The Six Tokens To Own This Cycle

Transcript

Nothing said on Empire is a recommendation to buy or sell any investments or products. All right, everyone. Welcome back to Empire. We got Santi, we got myself, and we got our good friend Yan Lieberman, who's one of the co-founders of Deli Digital, kind of grew up in the industry alongside Deli. I remember the day you guys launched Yan. Um, and Yan also is the managing partner of the uh the venture book at Deli. So, Yan, welcome to Stoutman. >> Thank you for having me. Excited to be here. >> How's life? Good. Good. Can't complain. Markets are better. And yeah, pump kind of solves everything, doesn't it?

>> Yeah, pump does solve everything. Okay, let's um why don't we talk markets? I I'd love to start broad, high level, get your view of um I think you had some of the biggest wins that I have seen in last cycles and uh I would like to hear how you're thinking about this cycle and what you're Yeah, actually I'd love to spend time in this episode talking about your actual portfolio and the tokens that you hold. But before we do that, let's just talk like yeah, how are you viewing this market? We've had a couple weeks of I don't know number go up. So I'm curious how you're thinking about the market today and how how you're allocated. >> Yeah. No, I'm I'm pretty long. Uh I haven't really been taking profit on any on any of the positions yet. Just just holding steady. It feels like there's

still legs. I think you know the market got a bit caught off sides uh on the best news that they're going to be you know basically some form of QE through long end of the of the bond curve control and that was a a catalyst in a in a time where everyone agreed that the markets were kind of bottomy where you know nothing was really happening and Bitcoin was just chilling and so if you had one uh light to kind of ignite the the fuse and and you had this big short squeeze and so I think after that everyone was kind kind of wondering, you know, does this continue to have legs?

What happens from here? Um, I think it's great that Sailor hasn't really been buying, right? That that's usually been a bearish signal. He's been kind of cashmaxing and and paying off some uh preferreds and and you're kind of starting to see STRC go to 100, but that's I think that rep is going to be really tough with the derivatives market that exists on that. It's just like, you know, there's infinite selling that can basically happen. Um, and and because your downside is is you're capped at 100. So, I don't know if he'll come back into the market anytime soon, but I think that's honestly been been pretty favorable for it. Overall, you haven't really seen leverage build up too much.

So, it seems pretty measured. You know, these kind of slow grinds higher and then we pause alts run. I think if you really want to see this continue, it kind of has to be in this order where it doesn't all happen very quickly. I personally have a hard time seeing new all-time highs anytime soon without some material new form of QE. Um I think Sailor was the one that took us to those highs and and that took quite a bit of capital. You know the counter is that you did have a lot of old holders sell out, right? And so it kind of went into much stronger hands in the form of sailor. So, you can argue that that's constructive towards future all-time highs, but I think it's just going to take quite a bit of time because you

need a lot of money to get there and there's going to be skeptics along the way and and so uh you don't really have this obvious buyer which we've historically had in these markets. Um so, in the meantime, I I do think, you know, the alt market isn't as deep as it used to be and that's constructive in an environment where there's just not that much cash slloshing around in in this market. So there's it's easier for people to kind of coales around a handful of assets and and that makes it so you don't necessarily need a whole new uh kind of collection of buyers to come in and a lot of new capital. I think there's a decent amount of sideline capital that that can kind of move out of assets that are less attractive and and kind of um it becomes a bit of a stock

pickers market so to say. And I think it's been pretty evident with just the amount of kind of outperformance you've seen in a handful of names while a bunch of others haven't really done as well. >> Yeah. Is that a good or a bad thing though? Because I I feel like let's say there's 15 investable coins right now. Like any liquid fund that comes on Empire names the same five coins over and over and over again. Like it's I mean you know I mean you know it's hyperlquid. It's like some of the thing it's it's a lot of the things that generate revenue. There's not many of them right now. So it's like let's call it 10 to 15 total. The counter. So the good the good thing about that is like yeah maybe when fresh capital comes in like there's only 15 things to buy. The

other side of that though is all the crypto funds are already allocated to these 15 tokens. How do you think about the if that's a good or a bad thing? >> Yeah. No, it's it's reasonable. It's especially if you kind of look at Val, they're not necessarily cheap. They're not overly expensive, but you do need a decent amount of growth for the multiples to expand. And so you can kind of start to make individual cases for each of them. They are trading at different multiples because of the the kind of the conviction in those earnings, right? hyperl liquid being much higher because you're also just going to have the USDC bid that comes in. Um and and so that that becomes a pretty stable source of of buyback and then on the other hand you have the pumps of the world where everyone's skeptical of the durability of those

earnings and and it trades pretty cheaply. Um, it is a problem. Uh, or not a problem, but I think it it the setup there is you kind of want to look for tokens that look and smell like those but aren't necessarily as crowded of a trade, right? And so I think the setup is there where there's appetite to look for compelling alts that that haven't really been bit up and and I think that's where the real opportunity is. You know, you know, lighter could still go up quite a bit. I think Hyperlquid on a longer time horizon is is easy to be bullish. Um, do I think it goes to 200 in in in the next four months? You know, that would be really surprising. But I think on a longer time horizon, it's you can it's something you can sit in

comfortably. Uh, but if you're trying to do like shorter term outperformance, I think you kind of have to look beyond some of the more obvious ones. >> Hey, Jana, get your perspective because I I know you guys do across asset classes. you you know one of your partners Tom is I feel like we got a lot of really good content on AI and robotics a lot of what we I've felt is is the riskreward there in crypto um you know people talked about okay you know coins are down 60 70% but uh some like we've talked have gained some you know have sort of bottom rebounded a bit but how do you guys think about just more broadly like is this an interesting category to invest behind verse AI I which is you know

incredibly exciting. >> Yeah. No, it's a great question. I think the the question is is the reward is the risk part, right? When things heat up in crypto, the like the markets move harder than than anything else, right? And so you could see the upside when things are hot. Um and I think in those periods, it's really worth paying attention to crypto. And then I think um you probably shift your your weight a little bit away from it as the market cools off and and so um we do spend a decent amount of time uh quite a bit. Everyone kind of varies but uh like I do as well just because that's where there's a lot more interesting things happening. Even our venture fund right now for the most recent one we have five investments and

