Meet the Blockchain VC, Pt. 8

Transcript

thank you very much deila for this event which we organize together it's always a pleasure also very welcome to everyone who's joining um uh our um our event we will have an event which lasts all together 60 Minutes pretty hard stop at the end because various of us have other commitments so we keep the introduction pretty short I would say I welcome here Tess how from Tess Ventures and I welcome Maxim Booky from Draper Ventures um I suggest both of you maybe in two three phrases what you are doing and why you are here and why you are in

the space Maybe test you can quickly start and then Maxim you can say a few words just just as a short introduction I think it's better if you do it then I do it excellent happy to so um I'm founder of test Ventures we're team of 10 we are based in Silicon Valley um Palo Alto California and we've been in blockchain for almost 10 years uh our exposure to it is uh the time that I spent during at Stanford um so uh Robin Hood uh they are the trip crypto training app they basically you know uh had very good

insights into what the future of money would look like so at that time um Bitcoin to us was also something that was already very um important um and from there we invested and also you know participated in a lot of the early first wave when everything was doing their you know initial coin offering and then iOS so uh we are very fortunate from then till now we are investors in many different categories in the web3 ecosystem such as inan mocha yatu he's uh very amazing uh we've known him since uh very early we're investor in Saga XYZ which recently we you know they they listed on binance um in ather in deepin we've invested in since you know early

even you know before they were ather um and then uh in a lot of web 3 AI companies such as minimi doai um me protocol that's the future of web 3 and defi as well um and of course a lot of uh uh apos um monod um zero gravity uh a lot of different categories because we think the C the whole ecos system uh is something that we actively as Founders investing in Founders want to participate in because then we can cross-pollinate uh our portfolio to help each other partner or build on top of each other so that's one of our strategy um and we are sector agnostic and Stage agnostic so we do evest across many different stages um and we also um you

know uh do you know like to invest um uh a good amount to have a good you know investment on the cap table uh after that we help very actively because everyone on the team uh is our Builders and operators thank you thank you very much tase we will come for sure with some questions more detailed questions to you to your activity and uh maybe Maxim a few words to you and to also trade prentes absolutely uh hi everyone happy to be here um I was a Trader in Wall Street and essentially saw crypto in uh 2017 kind of coming everywhere around

the trading floor um and been dedicating my career uh to it since then um at Draper Associates our general partner and founder is Tim Draper he's been a kind of a legendary Silicon Valley investor uh since the early 90s um you mentioned Robin Hood he was like first backer of Robin Hood and a lot of the big tech companies that power our world today and it was one of those really big ventor capitalist to see uh Bitcoin and to make a strong bet in it very early so since uh 2010 we've been active investors uh in the crypto space um well it's changed a lot since then um dper Associates is uh the latest fund is $2 200 million we invest uh very early preed seed so check size comes from 500k

to $2 million and 30% of that goes to crypto um and blockchain in general um I think we have a bit more of a focus on bitcoin powered economies we think Bitcoin will replace a lot of the Fiat currencies we have around the world so how do we make that happen and what is the infrastructure we need to do so and the second kind of area of focus is I think how do we break the the big companies and the big networks uh corporate networks power that we have today and so how does uh blockchains uh as a core layer of technology and device more users uh owned applications rather than corporate owned

applications perfect thank you Maxim now the mail side would say you have a few words about you about crypto valy investor working group and then I would allow myself to jump in the first series of a few questions and then later the MAA you take over from me right definitely well thanks a lot Martin for co-organizing this and also thank you so much Tess how um and buk bukal for joining us today and yeah my name is uh deza Hayes and I'm a portfolio manager at zelner inco which is a swiss-based family office and we have two crypto funds um one is a Bitcoin Market making fund and the other fund is uh trying to

outperform bitcoin with defi exposure for coins that are already trading on secondary markets and and and have market caps over 100 million so we're not so much in the VC phase but it's fascinating to hear hear from the VC investors because that's kind of the future of of the universe that we'll be investing in um and yes I wanted to say um I met Tess how at the crypto Valley Association conference um about a month ago so crypto Valley Association it's based in zoo um and they have a conference every year we also have um webinars like this uh put on by the investor working group and and we have several other uh working groups at the CVA so I'm also going to pop the link in

the chat for our telegram group for the investor working group so you can stay up to date with our webinar schedule so thank you very much uh for for being here today thank you very much deila so first I wanted to know from Maxim and from Tess you organize who speaks first maybe once in one one questions to one and then the other um where do you see the biggest potential in blockchain I mean we have maybe also since years let's say since years we say now very soon everything will be tokenized uh many lots of stuff will run on the run on

blockchains but until now I mean the daily applications are often we heard let's say VAR is the daily use and this is maybe also a bit the focus I want to ask where do you see and and when do you think will blockchain applications or blockchain in general you know enter into everyday's life yeah um happy to share a few thought uh super passionate about this question mainly because uh I've been expressing and my team that we feel uh the future of uh blockchain or a segment of it where there's a particular technology that will help it potentially

