What It Takes To Build In Crypto | Stani Kulechov & Jack O'Holleran

Transcript

this episode is brought to you by ZK sync join the elastic Network today at ZK sync. iempire thanks to ZK sync for making today's episode possible how's everyone doing how's day two nice to the guy who yelled loudly nice so apparently there's uh 32,000 people in the live stream 33,000 now on the live stream yeah it's great it's good great um so there's actually a fun B so this is a live Empire Santi and I are the host of the podcast called Empire we have stanie founder of like I feel like 17 different companies at this point in crypto but no not that many just a couple no lens and a and some some other things that we'll talk about

um we have Jack who's the uh founder of H scale Labs scale I don't know the right way to put scale we can just put scale um but actually there's a funny backstory so Santi and I I I launched the Empire podcast by myself and unfortunately because I'm really boring nobody listened to it so I was trying to court a co-host and uh I found Santiago who is this like big name in the industry I was like oh my God how am I gonna get Santiago and so I kind of knew stanie and so we got we did a test episode in 2021 which was Santi and stanie uh on on Empire together and stanie didn't realize that we was trying to court I I didn't actually care about stanie in this episode I was trying to court Santi to be the co-host and the

episode went well and so that's actually what what led us to to do the Empire podcast that was a pilot basically was yeah as a pilot it was funded we've been running this for what five years ago run yeah year this is year five of Empire podcast that's a marriage right there yeah we got a mar all right so we're talking about founder mode and what it what it takes to build a company in crypto maybe I'd throw it over to to you stonnie uh you've been building a since well since it wasn't called a it was called I think eth lend back in the day um what is the most maybe misunderstood thing that people in this room might not see about kind of what it takes to build a crypto company I mean it takes a lot I I think that's not it's no secret that

you know building any company is is really uh difficult and I would say especially when you think about our space and crypto blockchain um a lot of this technology is very novel and and there's a lot to build just purely from like infrastructure perspective and a lot of the um startups we have um they have a very longtime Horizon so things can't really be be built uh very quickly it takes time to mature and we are living in in decentralized communities where you know there's a lot of dependencies so so for example if you're building something on ethereum you might be dependent on future road map of of of ethereum and bunch of other things that that might be there I think um on a

personal level my journey to to uh startups and and and crypto um happened when I was still um studying in in University so uh in my dorm room basically where um a lot of the ideas came out and we started to experiment on on ethereum building basically Financial uh smart contracts and and trying to like kind of replicate um Financial transactions um and functionality that exist already in traditional Finance but doing it on chain and making it just more like transparent uh efficient and naely with with crypto assets um so obviously my kind of curse is always that

uh I've never been able to achieve um any anything really good at least in the beginning in the sense that I have to iterate with the product uh quite frequently and and find actually what people like and what the users like um and that kind of a process takes uh usually two to three years uh for me personally so we started with e which was effectively more like a peer-to-peer model and we realized that one of the benefits of of of uh of Defi and and um on chain is that you can um you can group liquidity together and and pull that liquidity and then when you do that you get incredible Network effects and you can build incredible products and that's where basically a was uh born and

and and that was a really successful uh product that became the market leader in our space uh Jack you you built successful companies in web to for what 10 15 20 years and now you're building in crypto obviously what are the main differences between being a Founder in web 2 versus being a Founder in crypto and in only 10 years not 20 or 30 great hairs um yeah so I mean I was I have to say I was incredibly surprised when I started my first crypto company because I 10 years prior of founder experience building a you know one of the world's leading machine learning AI SAS platforms so you know i' been in the meat grinder as an entrepreneur I kind of knew it to felt like I knew what to

expect but then crypto is actually three companies if you're starting something web 3 blockchain so you have all the challenges of any traditional company of building great product finding product Market fit doing business development doing sales doing marketing core marketing and but then it's coupled with this entire token world it's almost like a financial entity that is Laden with legal challenges and you know all these uh components around decentralization and Community ownership and Community governance that's frankly a business in itself and then you have this marketing engine that's not just core marketing it's almost like running a rock band or

