YouSaid · the spoken record

Avichal Garg

lines on the record: 61
first: 2022-04-11
most recent: 2022-04-11
sittings or episodes: 1
sources: podcast

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“No, they weren't stupid questions at all. I mean, you and I both basically ask stupid questions for a living, right? But I mean, those like first principal questions, those are the important ones. I don't think there's stupid questions at all. These are like the foundational questions on why electric can even exist.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Conversation with Maria Shen, one of my partners. I messaged Maria and I said, We need to give these guys so much money literally 10 minutes into the conversation. And she said, OMG, yes. It was so, so clear.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the last one that we just announced was a company called Magic Eden. It's an NFT marketplace, the number one NFT marketplace on Solana. And the reason we got excited was the founding team. It's just very rare. There's four of them. And the founders are just really exceptional. We knew one of them from, he was the COO at protocol called DYDX and was an early investor there and sort of met him there. But it's one of these meetings where I'm sure you've had this and other investors have had this. 10 minutes into the conversation, you have burned through the questions that normally take an hour because the person and the team just has such intellectual throughput that you've gotten through and then all of a sudden and all the answers are deeply insightful and thoughtful and then you spend the next 50 minutes like going so much farther and so much deeper than you do in any typical conversation that by about 10 or 15 minutes you're in, you're like, I just need to give this person all my money. We just had that conversation. We're like, I just can't believe this team is so stacked and so deeply insightful about all of these things. And we're only 10 minutes into this conversation. And literally, I remember I was having”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know if I have an insecurity necessarily. Is it fear is maybe the right word. The thing I'm always worried about that is both fortunate and unfortunate is I'm worried that the opportunity that we have in front of us is going to be very short-lived and ephemeral and maybe the last one that we get. And so there's sort of this constant, is this the last opportunity sort of feeling deep inside me, which I know is not true. I think that the world is a very fast-growing market.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“He was the catalyst. He was the person who came to us and said, you guys are really good at this and there's a real market opportunity here for a thing that's not a traditional VC firm and that's not a hedge fund that's built differently and you guys have the right DNA for it. And I think you should go do this and I'll give you the first million dollars to go do it. In fact, not only will I do that, but like I will make all the intros that you need in the early days to get your first 10 million in the door. And then he pounded the payment for us and with us literally Eli came to our first probably five pitches and like sat in the room and took notes and helped disclose those LPs and then gave me a bunch of feedback on what to do better.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, that's easy. Well, I'm fortunate I have a lot of really good mentors, especially in this space, a lot of general partners at a lot of big firms have helped us along the way, folks like Chris Dixon and Mark Andreessen and Josh Kushner and Hamont over at General Catalyst and Ray at Caffeinated. The person I sort of give thanks to most is Elad Gill. We wouldn't exist if it weren't for Elad and him helping us earlier the ground. And frankly, just learning from him about how his brain works.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“It's what we were talking about before how much of it is really about the accounting and the finance and the tax and the legal and like all those other things that go into actually building a venture firm. I could have prepared myself a little bit better for those I think. And so we've learned a lot of hard lessons along the way and I think we're in a great spot now, but the first two years getting your head around that we came up the curve pretty fast. Had to.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, I don't really have work-life balance. I don't really believe in it in some sense. I just think I'm fortunate in that way in that my day job is the thing that I just love to do and I'm obsessed with. And so I just turned my hobby into my day job and I just get to do it 24-7.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Correct, less physical movement, vulcanized supply chains like two spheres of influence that are competing against each other economically, politically, culturally, less of a sort of broad open free market global economy. I think that sort of moment in time is likely not going to be here for another 20 to 30 years until we sort of get a resolution to what happens with the Chinese economy. And it's so hard to get data about what's happening in China. Is it durable and sustainable and the growth is going to be here for a long time or you to take more of a Peter Zahan if you know him, geopolitical strategist approach of actually demographic bust coming from China and that is going to cause an economic cratering, but that will take 20 to 30 years to play out.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“I think I've recently changed my mind on the uniqueness of the period of time that we lived in from roughly 1990 to 2020. I thought we were trending towards that was basically the state of the world where we would have this sort of like globally stable travel is open to everybody everywhere, like free market society. And I think I've come to the conclusion that that was actually probably a unique moment in time and we're going to revert to the mean at least for a little bit in the next 20 to 30 years look a lot more like the 50s to the 80s.