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Seth Ginns

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2021-03-15
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2021-03-15
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  1. “So, NFTs are actually a very specific type of token that right now lives on the Ethereum blockchain. And think of these as scarce digital goods. Really, the first use cases were digital art. And what Dapper is doing, though, is using them for the modern day equivalent of basketball cards. So these are basketball highlight reels. You go in and you buy a pack just like you would buy a pack of basketball cards. And you can then trade the highlight reels that you get on the NBA Top Shot marketplace. And it's just an insane opportunity to drive fan engagement during COVID. They're getting a lot of interest from all of the broader sports leagues now. It had generated 100 million of revenue in the first four months, five months of the marketplace. Valuation of their latest round rumored.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Could flow to the governance token holder. So that's kind of one of the core innovations. And then the second core innovation was using these governance tokens as an incentive to get users to come and try out protocols. So, hey, come and lock some collateral in our borrowing and lending protocol, earn a yield on it, and we'll also give you a little bit of our governance token as a reward for using our protocol. And of course, people are looking at where the prices of those protocols are going. They expect them to accrete over time as they see the activity of that protocol go up. It was a bootstrapping mechanism for these protocols by offering a little bit of the governance token as a kicker to the yield that you're getting by depositing into the protocol.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “We were talking about a little earlier, collateral locked in DeFi has just skyrocketed over the last year. Another core aspect, DeFi is really borrowing and lending protocols. It's decentralized exchanges, and it's stablecoins. Those are the three big buckets that we like to use. The collateral we talked about, decentralized exchange volumes, similar trajectory to collateral. July of last year, four and a half billion or so of trading volumes. That was more than all of 2019 combined. Fast forward to January of this year, 60 billion of trading volumes. So just this exponential growth curve. Really two core innovations in our view that have led to this big pickup in activity across DeFi. One is what's called governance.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Know a lot of the chatter back in 2017, maybe to a lesser extent today, is this question of when will we see cash flows? When will we see use cases? You mentioned DeFi, decentralized finance, which is increasingly seen payments, lending, and other things as one of those use cases. I'd love to hear your perspective on the evolution of DeFi and where we are today.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Base layers that we've been talking about, as well as scaling solutions for Ethereum itself. And these scaling solutions take two different forms. One is a migration to Ethereum 2.0. Just think of this as a different form of Ethereum that will be able to scale in a way that the current version cannot. And the second dynamic for Ethereum specifically is what's called layer two. These are solutions that include things like batching transactions as a way to bring down transaction fees. So they all have their advantages and disadvantages. But when you see a bottleneck, it creates this forcing function that very quickly leads to a bunch of really smart people globally trying to fix the problem.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “That's right. So for Ethereum, the biggest bear case or bottleneck today is the fact that transaction fees have spiked as activity in decentralized finance, which is really the first product market fit for ETH has picked up. So a little bit of a high quality problem, an immense amount of activity in DeFi going from under 700 million of collateral locked in the system at the beginning of 2020 to around 40 billion today. What that's done is that's led to pricing to have your transactions confirmed skyrocketing and really making a lot of lower value transactions. And these are transactions that are kind of part and parcel of interacting with DeFi cost prohibitive. Now, what that's led to, by virtue of this being open source, open competition, and global is both the development of an investment in these challenges.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Transaction fees are seen as bottleneck number one. And I'd say the fact that locks on average are confirmed every 10 minutes is impractical for payments on layer one, on the Bitcoin blockchain itself. So those tend to be the two biggest criticisms of blockchain's functionality. Now what's fantastic about Bitcoin's functionality? It's the fact that it has a limited set of functions which means that the security attack surface is limited so it's very secure. So even though transaction fees are high, even though blocks are confirmed roughly every 10 minutes, this use case, this product market fit of digital gold, need for high security, it just fits Bitcoin incredibly well. And because this is an open marketplace, a competitive marketplace. That's why we've seen that digital gold use case really catch on for Bitcoin in particular.