something you've got to like you know build community be hot be in the narrative and it's so you have to manage frankly like three really distinct all-encompassing things and um yeah it's not easy and I think I don't know the strong survive I guess yeah do you guys think that having a token makes your life easier or harder because in some ways it's easier because you've got a bunch of capital you've got a big treasury you've got tokens to incentivize things to happen and in some ways it's a lot harder because uh your employees get demotivated if the token going down there's all these legal challenges and the the whole host of other problems you guys think having a

token is better or worse for being a Founder makes your life easier or harder I I mean I would say I would say harder in in many ways uh because uh it it can be a distraction to be honest like it especially if it's in a in a place where there's no um like protocol Market fit or network Market fit or or so and you know then having a token component will it can be very confusing um but at the same time um it might be counterproductive so I do think it's uh a token is a really uh valuable um tool to actually distribute uh governance power and ownership of something that shouldn't be um relying

to one uh single entity so if you are building a you know future Financial system whether it's payment rails or uh let's say um a lending and borrowing protocol or some sort of uh um trading protocol it is very important that there is no single entity that you can you have to trust and go to but actually the the governance is is decentralized it's transparent and anyone can contribute so from that perspective perspective it's it's really helpful um but having a token very early can be very confusing and also you get um an audience that basically um is kind of like assessing a product that might not really have uh its product Market fit and I think that

can be really hard this episode is brought to you by ZK sync in 2024 ZK sync took a step toward a multi-chain future by transforming from a single L2 into an ever expanding Network of ZK chains the elastic Network to onboard the whole world into crypto many specialized chains must be able to coexist work together and share liquidity institutions and Global Financial leaders choose ZK sync for unmatched security scalable infrastructure better onboarding gasless transactions and privacy first design join Over 20 chains including abstract sofon and Kronos in the elastic Network today behind ZK sync

is the ZK stack it is a One-Stop platform for building private blockchains on ethereum the stack solves all the typical privacy regulatory user experience and deployment concerns of blockchain without compromising performance or security join the elastic Network today at ZK sync. iempire thanks to ZK sync for making today's episode possible I think one of the key things about this industry it attracts like the best the brightest but also uh the other end of the spectrum um and from your standpoint I mean you guys have been building for so many years what would you tell a younger version of you if they were trying to do it again that you would want to know if you're starting in

your journey of building a crypto company like what would you want to have known back then that you would tell to someone in the audience someone that's listening Hey listen I want to start something yeah um so I I think you know I'm going to combine an answer here because I think it's like something that it took me a while to figure out is crypto is a world world of double-edged Swords okay and I think the more you understand that the the more you can get ahead of the other side of the sword and a token is a really good example of this where when the Market's up when the prices are up when the community is happy it is the is a powerful tool and the token everyone frankly works for the token in these decentralized systems

right no one's really in charge lots of people are working lots of people are are paying and getting value um but then you know when the Opposites true in terms of Market you get the other side of the sword and you've got to be ready for that and so I think you have to be emotionally ready you have to be ready with a Communications plan you have to be ready with like you know new plans to execute and improve and you know that double-edged sword also lives with decentralization decentralization is one of the most powerful growth tools out there but it also means you have to give up a lot of control and there's other examples like that and I think you don't one in like the prior world of web 2 and SAS you could just go and read blogs and books and learn how to start companies

and in this world we're we're figuring it out and I think it's probably easier now than when we first started a while ago but it's been an adventure yeah and I I think um I would probably say to myself to to focus more in the sense that there's a lot of uh distraction in the space and and a lot to to actually do and and that can be really um uh distracting from whatever you want to achieve because when you come into the space and you have some sort of a goal and objective um you know it's very important to actually stay on that that track so what what you're trying to really achieve um and and obviously U products change and ideas change and and that's uh totally fine but you have to really trust your gods and go with your

own kind of like U um assumptions of what you want to achieve essentially and that's where like focus is is really important and um because there's that Community element um it's you know it can it it can be quite difficult because everyone obviously has an opinion and you as a founder and and as a builder you have to create something opinionated because you have to have a vision of of what you know the future will look like and and build that if if that future that you build is in something that uh isn't actually getting traction then you might reimagine what uh the future must look like but I think having that focus is really uh important on on what kind of problems you are trying to solve uh s to mayad thr to you actually cuz you're

