Placeholder Image

Subtitles section Play video

  • Well, thanks, guys, for coming and, uh, giving me your lunch hour.

  • I know the pizza was probably the drop more than I was.

  • That's cool on.

  • So I'm Lisa.

  • I graduated from the JD MBA program last May on for the past year, and change had been working at August Capital, which is Ah, San Toll Road venture capital firm, focusing on Siri's A investments in technology.

  • Uh, and Greg told me, you know, it'll really be a hit if you come and talk about Blockchain and crypto on.

  • So I've done my best to put together how we think about it from an investment perspective, and I hope that's useful to you again.

  • Feel free to interrupt with questions a lot more fun that way.

  • A little bit about me.

  • Eso went to Thomas Jefferson High School.

  • Maybe there's some TJ grads in the audience, then worked at Bain in New York for three years.

  • Um, did a brief stint at the White House working at the National Economic Council.

  • Uh, and that was the inspiration.

  • Thio, come back to grad school and do a JD MBA.

  • Uh, it was here that I first met David Hornick, who's featured in the photo gallery over there.

  • He was here last year, giving a talk with me on as a partner in August.

  • Undergraduate of law school on.

  • Not till I got connected Thio venture Capital and thought that that would be really fun thing to do.

  • It turns out it's a dream job because you get to talk to super smart people all day.

  • And don't I really have to make any power points or excels except for this power point?

  • But that's cool.

  • Um, so yeah, so that's that's a little bit about my journey, uh, earlier this year, One of the things that veces do is we blogged a lot.

  • Uh, and earlier this year I decided I would join the VC bandwagon and publish what I was looking forward to investing in in 2018 on.

  • So I got published in TechCrunch is pretty cool.

  • And these are the things that I was excited about and one of them relevant to this presentation.

  • I said, I'm searching for block chains.

  • Killer distributed application.

  • Um, course, the irony of that is 2018 but the concepts around Blockchain have been around since ancient times.

  • This is something called a rai stone.

  • Turns out there's a Micronesian prehistoric culture, Micronesian island of Yap, and this was their currency.

  • They are limestone blocks.

  • There are about four meters in diameter, probably weigh on the order of tons.

  • And obviously you can't physically transact a four time limestone block.

  • And so what the Islanders did was they decentralized knowledge about the ownership of the currency?

  • It became an oral history that was decentralized.

  • And when arrives Stone transferred from one person to another, everyone in the island simply moved their aural understanding of who owned the stone on.

  • And, uh, you know, I think that's a very beautiful analogy for exactly what Blockchain enables today.

  • It's a distributed understanding of who owns what who has transacted, uh, in with With who, etcetera.

  • So Google Rai stones are super cool.

  • How do I think about investing in Blockchain?

  • There was a log written by the team at Union Square Ventures a couple of years ago, which is where these Tarts came from.

  • That I think, explains this really well when you think about the Web on, think about the difference between protocols and applications.

  • Applications have taken the lion's share of the value, Uh, you know, protocol, Air http TCP It's a utility that shared by all of the major applications.

  • Why have the application's taking the lion's share of the value?

  • Well, it's no surprise, because there's silo data.

  • What's proprietary to Google and Facebook and Twitter and Amazon is the vast amount of data that they've aggregated about each of us and our browsing behavior and our friend and our networks, et cetera.

  • And that's where the lion's share of the value has accrued.

  • When you think about Blockchain, it's very different in Blockchain.

  • There's a lot of reasons to believe that the protocol layer is actually where the value will accrue and application layer less so.

  • And that's because Blockchain, by definition, is a shared data landscape.

  • The protocols enable any application on top of them to access all of the data that exists within the protocol.

  • And so there's not that same proprietary siloed data within a distributed application.

  • Moreover, with a protocol, there's economics of the tokens that incentivize both development and adoption of the protocol more quickly than we saw with, uh with the Web and why is that well, network effects, traditional network effects say Facebook's getting started the overall utility of Facebook when it was 10 people first using it at Harvard pretty low on the incremental value of one new person joining the network help to make it more valuable until it reached a critical density.