only one of the five is in crypto. Um and I think we've done one venture crypto deal in the last year I'd say. Um, so like the the venture environment, I think it's just it's a lot more clear what can acrue value and and what's defensible on the on the crypto venture side. And so what that allows you to do is is kind of screen out a lot of the stuff pretty quickly. Um, you know, it's unfortunate, but the kind of the broader adoption of crypto across a bunch of different verticals, that thesis has kind of fallen by the wayside for a handful of reasons. I think AI is definitely a contributing factor in terms of just attracting talent, attention, and and capital. um but it is the case and so you kind of narrow your focus on the crypto venture side and and

that allows you to do more on um the AI venture side and then also I think liquid crypto has a lot of interesting opportunities when markets are trading well. >> I'm curious what that one crypto investment is if you're willing to share. >> Yeah. Yeah. It's so it's Tory Finance. Um they're live right now. They don't have a token um yet but it's a tokenized uh carry trade but dollar hedged. So you get uh Turkish lera basically carry trade and and it's it's in dollar and you're getting about 10 and a half percent kind of uh organic yield.

There's no juice. There's no um incentives and and the idea is you have like some private wealth and and ultra high net worth folks have the right relationships to kind of run this trade. Uh because you need to find the right counterparties and the counterparties are you know the ones that they would use. they're all kind of, you know, the highest tier with like the least amount of credit risk and and so that trade doesn't really exist in crypto at all. And and so the idea is you can bring this on chain and and the benefit is that there's massive amount of capacity to the trade and and really the risk >> obviously you have like the crypto specific one and then the market one is is to the dollar hedge component and it's so it's your counterparty and it's basically a bank that's backed by the

central bank of Turkey and they've never really had issues even during the unwind. So, um, that's like, you know, a durable yield that that's kind of exogenous to crypto, uh, but but can be brought in. And then if you get if you want to get cute, you can kind of carry trade borrowing USDC against this tokenized position. And then >> Yan, is this you mental mapping uh your guys's investment in Athena into trying to find the the Athena model in other areas? >> Yeah, I mean, it makes sense, right? You want to like yield is one of the areas that makes sense. I think depending on how you structure it, right? I'm I'm less interested in the net interest margin type A businesses um at least unless you're doing it from a venture position and really early on right a now

is obviously going to do well but you're not really going to get venture returns and so if you can kind of do that and the higher the yield the higher the take rate right and so each dollar of TVL can be more creative to the top line when you have higher yield and and so it doesn't need to get as big to to generate the same degree of returns >> it's funny you mentioned this uh one of my buddies uh is pretty big uh sovereign debt uh like uh uh trader and he was telling me you got to do this Turkish LRA thing and I'm like I'm too busy for this stuff but hearing you say it brought me back to that. I feel like I feel like a lot of the axis has been hard uh old enough to remember long-term capital management blowing up uh but uh hopefully you uh

you get comfortable with Erdogon and the Turk central Turkish central bank not doing funky stuff or going out. >> Yeah. Yan, how do you think about uh what is more exciting right now, buying liquid public markets in crypto? Like just the token markets or the private venture side of things? >> Uh right now, and I I think in general there's just going to be more opportunities on the liquid side. Um just purely a numbers game. And then the return profiles as well obviously are are much shorter. And so if you're thinking from an IRRa perspective, I think the liquid situations are pretty interesting because I think there's kind of like these legacy tokens that have fallen by the wayside and are completely kind of forgotten but are actually

building in the background and and so you can get incredible vows [clears throat] and I'm happy to show if if you want. >> Yeah, we'll get there in a sec. I do want to hear about what the book is. Santi, do you as you started nib, maybe not nibbling, but because I don't think you've started allocating yet, but as you started looking at crypto, do you have a thought on like will you ramp back up your angel investments or will you just start buying tokens? >> Uh, good question. So, I I have uh I have ramped up and bought like just on FOMO. I always have a YOLO account. Um like I I was early on WIFF um and and that did phenomenally well. It's one of like one of my best returning investments [laughter] funny enough. Uh, so I I I felt compelled. The market pulled me back in

and uh I've been I've been dabbling in some names um just for shits and giggles to be honest. Uh you gota you got to feel alive and and what is worse is like not being allocated and missing out. So um we're all human. It's very psychological. But but on the on the big part of the portfolio, um I I'm rotating uh from kind of locked and/or vesting positions and I like I like hype. Um I don't have a meaningful position there, but I like hype. Um I held through Athena. Um I sort of put it in this DAT USD.

Um, and I was like I I feel like dads were like we all knew that they were they would unwind and they you know they trade at a premium when bull markets are all the rage and then and then you just know that the discount is going to be really really brutal. But I remember when this debt launched I was like [clears throat] I know they have x amount of Athena on the balance sheet that they're not they they won't sell. Um and it's like a massive discount to the underlying value. And look, Athena's like every other token went down 60%. So like the beauty and the curse of venture is that you're always fully allocated because you're vesting and locked. So I'm not jumping out of my seat. I feel

like I'm I'm fairly sized on the venture side. You know, projects like Pump. Um Yan, you mentioned that. I'm curious how you guys are looking at that or not, but you know it's it's a project that has cranking out a lot of cash flow and you know it's it's has staying power. Um I didn't fully I'll tell you like in a prior cycle I probably would have bought a bunch of Zcash but I just can't I can't wrap my head around like I tweeted about this the other day. Like I'm comm trading commodities is extremely hard and I can't wrap my head around like the pure supply and demand like I I want to bet on some things that the good thing now is you have like three or four years of

like a protocol like pump you look at the cash flow go look at the blockworks data it's like okay like it was a pretty brutal market last couple months like last 12 months and these guys have continued to crank cash like okay I I can I can I'd rather just be super concentrated in like five names which happen to be venture positions. The the other name I have which I've just been an investor and have been sitting for a long time is Arbitron. So like like my trade and like there was I'm actually curious to get your thoughts on like what do you think of my my thesis for L2 investing was like okay this is a levered bet on Ethereum and they're going to capture more of the fees. And so I did Mega, I did arbitrum and I did a couple others.