you're the new founder on the stage um I started this three months ago I mean I yeah you're getting off the ground um how do you think about like what what are the lessons that you've taken away from seeing I mean you were I think seed investor in a or early investor in a and early investor in you know over I think a 100 crypto companies at this point what are the lessons that you've taken away and how how do how do you think about applying those to inversion yeah well listen I never thought of myself as a builder and I think it was the biggest scam that I was sold on this idea that investors can't build and I think you hear this a lot in crypto which say BCS just don't add any value but I think like a founder and an investor you

you're doing fundamentally the same thing which is you your role as a leader of an organization is to inspire people to bring out the best in themselves and if you do that well whether it's because you have a Clear Vision then I think you will succeed and and I think that starts with leading by example um but yeah it was sort of the one of those things that I you know a lot of what we hear are just the success stories of the most successful Founders or people on the stage and we don't really like go into the process of how hard it was but I can tell you in conversation with wani it was hard you're launching a you're doing the migration it is nerve-wracking like you have billions of dollars on the line

this is not like let's move fast and break things like when which makes a to your point you know an added layer of complexity in the space you're building the open and it's you know your community is there and it's just I think being a Founder no matter what industry you're in is super hard but crypto just adds another layer of complexity to it but honestly fundamentally it's been an incredibly rewarding Journey over the last you know I'm building in the open very intentionally uh to inspire people that believe in the mission that want to come join and you know it's just people that I think this is why you go long crypto because I again I said in my last talk it is the most impactful socioeconomic transformation of our time we I consider myself extremely lucky to be born at a time where the more I spend

time in this industry the more I realize that it just fits so closely to everything that's happening like AI some people say wait a minute AI is more important I'm like yeah but like AI fits into like you want to do AI agents like you want to have immutable data like all of that is super important like so crypto is just important because it touches a very fundamental thing that the most important technology allows us to coordinate better the internet radio airplanes crypto is that and and I think you always go long open source cuz it attract like brilliant people want to work on difficult problems whether it's Reinventing the financial system or creating core Primitives to allow everything else to be built on top and I think that's the most exciting thing

about this industry like I why would you be doing anything different you know yeah you're billing in the open you're attracting the brightest people cuz smart people want to work with smart PE with smart people want to build and solve difficult problems there is no shortage of difficult problems in this industry and that's the most inspiring thing this episode is brought to you by ZK sync in 2024 ZK sync took a step toward a multi-chain future by transforming from a single L2 into an ever expanding network of ZK chains the elastic Network to onboard the whole world into crypto many specialized chains must be able to coexist work together and share liquidity

institutions and Global Financial leaders choose ZK sync for unmatched security scalable infrastructure better onboarding gasless transactions and privacy first design join Over 20 chains including abstract sofon and Kronos in the elastic Network today behind ZK sync is the ZK stack it is a One-Stop platform for building private blockchains on ethereum the stack solves all the typical privacy regulatory user experience and deployment concerns of blockchain without compromising performance or security join the elastic Network today at zync thanks to ZK sync for making today's episode possible so maybe for Jack and Sonia how

do you take I think you guys would probably both agree with what Santi said big thorny problems 10e Visions 20-y year Visions for solving these problems uh you basically have to marry that with extremely like memory of a goldfish people on Twitter uh and like very narrative driven industry people who are always chasing a new narrative in like price action how do you basically like balance these two different things where you're trying to solve the big problem you're trying to build amazing products trying to have a very long-term Vision with you know you've got thousands of stanio following what happened last week with your guys's governance proposal that seemed like a big debacle um how do you balance these two these two ideas yeah I mean um in this space definitely

everyone has an opinion and I I I I think it's actually a good thing um because we're as Sandi explained we're we're building everything publicly and open and when you're really doing things like for example if you're building a company and providing a service uh it maybe matters less but when you are actually building um a financial system where you want every single person to to be on and rely upon um you know you have it had to basically stand all the pressure that you know all the opinions that that that might come from from like specific Community or or or wider uh the interest and I think that's a that's a good thing I I will definitely think it's the right way for path for resiliency um it's not really easy