  • And then, at that point, you get good viral effects of network effects that take over and that period of time from an equal zero until an equals density is called the bootstrapping problem in network effects tokens.

  • Because the first users of the block chain of the Blockchain utility are compensated with tokens, and they get more token value for being early adopters than people who joined later.

  • You actually have this financial utility curve that's inverse to the application utility curves.

  • And so there's reason to believe, as you all know, that token network effects will actually be a lot stronger than the network effects we saw for the traditional way.

  • Uh, so that shows that the protocol layer is actually where a lot of the excitement was.

  • You'll remember that I had written that I was searching for black chains, killer distributed applications.

  • You're probably like Okay, Lisa, what's your point?

  • I think Realistically, I was probably wrong.

  • I think that really what I mean by searching for the killer application and is searching for that next great protocol.

  • And if you look at the distributed application landscape, it's still pretty nascent.

  • There's an amazing website called the State of the Gaps, where you can see in real time how many distributed applications are being developed on top of Ethereum.

  • As of the time I put this together, there were 1500 of them.

  • You can see the category is.

  • Most of them are in games and social.

  • Probably heard of Crypto Kitty's like one of the best distributed ups out there.

  • But even crypto kiddies, which was invested in by Union Square Ventures and others back in April, eyes still today, maybe a company worth tens of millions of dollars, whereas Bitcoin, ethereum, et cetera are worth tens of billions of dollars.

  • And so I think it proves the point that the protocols are where all the action is.

  • Applications might develop in time, but they're still pretty early.

  • How Riyadh August capital invested in a really cool company called Spring Labs?

  • Uh, and Spring Labs, uh, is trying to build a protocol layer for financial institutions today.

  • If you walk into a bank on want to apply for a loan, you have to submit pay stubs on a copier, your driver's license and probably a letter from one of the credit bureaus that tries to prove that you are who you say you are.

  • On.

  • The credit bureaus represent $40 billion businesses, but as we know from the equal fax hack, they're not particularly secure.

  • You, the consumer, have no access to your own data, no control over your own data, and they don't even really provide.

  • All the service is that financial institutions need.

  • They don't do anything with anti money laundering, anything besides just the basic know your customer analysis.

  • And so what Spring Labs is trying to do is take what today is a really centralized process and decentralize it and make it such that Bank of America or, well, Spargo etcetera can ping a network toe.

  • Find out Hey, has Lisa been verified before?

  • If so, I'm gonna compensate the institution who verified her, and if not, I'll do the work and then be compensated in the future.

  • Whenever anybody else needs to verify her identity, Ah, and so I think it's It's a really smart use of this protocol layer network effects thio, um, to create a, uh, a decentralized way of storing data that today is very simple.

  • And if anybody is interested in spring labs or wants toe talk about job opportunities there a shameless plug Happy to check, uh, as a law school graduate, I would be remiss if I didn't talk about how is all this being regulated, right?

  • Like a zoo venture investor when dealing with something like Blockchain one of the things we think about aside from, uh, you know, where is the value accruing what are interesting applications is what's the regulatory risk here?

  • And crypto has certainly been full of controversy in the past couple of months.

  • Uh, in regards to will it be regulated as a federal security or not?

  • And if you turn to the federal security laws, all securities have to be registered with the SEC.

  • That's the very basic.

  • Then you need to know.

  • Ah, and then the question becomes what the security and is a token, a security eso security 11 of the things that counts is the security is what's called an investment contract, and that was defined in a really important case called Howie as a contract transaction or scheme whereby a person invests his money in a common enterprise and has led to expect profit slowly from the efforts of the Broder.

  • There pretty a lot of legalese, but it's been boiled down to a four point test.

  • One.

  • Was there an investment, too?

  • Was there a common enterprise?