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll give you two. I'll give you an eastern one and a western one. I think it's the Bible and the Gita from the eastern side. Like technology humans, people who do math and science and physics and people that invest capital, I think underweight the value of stories. And these are probably the two most important stories in like Eastern and Western culture.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think just getting up to speed and getting your head around it and actually understanding it before you start to deploy. There are a variety of strategies or a variety of approaches. There's a lot of nuance here. And I think we're still very early. So I wouldn't FOMO in. I wouldn't worry about missing it. I would be very deliberate about sort of cost averaging in over a couple of cycles. I don't think people need to freak out about it because there's just so much runway in this. And so I think the more important thing is actually to start getting deep on it and actually understanding it. And there's a lot of work there to actually get deep on and understand it. So I think it's more about like doing the work to understand what's happening more so than like rushing to deploy capital.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's a great question because actually the answer might be yes. The lesson from the last 10 years of investing, you look at it and you say, well, who played that right? Who really got that right? And maybe it was actually Tiger and Andreessen, right? And in the moment 10 years ago, it was like, what is Tiger doing? And it turns out they were totally right, right? And so, yeah, that might actually be the right conclusion that we really should be doing is putting money into everything credible because our intuitions about how big the things that are really going to work are off by an order of magnitude. I actually think that is probably one of the lessons from the last 15 years, 20 years of venture investing. Now, there's a whole backdrop there. We've existed in like a very unique bull market with specific sort of monetary policies, and we exist in this amazing window post-World War II post-Cold War where you had certain properties. I don't think it's an unreasonable conclusion to say actually, like, you should be investing a lot more money and you being a GP or an LP or an individual human, you should be investing a lot more in technology as a percentage of your”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“That was the case. Now, when you look forward, if you extrapolate exponentially and you continue to extrapolate exponentially, you feel silly because you get to these sort of seemingly ridiculous conclusions five, 10, 20 years out. And so our instinct is to extrapolate linearly rather than extrapolate exponentially because the conclusions that you reach to seem ludicrous in the moment. But it's turned out that every moment in time on that curve, whether you were in 1980 or 1985 or 1990 or 1995 or 2005 or 2010 or 2015, the correct thing to have done at every moment in time was to extrapolate exponentially. And so that's always in the back of my head. It's like actually our instinct is to extrapolate linearly when really we should be extrapolating exponentially. I mean, why fucking stop now on asking stupid questions? What does it mean to extrapolate exponentially? It really, in reality. Yeah, I think what that means is like you can end up in really crazy places. So for example, could Bitcoin actually be a reserve currency that central banks are purchasing?”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Is that our intuitions about what happens when there are 3 billion people involved and 3 billion mobile devices involved and trillions of dollars involved? Like our intuitions are actually quite wrong. And so one of the things we always think about is how do we have reasonable estimates that we can justify? And so we never oversell to the LPs. We're very sort of deliberate in being conservative about what we think is possible. But in the back of my head, what I'm always thinking is like, am I actually being too conservative? If the number one lesson is that these markets are actually going to be 10x bigger than anybody thought. And I think it's entirely possible. It's just there's a great article a couple months ago, I think, from Packy McCormick. I think it was him. So I apologize if it wasn't, whoever wrote it. But the crux of the article was basically in technology and markets, they're exponential. And when you're sitting at a moment in time and you look behind you, it's very clear that it was exponential, right? PCs, internet, mobile, cloud, like it's just clearly technology has been exponential forever, right? For the last hundred years at least, let's say 200 years, industrial revolution and beyond. When you look back, it's clearly obvious.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Along the way, as long as that sort of like ends up roughly where you need it to be to generate the returns that you need, venture is not about what is the thing worth today, right? It's really about what could it be worth and what do I have to believe for it to be worth that and can I underwrite that? Are there any investing lessons you have from your traditional angel investments that you've applied with you to your crypto investing stay with Electric? Yeah, probably the biggest one is that I think our intuitions about how big markets will be is wrong. I think it's probably my number one lesson from the last 10 years is I worked at Google and Facebook and just to me the fact that Google is a two trillion dollar company, it's unbelievable, right? And I think our intuitions when we start getting into that many zeros are just wrong. And so when somebody says something like Bitcoin could be worth a million dollars, obviously not investment advice, go to your own research, but you look at that, and it sounds like a silly statement, but actually if you said similar things to about Google or you'd said similar things about the revenue of these companies or how many Android phones there would be or how big Apple would be, like these sounded like stupid statements 10 or 20 years ago, but I think the lesson from the markets.