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Challenger base layers. What's the purpose of having another blockchain when you already have Bitcoin and Ethereum? I think this is a really exciting element of the crypto community. It's open source. It's global. And what you see is when bottlenecks emerge, when there's an unmet need, developers come to the rescue and create new solutions that solve that problem that's not being addressed by existing solutions. each of those other communities and blockchains and they're all going to have some degree of interoperability over time has trade-offs between decentralization, security, speed, broader functionality that meets specific needs in a different way from Ethereum or Bitcoin.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “So, two different ways of approaching that question. So, as a firm and what we're investing in, we're seeing a lot of really interesting developments in ecosystems outside of Bitcoin and Ethereum. So we're very bullish on Bitcoin, very bullish on Ethereum, but then a large part of the portfolio is kind of exciting innovative developments outside of those two core ecosystems. Base layers and DeFi, Polkadot is one Challenger base layer. And I think that the broader mainstream investment community will start to hear a lot about developments in the Polkadot ecosystem over the course of this year. Solana, another challenger-based layer, flow, a base layer that's associated with one of our investments, Dapper Labs, that's doing MBA Top Shot. One thing that we should maybe talk about stepping back is why are there...”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “As we walk through some of these key, let's just start with kind of macro ideas relating to the space, it still seems like Bitcoin and to a lesser extent Ethereum command most of the attention of institutions in particular looking into this outside of maybe a venture capital investment they make in a fund, where are you seeing the next level of significant potential investable interest?”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “I'd say the trajectory toward institutional interest has been just as exponential in development as the price trajectory of, let's just say, Bitcoin as a proxy for the broader space. I remember back in 2012, sitting in my regulated mutual fund seat, feeling a little uneasy interacting with the ecosystem.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “So if we take a perspective on this ecosystem, on the one hand, six years ago as the Stone Ages for this world, on the other hand, it was only six or seven years ago, we've talked already in this miniseries a little bit about the macro case and the infrastructure evolution for institutions. I'd love to get your perspective over the last almost 10 years now. What's been the trajectory in both crypto assets and the blockchain that leads itself towards this institutional interest today?”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “I believe luck favors the prepared mine. So I'd actually read a New Yorker article about Bitcoin in 2011 that kind of primed my perspective. Invested in Coinbase, and once you have skin in the game, that's like the catalyst for having everything associated with that space just capture your attention. So once I was invested in Coinbase, I set up a bunch of Google alerts. I was following what was happening with Bitcoin, but also what was happening outside of Bitcoin. And there were a handful of coins outside of Bitcoin at that time. And I started to see a lot of really interesting buzz around Ethereum. This was just at the ICO period in 2014, but I said, I want to put a little bit of a bet here. I think this is quite interesting. A lot of people who understand way more about what's happening here than I do think this is quite intriguing. So I invested a little bit in the ICO. And then all of this starts to snowball. You have more and more chips on.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Their direct compairs are Amazon and Google, and all of these big players fresh direct in certain markets. This is like a little lower probability than the rest of the early stage portfolio. What you end up figuring out is in that type of competitive environment, if they're able to be successful, the startup can accrete in value much more quickly than standard startups and can go much higher than standard startups. So that lent more credence to the idea of just level setting all of these investments.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Of get to investors that they want to engage with. And the last thing is just like no big concerns up front. And look, there are going to be plenty of early stage startups that have big concerns up front and end up overcoming them. But my view is you're going to have roadblocks come up along the way. If I'm building a broad Angel portfolio, why not start with companies that kind of have a clear path? The last thing that I'll say on that is I started out kind of modulating my investment size up or down based on the alchemy of how those different factors came together. And what I realized was I was really bad at upsizing the right investments. In fact, I was downsizing the investments that ended up being the biggest winners. So I kind of decided level set all investments. Oftentimes when you check off all of the boxes associated with that, except you say, you know, gosh, they're direct compares. Take Instacart.