  • Which just means a whole bunch of people pulling together toe work jointly.

  • Three.

  • Did the people who invested expect to make money?

  • And for, uh, do they expect to profits only from other people's efforts rather than from contributing to the system themselves?

  • Uh, and so these security laws are implicated in different ways, depending on how the investment and Blockchain is structured, you've probably all heard of the I.

  • C E.

  • O.

  • And another phrase for an I C.

  • E.

  • O.

  • Is the direct token presale, and typically what happens here is the developers of the protocol put together a white paper.

  • That white paper is distributed pretty broadly to both accredited investors and retail investors like um, and the white paper describes the network that will be built, but it's not yet built.

  • Ah, and it says, you know, you can buy tokens directly in that future developed network, and then they raised a ton of money.

  • Some of these icy roads have raised tens of millions of dollars, and then all of that money goes towards the development of the network and compensating the developers, et cetera, et cetera.

  • Everything that you need to start a business.

  • Contrast that to the Saft, which was the brainchild of Ah law firm, called Coolly and modeled after ah, standard document developed by Y C for investments, often in the very first institutional round of a company's creation that is called the safe.

  • This is the Saft, the simple agreement for future tokens.

  • Ah, and it's very similar toe what happens with the I C E O.

  • But importantly, different in a couple of key ways.

  • Same thing.

  • There's a white paper that's developed before, usually before the network is existent.

  • But importantly here, accredited investors invest in equity in that company rather than directly in the tokens, uh, based on this staffed and then money goes to the rela bears.

  • They developed the network, and it's only once the network is existent, and there's actually utility to those tokens.

  • So in the case of Spring Labs, it would be networks created.

  • There's now tokens banks can transact them.

  • Then me Lisa, retail investor could buy one of those tokens and participate in the Took an economics that way.

  • So on the left hand side of the I C e o.

  • Uh, these tokens air probably regulated a securities.

  • We've already seen some action on the part of the SEC that suggest that they believe that, uh, on the right hand side, it's still a little ambiguous.

  • The SEC has not yet ruled, but the Saft itself that investors invest in is starting Leah security.

  • And then there's ambiguity as to whether those tokens the utility token, is going to be regulated a security or not.

  • But it certainly seems a lot more likely that because those tokens have a value, people aren't buying them because they expect that they will increase in value.

  • They're buying them because the network exists, and it each token represents some sliver of utility to participating in that work, so probably more likely to be regulated, not as a security and so our investment in spring labs was done via a staffed, and that's been our view.

  • It August there certainly tons of investors who are participating directly, not just in in crypto currencies themselves, but also in I CEOs.

  • And that's a super interesting thing to observe, as if you see, because it's it.

  • It almost poses an existential risks to what venture capital is because it's decentralizing what we do s o.

  • If I were you and I were thinking about, you know, are there black doing projects out there that I'm interested in joining?

  • Uh, you know, how do I triage this regulatory risk for myself?

  • There's a couple things that I would clearly avoid.

  • Uh, you know, no matter what picture the project you're joining is motivated to at least try to comply with regulations, right?

  • Like there should at least be a good faith effort to try to try to be above board.

  • There's a whole host of financial regulations having to do with money transmitter licenses.

  • You have to register with FINRA all this stuff, and then a lot of there's a ton of projects that are trying to register offshore and it attempt thio, save on taxes, Probably the case that black chain tokens are gonna be regulated as property other than as capital gains.

  • Uh, but from everything I've read doesn't seem like there's actually that much to be gained by registering offshore.

  • So it's probably more of a red flag than anything else.

  • And then look for companies that are raising money off of this Saft structure.

  • Like I said, proactively trying to comply.

  • It's always, always a good thing if you want to learn more.

  • Uh, these are a bunch of the leading lights, both in both from a technology perspective and also from a regulatory perspective.

  • Eso Brian Armstrong, founder of Coin Base Linda G.

