Why We Back Founders, Not Narratives

Transcript

Thanks for having me. Thanks to Mexc for sponsoring into this event. I don't normally wear sunglasses indoors, but I'm sparing you the vision of an eye injury, so don't worry about that. One day you'll see my real face. Um I'm here today uh to talk to you not about really Alliance itself or or what I do, but I'll just briefly mention it. Uh the the hope is to let you walk away with some secrets that we've been building for some time. Uh and I think that's why they even let me here alongside such incredible names who've accomplished much more than I have.

Uh so uh yeah, without further ado, let me uh walk you through this. So for about 5 and 1/2 years, Alliance has been asking founders what they are building. Uh we've been asking them that in the context of a community we've been growing to now 700 alumni. And they've been answering this question as best they can with either a few sentences or even full paragraphs. And what I wanted to reveal to you today is something that Claude doesn't know and Codex can't be bothered to answer with, which is what have people been building since the last big cycle.

And what you might think of regarding crypto narratives. So here we go. Out of the applications we received in what is our seventh cohort here going to our eighth cohort and where our data starts to get reliable enough that I can show you what we're doing, almost 40% of applicants building in crypto wanted to build with NFTs in mind. This was euphoria. A massive narrative that everybody wanted to be a part of where volumes were high, prices were high.

And then, as you can imagine, knowing today how often we talk about NFTs, this narrative has declined somewhat dramatically. And the same happened to a few other things that I want to walk down memory lane with you with. But, to make it visual, I've actually just re-indexed everything to peak. So, the top is basically when there was the most of a certain word showing up in applications and going to the bottom of when there was the least. So, DAOs. You might remember this idea in crypto sometime ago.

Uh this is a pretty painful one for us at Alliance as we were once known as Alliance DAO. Uh basically, the complexity of running a giant decentralized autonomous organization combined with the giant security risks involved in doing one of these things has led to a pretty steep decline, a very sharp peak on this narrative and idea. You can see the same thing with the word metaverse. Now, remember we're measuring the preponderance of words in applications. It's possible the metaverse is alive and well today as Roblox, Minecraft, and Fortnite, but no one wants to call it that, and certainly no one wants to tell us they're building the next metaverse or

in the metaverse anymore. An even perhaps sharper and more remarkable peak was the play-to-earn uh moment in the history of crypto. Uh Alliance was fortunate enough to work with the STEPN team, which did a move-to-earn version of play-to-earn. But, uh off the backs of Axie, a very exciting project that inspired the world to play video games and incorporate earnings potential, this entire narrative went very quickly to nowhere uh today.

Now, people still are earning in games, and there's still economies in games, but play to earn as an idea has gone away and you can see the sort of general trend of what we call like dead narratives. And I'll hesitate to say they were bad narratives or that the teams building in there were bad cuz we'll see that that actually wasn't the case. Um, but other narratives have had very different shapes. These are the narratives I would say are perennial. Payments and privacy have always been a part of crypto startup life. People have always wanted to build in this space and have been excited about them. Now, privacy has been less of a painkiller and more of a vitamin and in startup

land that's a really tough sell. You need to put hair on fire problems out, not solve problems no one's really suffering from yet. And so while it never really took off because we never had very big breakout successes, you know, maybe the recent Zcash explosion we'll see more privacy happening. Uh but payments we've never had a cohort without at least a couple payments companies. There's a very clear use case that crypto's always had. And we've had also cyclical ideas. Prediction markets. For those who remember Augur in the early days, prediction markets have actually been around for a long time.

But with breakouts like Kashi and Polymarket, we've seen them come back. And stablecoins. Uh now this is the opposite of uh the approach that Kashi and Polymarket bringing back excitement. Here was a a tempering. So uh at around this point in time Terra and Luna collapsed and using the word stablecoin was like a shibboleth. It's like a bad word to include in your application as you'd be lumped in with something that was sort of like the greatest embarrassment of our industry for some time.