Mass market adoption uh first of course all the infrastructure um and uh the technology you know is getting better so we're getting to a state that things uh where you know uh the average normally the normal average person can actually have better access into being able to acquire their first you know um um uh you know um cryptocoin or you know their um meme or their you know U nft but having said that we're extremely excited about web 3 AI um what we' seen is that this is definitely a needed um category and and area however the current projects that are currently fundraising on the market I think there's you know some decent Founders decent teams

however a lot of is still very visioned uh I had to mention that um I think what is important is if you find the teams that have true artificial intelligence which back in the days is called machine learning um and those who actually started in AI before it was cool I I think those who actually also coupled and combined that with crypto native uh knowledge and insight and also just being very plugged in very active in the web3 ecosystem they will build something great that allows everyone the average person the you know project the business The Venture investor the ecosystem to utilize web 3 AI and that can come in many different type of uh scenarios um

such as you know zero gravity you know our portfolio company they already have you know the AI element you know focused and also you know uh put into their technology base so that other we through AI companies can build on top of it um as as well as minime uhai they're doing the AI agents of the world and I think you know U me protocol is very interesting as well um and the team all of these teams have background and they care deeply about the web through ecosystem from a long-term perspective not from a short-term um and that's very important and they're actually building Tech that actually will work uh so I think that's crucial and why I think it's very interesting this area is in the web 2

World um as we know uh Andre he says you know software will eat the world uh I and you know my team believes that AI agents will eat the world and you know this will also happen in web 3 so you know with this gener of AI agent assistant it will be able to help all of us progress you know further and more efficient you know as business owners as entrepreneurs um and even as users so that's why I think you know with all the different projects right now as you see at e Berlin I would say there was at least 500 you know events um the theme was web through Ai and this is exciting to me because two years ago we already saw this and have been helping Builders build in this area so uh you know that's a great question and that's why I just

wanted to share that nice yeah I agree I think AI is a I mean I think we see continuous Improvement in infrastructure and I think there's a couple of new trends arising that are really interesting I think the cryp question when is crypto going to be here and blockchain going to be here well if you look at from purely the fintech aspect like crypto is already here it's in all the major uh fintech applications from Revue to Robin Hood uh there's billions of trading volume every day and there's robust infrastructure in that sense from the financial sector uh I think it's something also we're seeing this year is a big year um we're seeing coming to Wall Street to the various ETFs so crypto as a pure asset like I think it's

here and is it's uh this year was a big Mark for it um where we like to see things moving is uh first on the Bitcoin I think it's a very interesting year for Bitcoin um there's been Bitcoin has been around for 15 years and this year has been the first year that we're starting to see some developments on the Bitcoin blockchain uh and some programmability similar to what you can see in smart contract blockchains and um that I think has a tremendous potential to really uh push Bitcoin in everybody's hands I think like when we saw uh countries like El Salvador trying to make it as legal tender we're of the view that there's

going to be an effect that Bitcoin is going to be accepted as legal tender or as a currency in most countries in the world so that I think is really starting to accelerate right now and it's really really interesting and we're focusing that closely on that then the question is when is everybody going to use an app powered by web3 I think we don't really control it as investors like really users control it like networks go only as fast as their users want so we're starting to see people that are starting to understand the trade-offs between a web two infrastructure where you don't control your assets not rewarded for your time and not rewarded for your participation in a network um then we're start see application in gaming around

that where users sentiment are starting to switch a little bit I think T mentioned anim MOA they're doing great work um in that space and some games are actually starting to be um AAA leveled and starting to be used we're starting to see more recently a bit of social applications um there was a forast applications forecaster with fch so I think applications like little by little users are more internet native are starting to understand the potential of this blockchain networks and you know once they hooked they probably never leave so we just have to see how the snowball U accelerates in the next couple of years DEA can I hand over to you to ask

some questions sure uh we do have one question from the the um group that's listening they say we are fresh off of ECC what were the most exciting consumer Trends seen there so I just wanted to uh maybe uh Tess did you mention you were at ECC itself yeah so I was just curious what what was uh the most interesting part of ECC for you oops you're muted C thank you yeah I was at ECC uh I first was in London for um supporting

the London uh salana hack Hacker House Event uh from there took the train into EPCC um I was invited to speak at uh seven different events um and that was because you know at C Venture we have over 250 Investments and uh very fortunate a lot more Builders and despite the bare Market was you know not easy for many projects they made it you know wag me absolutely Israel and many have listed you know um an amazing you know success on some of the exchanges um a few months ago um and I say that because currently I would not suggest anyone listing yet until things pick up um so we have other teams are rolling out consistently because we invested in first round many years ago so obviously

if they're building tag and building project this is the time now uh to be able to um um um you know uh take the next step so to this point uh yes being so active you know and speaking with the audience and uh just being very um able to connect with every FCC uh as I mentioned the biggest thing that I saw that I myself was surprised is how AI is applied into you know almost every project now does all of them work no but um you know it it has been you know very um exciting to see the different uh ways of how technologists are applying it and how the sentiment of the market is going

