🔑 Key Takeaways
- Race Capital's Chris and Edith bring a mix of traditional enterprise and FinTech infrastructure experience to the table, with a background in successful seed investments and a love of travel.
- Startup Digest's curation model helped build a collaborative tech ecosystem by cataloging events and expanding to sub-publications. MailChimp's support facilitated growth. A similar, yet now decentralized ecosystem exists globally in Web 3.0.
- Networking and seizing opportunities can lead to unexpected success in the startup and VC industry.
- Investing in emerging technology areas like crypto can be highly profitable, but building a strong community and network is key to success. Hosting events and building an accelerator within a venture capital fund can help grow this community and drive success.
- Despite legal and paperwork barriers and LP restrictions, backing projects with a clear vision for crypto's potential can lead to massive growth and success.
- Solana's timing-based solution to transaction throughput issues, initially dismissed by the crypto community, proved advantageous in the current DeFi, NFT, and DAO climate.
- Perseverance, staying true to one's vision, and considering emerging networks can lead to success even in the face of initial setbacks.
- Practical successes and meaningful connections can ignite innovation and growth in any industry.
- Race Capital invests in data, transaction, open-source, developer tools, and communication infrastructure for both crypto and non-crypto sectors. They support developers in their endeavors and move fast to make investments.
- Race Capital's strong connections and emphasis on community in Web 3.0 and crypto make them effective at evaluating young founders in the space. Additionally, their understanding of regulatory compliance helps protect both investors and startups.
- Crypto investing requires diverse skill sets and thoughtful investment memos. It requires a long-term strategy, willingness to learn, and adapt. Knowledge of traditional finance markets is beneficial.
- FTX's early success required relying on personal judgment and relationships, not just funding. Building meaningful connections with supporters and partners is also crucial for success in crypto investments.
- Hold onto early stage investments for long-term gains, be cautious of trading in the middle, and consider becoming familiar with technical terms and concepts like NFTs for potential investment opportunities.
- As Web 3.0 emerges, Web 2.0 developers face challenges in building NFT ticketing, but the crypto ecosystem needs developer platforms and tools to make it easier. Crypto rails offer opportunities to displace traditional financial infrastructure and build normal banking experiences.
- Launching an NFT project goes beyond art; it requires understanding technology, building community, and navigating exchanges. Solana offers a unique ecosystem, but founders must also be community leaders and empathize with the challenges they face.
- To ensure ease and enjoyment in launching and maintaining a successful crypto project, choose something you love and actively seek to build a community with those who share your passion.
📝 Podcast Summary
Meet the Early Investors in Solana and FTX
Chris and Edith of Race Capital, early investors in Solana and FTX, share their backgrounds and experiences on the Acquired LP show. Chris's partner, Alfred, was an original seed investor for Databricks and founder of BA Systems, a middleware for enterprise. They have their hands on both traditional enterprise and FinTech infrastructure. Edith has a $10 million fund and invested in Solana at the same time with Chris. She also worked previously with Dolphin Browser and 500 Startups. Chris built a company called Startup Digest where people can create newsletters based on topics. Both are based in California and shared their love of traveling before the pandemic hit.
Startup Digest and the Early Tech Ecosystem
Startup Digest, a little newsletter started in 2009, was pivotal in building the early tech ecosystem. It cataloged tech events happening in Silicon Valley. The model of curation was introduced where Startup Digest was the primary publication with sub-publications in different cities and verticals. MailChimp, the email newsletter platform, was one of the earliest customers of Startup Digest and helped it grow. The early tech ecosystem was collaborative, with a sense of expanding pie and the feeling of "we are all going to make it." The Web 2.0 ecosystem was similar to the Web 3.0 ecosystem today, but now, there is no central center of gravity. There are huge ecosystems all around the planet now.