  • Uh, it puts together some really wonderful content on medium, about about different crypto currencies and also about different events that pulled together some of the smartest people in the space.

  • Elizabeth Stark is creating a layer on top of the Ethereum network that slows.

  • The are sorry increases the transaction time.

  • Kathryn Hahn is a fascinating example owes of someone who's transition from the legal world.

  • She was, think of federal prosecutor for a while, a Supreme Court clerk and now is leading injuries and Horowitz's crypto fund on.

  • So she's a really deep thinker and how all of this will be regulated.

  • And then Matt Long, along with Fred or Cem, just launched a crypto focus fund called Paradigm.

  • They're both very smart.

  • Uh, and that's it.

  • Please ask questions.

  • Yes.

  • So it's great to see you.

  • Okay.

  • I don't know how you get consistent returns from, you know, super follow market.

  • How do you know a sellout, Especially Markie Adam Exchanges.

  • Yeah, we have not yet invested directly and tokens like we haven't invested in Bitcoin ethereum or any of the old coins.

  • I think for precisely that reason, it's way too volatile.

  • And we don't view ourselves as experts.

  • We don't yourselves, as public public equity investors in the Blockchain equivalent.

  • Uh, what we do via this saft mechanism is treated just like we treat equity and any other company.

  • So we're investing now.

  • We know the company's really nascent.

  • It's got maybe 15 employees and they're gonna build over the course of years and probably, uh, our investment in them will last a decade on.

  • At that point in time, you know, we hope that it will be a build big business that happens to be built upon Blockchain technology.

  • But it's not really exposed to the volatility of crypto currencies themselves.

  • Uh, you know, obviously it will have to be successful there.

  • Tokens will need to develop some value and actually be used and things like that.

  • And that's the bet that we're making.

  • We don't know yet how it will turn out, but but, um, But if those tokens a crew in value, it's because the business fundamentals of that business, or good and strong like within the next year he doesn't like anybody.

  • No, probably not.

  • Which is true of any of our investments, right?

  • Like invest in Oh, it's a worthy Parker or, um, uh, we have, ah, company called Get Lab that's going really fast.

  • You don't really It accrues in value in that we invested the Siri's be someone else invests at the Serie C, and you see an uptick in valuation.

  • You hope it's a really large uptick, because the company is going fast.

  • But we have the investors don't get liquid, so to speak, until it either goes public or get spot.

  • And here, uh, you know, I guess you could ask the question when investigating walked in.

  • What's the exit going to be?

  • Is it is a company built on Blockchain going to go public just like any other?

  • Or, you know, like will we go public by eventually selling What?

  • What sliver of the token pool?

  • We have thio others and more of a secondary transaction.

  • It's possible, but we don't really are our capital doesn't demand that we exit on the order of years the way our fun destruction right of what?

  • Cocteau Crypto crimes.

  • Um, that's a really interesting question, It turned out, if you look at the history of just taking it.

  • Tech interview Shin generally often the boundary of innovation happens at this border between illegal and legal on some of the earliest adopters of the Web were using it for a listen means some of the earliest adopters of crypto obviously using it for listen means, um, I think, uh, you know, I think that policing of crypto kinds will require some interesting coordination as between public and private sectors.

  • We're increasingly seeing, you know, the folks from Silicon Valley kind of do short stints in D.

  • C and then come back on.

  • I think that That's what's going to be required for government to get up the curve quickly to be able to even know what they're looking for in terms of, you know, the the forensics of crypto crimes, which are much harder to detect them.

  • You know, Webb Webb, 2.0, crimes.

  • But I don't know much more than that.

  • Unfortunately, General, I mean, obviously move your body like that.

  • And then is there concern, like Brisket says that government broadly have regulation that would inadvertently affect, you know, technology.

  • Our companies are trying to kill broadly, watching, responding, respond.

  • Yeah, totally.

  • And that's how you think that?

  • Yeah, we've We've seen, uh, many SEC actions brought against companies that decided to do an I C e o.