obviously because there's so much noise at the same time to understand what kind of opinion really matters and one of the big Reasons from like founder and U Building Product perspective it's it's good because typically companies have problems of actually finding the first users that actually can give some sort of sort of uh value and feedback for what they're building I think in our space in our industry it's very easy to find your first users and the reason why is that everyone is so connected uh on chain so you can just connect your wallet into a new application um and then start using it and you know you the onboarding is is super easy once you're in the uh space it's it's the kind of

like a bridging part that we we are still uh figuring out um as a WI community so it's about um facing all the uh opinions and then deciding yourself which of these opinions are what you need to value and sometimes you get a really good takes that actually changes the course or ideas that you have and it happens quite more frequently than than um I usually expect um and it's actually creates a more resilient uh protocol down the line because I see that everyone who contributes from the community perspective are also owning the protocol so they have a voice and that voice should be respected uh a lot of people trust me personally um but there's also a lot of other community members that

basically uh are working hard to that uh common goal so in overall I think it's just a matter of understanding what's valuable important um and then using that feedback to to to build something more more better Jack how do you think about this yeah I kind of see this crypto is two separate animals at the same time and you have to honor both and realize they're both really important or you're going to fail and one is traction fundamentals execution and that's like kind of like being an Enterprise software company you've got to go put points on the board you've got to post Revenue you've got to get users you've got to show all these like you know economic value capture metrics but if you only do that you will not be

successful and and scale is an interesting example we're we're top 10 in the world of all blockchains all layer ones all layer twos in terms of uh transaction volume and unique active wallets but what we realized is no one not enough people actually knew about that um and so a few years ago we said hey like we're we're losing in this other category this other category it's almost like being a rock band you've got to be like hot you've got to be part of this narrative you've got to be in the community you've got to be on the timeline and you know we went out and hired a world class CMO we went and you know really changed some things and kind of leaned into that but you have to do that without losing you know the other piece so I think I think we're getting

ready to and I it what's more important oscillates but I think the pendulums really swinging back to fundamentals but you can't just have fundamentals and not have like that other superpower yeah um let's maybe switch gears let's talk about fundraising so you guys have each raised I think like hundreds of millions in your careers um and San I think you're you know you'll you'll do that at some point um I'm sure you I know you fundraised when you Pary and stuff like that but there's I think this idea that in this AI driven world you can build software very quickly what used to take three years to build now takes three months to build what took 300 people to build now it takes 30 people to build and in the future will take three people to build how do you guys think if you were just starting out today how much

Capital let's say you were launching an l a new L1 let's say you're relaunching scale or something like how much money would you try to raise do you still think that we'll see these big Mega 100 million 200 million $300 million raises in crypto or is it look we only need 10 million keep your dilution low um and just Sprint yeah I you know I think um I saw someone the other day I forget who it was they posted they're like a layer one should not have more raised more than4 or $50 million because you can't really spend more than that in any meaningful way and I kind of look at it you know in traditional company building if you raise it too high of a valuation you really paint yourself into a corner and so it's a little counterintuitive thinking oh give me all the cash and

more ownership um but the it is we see this in the market today where that valuation is you know if you start here and it just goes here that's not a good not a good look it's not good for the decentralized efforts of the community so I think I think there's an element of you know what is the right amount bottoms up you need to be really successful which is you know in probably the 50ish million range um in this day and age maybe it took hundreds of before um but uh you know I hear you hear these Mega rounds I actually become a little bit pessimistic when I see that and I get more excited when I see people raising something like wow that's a

practical amount and yeah hey you still have treasury you could sell a lot more later but it's done in a more logical manner because when people when there's that much money in a you know a company or an entity or a project it starts flying around and it I don't think it gets utilized that well either this episode is brought to you by token.com the social first platform transforming how people discover and trade through crypto content with a mobile first interface token.com transforms crypto investing into an intuitive scroll based video experience trade the latest and trending tokens at your fingertips all while discovering captivating web 3 stories from the top industry leaders