How a Failed Company Led to the Creation of Greylock's Community and Ecosystem Program
GroupTie, a failed company that tried to develop community tools similar to Discord for company tooling, led to the development of Greylock's community and ecosystem program by founder Chris Yeh. Yeh was approached by Greylock partner Dan Portillo, who saw potential in the community concept and suggested applying it to the VC fund. Yeh eventually joined Greylock to run the program. Yeh and Edith Yeung, a former partner at 500 Startups, later came together to form their own VC fund Race Capital. The two met through a mutual interest in cryptocurrency and investments in the Bitcoin ecosystem. The story highlights the importance of networking and opportunity in the startup and VC world.
Building a Strong Community: Key to Success in Crypto Investment
Early investments in emerging areas like crypto can be highly lucrative. Building a strong community and network is key to success in this field. Hosting small dinners, talks and salons can help build this community. China has been an important player in the crypto space since early on. Binance originally targeted Antshares/Neo holders and captured a lot of volume during the boom. Crypto-to-crypto was a new concept at the time. Building a cryptocurrency accelerator within a venture capital fund can be a successful model. Investing in emerging technology areas can be both a hobby and highly profitable.
Early investors take on legal hurdles and back projects with vision for crypto's potential.
Investing in cryptocurrency involves legal and paperwork hurdles, and LP agreements often bar owners from investing in liquid assets like tokens. In the early days of crypto, most founders were focused on making money, but there were few projects with an actual vision. Solana (formerly Loom) was one such project, with a concept of proof of history that made sense to investors like Edith and Chris. Bitmain, the largest bitcoin miner in the world, was a controversial figure at the time and investing in crypto was still a novelty. Despite the challenges and uncertainties, the early investors saw potential in the industry and backed projects that would later achieve massive growth and success.
Solana's unconventional approach to transaction throughput.
Solana's founder, Anatoly, had the idea to apply concepts used in low-level CDMA chipset development to layer one blockchain and distributed transactions. Instead of using computation, he proposed using timing to get around transaction throughput limitations. This idea was not initially well-received by the crypto community, as it was not EVM-compatible and the market was crashing at the time. However, Solana's founders persisted, and eventually built their own state machine based on Rust. This decision turned out to be a good one, as the explosion of DeFi, NFTs, and DAOs drove gas prices up. Anatoly's way of addressing transaction throughput limitations is now seen as an attractive feature of Solana's blockchain.
How Solana persevered in the face of initial disinterest and became a successful network
Despite facing initial disinterest from established crypto investors and exchanges, the Solana team remained unfazed and persevered in building their network. Their focus on innovation and dedication to building a high-performance network allowed them to attract significant projects like FTX and Serum. Despite facing setbacks and non-believers, Solana's team remained committed to their vision, which ultimately paid off when they gained recognition and success within the larger crypto ecosystem. This story highlights the importance of perseverance, staying true to one's vision, and not getting discouraged by initial setbacks. It also shows how important it is to look beyond established players and consider the potential of newer emerging networks and projects.
How Solana's Testnet and Connections Inspired the Crypto Ecosystem
Solana's practical success in building a functioning small test net scale gave FTX confidence to use it to build Serum, and this, in turn, gave the rest of the crypto ecosystem the confidence and leeway to start experimenting with it. Additionally, meeting with Alfred, who had scaled something from nothing to having over a million developers built on WebLogic, inspired the founders of Race to focus on building a developer ecosystem for crypto. This teaches us that practical successes and meaningful connections can be a guiding force in shaping the future of any industry.
Investing in Infrastructure for Web 3.0 and Crypto with Race Capital
The development of Web 1.0 to Web 3.0 is not a separate path but part of the same ecosystem. The experts in cryptography and crypto investments also excel in Web 3.0 infrastructure due to similar skill sets. Race Capital invests broadly in infrastructure, including data infrastructure, transaction systems, open-source, developer tools, and communication infrastructure. The company invests in both seed-stage private equity, and tokens all at the same time. The firm was intentionally set up to invest in both crypto and other sectors, and it moves quickly and fast, as the name 'Race' suggests. The partnership intends to make its investments in such a way that fully supports all developers who decide to do crypto, cryptography, or other endeavors.