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Worth today, right? So take something like strike. If Stripe comes to at the series A and has some revenue curve and some customer curve, you're not looking at it and saying, hey, this thing is only worth $25 million on paper or $35 million or $40 million. The way it really works in practice, as you know, is the founder says, I want to raise $10 million, I want to take this percentage dilution, therefore my company is worth X. And the math that you're doing as a VC is, okay, well, if I own this percentage of this company, is there a path for to have a multiple such that at the end of the day it's worth $5 billion or $10 billion or $20 billion or whatever return you need to underwrite? And it's actually, it's nice because then you don't have to figure out what the company's worth in some sense. You just have to figure out what the company could be worth and what do you believe such that if those things were to be true, then the company could be worth that amount of money or that protocol could be worth that amount of money. And so the process is actually very similar for us, right? We're trying to underwrite is what is our belief? Like what do we have to believe needs to be true such that this thing can have the multiples in order to end up being worth whatever it's worth? And the shape of the path along the way, the shape of the value might be up and down.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Investment at a fair price and make a good return, but the motivation may be we need to make sure we have the right logos so that the next to the deal flow that comes in comes to us and we're not left out of this. We're not boxed out of this new and growing market. So yeah, it does create some kind of market distortions. And then you sort of have to just be patient, right? As an investor, I think you have to be willing to say you have to be disciplined, you have to be patient, and you have to sort of bet that the market is going to grow in such a way that there will be an abundance of opportunities. And the people who are really long-term minded, the founders who are really long-term minded and the projects that are really long-term minded will want to take capital from the people who are actually creating a lot of value and creating the most value and not just going to the highest bidder. And so you sort of have to bank on that a little bit. What are the pricing dynamics that like on crypto assets? For us, there's like benchmarks and then there's outcome scenario planning, you know traditional venture. How do you price equity and crypto assets and tokens even more so? Like what's fair and right? Yeah, it's actually very similar to traditional venture. You're not trying to do some sort of like discounted cash flow in PV like what is the thing?”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“You can't have exponential growth and experimentation and exploration without a bunch of this sort of speculative cringy kind of activity. And so I think you just sort of have to swallow it as part of the process of figuring out what's really valuable. And so you kind of have to take the good with the bad. It's kind of like in order for us to find that 10% of stuff that's truly revolutionary and breakthrough, we kind of have to deal with a bunch of stuff that's just kind of cringy and like short term and speculative and all that stuff. And so I don't know. I don't love it either, but I think you kind of have to accept that sort of a natural property of high growth markets. Does it make your job harder? Like tourists in Vancha make my job harder paying stupid prices that shouldn't be the way. Does it make your job harder having tourists? Yeah, absolutely. It does. Because you have a bunch of people that are in some sense irrational actors. Like if a VC firm that feels like they missed out on the last wave of crypto for the last four years comes in and is starting to buy logos, then they're going to overpay because their motivations are not just that they want to do.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“And open up economic opportunities to them. I tweeted sometimes some less positive things on Web3 and crypto because I get so fucked off. Sorry, I'm very honest. Tell them my interview has changed a lot. Talk about authentic. I love it. Everyone tweets a picture of like a dinner table and they do, hey, we're doing a Web3 crypto dinner. Who does a direct consumer dinner? Is this awful the way that people are latching onto this? What would you like to change if mine is like the attachment to it as some sexy accessory for people? What would you like to change? You know, it's a good question. I don't love that stuff either. There's a lot of sort of tourists. There's like a lot of conferences that happen with the market goes up and a bunch of people start coming out of the woodwork that are not long-term minded. They're not builder oriented. They're not fundamental value creators. They're sort of extractors. And I personally recoil a little bit. I sort of cringe a little bit at a lot of those things too. But the reality is I think it's just a natural property of markets.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it depends on the use case. If you're talking about an investment DAO, it might be something that has broad global participation and is actually in covering new founders in new markets that are creating very disruptive technologies or new forms of innovation that otherwise would not have been funded by VCs or are actually able to compete with the VCs to earn a space on the cap table. In the case of NFTs and artist DAOs, it might be that you can actually have effectively new museums. Like you have a new form of public good where a bunch of people can buy this art and put it up on display and it doesn't need to sit inside a museum in London or New York and so only the people who live in those cities can go to them. You can now have global digital museums of the world's best art and music and writing and so on and they're publicly available on chain case of their service DAOs which I think are really interesting. So people are saying you know what, let's get all of the designers that understand crypto into one place and we'll share best practices and learn from each other and that becomes sort of a hiring marketplace and the success of that DAO is can you find all of the world's best designers and bring them into one place and identify this talent?”