  • Uh, and you know, why is that dangerous to a start up?

  • Well, it takes a ton of time and resources to defend yourself against a SEC action, not to mention the scrutiny and the negative publicity effects, whether consumer might want to use your product.

  • And so we spent.

  • We do think about that.

  • We think a lot about, um, trying to proactively partner with the regulators to make sure that at every step in spring labs is development.

  • They know exactly where they stand being viewed.

  • The regulators.

  • Yeah, I think I think that that's a really important point.

  • Uh, if certainly if you're the CEO of one of these companies, you want to make sure that you're thinking strategically about the regulatory angle of it.

  • Yeah.

  • So Spring labs, ultimately spring labs is usually when we think about Blockchain crypto like a lot of people are.

  • Okay.

  • My broader question is, Is your message pieces that finance is probably the first viable segment That or would you guys be open Thio Investments and other types of distributing protocols that Mike Burns?

  • Yes, definitely open to investing another verticals.

  • I think that I think that the core of what's interesting in spring labs isn't actually the financial service is component.

  • It's that they're using Blockchain toe help solve an identity verification problem.

  • And when you abstract that out of fintech to all sorts of other segments, it applies exact same way Dorothy's This was Hey, we think that Blockchain the technology is perfectly suited to solving what Web 2.0 has really struggled to solve, which is identity.

  • We expected Facebook to do it.

  • We thought maybe Amazon would do it.

  • No one did it.

  • Maybe Facebook's working on it now, but they have other issues.

  • Um, and so Spring Labs is doing it for you right there.

  • Very focused vertical.

  • And you can imagine it takes supply.

  • Chain is another great example there.

  • It's not the identity of an individual human with the identity of an individual palate.

  • An individual piece of fruit.

  • Like how do you verify that?

  • This is a thing that came from this place.

  • And I think that there are all sorts of other myriad ways that identity is going to be tract.

  • Like we were just talking about educational institutions.

  • And, like, how does Harvard verify that each of you actually took CS 50 and passed it?

  • How does Harvard verify that you, in fact, graduated and over the course of your life, like, do you really own that data?

  • Not really.

  • On each time you apply for a job or applied to grad school, you're gonna have to go back to Harvard, pay some money for them to print a form and mail a letter.

  • Andi, wouldn't it be a lot more powerful if that existed in a decentralized network.

  • Yeah.

  • Uh oh, that's great.

  • You see any other way?

  • Areas?

  • Ah, great.

  • Great question.

  • One area that I think is really interesting and still incredibly nascent is watching for health care.

  • There you have the added complexity of, you know, not just regulation of of tokens and the financial repercussions of that.

  • But, um, hippo and all the regulations that come into play when you have personal health care information, But, uh, you think about medical records, I think that's a variant of the identity problem we were just talking about, uh and then, um, like compliance with medical billing is another area that could be really interesting.

  • S So, uh, I think health care is an interesting example.

  • Supply chain, certainly financial identity.

  • What else?

  • Um, the core idea within crypto kitties of digital assets is also really interesting.

  • Others I think going to already is within gaming, whole economy of digital assets.

  • And you can imagine in the future that we're all gonna own a basket of things, some of which are physical world.

  • I don't sing, some of which are digital items on.

  • And so using Blockchain is the record of transaction for those digital items will be another use case.

  • Yep.

  • How you Yeah, you're supposed the biggest living after is how we're going to have every single item.

  • How much is that?

  • And higher energy source?

  • Totally.

  • The question was, how do we think about the energy implications of building upon Blockchain?

  • I think that it's a great point.

  • We definitely think about it.

  • We think about it from the lens of Okay, you look a Blockchain.

  • Is the technology as a technology?

  • What is it good at and what is it bad at?

  • What is it good at?

  • It's a fancy or database.

  • It's the distributed database.

  • What is it bad at?

  • It's actually kind of slow.

  • Ah, and it's very energy intensive on.