Uh but today's stablecoins are alive and well, resurging of course from Circle's IPO and USDC's incredible success in the mainstream. And I think this is the last one I have, launchpads. We were launching NFTs before, we're launching meme coins there. Both sort of peaked and went away and I'm sure they'll come back for some other narrative but they require a sort of exciting catalyst to to bring everyone into them. Um this 2024 catalyst was of course pump.fun, right? Pump.fun is this still today doing very well and uh research that one there.

Um but I wanted to go back to NFTs. I wanted to sort of in addition to walking down memory lane with you and you know, reminiscing on all these great narratives we've once had and still have today. Uh what we sort of interacted with on this timeline. And well, I want to talk about first Metaplex. An early company we backed at Alliance and look, I'm not here to say we're great at backing companies though I think we are. I'm just these are the ones I know about cuz they're the ones I got to work with. Uh and so Metaplex was helping people uh lend on an with NFTs and it was a modest success growing and then until it couldn't because the NFT

market sort of fell away. And they pivoted to financing AI hardware with USDAI and the chip token and they're doing really well today. And we're really glad we backed them regardless of having started in a different vertical. We did again something with a company at the top of the NFT hype cycle, a team called Tensor. At the time they were building an oracle to help people price NFTs and then realized they could build a marketplace and then realized they could build the biggest marketplace on Solana.

And then again, narrative went away and they pivoted once again and found Victor and meme coin trading and then got a Coinbase acquisition. Another really nice opportunity for great founders to come into a narrative at a new point and leave it a different one and do fine. And then you think this would be crazy to come in once the narrative is already clearly dead. Like why why why back a team so late into the cycle? But what we had learned from Tensor and Meta Street is that great founders who ship fast and work hard and who listen to their customers are always worth bringing on.

And the last Caviar didn't do very well on demo day. They didn't even raise. And so we helped them pivot and explore social fi, a new narrative that was growing at the time. And that didn't do so well, either. Uh but they kept learning and compounding what they learned and kept shipping, and because they were technically minded and working tirelessly, uh they eventually found a great idea. They built a pump.fund, and uh they've made $800 million today, which is great. And are one of the largest, most impressive companies we've seen in crypto.

So there is no real pattern to when you should back a founder given a narrative. And I don't think you should really care about investing in narratives or supporting founders in a given narrative. I think what we've seen is that ideas come and go, but founders stay. And you want to find the ones that can. And so that means founders that are comfortable pivoting. That means you being comfortable with founders pivoting. And be excited by pivots. And what that really then means is what is the kind of founder that can pivot. What are we looking for when we look for someone who's going to come into and out of great ideas and explore new and

interesting opportunities. And this is the community we've been trying to build for some time and learning how to build it. So, the first and and this should be no surprise to anyone who's been in startup life is you have to talk to your customers. You have to talk to people. People have all kinds of secrets to reveal to you. And to build a successful startup is to accumulate secrets, to grow domain expertise, to know things Claude doesn't know, like we were saying before. And it's actually really awkward for young people who are building companies to go out from their armchairs and explore the world of of real-life problems and to embarrass themselves and be cringe

asking and finding out what's wrong. But, I think that's a really great thing to try and do. But then, once you do find what's wrong, you have to ship really fast. And thankfully, we live in an excellent age of AI coding tools, uh which many of these founders didn't have access to when they did. But, theoretically, you should be able to ship 10 times faster than we used to to solve problems at a greater breakneck pace. Uh and then, the last uh and most I think important part is to listen to your customers and to your friends and family and investors when things aren't growing anymore, when your North Star isn't guiding you towards up and to the right.

And that's uh then to find a new idea. So, talk to users, ship fast, and know when you have to find a new idea because your numbers don't make sense anymore. And I think that's that's what we've learned and that that's what we learned from these uh founders coming in all points of narrative. And uh yeah. The last thing I want to leave you on and because I promised I'd let them catch up on their timing is uh don't index on trends. Find founders who talk to users and ship like there's no tomorrow. Thank you.