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a great question. I don't think anybody really knows the answers to that. And I think we'll only be able to know that in retrospect. And I think it's still so early that we don't even know what the successful DAOs are exactly. I mean, we have some inkling that some of these DeFi DAOs, for example, are trending towards more success and are healthier than others, but we're only like two years into this. And I think for us to really know which of these experiments from governance or economic game theory perspective are durable, I think it's going to take seven to ten years. So we're in the very early innings of even figuring out which of these things are successful.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Will look very similar to what we would expect, just reasoning through it, and some small percent, 10% of them, will wildly break our expectations about what's possible. And that to me is a really interesting set of stuff because there's a lot of learning in there, right? There's these sort of new metastable states of what kind of governance is possible or what kind of economic models are possible. And now we can just run these millions of experiments and see what emerges. And to me, that is like the fascinating thing at the market level.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“But I said to her, like, DAOs, this idea that you have this restricted group of people that have governance for a certain limited number of time, and everyone gets incredibly excited Call governments. We've had it for many years. There's nothing innovative here at all. Am I wrong? Is she right? Yes and no. I think what to me is interesting about a lot of these things is I absolutely think we will recreate a lot of the known governance structures in society. We will recreate representative government, for example, where there are experts and you sort of delegate your votes to them and then they go off and make decisions that need to be made. But to me, what's really interesting about really a lot of these L1s or these DAOs or these blockchains is that you can now run economic and governance experiments in parallel at a scale that was not previously possible because there's real money involved. So rather than some economist writing a paper or some political scientist writing a paper about theoretically how might some form of governance in some country or some economy work or if you pulled the lever in this way and a central bank here's what would happen or if you change the economy in this way wouldn't it be great if we can actually empirically run these studies now right so to me the interesting thing here is at the market level all of these DAOs will be created you'll have millions and millions of DAOs created many of them will fail many of them”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“People have talked about this for years, right? Why can you not do equity swaps as an early stage founder to de risk your business a little bit? Or if I really create value inside a community, I've created a ton of value for not me personally, but somebody's created a lot of value for the Y combinator community, like how did they get compensated for that? How do they receive reward for that beyond sort of the social capital? And I think some of these token networks are sort of playing with that idea of are there actually ways to align social capital with like financial capital.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Or they'll get a new business line that will be additive to the core business. But a lot of times what you're really doing is not building a sustainable token network. It's often going to be the case that it's sort of a customer acquisition channel and it behaves a little bit more like loyalty points than it does a true distributed system where like the value capture and the tokens is larger than the company. Generally a litness test we're using is like does the company just go away? And if you shut down the company, would you still have a significant amount of value capture and creation that happens on the token side? And if the answer to that is yes, then really the company is in pursuit of making a token network successful rather than vice versa. Is the most obvious opportunity not a y combinator token? Well, there is Orange Dow. I think something like that will exist. I mean, actually, if you look at even what's happening, there are businesses on or there's sort of these DAOs on chain. You look at things like Seed Club or Flamingo DAO or eGirl Capital. People are really playing with this idea of what does it mean to have a token network. And when you as a founder receive investment, you receive tokens in this new community and everybody's incentives are aligned.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Does it make sense to have a token versus not have one? You said a lot of the time it doesn't actually make sense. When does it make sense? When does it not make sense? Yeah, generally speaking, if you think that the company could go away and just shut down and everybody leaves and the value creation to the end users will persist, there might be some opportunity for tokens. If you think the company is going to be around, it needs to be around in order for the thing to work. I get a little bit more skeptical. That's not to say it can't exist, but I get a little bit more skeptical. And in those cases, often the fundamental question you're really asking is, are the tokens in pursuit of supporting the equity and the cash flow that gets captured by the company, or is the company exist in pursuit of making the token network valuable? And if you sort of like can answer that question, then you can figure out where the value capture will be and why. And a lot of the times what you see, especially in this part of the market cycle, you see companies that are eat their cake and have it too. They have a core business and they think that by adding a token network, they'll basically get non-dilutive financing.