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Really came into startup investing saying, okay, I'm a deep fundamental investor from the large cap world. I get this. I do fundamental analysis on the companies that I'm looking at and make decisions. I realized really quickly was early stage investing is quite different from more mature later stage investing. And I sort of came up with a rubric of the quick decision process for these early stage investments. They had to be end markets that I was very excited about and I have a lot of interest. So that's an easy one. Teams that I just loved and was really passionate about. But then no yellow or red flags. I always look for warm intros or having the deal flow come through the channels that we were discussing earlier. And part of that is just a test of the founders network, their grit, their ability to kind of...”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “So there were a bunch of investments that were kind of friends of friends investments before Coinbase. Coinbase was one of the first Y combinator investments. I also invested in Instacart out of that vintage. A lot of these investments were on Funders Club and Accredited Investor Crowdfunding platform. So I invested in Funders Club itself. And then I've built up a portfolio of about 150 angel investments. And I'd say about 70, 80% of them have their provenance in one way or another back to Funders Club. It was a direct investment there or I got to know the CEO of one of the investments and they introduced me to other investments or other Angels that I met through Funders Club. So really productive deal flow network and high graded, which was fantastic.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “The macro environment being one where we had a deflationary overhang and a fed at the time that wasn't willing to commit to consistent stimulus. So my thinking was we have this deflationary overhang. I want to go to the most secular growth segment of the investible universe, which even if we have another big downturn, will have a big growth opportunity. And I thought, okay, that's early stage startup investing. It turns out right after I started doing that, Bernanke came out with unlimited QE, Jackson Hole of 2012, and the rest is history. But I really got bitten by the early stage investing bug, really loved it, and continue to love it and passionate about rolling up my sleeves, getting involved, helping early stage companies. And I do that now on the venture side.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “So it's actually funny. In 2009, I started doing residential investing. So in Tempe, Arizona, and I was there for Honeywell Investor meeting, had a half a day free, went to a real estate agent and asked them to show me around, right? This was the depths of the GFC. Built a little operation there with a real estate agent, a mortgage broker, a property servicer. We were looking for north of eight and a half caps at that time. And we bought a bunch of properties. These were all 50, $100,000 properties. The market recovered much more quickly than I was expecting. Reinvested then in some commercial real estate, which was lagging a little behind, had built a little network getting deal flow there. And then that market started to recover. And I was also thinking I wasn't sure that I wanted to make a seven-year bet at that point.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Seth, thanks so much for joining me. Ted, thanks for having me. Excited to do this. Well, why don't we start with your background and how it led to your interest and involvement in this space? My background is in the large cap growth public equities world. So that was 18 years. Back in 2012, I said, you know what? There's a lot of exciting stuff happening in the early stage startup world. I want to get involved. And I looked for deal flow out of Y Combinator and came across Coinbase. Coinbase was an Angel investment of mine back in 2012, and that kind of opened my eyes to everything happening in crypto. And then for the next eight years, it was a journey of traveling, meeting developers, going to conferences, building a network, all with the view that at some point when this became sufficient.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “My guest on the third episode of Crypto for Institutions is Seth Jins, managing partner and head of liquid investments at Coin Fund, which he joined a year ago after a seventeen year run as a large cap growth equity research analyst at Genesison Associates. While in that role, Seth began Angel Investing a decade ago and became an early investor in Coinbase, Bitcoin, and Ethereum, which eventually led to diving into the space full-time. Our conversation widens the discussion of crypto investments beyond Bitcoin and Ethereum with discussions of base layer protocols, decentralized finance, and non-fungible tokens. We discuss Seth's background, how he invests in these markets, and some of the key issues and risks investing in the space.”

    2021-03-15 · Capital Allocators · Crypto for Institutions 3: Seth Ginns – Investing Beyond Bitcoin (Capital Allocators, EP.182) · IDENTIFIED FROM THE TRANSCRIPT · source