And for a while I was crucified. I was like dude this is a dumb trade. like you shouldn't like just just move on. Don't do it. Now it's starting to feel like some like arbitum if you think like Robin Hood fees you know Robin Hood chain continues to do well like would you rather have arbitrum in your book or would you rather have Ethereum? Um what do you think? >> Yeah. I guess if you had to pick um [laughter] which which is the answer it's like I want to pick that says it all. Yeah it all. >> Yeah. [laughter] Um I the tricky thing is it's it's like if you're right on that bet then there's probably better exposure to have right and and that's kind of where it ends up falling for me. I I get the arbitum

side. Um but like have sequencer fees gotten grown materially? It's I don't know what what is >> it's directly correlated their take rate. I think of it as a take rate. Like what's a what's a GMV which is like Robin Hood, you know, they take their cut is 8% of Robin Hood. And if that happens, then, you know, it's sitting at like a billion and a half, two billion at FTV. Um I I just feel like I don't necessarily like doing pair trades, but like it's like short ETH, go long ARB kind of thing. or if you if you have like a huge position in in in Ethereum at 300 billion or so like doesn't take

much to move that L2. Could you see arbitrum being a $10 billion token? >> Yeah, I can. >> Welcome to token 2049. Token 2049 is back October 7th and 8th, bringing together 25,000 attendees, 300 speakers, and 500 exhibitors for the world's largest crypto event. Token 2049 is happening alongside and in partnership with our own digital asset summit Asia, so you can experience both conferences in Singapore during the same week.

across token 2049 week. There'll be more than 1,000 side events culminating with after 2049 and formula 1 weekend and the speaker lineup is stacked. Shane Coplan of Poly Market, Jeff Yan of Hyperlid, Arthur Hayes, NASDAQ CEO Adena Freriedman, and many more. Join us in Singapore October 7th and 8th for Token 2049 and Digital Asset Summit Asia. Avalanche Summit is coming to New York City September 16th to 17th. Join the business and technology leaders building the next generation of financial products, enterprise systems, and consumer applications on chain. Learn how blockchain is enabling faster

settlement, more efficient markets, and new business models at Avalanche Summit NYC. Register for Avalanche Summit and use promo code blockworks15. And ahead of the summit, you can track Avalanche tokenized equities alongside tokenized treasuries and their growing footprint on Avalanche. See the data for yourself with Blockworks Research's Avalanche [music] dashboard. And don't forget to join us in New York City for Avalanche Summit. Yan, [snorts] maybe this is a good time to get into your book. So, you me you told me you have you're holding six tokens right now. I don't know how comfortable you are sharing those six

tokens and maybe we can Yeah, let's start let's start with the portfolio and I'm cur and the more detail the better here. So, you know what's the biggest one? Sant Yeah, >> just send us your wallet address. I'm terrible. >> Yeah, exactly. Yan told me he's going to be transparent. He's he's a man of the people. So, yeah, I won't I probably won't break down the sizing of them, but they're all they're all uh because it also just moves around so fast and I'm not necessarily rebalancing too much right now. Um, but so the obvious ones were, you know, the hypes, Zcash, uh, lighter. What else did I send you? Um, because I have like some smaller stuff as well. Uh, yeah, Venice. So, like I I I'm just a fan of the kind of the revenue story

ones. Um, and and revenue stories that aren't highly dependent on crypto activity. um because I think they they can be a bit more resilient and and I think the TAM is also uh the story for the TAM becomes a lot stronger. So you know I think uh Venice was one of those right where the the the idea of private inference and you kind of will have these periodic uh events that happen that remind people why private inference is valuable and and so um the revenue story there made sense. I think there was some, you know, hiccup when the raise happened and it kind of shined a light on on the the issues of of having equity and and

tokens simultaneously and and kind of who's higher up on the pecking order of of value acrruel. And so I think that gave that token pause, but it's clear that they are planning on continuing to direct value to that token in in in additional ways. And I think the business itself, the margins will kind of continue to improve as they bring on more of their own hardware and just as the revenue story gets bigger and you kind of have economies of scale on on some of these business lines, which will allow them to direct more value to the token because I I do think it's one of those uh where exiting the equity might be a little trickier. I'm I'm less optimistic on that. And so I think the token actually ends up being the long-term value capturing mechanism and and both all the investors are kind of

exposed to it. So, you do have this easy way to just kind of position to that. Um, I think I like Grass a lot. Grass I think is is actually one of the tokens that I was kind of alluding to um in terms of one where they've continued to build but have fallen by the wayside where they're doing the hard part of actually delivering a business that generates a bunch of revenue but they're not really doing much on the the market awareness side. You know, people kind of assume the worst. They don't really communicate much. So I think with a correction there you can have a pretty strong repricing. We we're venture investors in them and I'm also just an investor personally. Um uh so like that business is doing 70 is expected to do 70 mil topline in revenue and and and

based on kind of what they've suggested it's 40 million in operating profit. uh and the business itself is basically so data scraping right now is is a difficult or just data aggregation and scraping off the web is difficult because a lot of sites block uh data center IP so you need to have a residential IP network and that's kind of what they started with where you download this kind of plugin and all it does is it uses your bandwidth to scrape the internet doesn't actually see what you're you're seeing or or any of your keystrokes it's just using excess bandwidth to to to do ad hoc scrapes and so you want to have a geographically distributed base because you can kind of touch all these areas. Um, and they've built up this massive uh pool of data and they they their customers are all the frontier labs. So, Frontier Labs