to accept it obviously dpin Computing all of that is also very important because each of those needs each other in order to work in web 3 AI and of course you know again I emphasize there are a lot that are Vision projects and then there are a lot that actually are building Tech but they may not Garner the attention from the marketing standpoint so we like to look for projects and Founders are under the radar that actually are executing and we don't need the shiny other um amazing you know um VCS involved before we make a decision because we're happy you know being one of the earliest check check in um but you know of course uh with Draper we're always happy to have them on the cap table so we've actually co-invested in quite a lot of companies so very

excited uh that uh you know we actually get to be on a panel today yeah likewise I was I wasn't at e unfortunately so I won't be able to to give you most Insight but I think it's I used to go a lot when he was in Paris and it's really amazing to see for us that are very that are early stage investors there's a lot of large conferences today that have gotten much more institutional and you're going to talk to a lot of trading infrastructure companies or lot of Traders or Wall Street guys and ECC has really built something special around Builders and for us as Venture capitalists it's really what we want to see be able to see be in the trenches seeing the people creating the new applications very early

on so I think they're doing a they're doing a great job I heard like there was maybe some uh problems around Brussels and Reigns but yeah yeah yes that part is true yeah I have such you comment on it we were like if only it was in Paris again um it was just it's amazing very cozy very you know uh smaller you know City so everyone was bumping into everyone which is very nice but at the same time I think you know as us who are speakers and very active in the events once it's all over you know there's nothing available no restaurants to eat because everything you know is closed except for pubs um so you know ended up I myself I know I don't eat McDonald's but there's only one McDonald that's a 24-hour so we

end up having meetings there and uh you know bumping into everyone else so that that was something that you was interesting but uh it allowed for everyone to see each other but yes the rain was not easy to get around to but it happens everywhere flood in Dubai you know two years ago in Korea I think blockchain web three brings the rain which in the Asian world that's nice because rain equals Fortune yeah very nice excellent well I was going to ask um even though you weren't at ECC Maxim would you say that your investment world and your thesis is more Bitcoin Centric or more ethereum Centric or do you see like a multi-chain world

or like maybe even you see other coins and maybe ethereum is not the main one now maybe Solano or something else so what what kind of world do you see going forward I think and people are starting to get extremely smart about how you blockchains are built and how consensus is being done for application specific and I think we're definitely going to live in a multi-chain world I mean ethereum kind of made a statement that it will just be a settlement layer and that every single a bunch of chains will be built on top of it I think Bitcoin can of still live in that separate world I think it's linked to the fact that it's proof of work it's more accepted um widely as a more secure consensus algorithm some people might think

because it's been around for longer it's more decentral ized um and it's more clear the supply um but I think you know training applications will live on a separate chain I think identity we might live on a separate chain I think gaming might live on a separate chain so we're definitely going to have a bunch of them uh they're going to have different trade-offs that are going to be better answer to the apps and the funders and the entrepreneurs that want to build inside of them um so yeah Tess maybe I can give that question to you are you also uh of the same view that it'll be a multi-chain world or are you more Bitcoin focused or how does your investment Outlook absolutely

absolutely um 100% I believe it'll be multi-chain and the ecosystem Still Still is so young I think not even the fact that wether is just multi-chain but a lot of things are experimental now and we know that um you know it's not that great from an investor standpoint because essentially you know sometimes it feels like you know investing in the team for them to research explore trial and error however you know if you take a step back um you know that is fundamentally what early investors do uh on the web 2 side there's more fundamental and there's more metrics that we can measure um and the econom is a bit more stable whereas in web 3 you know different things happen in the industry that has those cracks and things blow up so then you know you have

to understand when projects you know do have to Pivot iterate so for us I will tell you when we invest early we practically focus on spending a lot of time with the team to make sure they have that superpower um that they have the different team members uh that can execute from the different components the tech the business you know being able to fundraise being able to do marketing so we spent a lot of time on that on the PowerPoint and their Vision you know that is important but we do expect that they get to know that's going to change so whatever they're spending hours to us presenting you know uh that is very important but understanding the team of them being able to be dynamic is more important so you know to the point that's why I say if you just look at our portfolio like

uh I'm very fortunate all founders you know know each other and help each other and respect each other but if you just think of um you know infrastructures and you know uh layer ones and you know layer twos or especially layer ones as countries you know every cycle you know there's a different country started and then you want the citizens to go there and live there but if that country has not established a really good concrete um I would say foothold the next cycle comes you know then another country is established and those community members may leave so in that sense uh we do de in diversifying and backing Founders that you know um understand the newer sentiment of the market uh because they

can you know someone who hasn't already started a company from you know the Old Market cycle um is very different from the new so if you just look at you know our investment across the board we've we love backing all these Founders early some of them we knew them way before they started company so if you just look at atos monan uh zero gravity they're all you know uh from different times and um doing different things uh combined with how we believe web3 AI um and dein that's very different because when I invested in you know my Founders um you know such as U mini me um me protocol you know they're evaluating which you know um ecosystem which chain to build