  • And so it's good for applications that can't be solved by a centralized database like identity on.

  • It's bad for things where you have to ping the database really quickly, really frequently.

  • Uh, that's why I like a spring labs where maybe you paying the database once on the order of a year, uh, for per customer on, and it's probably bad for a marketplace or aah Financial exchange and things like that And that's why you're seeing folks like Elizabeth Starkness tried to develop the lightning layer on top of a theory.

  • Um, toe help.

  • Help accelerate development of applications on top of it.

  • Yeah, we definitely think about it as as part of the why now, Like is, is this actually the right time to be investing?

  • Where is this?

  • Still, maybe a year or two.

  • Too early in the development of the technology before things really start to take off.

  • You know, it's a tough thing.

  • Is an investor you want toe?

  • You don't want to wait until it's too late.

  • But you you invested in tons of companies that were a year or two ahead of their time and just didn't work out because adoption wasn't ready to take off.

  • How do you know why?

  • Courtesy value and application.

  • So you're in this year that was really like the roof.

  • And then now you know that and also one of business become successful artist.

  • Yeah, but the question was, how does the value of the protocol tokens affect the applications being built on top of the protocol?

  • Cryptocurrency, cryptic kiddies, a great example.

  • They're back at its peak.

  • I believe that there were 120,000 daily active users of crypto kiddies.

  • This was like November 2017 on, and then they got $12 million invested from Union Square Ventures and another really top to your firm.

  • Now, if you look at the daily active users, it's down in the 12 hundreds.

  • Or so uh, really has taken a dip, in large part because the value of the ethereum token underneath is is a lot lower than it was back in the peak of November 2070 s.

  • So I do think that there is a strong correlation as between the the protocol value an application value, uh, probably part of the reason why the AP player is still as nation as it is and an interesting question to ponder, like, how do you as the application tried, Thio, um, mitigate yourself from that volatility?

  • I don't know the answer to that, but it's interesting.

  • Why don't you investigate themselves?

  • Well, we've seen a lot of the scenes to choose to do that on.

  • I think I mean, so you know our investment in Spring labs because it's ah, agreement for future tokens.

  • Eventually we will get spring lab coin there.

  • Plenty of the scenes that are directly invested in Bitcoin Ethereum.

  • You know, uh, ripple etcetera, Uh, and you know, most have done exceedingly well because they have recruited value so dramatically on.

  • I think if you really believe that the protocol layers where the value is, that actually might be the right answer.

  • With this.

  • Yeah, there's fires.

  • You make this work places.

  • Yes, it's a great question because in an important point to remember that when investing in Blockchain there's kind of a two level analysis.

  • First, it's ignoring the Blockchain part of the business.

  • Is it a good business?

  • Does it have good fundamentals if its marketplace does it function as a marketplace and then looking at the text back and making sure that that's also a way to make sense?

  • So if you take spring loves its marketplace right, it requires, importantly, the financial institutions to want to use it.

  • Because unless Bank of America is willing to paying Wells Fargo and get compensated in Spring Labs token, it's never going to take off.

  • And there I think that certainly our diligence waas in large part talking to financial institutions with whom spring lots had already partnered to Better understand why they were excited about using it.

  • Uh, and it was they gave you this K Y Z process is a cost center and so being able thio partner with with an entity that wants to help reduce that cost, the view doesn't win win.

  • But still, you're right that the earliest adopters are gonna have to believe in the value of that token because they're gonna accrue Ah, higher amount of token before its values really demonstrated.

  • Just said are just so many phone calls in the market right now.

  • And, you know, invention Just 1 60 probably multiple technologies.

  • And there's gonna be some need to be some technology to talk, change, change and all that kind of wondering how much research you guys to figure out.

  • You know, spree.

  • Last video won't be the only people doing doing this kind of stuff.