need to continuously buy new data for each model because they don't store as much of it themselves and and also there's con data is constantly updating and so you have this really profitable underlying business and then on top of that there are additional products that you can build. One that I think they'll be probably releasing this year is called LCR. starts live context recall. And so the ability to scrape a bunch of live data right now is is really difficult. Um you can't have, you know, even if you're using current agents, they're blocked because either like Cloudflare or and basically any Cloudflare blocked website can't have agents accessing it. And so you can access it with this. So there's going to be kind of a subscription product that'll launch and the token is trading at, you know, 330 FTV. Unlocks are done

in October for for investors. uh 30% of the supply is sitting in the foundation roughly. So you have this really attractive setup and and it's one of those that actually did the the equity uh token distribution correctly in the sense that there is no equity. There's just a foundation and there is no other value acrewing mechanism. So you effectively have this business if it was a pure equity non-crypto business it would probably be trading at in in private markets like raising at 1 to2 billion I think um just based on the growth rate but it's a token and and the token was necessary to be fair it helped them built out build out this this residential IP network of like 8 million uh nodes and so it it it was a means to an end it was also they raised at a 500

mil FTV actually the last round which was a couple years ago and and realistically they wouldn't have been able to raise at that vow if they weren't equity because it was a peak crypto mania. So like there the token is being punished now but it was an absolute necessity to get them to where they are and so I think there is an eventual repricing that comes once just awareness comes to to the market about the token. >> Yeah. Maybe just zooming out like what's your expected rate of return in crypto now and how has it changed? You've been along you've been around for quite a bit of time. Uh has that evolved over time?

Yeah, I think just just taking less risk um has has forced it. I mean, I think >> 10 but but but you're taking a shitload of risk. like you're still you're still if you think about broadly asset classes no matter what whether it's Ccash, Bitcoin or you know your top 100 coin market cap like it's it's still as high beta as you could possibly think in a world where we're going to be I was just listening to the all-in pod today and you know they're they're discussing they're discussing whether it's like 19967 or 1999 which tells you we're closer to we're closer to for a recession that we are to

to not being in a recession. Whether that happens in two or three years, if your venture book is going to, you know, be a 5 10 year rise, maybe you don't care as much if you enter in the right balance. But for liquid stuff, like do you want to be sitting out in tokens where liquidity might dry up super high like like what kind of return do you need to get in your underwriting to justify being in the highest beta of asset classes? Full stop. It's hard to do it on a year-by-year basis because there's just sometimes these extended lulls and so I'm I'm less anchoring to a return. I have, you know, individual price targets. I have uh kind of stop losses. I have invalidations and

so I think like doing on a pure return basis is is doesn't isn't as needed. Like I have, you know, money set aside where if if this all gets goes to [ __ ] like you kind of have to operate that way. And then I also just really enjoy the volatility if I'm being honest. >> Well, maybe starting from there. We're all hooked to [laughter] but I feel like uh you know back in 2017 2020 you're like this this is a 10x like like I'm shooting for at least a 10x. I think um I I would >> at least personally I'm like I'm not doing a I'm not doing a venture investment in crypto. I don't think I can make at least a 10x. um Ethereum at 300 billion like this I can't see a 10x cleanly and it carries way more the

asymmetry is very skewed on the downside like like yeah maybe Zcash goes to 10,000 I don't know man but like it's on a relative basis but there's a very credible there there's way more probability of a lot of these things like really repricing down versus up >> yeahc to answer your question yeah like that's just always been in my head maybe it's just too much scar tissue I'm like I definitely want to have cash when there's like a very brutal unwinding of just the economy and whatnot. Uh, and I just I I found it increasingly hard because the market's more competitive in crypto. Uh, you have much much more dispersion, which is a healthy thing, right? To your point, like if you're allocated to three or four things over

the last five years, you not only like underperformed Bitcoin, you just lost a shitload of money. And that's really bad. So, I don't know. Like what do you need to believe maybe concretely like a price target? If you're in hype and hype's at 80 bucks, what do you need to believe for that to be like a $400 billion asset? >> Yeah. Is that rhetorical or or >> No, no, no. It's not it's not rhetorical. I'm just thinking like like in the range of scenarios like it's possible that we'll see hype maybe at 500 billion. Like I'm not saying I don't want to be cynical. Like there is a very credible chance of this. Like I'm just trying to understand like where's the volume coming from? Where's the demand coming from? Like what do you need to see for hype? Like it comes to the US,

uh it gets adopted in XYZ. I I feel like now you definitely need to be thinking about much more tangibility and like who where are the flows going to come from? How does this ex how does hype get to if you're said it differently? If you're allocating hype at 79 bucks, you need to probably clear a two to 3x. And what do you need to believe for that to happen other than like my buddy and my dumb cousin is going to buy it before I sell it, >> right? Yeah. I mean, it's so back to kind of to to cover both points, I think the comfort level comes from more so sitting in productive rather than reflexive assets where uh I think

there's and then and then like the productive side is the earnings durability. How how susceptible is it to the reflexivity of the reflexive assets, right? If if Zcash goes down and and all because the whole market's coming down, that means, you know, trading fees are probably going to be coming down. And so, yeah, some of these are are are dependent on that, right? Hype I think why it's multiple has expanded a bit as you've seen just a lot of dominance in in non-crypto trading assets. on the other hand, they charge much lower fees, but I think over time those fees can step up a little bit and and so each, you know, minor increase does produce quite a bit in revenue right now for them. Um, and so that I think adds a bit of comfort to hype and it also just, you know, expanding the TAM and and it

becomes the everything exchange and and and so it becomes a more comfortable hold. Um, I think, you know, similar things I would say about Grass or or Venice and and some of these others that they're demand. They're a crypto asset with AI demand, right? And and so or AI kind of revenue and and that's what you know I think the intersection of the two where you have a a discounted token just for a handful of reasons. Uh but the business itself is is doing really well and and you probably argue less susceptible to recession. Although the question is like what causes the recession? Is it all right? AI revenues didn't come in and now we're bloated in AI funded debt and and like that's you know what would happen then. And I'd