on top of and they're multi chain but which one first and it's not easy because the technology for some of the you know um ecosystem and chains are not there yet um but they're actively iterating to support this so I do think you know any new players have that Advantage you know true technologist that can come out and build to what is on the current market and also hope to Overlay that to what might happen in the next Market um no one has a crystal ball but as long as they really do fundamental um I would say uh understanding of web three blockchain they will be able to figure it out and we love to back Founders you know in that category wonderful well thank you I'll ask one more follow-up question to that

and then I'll pass it over to Martin so I think that around the investor space there's been some people saying like they're not really um happy with how ethereum has performed over the last year or so I mean there was the big bump up when they announced the ETFs and of course we've seen some of those ETFs might go live next tu Tuesday um but how do you guys feel about people saying that eth is kind of part of that Old Market cycle and they're not really doing as well as they should be versus other l1s um and people saying that maybe scaling with with l2s isn't isn't the future and and they want l1s that are scalable so how do you guys kind of feel about the the eth becoming a zombie coin de debate versus you know does it have a

big future so just wanted to hear you guys with your thoughts about e um I I think it's a bit of a overstated take I think like when we've seen the amount of work that ethereum has done for crypto in general I mean everybody that's a developer in crypto is building on evm chain and using solidity and I think they did make a switch that a big statement that nothing is going to happen on the main ethereum chain but now we're seeing first of all the language being accepted in every single other fast and scalable chain that are using evm so super good for interoperability most of the apps actually start getting built on ethereum

and then move away um a lot of the direct Layer Two and scaling solution that we see uh do their settlement directly on ethereum and so I think when we're seeing projects like arbitrum optimism base they all leverage etherum and at the end of the day e theum will be the place where um it's the biggest one right so you can have different application blockchains uh that are built on top of it and they all go back and use the security of ethereum as core um I think it's an important switch that they're making I think it's not incentivizing a lot of Economics around it and it's true that there's questions but um we'll see post this ETF Cy this ETF cycle I think also the runup was a

bit quick in other coins because Bitcoin ETF kind of kickstarted things a bit earlier than it should compared to like the halving but um pretty convinc that ethereum just price-wise will outperform a lot of other coins or even this markets I mean it's tough to outperform when you're already extra 100 billion right but it's uh it's fing a good path yeah I do agree I agree too um ethereum has built such an amazing Community uh we all know um Bitcoin is seen as gold eth is seen as silver and you know potentially Salon is seen as you know the uh third one um along with you know some other top 10 coins that we also do believe have a very good chance to really come out and infiltrate and

also um capitalize on uh I do want to say um The Ether ecosystem is interesting and the community I think what happened from a engineering standpoint that I saw my friends um some were frustrated um and some have moved to different ecosystems to build such as uh in the Bitcoin ecosystem um and also into some of these other ecosystems I mentioned earlier now um we also saw how the fundamental success of how ethereum succeeded based on building great Community you know really built a great Tech the community was just so strong that it didn't matter over the last few cycle that other um chains and other you know competitors

came in however I would think for example I've been hearing um and you know such as bar chain um their community and how they're fundamentally starting I think the philosophy and just attracting um the type of um community members they say it does have that you know reminder of how ethereum started so that was very interesting to me and I dived in to understand a bit more of how and why and you know uh how this community is quite different so I think ethereum will have challenges but 100% with the eth ETF uh that is about to you know be very visible in the media and you know actually as we see you know it

it being um affecting eth and the price action uh I think it would put eth back at the Forefront and be very relevant and be very important um yet crypto always surprises us we don't know so uh we we we should be open-minded and diversified thank you very much now I wanted to address a few other questions especially I mean you're both based in the US and regulation was always a big topic for crypto for coins for investment into the space regulatory uncertainty I think now

anyway 2024 being a presidential election year um so maybe and T just maybe you start with this because before you mentioned this you have these teams and you know you have this also this Vision or you check with the regulatory framework maybe H how do you see what is needed now in the US and maybe also abroad and where do you see developments where you think that these are places which attract good projects due to regul regulatory Clarity yeah we think about a lot so that's a great question um because we invest globally uh but of course our

home base is us and um we we we do see a lot and we have backed a lot of us projects so how we see it is over the different Cycles um we all know you know uh in web 3 because regulation is not clear yet and I do think regulation is needed once it's clear that will allow a lot of normies U Mass adoption you know just the mass Market to feel safe to come in and participate so we do look forward to that uh but I think it needs to be gradual um how the last two years how that happened with um the SEC was constantly just you know um looking into different projects uh more probably from a learning perspective you know you saw

what they did with Unis Swap and you know all the others um but they made a lot of noise in a negative way so that may not be the right way to do it but I do think being able to you know be in touch with the community and really understand and talk to the leaders will help regulatory be able to come up with something that makes sense and favorable to all sides um having said that I can tell you the changes that we've seen in every cycle that's how come sometimes you know obviously we have access you know to Great lawyers our own team doulas Park you know he's an amazing lawyer that's been early in crypto and blockchain and understand us regulation and Global um and other uh lawyers that we've used um helped navigate this so in the first cycle we saw obviously