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Because, like, the infrastructure to power the net sharing of crypto deployment. Everything. Yeah, absolutely. Yeah, they're a fantastic businesses here to be built. And we invest in some of those as well. Are they crypto businesses or are they more traditional SaaS businesses? They're traditional SaaS businesses from a business perspective. But you look at a business like Anchorage or you look at a business like Bitwise or you look at a business like Kraken or Coinbase. They are traditional businesses, but understanding the product strategy or understanding what you need to build and how you need to build it as a crypto investor, we're very close to it because we have had to solve these problems ourselves. And so our ability to sort of understand what the business needs is. There's sort of one foot in both worlds. And so you still have to be relatively deep on the crypto stuff, at least in the early stages, I think, of this. By the time you're at a series C, you're Series D, they look like you can evaluate them as traditional businesses, but in the early days, like getting your product strategy right, you go to market right still requires some pretty significant understanding of what's happening in the crypto markets. Sorry, I just want to make sure that I've actually got this on the token versus the equity.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, absolutely. The entire life cycle of identifying an opportunity to doing the diligence to accruing into the asset to holding the asset to generating yield on it to paying your taxes on it and marking your books to doing your audit to divesting there is not a lot of”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you're not going to go wrong with the option value of like, all right, well, I get to invest in both equity and tokens. That's great.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it depends a lot on the company. We see a lot of companies where there shouldn't be a token. Actually, it just doesn't make sense for there to be a token. We see some really interesting opportunities where you could potentially have a token. And so as an investor, you sort of have to structure the investment such that you might be able to participate in a token network if one emerges and makes sense. And we see cases where actually, yes, today there's a company, but the real value clearly will be in the token. And actually, you want the company to dissolve and not exist. So effectively, you're going to invest in some equity. Over time, you'll get some tokens, which then you'll have to sort of mark on your books. And then you sort of write off the equity, the equity investment essentially the company shuts down. And so it depends a lot on what the protocol is and what you're trying to build and what the needs are of that particular user set. One of the reasons that investing in the space is challenging. It's part of the reason we have a business is there's a lot of tribal knowledge here around what is the instrument you're investigating and where will the value capture be and what are your intuitions around where that will be and how do you structure that in the right way to do the right thing for the company and do the right thing for the users ultimately.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. Really hard. It's hard. It's just a muscle you have to build in the same way that you have to get comfortable with 80% drawdowns. Your portfolio literally might be worth 80% less one day. And that's okay. Like you just have to get used to it. And so you just get emotionally and psychologically sort of dulled to it.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Human cognitive bias, which is we don't really understand large numbers, we don't really understand exponential growth because we're just primates. Primates can understand five. Primates cannot understand a jar full of jelly beans. Like we don't know if that's 200 or 5,000, right? It's just like our brains aren't wired to do that. And we don't understand exponential growth because as we weren't in the jungle and all of a sudden just a tree sprung up next to you overnight, like at macro biological scale, you don't have an intuition for exponential growth. And these businesses are billions of users with exponential growth baked in. And so our intuitions around this stuff are really wrong. So I think the real risk with liquidity is you sell too quickly. And so actually, I think it's advantageous to sort of force people to not be able to sell for a long time because I think that's actually how you're going to generate the best returns.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, also an excellent question. Yeah, we actually look pretty vanilla on that stuff. And the reason is, I think, from a product perspective, it's much easier to tap into institutional capital at scale if you're not trying to invent something new there. And actually, I think the lockup periods, 10-year lockups, despite the liquidity, I think is actually better for LPs because it is a venture asset class. The returns are extremely asymmetric. And you can generate many multiples on your fund if you're patient. The liquidity is a double-edged sword, right? In a couple few different ways. So one, a lot of it is actually not real liquidity. Like, can you actually get hundreds of millions of dollars out of some of these protocols? Unclear. You might shoot yourself in the foot on the way out. So it's a little bit of a misnomer. Two, I think the ability to sell early is as much a curse as it is a gift, right? Because too often I think the mistake that people make is they sell too early rather than too late. This is why Sequoia is doing this new fund structure. Actually, if you just held on to these things, you would have gotten another 5 to 10x. And it's because there's the fundamental...”