argue that's almost bullish for crypto because before that even happens, you know, yields will start coming up and the the Fed and and and Treasury will have to do something about that and and we've seen how crypto responds to that. So >> yeah, there's there's elements of of the like precursors to the recession that I think will be bullish crypto. Ultimately, when when it all goes to [ __ ] everything comes comes down. But I think in the buildup the narrative will be that all right you know basically what's been happening now where debasement trade is now in vogue and and capital flies into just uh harder assets basically >> when you think about um the venture book um talk to us a little bit about the quality of the founders and the evolution of that over the years. I mean

just for context folks listening you guys were early on some of the big winners last like AXI was a big position of yours. Are you still excited in gaming? Are there categories that you feel more strongly that you think are non- consensus and you're willing to take a five 10 year bet on a strong team? >> It's a good question. So on the gaming front, I think um gaming in general is a difficult vertical to invest in just based on you know the life cycle of games and how they don't exist as businesses for too long a period of time. And so when you kind of NPV some of these it becomes a harder long-term value story. I I you know the the the idea with crypto is I thought you you ideally enable functionality and kind of

trading activity that wasn't really prior possible but um we've we've tried a few more uh Gunzilla was a big swing for us that that didn't work out well um >> why is that by the way you're talking about backholder too I'm curious >> nice um >> because because we tal we talked about in the pod like it was like it felt like it was a great game like the skins like the like it was they were iterating past on it felt like the fast casual but like much more engaging game like what has happened there. >> I don't want to necessarily you know uh speak ill of of the founder or anything like that. I think it was an issue of uh kind of management and spend to some degree. Um I I attribute it to that uh

because I agree the game itself was really high quality and and that's what got us really excited. it was AAA caliber um in line with basically you know your Call of Duties and and and your uh PUBG Fortnite. Um so yeah, that that was an unfortunate one. I think that and for us that was really going to be I think the final big swing where you know try and do try and get AAA title because we've we've taken a decent amount of swings at smaller attempts for for micro titles that could benefit from a token and and so the idea was barbell the approach a bit and and see if if we can have a AAA title as well. Um so it's going to be hard. I don't know that that gaming will come back meaningfully. I think you'll have small iterations of of

small versions of games do well, but I think as broadly as a category, it's going to be a bit tough. Um, for us, honestly, just the amount of the the verticals that we think are really investable is pretty limited. It's it's basically just like financialized apps. So, we looked at variations of prediction markets um that we thought were really interesting like impact markets. It's um uh I don't know if you you saw those, but the idea is basically you have two markets that exist simultaneously. It's like if you're going into election like a Trump BTC and a Kamla BTC and and the two markets trade with the assumption that the price is is reflecting what would happen if that were the reality and and so it's a it's a compelling way to to kind of express bets. Uh we looked at those for a while. who were pretty nerds tonight

by the idea but ultimately didn't end up investing just I think it's going to be tricky to to to get broader adoption and there's also just this issue of moes uh right in the end it's whoever has a distribution can kind of just take over and and that was that's been a big issue for us I think in general and just thinking about where these >> yeah what do you think is going through the mind of people that are putting in money at prediction markets like Khi at like what is it KI's raising at 80 billion 40 billion no 80 billion I saw yeah I don't remember I I was uh yeah I think your point around distribution like when you think about like what is the mo of of these open permissionless protocols

um well Kashi's not open or permissionless but but but just but you know I mean like like I think we discussed in the pot like Robin Hood is a huge share of the volume like Robin Hood at some point is going to turn that on they have a good product team like they can launch their own prediction market like at that point like what What is the real moat of of some like Koshi and and yeah and who's investing at for like what what kind of assumptions are you making when you're buying it at 40 billion? >> So it's it's basically my my take is that it's it's uh regulatory ARB on sports betting. Um and in particular because it's peer-to-peer you have better pricing than you would uh somebody who's doing pure to house because there's not that like plus 110 or minus 110 type vig. So, I think you

have tighter spreads and and and basically you have kind of a regar and and they do have a decent amount of capture. Like I I have other friends that work in in sports betting and like your traditional sports betting um companies and and yeah, they're just basically the Koshi even though they're breaking state laws like that. That's where I think it can backfire for them because the issue is any any traditional sports book pays a decent amount of tax on every dollar of revenue and that's why the states allow them to do it. Koshi doesn't because it's it's labeled trading revenue, not not like sports betting volume. And so there's just a lot of money that they don't have to pay to these states. And so like that's kind of the push and pull where I wonder at some at some point they're going to have

to like the booster is going to come home. Like I don't know how you can continue on that front, but I think that's kind of the bet they're making. I >> I had a buddy who was who was investing like uh the poly market round. kind of forgot what it was and it was, you know, like it's been a 2x from here and I was like, I don't know, man. That seems pretty rich and like I'm I'm the one with that got in my face. But, >> um, yeah, it's just it's tricky. >> May maybe on that point, what what if it's been um we all have one of those like rounds that we passed on that comes back and haunts you, especially on the venture side. It's like there's ones that re just really torture you. What has been one in recent memory that you

it's like, gosh, I wish I I would I did that. like maybe it's FOMO or maybe I don't know. >> Yeah, it's uh we had we had a look at pump. It was but it was like either a 25k or a 50k ticket and obviously right now that's still worth like a good amount. Uh but it was in like the the basically that first round and we just thought you know we can't really do this as a venture deal and and >> I had the same thing Yan I passed at the 20 million bell. >> Yeah, that one. >> Yeah. >> Yeah. >> Brutal. Brutal. You know, you you don't you know that that happened to us uh with AXI actually and that would have been an astronomical return and it was the same construct. So I learned that mistake and when I saw pump I was like

yeah no I'm not making this mistake again. >> Yeah. >> Y what do you think about the quality of founders right now in crypto? >> Um honestly we've been seeing way fewer venture deals in general. So, you know, I guess if you're talking quantity of quality founders, it's just going to come down as the denominator comes down. Um there haven't really been that many new startups and and and and this is one of those where I think AI is just the the talent vacuum where you know in 2019 2020 2021 a lot of the smartest people were were trying to build in crypto and and then after you know everything that's taken place that that that talent has pivoted to AI just based on what's most interesting. So, um I don't see

there being that many new talented founders, but I I think you you do have some legacy ones um that that you can kind of invest in and and so that's why that I think the liquid side ends up being potentially a bit more compelling um at least when markets are doing well. >> Yan, what is the you mentioned six tokens in the portfolio? I think we got five. So, we've got Venice, Grass, Hype, Lit, Zcash, and I think there's one more. >> Yeah, I think uh Arrow is probably one of the the more interesting tokens right now uh based on kind of what's coming.