and influencers with token.com you can earn points for tasks on the app including on every trade you make just scroll to watch and tap to invest thanks to token.com for making today's episode possible hey everyone Jason here earlier in today's episode you heard me mention the weekly CIO Memo from bitwise in an industry as hectic fast and complex as ours it's incredibly hard to get an easy noons stream of what's actually moving crypto the memo comes from Matt Hogan bit wise's Chief investment officer he's been on the show before and he has this amazing ability to take the most comp complex topics and break them down with Clarity trust me on this one the bitwise

weekly CIO memo is really worth the five minutes of your time check it out at bitwise investments.com memoire or just hit the link in the description of today's episode to get started carefully consider the extreme risks associated with crypto before investing this episode is brought to you by wallet connect the connectivity Network shaping the future of onchain ux for from defi to nfts swaps to staking wallet connect is the backbone of connectivity in the onchain economy seamlessly bridging wallets apps and blockchains with over 220 million connections and 35 million users worldwide wallet connect is the place to

power your web 3 experience with the launch of the wallet connect token the network is taking the next step Paving the way for a fully decentralized permissionless and community-owned Future of connectivity to learn more follow wallet connect on X and telegram or visit wallet connect. Network to stay ahead of what's next what do you think about this yeah I think kind of like the in some some way I think that with blockchain the idea is that you know you can raise you need less Capital because you you um you can automatize a lot of things I I think realistically speaking probably U the AA protocol uh by itself it's programmatic automated automous nature

um you know does something similar today that 2,000 people do at the same time in One bank so um I think it's about um using better resources and and building something where you actually need need less people but you still need people and I think that's where the the the biggest kind of like Opex is uh on the engineering side and especially for us it's not just engineering but also design uh engineering as well and and building really good interfaces because our eventual goal is to essentially get yield to up to uh 8 billion people down the line and I think defi is is the the vehicle that you can distribute yield globally most efficient way and produce the best financial opportunities that

it's hard to compete of of chain I think um I also uh think you don't need to raise that much uh to build uh most of the things in our space and what actually is more interesting is that uh what is the audience that uh you're raising because uh one of the things that uh the blockchain provides uh is is fundraising rails and that means that it creates more accessibility so do you want the investors to be for example Venture Capital um growth funds or or actually people who really want to live in the future that you're building um and if it's the the last bit I think that's fascinating because this is

probably the one of the rarest spaces where um the the the audiences that really use these products they have accessibility to owning these protocols and and even um you can fundraise from them so I think being able to fund raise from a community is uh one of the most bullish uh signals uh to me personally because you get people who really care about the product or are interested in they might not necessarily have um you know the same type of uh experience with with uh investing but they really care uh what what you're building and what this technology can actually do and I think that's the whole point access like you know if you if you're building defy

and accessible protocols and uh a new Financial system why don't we also change the way we you know raise funds let's raise from people who really believe in the future yeah I mean I'll I'll tell you how I thought about it U look uh a you always want to hire A+ people A+ people hire A+ people the minute you hire B+ you go to zero the B plus hires to C A+ people are not cheap so I inverted in said an exercise how many people do I actually need to execute on the vision that's 10 15 people and from as an investor you always hear from Founders there's always that 10x engineer it's like that we can we can let go of like nine if you have 10 Engineers you can let go of nine but there's one engineer who does the 10x work that person should be compensated

appropriately because the way I think about hiring is I never want to give that A+ person a reason to leave so so again but you know there's there's Market comps out there you're going to pay an engineer x amount and you're going to give them skin in the game and Equity but but I will say uh there's been no semblance in the industry of capital efficiency we don't need $100 million rounds I'm not raising 100 million maybe I will down the road and I'll eat my words but but there is a natural sequence and progression to companies right and it's like that scene in The Big Short where they go to that conference real estate conference in Vegas and they're like you know all the real estate brokers subprime Brokers are like going crazy and he just gets on the phone says short everything and I think