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Somehow, make money because these markets are transparent and open. And so the ability to participate in the markets and transparent and open way means there's a very collaborative sort of market-based way to have a thousand people engaging around your community to create value for all the things that you invest in. But that doesn't look like a thousand employees sitting in an office.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Accountants and finance people and recruiters because much of this stuff just gets standardized and operates in a very transparent way on-chain and at scale. It's more likely that you need, for example, engineers to build software that allows them to interface with these systems at scale. And so is it possible that we end up with 30, 40, 50, 100 engineers in time? I don't think that's crazy. But also what it means is that these systems operate in a much more open and transparent way. And so what we're constantly thinking about is where is it that we need to build out a team internally and where is it that we plug into the ecosystem and the market to solve these problems for us? So, you know, the observation here is all these DAOs that are on chain are starting to deploy capital. And I think the best venture firms are likely going to build communities around them. So like all the communities are becoming investors and all the investors are trying to build communities. And so maybe what you actually do have is an army of people, but they're not your employees, right? They're not people that work in your firm full-time. They're this sort of community of people around you that really trust your judgment and themselves can”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Not a dumb question at all. That's an excellent question. So I think crypto protocols and businesses need an entirely different kind of services layer. And so you don't need a board member that helps you figure out how to interview a VP of sales. You need people sitting in your Discord helping you do distributed governance. You don't need somebody doing intros to other companies in their portfolio to set up partnerships. You need somebody to go run a validator in some data center to help decentralizing the network and produce blocks. Or you need somebody to bring liquidity into your marketplace and help bootstrap be the first couple of million dollars of Ethereum or Solana or whatever into your marketplace. So I think there is absolutely a place for people who are value add. And I think that's always the case. Like if you create role value for people, you will be able to accrue value back to yourself in some way. But I think the forms of value that are necessary are very, very different. And so the way that you end up then building your firm is very different. And to your question around kind of like, what does that mean in terms of an army of people? At least the way we think about it is twofold. One, that army of people is unlikely to be”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“I suspect so. If the internet is any guide in terms of information businesses, I suspect you will get some interesting scale effects and network effects here, especially, I think, for the businesses that don't think of themselves necessarily as scaling through humans, but think of themselves as where can software give you leverage and are able to do that. I think you're going to be able to apply leverage to the venture business in a way that you haven't been able to historically. And every time you do that through software, you tend to get this sort of like power law dynamic that happens.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“It's the equivalent of what's happened in a lot of markets, which is there used to be essentially local and regional monopolies like newspapers used to work this way, venture used to work this way, like people had to come to Silicon Valley to get the money. And all of a sudden, it's going global and it's going global in a way where they don't have to come to you, you're now competing against every other human on earth that has actually pretty reasonable venture investor and they're guaranteed people sitting in India and China and Nigeria and Italy and Greece and Brazil and Turkey that are better venture investors than like the 50th best venture firm. But I don't think you have to worry, but I think venture firms like 25 and beyond should be really worried.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Great question. I don't think you're out of a job. I think it's equivalent to Microsoft still had a fantastic business despite Google breaking through and Google still has a fantastic business despite Facebook breaking through. So I think we just invent a new thing. And I think a lot of these traditional businesses that coexist alongside. And then they slowly decay and some of them can evolve. And it depends a lot on which part of the markets you're talking about. I think in Venture, there are real human network effects. I think there are at the top people who create real differentiated value and those people will not be replaced. So I think you'll be okay. Sequoia will be okay, Andreessen will be okay. The people I think should be worried are if you're like VC firm 15 through 1000, right? Like I think you get disrupted because capital as it becomes a commodity if you're a venture firm 25 and you're like not breaking the top decile in terms of returns and I'm an LP and there's somebody who's on chain and is generating better returns than you, I think the capital markets tend to be pretty rational about this. The money will find its way to those people. And so your competition set just went through the roof, right?”