So, you've had Uni trade really well. Uh they did the right move of of moving to Robin Hood and they turned on value acrruel and and so the two combined have kind of led to really strong performance. uh Arrow was supposed to basically do this migration where they would move to mainet and and also be able to move to other chains as well and that was supposed to happen in mid July and then that got delayed and and so price obviously suffered as a result but right now the the release is slated to be in in the basically the second half of September and so they've announced that they're moving to ETH and and also ARC uh but you know there's unconfirmed whether they do move to Robin Hood as well and so I think there's just this

massive opportunity for them to really step up in terms of the amount of TVL and and volume and fees that they'll acrewue in a very short period of time. And I think people kind of use it as a catch-up trade and I think the the other issue around arrow was always this kind of relationships relationship between uh revenue and emission and and basically the idea was emission would go to LP pools and revenue goes to stakers, right? And so you have the criticism was there was like you're offsetting revenue with emission and and ultimately the value cruel isn't necessarily real. Um and what was happening now is is twofold. One they're uh going to be making emission dynamic. So it it will be onetoone with kind of the the trading volume and and trading revenue that

happens. And then in addition they will be um and so you have like positive reflectivity there where as price goes up emissions come down. And then they're also adding uh multiple new re revenue lines that they estimate will will contribute about 40% in additional revenue and those won't have an emissions offset. But those revenues will go to kind of token holders or or buyback. Um so right now you do get pretty decent yield just by staking uh the token. But I I think you just basically have this big opportunity. If you look at OI relative to kind of FTV, there's not a lot of positioning in it. You know, I've like chat with desks and teams and there's not a lot of folks in it. So I think it's one of those where you have this obvious event that'll happen and you get you know clarity on

on what the token should be trading like you get you have invalidation you have an event so it's one of those where like the thesis can play out and you can you can either have confirmation or invalidation and I I think it's you know it naturally fits this value acrewing token uh there isn't much positioning in it and there's a reason for fundamentals to materially improve like at a very rapid pace. And so I think that one is is a really interesting one. >> Yeah, we we also I I like Aerrum as well. What um when you are expressing these six trades, Yan, are you putting on leverage or are these just spot positions?

>> Uh I I usually do leverage early on and then I'll unwind that into spot. And so I get like kind of the torque early when it's >> uh you know move the least. And then I just like I I don't really want to hold leverage after it's moved considerably. Like today, >> we're recording this, you know, September 11th. Are you in sitting in these six things in spot in spot or are you levered up right now? >> Uh, some spot, some lever. >> Got it. Cool. >> We're early. Yo, believe. Yeah, >> I I mean for me I think Bitcoin probably goes to like n high 90s maybe and then and then I don't know what I don't really want to be too long after that

unless we get some new information around you know a more accommodative Fed or something like that or like a really good inflation print that allows them to start cutting and a reason for people to Yeah. Yan, why are you guys um I was talking to Anneil the other day and it sounds like you guys are now starting to allocate to a bunch of emerging managers. I've seen Jose's podcast that he's been doing with the emerging managers. Why is this a thesis that you guys are getting excited about? So we started doing a mix of of crypto and AI probably in like 2023 is when we we started in that path like right after the chat GPT moment we kind of started to try and explore and and at first it became the intersection of the two because that's just naturally what we

knew best and then shortly afterwards we also just started looking outside of it and and in robotics as well. Uh and then more more recently over the past like 12 months 12 18 months in defense tech with just like as soon as the kind of the war kicked off is where and the like the all the drone warfare both in in kind of Ukraine and then in the Middle East we've been trying to invest on on both sides of that. Um and so the naturally it's a it's a new area we're investing in, right? And so you kind of have this adverse selection bias fear where like why am I seeing this deal? who with much better reach is passing up on it. In crypto, I had an idea of why I was seeing this deal and why I might potentially be first to it

and and in this market where we're new, it's it's a much harder thing to get comfortable with. So, in in the interest of kind of building up our network, building up our understanding of the space, trying to speak to as many smart people as possible and and and understand how they're thinking about the market. We also wanted to do this this fund to fund. So basically it's all kind of first and some second time fund managers. Um we we've chatted with probably 500 or so now and we've invested in I think seven or eight. Um >> you're talking with 500 emerging managers. You've invested in seven or eight.

>> Yep. >> What are the key standout characteristics of these guys? Is it like people who have, you know, hit one or two huge winners? Is it hustlers? Is it expertise in a really niche like topic? >> It can be any of those. It b like the the it's a repeatable edge, I guess. um like why their right to win a repeatable edge and and kind of something that they can continue to to to do well with is is what we we want to understand. Taste is is a big one. Uh I think one of the bigger things because you know prior to this we haven't really invested in any funds. So we kind of had an idea of what a good uh founder looked like but not as much what a good investor and and those are two very different things and that's I think been a fun exercise. Um, but

it's it's uh kind of it's a a hunger uh like a something novel about their approach. They they need to have taste. they they need to have like strong thesis that um allow them to be or like principles that kind of allow them to be early to trends and and so um a lot of character references as well, but but really it kind of it it just you know it's chatting with them enough and and understanding what makes them unique and and kind of how they think about the world and and so um and we've seen you know we try and do it geographically distributed as well. We have some in China, we have you know SF, we have some in Europe as well. um and and uh one in South America, one in India. So, we're