like sometimes I don't like to come to conferences because I I feel I'm like you know you know I love ask but but there's sometimes a lot I see a lot of wasteful spending from teams and you see it not just in crypto like and you know you go to dreamforce which is Salesforce largest conference in San Francisco and I think there's like the curse of if you're the title sponsor for dreamforce you will go out of business in four years but you should definitely be the title sponsor for D it's a great conference you should you mean you should always be the title spor D it's a reverse effect right if you're a title sponsor in DH you will be the best crypto um project uh but yeah know how do you think how do you think about uh so that's on the hiring front how do you

think about who you should raise from because you're a VC right you're a VC at parfi then I think you're one of the most allocated angels in the industry institutional Angels institutional Angels whatever good branding um how do you think about like you know now there's Echo and Legion right so you can raise you could raise a whole round just from the community you you could skip the VCS alog together you can now raise from financial institutions who are allocating to crypto you could raise from like you know the coin bases of the world have coinbase Ventures and circle Ventures and all these firms have Venture firms now how do you think about where to get the capital from yeah until you do it uh you really appreciate that there's a very big divide between investors that actually get it there that are there are going to help you um

so for instance the fund that is leading my round uh just CAU it immediately I've worked with them for years I've known them but it was just until I kind of was on the other side of the table that it was so clear that it's such a massive divide between an investor that is asking the hardest questions and that's how I I picked the lead investor in my round because it was like I want you guys in the team because I a feel like you're part of it you're asking the most difficult questions and then they just have provided immense value and I think as a Founder I've just been very intentional and saying okay what are my biggest problems what am I not good at and that's how I'll supplement you know an investor as a partner in the same way that you're

the first five hires that you make really dictate I think the outcome and so I I was just very conscious about that because i' I've worked with most funds in the space I've interact with a lot of funds um outside of crypto as well and so but but I will say there's a massive divide yeah and this whole idea that VCS are not value additive is is not correct I do think that there's the the beautiful thing about Echo Legion it is very important um I think there's incredible proof points around that you know um you know in a perfect world your customers um are also your investors as your employees are also investors so everyone like you you want to talk about

producing alignment and skin in the game in the tightest way possible and I think you you community is so important um but you know there is there is a place and a role for traditional investors because they bring an immense amount of value and sometimes in the cycle we hear obcs are you know just dumping topings like what are you talking about they're locked up for like four years the community gets an airdrop can sell immediately um so it's it's a bit of a challenge I as I think about what I'm doing uh there's a place for everyone of course regulation has been sort of like a limiting factor in what we do but in a perfect world like I do agree like everyone I think there's like from first principes you think everyone should be under the same term

same lockup schedule like there's orderly things that you want to do as an organization to set the tone because the way you build things is like you just imagine if the way like my mental framework is if someone were to discover every legal agreement every cap table every advisor like you know what I mean like if this all of a sudden becomes public we have a problem with that and if I don't then I've done the right thing because that sets me up for Success long term I would also say that um um in the sense that there's a lot of value in in VCS because they do a lot of due diligence so like kind of like a the another part of the accessibility is that um when there's more actually investors in the space and more access um some of the deals that are maybe kind

of like U they aren't like the highest quality might go to these investors that really um gain this new access so I think one of the challenges I see is that um the the actually low quality deals might go to communities which will be kind of like a the counterproductive effect of uh access and I think that's where uh VCS or any other types of services can actually help where um there is that rigorous DD process and understanding of of what that company is is looking to do um and and being able to actually assess the the quality so it the access component is always goes both ways so you can have a lot of access and people make lot of uh mistakes and they get

upset about you know the whole idea of being able to access to new Financial opportunities and there's this other idea of basically you have all this access but at the same time you have the best tools to choose amongst uh quality uh opportunities we're yeah I was going to say we're definitely at this point of transformation where the exact model we've been using the last six 12 months things launch and they don't work well part of that is macro driven obviously but so I think you're going to see some blend of this where you start giving like intelligent smart engaged communities better access lower price but with longer lockups nvcs may start get you know have to you know come up a little bit as well just to in terms of

price and access and exposure because things aren't working perfectly yeah 100% uh that's all the time we have uh hopefully you guys have been enjoying the Empire podcast thanks for listening thanks for uh enjoying this panel and yeah thanks for coming out [Music]