand. Um and so I I expect that they will be one of those with that one answer. Rob just lost his uh spicy Rob moniker. Um it was too politically politically correct. I'm sorry, Rob. All right, go for it, Diego. Hit us. I mean, in general, look, it is what it is. I I I think they have basically no chance at getting a stable coin um to be successful. It's extremely hard to get in.

Um there's anywhere from obviously like massive distribution advantages already. Massive balance sheets. I mean, look at this IPO, right? I think just crossed $20 billion market cap. Circle did just now, right? And so, I mean, the amount of money that they're against, not even Ripple has that much money. Um and They do. They got like hundred billion. I was going to say they have to sell it. They have to sell it. The more they start selling it, it's different, right? They have to sell it. Once they start selling those amounts to market, do they have to sell it or could they like do creative structures behind it? They can do creative structures. At the end of the day, it's just like it's sell pressure. Oh, this is crazy. 110. No, no. I I think though just Jeff Dorman is crashing out right now hard. Crashing.

Oh my god. Just imagine staring at that all day be like [ __ ] I just s on your one question about like can they do create structures with the XRP? Um I think there's there are ways to do it. Um I think it is tough. I think you probably can't use it as consideration. You have to somehow turn it into cash beforehand for like tax reasons. Um but you know they their whole business for the last like you know call it like five years has been actually just selling XRP. they have a defined amount that they can sell every quarter and they they put out a you know kind of a quarterly report that says how much we actually sold. Um and they can continue to do that and that the price that XRP is and you know it's continued to go up like they can raise a lot of

capital that way but there's no reason they shouldn't be able to like borrow against it. there's no reason that they shouldn't be able to do like other things that provide cash and plus they have equity that they've actually continued to use um and some of the transactions that they're doing and you know has a secondary market that is in the billions of dollars and so I I I don't know why they can't continue to buy things and if they do a good job you know fix that distribution so yeah I mean I agree with that but that there's a big hypothesis if they continue doing a good job they need to integrate and I think some of the acquisitions already have u you Yeah.

Um Rob Robin do yoga. What is the biggest thing that you guys disagree on? Do we disagree on anything? Well, we just disagree on Yeah. Well, I I think we agree more than we disagree. You are now a stockholder. So, you're no longer an an objective uh uh you're a very I don't own any I don't own any Ripple stock, just to be clear. Um what do we disagree on? We so I I think Diego and I have a um a lot of things that we agree on. I think we've been um among the most active next stable coin investors. I think we've been you know among the most active in terms of thinking a lot about like fintech u you know crypto crossover. I think where we probably are a little

more constructive than Diego and he and he might uh disagree here as you know he's like very focused on you know like regulated assets on chain which I I continue to think is is going to happen as well but I think there will continue to be a really robust you know non-custodial non KYC financial system that exists on on chain as well. I think we're really constructive around that. I think there is going to be you know more privacy in the future uh than there is today. I think we've already seen a bit of a push back on, you know, broad KYC and they're not being like a central repository and, you know, you have these points of failure now where every single company, you know, has to, you know, become basically like an IT company and figure out how to protect, you know, you

know, PII. Um, and so I think we'll actually see um uh a little bit of of deregulation in terms of DeFi um in a lot of parts of the world. And so I think we're we're we're pretty constructive on on things like that. Um, and I I don't think that um, you know, it's necessarily true that like all of crypto is going to become like, you know, a like web 2.5 like regulated um, you know, ecosystem that Satoshi would roll over in his grave and and and just completely hate these agreements. You just have to go to our portfolios and see what what is uh, what who's per who's uh, performing better right now, Dragonfly or Han? We don't

know each other's performances. Uh but uh let's do it in a zero knowledge way, right? Do it in a zero. Also, it's a kind of a difficult it is not to like dwell too much into this. Maybe we can start off in the next segment that we do. Uh because we should have you guys on more regularly is the valuation methodologies are just different. It's it's it's actually really hard like how do you like um I wonder how if we have more equity positions than Dragonfly does. Um, I feel I feel like we probably do. Um, overall, you're saying strictly equity that never going to have a token or just That's right. That's right.

Yeah, I think I would say so. Um, also our funds are differently structured. We have a growth fund which is a billion dollar growth stage fund acceleration fund. That's pretty big. So, that just meaningfully makes it portfolio very different. But clearly, Rob and I have disagreements. Uh, but they're usually investment disagreements. you know, there's many investments that we've uh obviously both of our funds have looked at it and we passed on or vice versa um that um that the other one ended up investing in. So that's that definitely like you can compose it as these agreements. But it's actually like look of all the venture investors, Rob is actually one of the ones that I uh that I very much prefer debating and investing with. Um I think part of the reason why I was excited to to join in is because I actually love teasing Rob

and being teased by Rob and just uh we have great rapport and uh I do think we have co-investments together that are pretty great. Um, so we could also talk about our shared portfolio, not just the ones that are just on Rob's portfolio. That would be my preference. Hey, do one question. Is the the fact that you have more equity investments intentional or is that just by virtue of your fund size? No. You haven't found a billion dollars to deploy on like tok like token issuers or like like companies that are going to you you could you could it's really about flexibility at the end of the day. I think different phases of crypto will require different um decisions, right? These these cycles have not all been the same. There's been cycles in which equity has outperformed.

There's been cycles in which tokens outperformed. And overall, as you were actually mentioning, Bitcoin has outperformed basically everybody over the very long term. And so there's that there's different uh different takes here. Also remember that the products that we're selling are very are very different. They're specific products. They're they're venture products. They have a specific timeline. They have a specific set of investors uh and expectations. This is not a one fund type of investment. It's a multiund type of commitment from some of these very large southern world funds. Um and so the thing that you're you're selling is a is a very different product which then again uh also means composition of the fund is is different. I think if somebody wanted just a liquid portfolio and not a hybrid portfolio, there would be vehicles for that. Yeah, Jens, good chat. Yeah, this is fun. Uh we should

bring out uh Spicy Rob more often. Well, Diego, here's the problem with that nickname. If you agree with Rob on everything, you're spicy DO. So that's the problem, my friend. I like that. I like that. We should just rate each other's stakes. Whenever Rob starts being too political, I should have a button that just, you know, rings like you're being too politically correct here, you know, to be able to press. So reject it. Rob is just talking about like, by the way, by the way, not to make a permissionless plug, which I never do plugs. Jano always does a plug. I got it again. I forget. Yeah. I'm just gonna say, you know, are you guys going to be a permissionless? Yes, I will be there. Rob. So I'm actually not because uh I'm speaking at now we should have the money and no no so so the specific reason is I

agreed to speak at Goldman's digital asset summit uh many many months ago and I started my career at Goldman in London. Yeah. Yeah. The one in London and it's the same exact week. So I'm actually leaving New York. Spiciest tank we've had on this. We put it we put it in Brooklyn for you Rob. It's like 7 minute walk from your house. I probably could walk there and so I'm actually I'm very bummed out. I I'm going to give h my my apartment so he can walk there because I know he's speaking and coming from Seattle. Well, Rob, we might have to have his on and he might there's a high prob. I mean, there's a risk that he might replacement risk in. You went you went from spicy Rob to uninvited Rob. Uninvited.

You don't you don't want the downgrade, right? You got to keep me up. Come on. Finally, Spicy Rob comes back. Okay. I see Rob gets fired after that comment. I was going to say I don't want to get in the mix of that. But anyways, J, thanks for coming on. We'll have to have you on again. Appreciate the time. Yeah, be well. Thanks, guys. [Music]