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Of our business, I think it's going to sort of disrupt us. And I think it's just going to disrupt the entire way venture works. I mean, you just look at things like Ethereum, look at where the value capture has been in NFTs, look at the value capture that's happened in Bitcoin. It wasn't the VCs that captured the value, right? It was actually globally people could participate in a way that just hasn't been possible before. So to me, it's one of the most sort of amazing but also sitting in plain sight kinds of things, that this stuff is just totally going to disrupt all the capital markets of the world over the next 20 years.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Millions and millions of dollars wasted, and really should just be sitting in GitHub and you can fork it, and everybody understands there's essentially like 10 versions of an NDA that we all agree to. And this is what software is so powerful, right? This is the composability of it. This is what made the internet work. And so I think all of that is going to happen here to crypto and all the capital markets in terms of just like moving money around, all of a sudden you have the perfect infrastructure. And I think we saw this in 2017, right? The ICO boom, people looked at as a speculative thing, which there was a lot of speculation there. But to me, the magical thing was we created a 24-7 global capital market that anybody in the world could participate in. And that's why I think things like DAOs are really interesting. And I think that's why all this on-chain activity, I think, ultimately is going to be extremely disruptive to venture and to our business. And so I don't think it's so crazy that 10 or 15 years from now, a lot of electric activity actually just happens on chain. Like, do I really want to have a bank account and I have to deal with the overhead of not being able to send money on a weekend? Like, we probably do about a fourth of our investments in USDC because it's just faster. I can just send it on a weekend and it shows up. And so I think at every part.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Owns money, well, you can program it, right? You can write code around that thing. The ability to write code is really powerful because you can control access to a thing. You can control what happens to that money over some period of time in some predetermined ways. And you look at the entire world, you look at all the capital markets in the world, and fundamentally what are they? Here's a pile of money. Here's a bunch of rules around who has access to that money. Here is what I need you to do with that money over the next 10, 20, 30 years. It's like wills, trusts, escrow, reitz, mortgages, HELOX, derivatives, credit markets, securities. It's like a hundred trillion. If you count the notional value derivatives, it's like a quadrillion dollars of stuff. And instead of it being 1970s infrastructure and PDFs and Excel and email that is sort of moving all this stuff around, which is, I mean, you've done venture for a long time. Like, how does ventures happen? It's like it's email and it's Excel sheets. There's like a cap table coming through and you sign some PDF that gets put up on time. I can't believe we're doing this. It should all just be code. And think about the amount of money that's been wasted doing NDAs. And like every law firm recreating the NDA and then like people marking it up.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, where that set of ones and zeros come from that allows me to own the other ones and zeros. Well, that came from some piece of code. And then you say, okay, well, what if the code didn't give me the one and zeros? What if it didn't spit it out to the screen and say, this is your wallet address and this is your private key? What if it just wrote it out to disk and encrypted it and it knew the password and I didn't? What does that mean? Well, what that means is you could send money to this smart contract. You could spend money to that wallet and you don't own the money anymore. Now a piece of code owns the money. And that I think is a very underappreciated breakthrough because that piece of code is an entirely new entity, right? It's not a person. It's not a Delaware Corp. It does not exist inside of jurisdiction. It's not in Delaware. It's not in India. It's not in China. It's not in Europe and the EU. It just lives in the cloud. So now you have a non-human, non-business entity that doesn't have a social security number or a TIN. It doesn't exist as far as the government is concerned. And it doesn't live in a jurisdiction. And it can custody billions of dollars. And you look at that and you're like, wow, that's kind of crazy. What are the implications of that? And I think the implications of that are what can you do now that you have code that”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, totally. So here's how I reason through it. If you sort of believe this premise for a second that ones and zeros are now some sort of value capture and value exchange, right? You look at something Bitcoin, it's a potential store value. I don't think it's a store value today, but it potentially has all the characteristics of a fantastic store value. You sort of are faced with a really interesting set of questions that you can ask yourself. So the first is, well, this is supposedly money that I own. Like, how do I own it? What does that actually mean? How do I own ones and zeros? Like, wasn't the whole premise of the internet that I can copy paste ones and zeros and send them to somebody else? And the way you own them is through this private key and through this wallet, right? There's a sort of API and this protocol that says only you, you know, if you sign the transaction, you've officially moved the money, you move the ones and zeros, and now somebody else has that money on this chain. And so there's actually a social consensus layer that needs to emerge there, which I think 100 million people who have bought into Bitcoin and crypto is a social breakthrough as much as it is a technical set of breakthroughs. Then you say, okay, what does it mean to own the ones and zeros? Okay, I have this private key. What is that? Well, that's itself a set of ones and zeros. And so you say, okay, well,”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think you're absolutely right. And I think there will be a set of opportunities that I think when you try to do it as a part of a generalized venture firm that you can certainly do.