everyone loved Hong Kong and all these other different places um and then you know the new laws from China everyone went to Singapore um and you know uh would say you know some Dubai some you know into Abu Dhabi um and then uh we think that uh we see the moving around because a country you know a city is only as good as what the citizens and the legislation support so in the last two years um I've been speaking at you know the Hong Kong web three events uh because the Hong Kong government has been very supportive they always have invited me to go and speak because they feel they really also want someone from Silicon Valley that invest in web 2 and web 3 that can see for their own eyes

that Hong Kong really is starting to really be very friendly to web 3 so we do see the switch of those who were in Singapore slowly moving back to Hong Kong and setting up their office and their you know um companies there uh having said that you know as we know there's just the traditional you know bvis cman um Panama that also has been very popular uh we do think the key thing is you know each compy needs to know what is best for them and what is the current uh I would say uh countries of choice that can have the better regulations that fit their needs and as investors you know we try our best to you know advise them to speak to the right people so that then they can make

their decision so it's very important regulation uh we ourselves saw a lot of defi companies that were US base in last bare you know in the last few years that were bare they really looked at Dubai um and looked at Abu Dhabi to really understand what regulatory environment would be more favorable for them or at least not as harsh right Sometimes some Founders are not even optimizing for what is favorable they want to be compliant but they also make sure you know they won't be put into you know risk of you know trying to be compliant when regulation actually is not clear in that particular country maybe Maxim you will you will also say something about this I mean

what what I would be wondering also here I mean you've been at crypto Valley Conference in sou in June and I mean we have quite many or let's say Switzerland was in the last few years also se you know we were pretty early adopters in Switzerland regarding our regulatory framework to create Clarity already a few years ago maybe also if you have did you did do you have projects in Switzerland did you see you mention how many other countries but well I have a lot of companies incorporating in Switzerland and I think it's I mean I think it's amazing what Switzerland has been able to do because the the big problem in the US is the lack of clarity so you know they've been playing catch up for a very long time I

launched one of the first D5 protocol we had the SEC knocking on the door every day they had no idea what to do what to say then I launched a token for a publicly traded company same story and just people want to innovate people want to do things and we have no idea under what framework to do so now we advise all our companies to actually don't incorporate in the US and I think what has done and clear create that Clarity I mean I've been to zoo I don't know what business is there normally but it's amazing to see that you've got so many crypto entrepreneurs come there understand the legal framework know how to incorporate the business know how to so it's really bringing a lot of value I think Europe is like now moving a bit further with Mika which will be a very

decent framework um Asia has been doing back and forth a bit forever I think now as Tess mentioned there's more character out Hong Kong but we're we have the elections coming so people are people in the crypto world are watching that pretty closely um yeah and honestly we had the I think the big problem is the chair of the SEC was the worst chair of the SEC we could have had uh for crypto environment so uh we really Gary someone to replace Gary gzel for that role um and I'm going to be in Nashville next week there Trump at the conference post it we got to do another panel about it because I'm not I was invited but you know uh I mean you know

to be clear also we are actively looking in the Bitcoin ecosystem too um and uh a lot of the companies and projects already had the run up uh by the time that you know we did spend some time understanding so you know we're always interested in learning more in that area um but to you know also uh Maxim's Point uh Z and zuk is just wonderful um it allows for you know regulatory uh I would say knowledge and you know structure and also being able to have such beautiful environment and um you know very opposite of web 3 where you know even I when I was there at all the different events that uh crypto Valley hosted along with a lot of great partners for a few moments we're able to

kind of think we're not looking at our phones we're not thinking all crypto blockchain we just want to look at nature um and you know really be able to have that balance so uh I am very glad that you know I made the trip to you know participate uh and be there with crypto Valley um so I do think Chris Switzerland uh in Europe is very interesting um some people may think initially it seems very you know uh too regulator structured but that's exactly what we need so there's no ambiguity and no nothing that seems uh you know in the gray area as much as some of the other countries so you know very excited to also you know share more with found so that they can consider Switzerland thank you very much now

that's interesting thank you for your Insight here um I wanted to now maybe change a bit the subject a b talk a bit more about your Investments I will add here one question and then I hand over to the I know for me the question is where what do you invest do you invest only in tokens do you invest in equity how do you see it also if investors or start companies sell shares and tokens I think it's always kind of you know another sales pitch and also there could be kind of a conflict of interest if you sell shares and if you sell tokens I'm wondering what you think about that yeah