  • And secondly, just comment on something else said was, has released energy consumption in addition to power proof that workers proof estate, there's other consensus algorithms and wondering if you guys you don't look that now that the mining side of things it has also been an area right for VC investment analogy, much more to the server infrastructure layer of the Web.

  • We have not played there.

  • Um, I don't know if I have a really satisfying answer for you as to why we haven't played there, aside from no particular domain expertise on our end.

  • But I think it's fascinating because some of the biggest companies existent within the space for a large or actually huge mining operations.

  • And they're just intellectually.

  • It's interesting, some sort of proof mystique primary system.

  • So I don't think the energy consumption will continue to be the problem that this now, unless they can find it's just not.

  • It's just not a secure or trustworthy validation scheme, you know, to make sure that everything you know, all the chains sync up.

  • Yet the data is accurate.

  • Yet your your your point about in the future, there's going to be a ton of a you know, a whole slew of protocols is absolutely true.

  • Unrealistic to believe that because Spring Labs has taken financial institutions as its vertical, that they're gonna somehow have a monopoly over all transactions, they're think it's gonna be just like what we see for the Web, You know, there's gonna be healthy competition by vertical, and then someone's gonna build a really interesting business in trying to be the interoperability layer, as between all of these different tokens that might be coined based, No.

  • How do you think that nations Texas use a responsibility Effective?

  • Just, um, kind of to the point earlier about crypto crimes.

  • I think that, um on entrepreneurs are incredible humans and are always pushing the boundary, uh, kind of regulation be damned.

  • And so I haven't seen so much reticence to develop for fear of regulation.

  • Um, I think what we're seeing is now a little bit more enthusiasm for proactively partnering with regulators.

  • The the legal standards air kind of becoming well known enough.

  • And there's also lawyers who are now decently expert in the laws that pertains to crypto, that even a really fledgling startup can get pretty high quality advice about howto navigate the regulatory landscape on.

  • And I think that investors are kind of voting with their dollars as toe investing in those companies rather than companies that are being a little shadier on.

  • So I think I think all of those things are forces for good in the development of the technology because the more examples we have of amazing cos amazing investments that are built upon Blockchain the better will be for folks like you to be in this room thinking like, Okay, I want to start a company in the space.

  • It's everything.

  • Yeah.

  • Hear more about your Yeah.

  • No, you have, but yes.

  • Correct.

  • Correct.

  • So the question was about the saft on how it it works.

  • Technically.

  • So set aside the South for a second.

  • Let's think about the safe.

  • Uh, when, um when will I see?

  • Invests in a company via a safe?

  • What they're investing in is us.

  • Uh um in a sliver of the company that will convert upon the first price drowned.

  • So it's basically saying, like, we don't really know yet how much you company is worth.

  • We're willing to wait until, say, in August, Capitol steps in and says that Series A Okay, you're worth $24 million.

  • And then that note converts in at the $24 million valuation here with the saft, we're saying we're gonna invest now.

  • We don't yet know what the tokens are gonna be worth, but we're gonna give you some money up front.

  • That's gonna be worth a certain percent of your company and at some future date when we know what the tokens are worth via the pricing of the token economics, our sliver will convert into whatever number of tokens it's worth.

  • So so you're right that from unvested int now perspective, it's just like buying equity in the company.

  • Nothing to do with the tokens.

  • And that's why it's very clearly it's a It's a nice legal for him because it's so clearly a security as governed by the SEC, and you don't really have to worry about the ambiguity of what, what a token is.

  • Each took it now representative of equity and Spring.

  • Yeah, yeah, just a financial vehicle for the banks.

  • Do identity verification.

  • You're right.

  • It's blending utility and security.

  • Uh, upon that conversion are that's a good question.

  • I don't know exactly whether there is still any equity remaining outside of the tokens, but certainly some sliver of our equity converts into token.

  • And I think at that point you can wonder.

  • Okay, are we as August capital really holding those tokens for their utility or are we expecting that they will recruit value?

  • If so, that's an investment, not a utility.

  • Right?