we're trying to be as geographically distributed as possible and then just trying to learn from them and and I think it's a really great source of information about where they're seeing growth and what they're finding interesting and and and not. So, it's it's just a great learning process for us. >> Yeah. And maybe to double click on that, like what are the things in your investment process or discussion in investment committee have evolved, changed the most? It's like if you were to sit on investment committee of Deli um what is it eight years ago five years ago today and you take snapshots you would have been like holy [ __ ] we've really totally changed the conversation way more focused on X or Y and less focused on these other things. Has there been a material change in your

underwriting process and discussions at committee? >> Yeah. Yeah. If I had to pick one for sure it would be probably the degree of founder diligence that we're doing. I think in in crypto it was especially early on it was very obvious what needed to exist and so you you'd invest more so on the merit of the idea and its defensibility uh versus the founder where like obviously the founder component came into play but I I think the the weight that we assigned to it was lower than what we'd assigned now on on these areas and that becomes two-prong one uh or like it kind of happens for two reasons one just the the nature of of kind of crypto where overweight the the idea versus the founder. And then two, I think as you

move into a lot of these other verticals that are very specialized, there's just no way you're really going to be able to kind of diligence the idea and and the you know, it's its defensibility and its moat. Over time, you know, you can get better at understanding Moes and and kind of where the market might be, but early on, especially with how wide a surface area there is to invest in like on the tech front, you the only repeatable one that you can that scales is the founder side. And so, it's been also just like a conscious strategy on that side. Yeah, that's interesting because I I I'll say like some of my best investments, they they were definitely very uncomfortable, but I didn't fully appreciate the quality of the founder and and that founder evolved and grew

like a ton from the moment I put money in like first first check in to where they are now. And I don't know how to honestly I don't know how to measure that. I because like a lot of times like people just look back it's like of course he was like tenacious and he was just a beast and he would never give up but it's like it's hard man because like there people walking through your office and you're definitely like miscalculating like you know is there like one thing I could tell you like there's 99 things that you can do pet peeves primarily that will like tick me off and like I won't invest and going to crypto conferences is the best way to like really assess the founder in the wild. uh they a lot of them just do dumb [ __ ] and you're like

okay yeah you're definitely not worthy of like uh you're not going to build a big company but sometimes like it's it's my j my gut is eventually like I think venture like your gut needs to be pretty good to like measure up people but sometimes it's really off in in the sense of like holy [ __ ] like like if I had really gone through gut I would have not made that investment and that ended up being one of the best investments it felt really uncomfortable so I don't know how do you guys like maybe maybe this is the value of something like five people or however many of you guys are in committee like is there a lot of disagreements in the quality of the founder >> or do you have like a really established break or process to like drill down into it?

>> It's a great question. I I don't think not not super strong ones. I think it's probably more magnitude of of quality rather than um than just broad disagreement. The other thing is that we end up relying a bit of of uh on each other in the sense that you know we can't all spend two hours plus chatting with the founder right sometimes it'll be two of us sometimes one sometimes three um based on kind of just the amount of time that we have to invest and obviously we don't we want to be respectful of their time so to some degree you know we're obviously sharing all the notes and and everything and we have like a framework that we use to to to kind of create it various criteria

area. Um, but not not massively. I think um we're kind of beginning to get aligned on what we think a great founder is. It It's funny. There's like I mean it it like not not to say that this is a massive one, but it it like the amount that you see childhood trauma being one of the actually valuable factors of of kind of just like the the chip on their shoulder and and this you know undeniable desire to win at all cost kind of thing and and basically I think probably the most the best one of the best crypto founders we've invested in is is Guy from Athena which you obviously know very well but I think that that guy will will stop at nothing to win and and So, um, and like

anytime I talk to him, I'm I'm just incredibly bowled up on on what he's building. He's got this innate ability to to really, uh, I think get you and the team excited. >> It's like a [ __ ] everyone else energy, not like I will do this and like I'm [ __ ] care what you think. I'm just going to do it and willing to um, he's as tenacious. There's definitely some family like or just I don't know like [laughter] a >> No, no, those are two separate tangential points. I wasn't alluding to the the trauma being one that he's uh part of. Um but I think yeah it's like it's a spikiness. It's uh and it's different than than than the good investor gene where it's um you know on the good investor side it's kind of taste its ability to network. What's how

are you like who who are you speaking to? Why are you going to be seeing these deals early? And then on the founder side it's just kind of this were you really successful at something early on, right? It doesn't have to be school, it can be gaming and it can be sports. Like were you just the best? It's it's very hard to be the best or like one of the best in the world at at anything, right? And so you have to kind of respect that uh as that's definitely something we we kind of chat through. Basically, we started like, you know, what's your earliest memory and and walk us through your entire life kind of thing. >> Yeah. Does it bother you that like you look back over the last eight years or five even even five years does it ever bother you guys that you could say gosh

I could have bought like secondary and SpaceX and vastly or or buy Nvidia and I would have vastly very likely vastly outperformed on an absolute certainly on a riskadjusted basis um our venture like like because there's idea of venture power law distribution like the top 1% of VCs make like the vast majority of returns um I've certainly like thought deeply about that like what's the return profile of my like I I benchmark myself against okay what's my DPI what's my like I have and I built a lot of that with like claude and and and like just been trying to measure that and sometimes I do wonder like [ __ ] maybe I should just like by ramp uh at you I mean like >> does that ever compute with you guys

like >> so the the tricky thing is that I don't know that I would have been in SpaceX one nor like I didn't I wouldn't have had the money to even do it, right? Like that >> nor could you get access you couldn't you couldn't get access to SpaceX >> but you could you could have Yeah, you could have gotten access like if you worked through it you could have gotten access for you five years ago. >> Yeah. Um I mean I I think the AI and AI has repriced public market comps massively, right? Like now you have I don't know eight or 10 trillion dollar companies.