I can go first I think um so we invest in all of the above we invest in companies that are doing pure Equity place and that similar to any other sort ofan companies just uh based on cash flow and revenue uh we invest in companies that have equity and also have adjacent token we invest in companies that we know the token will be the main value driver for return of investment some of them is hybrid and we also invest directly on tokens uh in the open market I think where you have to be kind of careful and look at your investment when you're in the situation where there's both equity and token is what when we invest we invest in a 10 Vision so where is most of the value acral

going to come is that going to be a token is that going to be the equity and I think we there kind of this weird space in crypto right now where a lot of the Venture capitalists are actually not venture capitalist anymore they're more hedge funds so they invest in a project they wait for six months token unlocks and they sell and they never talk to the founder again or they sell half of it and they're not really involved uh we are really pretty bad at selling maybe we should get better but we've never sold a token almost since we invested in tokens in 2016 so we're playing the typical VC Playbook you know power La we think like I mean I think Tim saw that because he B Bitcoin like 2011 2012 they've never sold them and that's how you make outsize returns right so we

look at tokens the same way as the main value acral and if some of them go to zero they go to zero and we hope that in our portfolio some of them will outperform over 10 years like much more than just waiting doing six months and selling um so it's been a bit ad adversary I think also for um for a lot of the retail investors to understand what are going to be unlock schedules or VCS what's the concentration of capital around that um I think entrepreneurs are starting to Value much more traditional venture capitalist I think t com from that background and she's been doing it around for a long time so maybe as more similar thesis to us but Builders are tired of just using it as a quick in and out and a financial instrument around

the token I absolutely agree with every Maxim says um you know Maxine and Draper we do have very similar philosophy it is probably because we all backed web to early stage companies and we see it t typically takes five to seven years it takes investors to be very active with the founders um and really you know guiding them in the best possible way and we started off like that in web 3 and clearly you know we've learned that web3 Playbook is not like that so we ourselves have made a lot of mistakes from a web 3 investor standpoint um but I think by now through the ups and downs uh because we have been long because we hold because we really do believe Founders need time to build out the

attack the ecosystem needs so we're very patient um so we now have the right balance of understanding and you know to Maxim's point we're also terrible at selling too because it's just not something we think about we just think okay we're backing the founders you know you meet with them you understand what's happening this year and what's going to happen next year you advise them that the bare Market's coming so maybe raise a bit more relax your valuation you know it's not about the ego so I do a lot of that kind of coaching and talks and at the end of the day I mean it's unfortunate many Founders are like Tess you had a crystal ball if only we listened and you know is still the advice we give as investor is the founders uh choice to make the decision we there to support them based on

knowledge experience of what we've experienced what we see so to that point um I do think it is unfortunately um I have a lot of friends in the industry you know other VCS are very C very web three uh focus and they are more like hedge fund um and it has gone to a state where sometimes if I see them on the cap table I already know the outcome of this project so sometimes I do avoid um and to the point of um a test Venture we don't go out there to you know spend a lot to sponsor or make a big name we just believe your reputation will you know be able to spread itself if you've done you know the team of the company has done good good work with the founders so would say you know very

fortunate um we don't ask to speak but you know at the ECC event we were invited myself and my Venture Partners the team was invited to speak at a lot of events because I think they wanted us to represent um more long-term investors and that was important so it's been very interesting where over time we we do we're always surprised when people say oh we know you know test Ventures and we were just so under the radar so lowkey just very happily building with the founders um so you know that's always been our style but you know saying yes to speaking a lot more helps I guess our portfolio that's the goal and it's not there to further our reputation it's to further you know helping our portfolio and we mention them all the time to see

how uh we can bring more synergies to them at that event or you know at that uh you know meeting wonderful yeah that makes perfect sense I mean on the other side like I mentioned we have one fund that invests in coins that are already trading in secondary markets and we're also kind of we're weary of coins that have certain backers just because once the the marketing budget runs out or you know once people have exited um it's it's a hard long-term hold for us so yeah I I definitely like to meet VCS like you both that are investing in the long term and and doing due diligence on projects that have like a five to seven year or even further um Outlook so so thank you for for that perspective um

there are a couple questions uh from chat so basically um I think these are questions coming from like the startup side like asking you to explain what you're looking for when you start to you know do due diligence on a startup um and then also asking yeah basically like are there any red flags that would be like no I'm definite you know that's a no no for me or you know are there any green flags where you're like okay I've this is an interesting aspect and I want to learn more I can share I talk about all the time um and again very passionate about this area it's very simple uh we don't want Founders chasing narrative like if you're a gamey company do not say you're AI company do not say

you're gamey AI because um it it's unfortunate I know you know sometimes uh Founders think that works or current investors think that might be the case um some of it is true some of it is not what's true is yes that is what the sentiment wants but you still need to build in what your team is good at and not just be thinking you know like that's why I said this week uh the past week at ECC 500 event I looked at the events and I I doubt they got goosebumps I was like everything is W 3 AI so you know it's going to be interesting as to what will happen on the market however you know because AI um sector is so strong it is here to stay it's not going to be like game five where it came and

went um and uh AI I hope it will have that slow gradual rise and not this huge up and then the huge drop you know with the industry in sense of many projects building they need to deliver um I hope the exchanges exchanges that will support their listing will also you know understand we want web 3 to have a long-term you know actual sustainability like everyone needs to cooperate in the ecosystem and not about just one group making the most um so I do a lot of that kind of discussion behind the scenes with different leaders in different areas um and because we don't just um actively um we also spend more time besides focusing on Founders also on you know the other ecosystem players and