Race Capital's Edge in Early-Stage Founder Evaluation
Race Capital has an advantage in evaluating new, early-stage founders due to their extensive connections in the sector and their understanding of the importance of community in Web 3.0 and crypto projects. The recent generation of founders they have invested in are very young yet conscious about regulatory implications. While the crypto ecosystem of true believers may be small, it is relatively easy to triangulate who someone is even if they use avatars or pseudo anonymous names. Chris, a partner at Race Capital, has always tried to help in financing and incorporation dimensions, and understands the protocols on a personal user base level. Structurally, as a crypto investor, they have had to change their LP agreement and handle regulatory compliance.
Investing in Crypto: Understanding Token Economics, Liquidity, and Market Maker Skills.
Investing in the crypto world is an opportunity to learn about traditional finance markets and apply that knowledge in a wild west environment. It requires understanding token economics, liquidity, and market maker skills. Partnerships are key, bringing together diverse skill sets including tech, finance, and analysis. Investment memos need to be thoughtful, logical, and well-reasoned, demonstrating a clear understanding of market potential, unique timing, and market competitors or opportunities. Crypto projects require a long-term investment strategy with an understanding and willingness to invest for several years, with tokens being locked up. Investing in crypto requires a willingness to learn and adapt and brings together people from diverse backgrounds, including traditional finance traders, tech people, and analysts.
FTX's Success Built on Independence and Relationship-Building
Investors had to rely on their own judgment and research in the early stages of FTX, as no other VC firms wanted to participate. FTX has faced criticism for having Alameda Research as its market maker, since this is considered a cardinal sin by other investment funds. However, despite the negative feedback, FTX has become successful and attracted traders from the firms that previously opposed it. Edith chose to distribute tokens to her LPs to give back to those who have supported her, even though the distribution would not change the ownership of the tokens. Success in crypto investments is not only about money, but also about building strong relationships with supporters.
Strategies and Challenges in Cryptocurrency Investing
Investing and holding on to early stage investments can lead to big gains in the longer term. It is better to not touch or trade in the middle of it. Distributions in the cryptocurrency space have no playbook or rulebook to follow and it's relatively new territory for many. Opening an account in the US is easy but for other entities, it's quite complicated. Some LPs are not familiar with the technical terms used in the cryptocurrency space. Being a technical founder can benefit in understanding cryptocurrency investments. NFTs are gaining momentum and the concept of a decentralized marketplace for NFTs, like Shopify for NFTs, could be interesting.
The Emergence of Web 3.0 and its Implications for Web 2.0 Developers and the Financial World
The Web 2.0, Web 3.0 world will slowly emerge and we will start to see a lot of Web 2.0 use cases that are now built on a new layer. People in the Web 2.0 world find it hard to build NFT ticketing, which is a little bit different mindset, but it's going to be interesting. Crypto needs developer platforms to take all of the tools and primitives on top to make it easier to construct things with it for Web 2.0 developers, which is important for more traditional Web 2.0 trying to build Web 3.0. And, crypto being used to displace the old financial infrastructure, and for people to actually build normal banking experiences on top of crypto rails.
The Complexities of Launching an NFT Project and How Solana is Changing the Game
Creating and launching an NFT project involves more than just the artwork; it requires an understanding of the technology, building a community, and establishing relationships with exchanges. The costs, speed, and transaction throughput of different platforms also matter. Solana has emerged as a unique NFT ecosystem with projects like SolPunks, Solarians, and Solana Monkey Business. The creator of an NFT project has to be a community leader, building a community around the mint before it even happens. Going through this process can be overwhelming, but it provides a better understanding of the challenges that founders face. Empathy towards founders in this space is important, as they navigate the complexities of art, technology, and community building.
The Importance of Passion and Community Building in Crypto Project Launches
When launching a project, it's important to focus on doing something you are passionate about. Success in the crypto space shouldn't be the sole motivation for launching a project. Pick something that you fundamentally love doing. This will make the process of launching and maintaining the project much easier and enjoyable. It's also important to help other artists or people who are passionate about the same things. Chris' Playground project was to give other generative artists the ability to launch their first collection within the Solana ecosystem. Passion and love for your work can help build communities and attract people to your project, leading to successful launches.