  • Um, and maybe there's a provision in there about cashing out.

  • It's, um set date?

  • I don't know.

  • We'll look into that.

  • The last concert.

  • Passing tokens, in fact, like work.

  • Thanks.

  • Mmm.

  • Where you going?

  • Real problems.

  • That fresh population part.

  • I would love to live in that world.

  • The question was, can you imagine a post speculative Blockchain world?

  • Yeah, I think we think often about trying to look at the companies we invest in a CZ companies not necessarily is Blockchain cos kind of pre imagining that commoditization in a way, uh, because if you're investing, there's certainly a lot of utility to investing solely for speculation.

  • And a lot of people have made a lot of money in that way.

  • In fact, speculation is how a lot of this technology is gonna get adopted because there's just, you know, economic motive there.

  • But yes, I think 10 years from now, 20 years from now, Blockchain will be a layer in a host of applications with which we interface daily, uh, and isn't necessarily the driver value in those applications.

  • Just enabling.

  • Yeah, years.

  • That's yeah.

  • Yeah.

  • Question was about I CEOs as the existential threat to VC.

  • Um, it's a great question.

  • Uh, you know, I think that from the perspective of an entrepreneur, if you had a choice of hey, I can broadcast to the entire market what I want to build and just sit back and wait on.

  • People can kind of come to me and decide to write checks or not.

  • I would take that all day, every day rather than having to drive up and down Santel pitching people like me trying to get them to be like, Yes, I will give you $10 million.

  • Right?

  • Um so I totally get it from the entrepreneurs perspective.

  • What?

  • I think that, uh what I think it does from an incentive to build perspective is a little perverse.

  • Like if you if you raise $80 million before you have a business model in product market fit, I worry about whether the company that will be born of that initial upfront investment will be as healthy as what the traditional venture capital model allows.

  • But, you know, of course, I'm biased by the position I have with Inter VC firm To think that my model's a better model.

  • I think that firms have taken all sorts of different positions on this August, probably being among the more conservative.

  • You see injuries and Horowitz dedicating a separate crypto fund there, tons of merging crypto funds like Paradigm Yellow University just announced its investing, some of it in depth, some of its endowment dollars and paradigm, which probably means it's now directly invested in some crypto currency assets.

  • Um, so, yeah, I mean, um, I think if you're if you're an investor who wants to hedge your bets?

  • Yeah, I should probably be big treating ice here.

  • Seriously, accounting for that regulatory risk?

  • Yep.

  • Launching portfolio.

  • I'm trying to get projects.

  • Gaming, trying.

  • Yeah, The question was, how do we diversify our Blockchain portfolio?

  • We think about diversifying our portfolio across a whole host of dimensions.

  • Certainly one is by sector s.

  • So if you look at our portfolio, it's about half consumer facing half enterprise facing and within those probably the bulk of our investments fall in one of four pillars ones enterprise infrastructure ones, application.

  • Layer one's financial technology and ones.

  • Ah, consumer e commerce and working places.

  • And so I think we wouldn't expect our Blockchain investments toe be spread across that those four pillars, just as as as any other investment that we make the incremental.

  • Uh, we don't tend to invest in two companies that are going after the exact same space.

  • Just because you work hard you share is on the board.

  • And, um uh, I can't invest in two companies that are directly competitive.

  • That said, you know, financial service is obviously a massive market.

  • Could I quite easily imagine two companies both based on Blockchain, going after different parts of of the financial service, its infrastructure that we would both invest in?

  • Totally.

  • Uh so I think it's very much an ad hoc, uh, opportunistic thing based on the quality of the team that's pitching quality of the business model that they're pitching and the sides of the idea behind it guessing that this marks the end of lunch hour in the return of class.

  • Any final questions?

  • Thank you, guys.

  • This is fun.

Well, thanks, guys, for coming and, uh, giving me your lunch hour.

Subtitles and vocabulary

Click the word to look it up Click the word to find further inforamtion about it