just giving them insights and they love hearing what we have seen and you know taking it into consideration um but then at the end of the day you know they will do what they want to do and that's where we realize you know in web 3 uh it is uh you just um it's everything's 5050 you know you just can't think what they say is exactly what's going to happen or what they say is not going to happen so everyone just need to really be doing their own diligence and surround yourself with as many you know smart hardworking people in the industry and you and information will come to you now the second point is another red flag is valuation so what I've seen is you know over the rise of the last few cycle especially last cycle where Founders had raised their first round easily because

that was the time when the market was very froy because obviously of FTX because of all these you know um you know where was the yield coming from right and the yield obviously if you don't know where it's coming from from you're the yield so you know it was just very interesting times where Founders let that get to their head and they were raising their second round at these hundreds of million valuation and I just kept trying to explain to them I actively would call my team would and we have meetings with them you cannot you know raise us such a valuation I understand that the project next door did it that did it and so therefore you want to but when the market you know takes a turn you're going to have a down round or a flat

round and because they don't understand actually from the web 2 valuation side of how you know funding is structured and you know kpis and metrics they never experienc what flat round and down rounds are um so it was just an extremely frustrating time you know even within my own portfolio but you know my portfolio uh they have plan a plan B plan C so you know they were able to be very Vigilant and uh they could have you know had a more amazing treasury that could have made things a little bit less stressful or scary for them but you know they're able to pick up quite fast and you know do what they needed to do and again that's why I emphasize that you know with the right advisors and strategic investors involved that actually care about the founders care

about the company you know they are listing one by one whereas other investors would have just actually I know what other investors did because Founders did come to me and said well thank you Tess for you know encouraging us you know that test venture to raise from a position of strength not from a position of weakness because other investors on table was telling them now it's so bare you know we don't know what the future looks like we can invest but you're going to have to give us the most lowest valuation possible whereas the teams already had great technology and you know they would come to us and we would give them Our advice we clearly don't think that is needed even though you know we don't want the project to go away we still want them building but we encourage them you know with strategies

you know coming from a more you know from a strength side and from positive side and again we all made it uh and they're listing one by one so you know just very happy to be part of that Journey with them um so the valuation was a big red flag uh so they really need to raise uh to not what the market wants but what they really think they can handle and what they can execute and it just depends on how many rounds they plan to raise in what time period so it it's just very fascinating how when we meet all the different Founders in this area now the third one is you know another yellow flag red flag is if a team is not in place you know if you just have a business founder or a business set of founders where's the technologist right and yes they can hire

them or Outsource it which is even you know not as good right but that happens um so uh you need to really F uh make sure that the core team has you know the CTO that is going to lead the tech the business founder uh those two are needed and ideally a third one that can also you know kind of uh run operations and you know everything else and the bonus if they can find a CMO because that is also one of the most like the way in web 2 you know Finding CTO are hard in web 3 finding the right experience CMO is hard um and you know many may have some track record but um they may not you know actually how do I say it um be as um uh I I guess what I'm trying to say is the

existing CMOS on the market if you can find the right one that actually you know can guide the team to some good playbooks you're very lucky and you should definitely try to you know bring them on board because unfortunately there's not that many great CMOS with experien in web 3 and seen the cycles and understand the cycle and not there just to um you know maximize profits for themselves that's all I have to say for now but hopefully everyone can read between the lines and uh share know that this is the type of discussion we have with our Founders behind closed doors you know um whenever we're having meetings yeah I would say just to add a bit um on what we're looking for I think we're always looking for something new I think in crypto like the same way that

we talk about why adoption is not here imagine throughout the six years there's new chain new infrastructure and a lot of kind of copycats and things that are very similar um so we try to stay away from those I think like what we're really looking for in Founders is you know find something where you found a very frustration big frustration in the industry you're on and you really want to change it because we want to find committed funders that are to a tenure Mission um so we want to be aligned with the funer and have that vision and I think a funer should think like an investor he should find should always be thinking more three years ahead rather than taking the quick hot shiny um Trend that's going on right now so which it's very tough for example we invest a lot

in Bitcoin and it's been very easy to do over the past three years because there was not that much um uh noise around it so we're so very committed founders with a true line of SES and now we're seeing a lot of noise coming and so it makes our job very much more complicated because we have to sort out through the noise um I think in crypto other sort of red flag I could think about is just to add a bit on to test is um there's many way to raise money in crypto uh you can see fonders that are a bit more looking for a quick cash grab I think you know there's many ways that you can sell your tokens early get on an exchange too early not have a clear strategy of like maximizing your app your network or your overal ecosystem and just try to grab

too much cash too early so that's kind of a a red flag on our list um yeah maybe I'll let Martin take it thank you very much yeah I was still muted um yeah thank you very much that's very interesting especially also now you can be too late but you can also be too early as as I understand and then you be you you could run into difficulties now maybe Tess you said something quite at the beginning of our discussion I think think it was when we talked about e or even a question before um you said wait until things are picking

up right what did you mean what did you mean with that um so just to clarify what question did you ask where I answered that I think I you I I I I don't remember it was just something I think we were were discussing about e the potential of e or it was one question before with the projects many projects you're in and you had like I mean the question is you know what now let's say we are in a market which is a bit awkward right we had a very strong first quarter 2024 now we are pretty much side sideways with some panics and then some Hypes again it's a