However many years ago there were so few of those. And so when you're thinking about like what is my upside in SpaceX, it it probably didn't seem as obvious that it would be this high. Um and I think the Nvidia you probably have to do a fork between you know that whatever November 2022 m like whenever that chat GP2 or like October because then the value of GPUs completely shifted, right? And so, um, if you anchor to that, yeah, I'm sure you like it, you'd still massively underperform. Um, but, you know, kudos to It's also just so hard to hold those things, too, right? Um, >> but but you're investing in tokens, right, which are way more volatile and the volatility will just spook you to like I'm not saying you guys, just generally will make you more inclined to

sell, >> but like less so on the volatility, but more so on like the unrealized gain portion where it's like you're just sitting on Yeah, >> totally. No, but like like I do look back at singular moments like and I think people try to be clever in how they make money. Like it feels you want to be non-contestants and right and that's the best validation and like if you bought hype at a dollar and be like this and now you're like you look like a genius and you're insufferable. uh but but uh or or Zcash um like it feels great to be non-conensus early and then eventually, right? But like you could have sat there and like listened to Stan Dam Miller talk in the Stone Conference like go long Nvidia. That was like in the Chad GBT moment and and and I remember like a lot of people I talked

to at that point were like no it can't be this easy. Like just you need to find the next Nvidia, right? It's just always you need to find the next Zcash, the next hype. And and then he said the same thing about copper like literally a year and a half ago. And that was a clean 2x. What is it? Two two and a halfx. Nvidia is like now I know you can do the math. What is it like a that was a that's been a over a 2x in any size that you can possibly think of, right? >> And I think about that constantly. >> Anytime I'm talking to a founder, anytime I'm going to pull a dollar away from that, I'm like I I I've sort of stopped trying to be clever and just trying to make like do you want to be right? Do you want to make money? I

think a lot of the stuff in crypto is hanging on to narratives or or this idea of like it needs to work, but I'm just not sure we're going to see a trillion dollar business. Like it's it's extremely hard for me to believe that we're going to see a trillion dollar business, not a commodity in crypto. And I don't have any issues seeing that in crypto in in in AI or in other industries. And and honestly, that's just really predicated on we need to see a whole lot more of user onboarding and stickiness to products and and or believe that like the ISIS of the world just are going to hand us uh you know a huge favor and it's it's hard to underwrite that to be honest. I don't want to depend on these like singular entities coming on like I don't want to

need to believe that like the token can do a 5x if there was like 10 other Robin Hoods you know and it's just hard to underwrite that you know >> yeah no I fully agree I think I mean majority of my venture book is not in crypto um [laughter] >> it is shocking how quickly things in this world can change like think about the things that were happening in 2021 and how completely absurd those things seem Even in 20 even if you talked when we did a you know podcast in 2023 we were like oh my go like and we talked about what happened in 2021 it was like you it's like who in their right mind would even do those but those were so normalized and so there's a chance that in two years SpaceX is the most valuable company in the world and Nvidia is

another 2x from here and there's a chance that we say can you believe that people were piling into SpaceX at that price like I I don't think I think it's so easy to say that today but >> totally no I I definitely hear that >> momentum just can change like on a dime, you know? >> 100%. I mean, you've had over the last three months the highest momentum unwind spikes in in the last like since 2008. >> Um, >> like ramp ramp, what is ramp raising at right now? Ramp is raising at at 60. There's a chance that ramp is a hundred billion dollar company in two years.

there's a chance that we say, "Can you believe they fooled the world into putting uh valuing an accounting B2B SAS company at $60 billion?" By the way, by the way, I love We use Ramp at Block Works. I'm not saying that about RAMP. I I do love RAMP. I I actually am >> our team hates when I talk about RAM because I talk about it so much, but like it is there is a chance that that is the case in two years. >> 100%. No, look, I mean, look at Bending Spoons. They acquired Air Table at a billionish, just clearing the prev. And then Miro just got and they just acquired Miro.

>> Miro was at what 19 valued at 19 billion 17 billion. >> 100% like if you were invested in Muro last round that was a 17 and change billion dollar valuation. Iconic leading that round and so it was like you wanted to get into that round and then they acquired it now for a billion three. Wait, wait. Speaking of this, Yan, did you guys do this? There were very hot secondary. Not hot. There were very discounted secondary deals about a year ago in crypto. Like a lot of the series B, series C. Did you guys do any of those? >> No, we we don't really do too many uh later stage things. It's just hard.

>> Yeah. Um >> like like what would have been like >> there were like um like like many many of the custodians prime broker prime brokers like let's say people who raised at like 7 8 n billion you know let's call 5 to 10 billion you could buy their secondary at like between 500 million and a million and a half. >> No. >> Yeah. Well, even even Kraken has had like wild >> Kraken Kraken secondaries you could get between like three and seven billion and now it's they just got an investment at like 22 billion. So >> yeah, >> that's right. Was it 22?

>> 21 or 22? Yeah, >> 20, >> which was a clean it was a 2x on the last round year and a half ago. >> Yeah, we did that round like Yeah. >> So um >> Well, I I hear you, man. But I I what I'm trying to say is I there's a very clear there's like a lot of frothiness in AI like instinct and the way that round came together just to me screams like there's a lot of froth in the in the in the private markets because there's a lot of like there's a lot of FOMO trying to chase the next SpaceX because there's been phenomenal outcomes and Enthropic is going to be a massive like I heard Anthropic raising and the value generation there will like be four times larger than all the IPOs that have come out of San Francisco based companies comb like and

they were talking about like the real estate in San Francisco and it's just insane >> insane right but yeah I don't disagree with you I just think like both can be simultaneously true like there's a lot of frothiness in in private markets in AI and there's also just unsustainable valuations in crypto like like most tokens have traded below their last round the private like tokens pretge if you look at the valuations of that and where they're trading today with a token I think like 99% of those tokens are down and there's there's clear gems in there that are going to be the next a right that you could have bought a like a 10 million fully diluted.

>> I just wonder what that sectors would be. >> So Yan, thanks for coming on, man. >> Appreciate it. Thank you for having me. It was a blast. >> You got a nice background here making us jealous. >> Oh man, I want to fly out there. [laughter] >> I'm not in the Caribbean or tropical island. >> Yeah, Yan. Good to see you, man. Good to see you guys, too. >> Cheers, folks.