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Or expressly is designed to be more private, how do you do that? So literally through the entire life cycle, software is baked into doing a good job. So you have to build your firm differently. And so for the traditional BCs, there is a structural challenge of how do you run your processes and you have to register with a CCC. DRLP sign up for being a part of this thing. But there's just the day-to-day, literally what you do to run your business effectively is different. And I liken it to the difference between Amazon and Walmart. Like Walmart still has a great business. Amazon had to build its business fundamentally differently from the start. And I think that's kind of what's happening with crypto VC versus traditional VCs. Like I think the crypto VCs are just building their businesses differently from the start.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“So, what you really want to hire are six engineers that are sitting in Discord all day. We don't have associates and principals, we hire engineers, and we comp them as investment professionals. We don't comp them as back office. And then when you're doing diligence, how do you do that? Like, you got to get the code and compile it and run the node, actually make the investment. You might have to go onto a DEX, and so you might have to write a little bit of code to accrue the thing. Okay, well, now you have potentially tens of millions of dollars of something. How do you actually custody that if the custodians don't support it? You might actually have to write some code and do that. If you have those assets, the whole point is these are distributed systems. So you have to use them productively on chain because that's the whole value. There's no board, right? You have to do governance, you have to generate blocks in a blockchain. You might have to put your money into an automated market maker to help boost the liquidity. And so you need infrastructure to do that. Like you can do that with your own money in MetaMask, but doing that with a billion dollars of other people's money requires software and infrastructure. And most of that does not exist from third parties. Once you do that, how do you pay your taxes? Can your accounting team actually track where your money is? At the end of the year, can you do an audit? Can you show to your auditors where the assets are sitting? And if you're investing in certain kinds of assets or certain kinds of protocols.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Of capital. And if crypto is going to eat capital markets, it's going to eat venture capital. Venture is just one form of capital deployment, right? And every time software eats an industry, you notice that like the corollary, in my opinion, to software is eating the world is that software engineers will run the world because every business when it becomes a software business, your critical lever is, can you build good software? That's actually what allows you to have a scalable and defensible business. And so the way we operate is we hire a software engineer. So half the team is software engineer. So of the 20 people, we have about 10 engineers. We have two designers. Everybody on the investment team has an undergraduate and graduate degree in computer science and engineering. The sort of DNA of the firm is very different and the operations, like if I showed you our org chart, engineers, designers, and like one BD person, one ops person, one finance person. And I said, like, what is this organization? You wouldn't say VC firm. You'd probably say, oh, that looks like a fintech company or that looks like a marketplace or SaaS business. And it's very much by design. So therefore, we end up doing things very, very differently. Our processes are different, right? Everything from diligence to, well, how do you even find the thing, right? Well, it's not happening at the ferry building. It's happening in Discord.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, there are a couple things. So, I think there are some regulatory constraints. So, for example, in a traditional VC fund, at least in the United States, most of these funds are. You can't go above a certain percentage of liquid assets. You have a venture exemption at the SEC that allows you to sort of deploy capital without having to register as an investment advisor. Whereas we're an RIA with the SEC as are the major crypto funds. And so that really constrains how much capital you can deploy into this sector. Secondarily, it's less about the structure and it's more about the organization. So if you look at a traditional VC firm, the way that the firm is set up is really optimized for certain kind of workflow, right? You're deploying equity investments, you have a series A, you do a partner meeting on Mondays, you go to Happy Hour to go source deal through your associates, like there's a pattern there, right, of how the organization works. Now what's happening with crypto is that at 100,000 foot view, it's software eating money, right, to borrow an Andreasen phrase. It's software is eating everything and crypto is software eating money. And if you believe that crypto is soft-eating money, then crypto is also going to eat capital markets, right, which is the deployment of money and the deployment.”
2022-04-11 · The Twenty Minute VC · 20VC: Why Crypto is Software Eating Money, Why Crypto Firms Will Outcompete Traditional Venture Firms, How To Price Tokens and When To Have Them, DAOs: How Are They Structured and What Makes One Successful with Avichal Garg, Co-Founder @ Electric Capital · IDENTIFIED FROM THE TRANSCRIPT · source