bit the strange situation right it's a bit like the presidential campaign discuss us and so I'm just wondering how you see things and maybe also Maxim how what you would you expect to happen now in the next few weeks and months ahead of us I do remember yeah because uh we do have a strong view on that uh like I said you know we're not the crystal ball but you know team needs to have their view of how the market will look um I do understand crypto is 50/50 however I think you know any um investor or advisor or anyone that is you know position themselves as um knowledgeable of the market you know it's their goal

it's their role to you know duty to guide Founders as to you know where the plus where the minus is where the landmines are and therefore you know looking from history and also giving them that factual example but also you know telling them the changes of now in current market there's these Tech there's these regulatory there's these you know groups that are now here so that's going to be different from the past and then to this point you know I can answer it clearly you know we think a lot about you know are we in a bare cycle or did the bull market start or is the bull almost over we we we surround ourselves with amazing people that are from you know Wall Street from different countries you know those who are involved in the politics in different countries Founders entrepreneurs from

Web Two web 3 so we try to collect a holistic View and what we've seen so far is exciting um because uh the last few months has been very quiet it has been like this or like this and we're all wondering so you know when will things pick up so you know for us we do feel with five things the presidential election coming um everyone's summer vacation is over it's fall is starting well everyone's back at their desk you know focus on you know career and uh you know have that break with family you know with uh downtime relax time um third with how the ETF is looking um we need Bitcoin ETF um and also e ETF and uh even if you see gra SC they just

announced their you know AI play where they have a fund you know almost like an index fund around AI web 3 companies uh that was just yesterday they announced of course you know we got win of it you know sooner so all of these combined is very interesting um as to what the market is signaling then under you know NE where not everyone has access to is we see how um for example um certain groups you know whether they're market makers somewh down sizing some are upsizing um and you know that's a function of how well they did or performed in the past how bullish they are for the future so when we see um more hiring in certain areas and more investment in certain areas we know those certain areas has a better chance

and things are picking up uh such as went through AI such as you know we do believe the market is picking up and that's why so many people's getting ready with you know um bringing on the best people onto their team because once things get busy in web three that bull market you know can last very short right it could just be six months or nine months but if at that time you're trying to hire or trying to list your company it's not yeah yeah now maybe Maxim I know you have a hard stop also to go do you also want to get do you have time to give us your thoughts for one two minutes what the about where are we in the cycle right now where would be the catalysts yeah where we are in the cycle right now yeah I think no I think

all the main drivers test mentioned them like they're pretty known in the industry I think really AI kind of Sav crypto we didn't talk I know there was a question around you know uh proof of work versus proof of stake uh we went from this world that was uh Computing is bad it's bad for the environment um Bitcoin mining is terrible to a world where Nvidia is the largest company in the world every everybody's Racing for compute and crypto is really as its Essence like what secures the network what provides consensus is all this intense Computing and I think this trend in AI that we're going to see and compute data is going to be more and more at the center of the discussion so I think we're going to see a bit of an uncorrelated cycle that might last for longer because I think

this AI Trend we're just starting to see really the impacts of it um Bitcoin with the ETF I think Bitcoin tends to lead uh bull markets and I mean we heard Larry fing talk recently we see guys as M Michael sailor like people buy Bitcoin they never sell it and more companies are starting to put put it on their balance sheet uh liquidity a bit drying up so I could see I mean people were talking about super cycle last time this one might be a little bit um less of a super cycle I think liquidity is starting to dry up and people will get surprised where where prices will get I think we could see Tim is like pretty vocal about Bitcoin going to 250k um so fingers crossed but yeah I

mean if yeah I mean you just to add on you know we look at that and try to calculate and predict but you know nothing so but we do think Bitcoin will hit uh maybe around the 150 mark on the low end um over over the end of the cycle at the top end you know that's where all these calist that no one can predict might happen and come in and you know it would just swirl up the top end it literally could be 400,000 um but at the end of the day you you just need different things to happen in the ecosystem and anyone who's investing obviously this is not Financial advice what we just mentioned but so simply you know how we think you know what's going to happen because you're going to see people selling at 9 0k 100K already um those are more you know risk averse and

conservative and for whatever reason personal reasons or you know their company but then you're going to see those who hold for a while and more people coming in so no one can predict because that low range and top range is very very you know a big difference yeah perfect so thank you very much Tess Maxim it was great to have you here I think we could have discussed for hours and hours and hours it's very interesting and I hope very much that we can stay in touch and that we can pick up our discussion at another occasion thank you very much also DEA for organizing this and uh for making this happen and I wish you all a great summer

and I wish that the markets go in the right direction for us all and that we can build interesting stuff together and that we make this place a better place thank you very much as well is that is I have one second is someone a take a screenshot picture and send it out yeah excuse me what do you want to say maybe sasia sasia can take the picture um maybe a screenshot let me see how I can do it yeah should I oh maybe yeah okay yeah and then try everyone smile one two yes thank you I send it

out everyone thank you bye bye bye