Crypto Venture Capital: What's Getting Funded Now?

Transcript

Great. Thanks everyone for coming down. We got a great panel here. Um a way of introduction, I'm Doug. I'm from CMT Digital. We're a VC firm based out of the US with the backing of a 30-year-old trading firm uh out of Chicago. And that informs how we think about venture investing. I'm joined by three of my peers today who I'll maybe do a round of introductions as well, maybe starting with Steve. Uh just tell us a little bit about yourself and your firm. >> Okay. At Neoclassic Capital, a digital asset investment firm based in Miami and New York.

Uh it's been 2 years. Uh before that, I worked at crypto hedge fund called BlockTower Capital for 5 years. Before that, I was at Goldman Sachs here in Singapore and Tokyo for about 10 years as a portfolio manager. >> Hey guys. My name is Akshay Bedi. I run Maelstrom, which is effectively the family office of Arthur Hayes. >> Hi everyone. I'm Min, and I run a firm called Ethereal Ventures, which is set up by the former investment team of ConsenSys. Um I started my career as an institutional investor and built a payment startup in the UK. So, you know, a very bullish and long-term career in financial services, and great to see it all come together. I'm also proudly Singaporean, so you know, glad to

welcome everyone of you to Singapore. >> Great. So, I think we can start with maybe the the a juicy question, which is the supposed death of Web3, right? When you think of, you know, Chris Dixon's framing for how everything will be on chain from, you know, storage to streaming to media. You've had NFT loyalty, you've had metaverse. Um that's never really panned out, I think. And so, the haters will say Web3 is dead. But you know, this room is pretty packed, and you know, all of you are still here. And so, I'm curious for for the three of you, you know, what what keeps you excited about being in crypto and digital assets? And are there any inflection points over the last, you

know, 12 months that maybe are are that you you're watching closely? Maybe starting with Min. >> Sure. Um so I think that blockchains are basically general-purpose programming technology. That's absolutely the case with anything that's, you know, sort of generalized programming technology, you run lots of experiments. Some experiments work, some experiments don't work. Um I actually think the financial services experiment, no one can deny that it's worked very, very well. And I think the mission of crypto is even more important than before. Um you know, the question is who has ownership over your money, your data, your activity on the internet? And blockchains is the best

way to sort of move money in a permissionless and also um user-centric way in the internet. I think in a sort of post-agentic world with geopolitical volatility around the globe, it's ever more important. Um some of the inflection points, uh you know, positive and negative, I would say stablecoins it's not really just a primitive, it's actually a real product. And it's also not just a crypto primitive anymore. It's a, you know, if fintech firms use it, banks use it, it's there's no better validation of the the technology. Um I also think like, you know, tokenized assets, the proliferation of it and the demand for it speaks for itself. Um

and also the intersection of AI and crypto I think is actually starting to take flight. We'll probably discuss it more during this panel. Um I would say one of the inflection points that is again an opportunity is, you know, the events of October 2025 shows that we still have quite a lot to build in terms of making the infrastructure anti-fragile and really encouraging more user confidence to deposit funds on chain. And I think for us as ambassadors there's an opportunity there, too. >> Yeah, I mean, for me I would I would kind of answer it from the perspective of a retail investor, which is how I entered the space uh in 2013, 2014.

Um you know, at that point in time I think we were just trying to figure out as an industry does does the consensus mechanism of Bitcoin even work? Can you use it to transact as people thought, you know, might be one of the use cases or, you know, store value. Um and in that, you know, bull market that was like 2013, 2014 um that was basically all that that we that that's the industry basically gained and learned. In the next cycle, that was like 20 17, 18, uh that time around it was smart contracts, right? Ethereum and its competitors started working on those concepts in like 2015, 2016. There's a little bull market in 17, 18 of white papers that were based on smart contracts. The next round, there was DeFi summer in 2020, right after COVID.

Um most recently, you know, this cycle was more about the uh establishment of stablecoins as a uh regulated friendly a Wall Street friendly kind of um technology that people can use for uh use cases beyond what we used to use them for, which was just trading. I think each cycle we just get one or two things that work. There's a hundred ideas at the at the frontier. Many of them uh contribute to that one or two things that work in the end, but all we need is a couple winning use cases each time. I don't think, you know, every random like NFT derivative per concept needs to pan out into something for us to say that we've been successful as an industry.

>> Uh so, I think for last 12 months uh I categorize into maybe three stages as inflection points. Number one, I think perp decks trading volume exploded with very famous hyper liquid. As it picked it up, what it picked it comes next is tradfi asset on chain. Starting with the commodities when the US Iran war exploded and the oil price is very volatile attractive asset to trade or invest with. So on sudden perp decks that you start to see the volume trading volume break it out on oil and gold and silver and etc. When that happened, the

third stage is that spill over to now is a tokenized equity even pre-IPO assets on chain. And then those things that pop it up on chain, now institution coming in that oh wait, there we there is actually real trading volume out of it. Why not we tokenize some assets? Starting with the money market fund which and the treasury which occupy about 40% of entire RWA asset asset market cap. And now is commodity tokenized equity. And because of that, you see a lot of tradfi Wall Street institutions are on the panel talking about we are analyzing, we are evaluating different asset classes to be

tokenized. So basically perp decks and tokenized tradfi and now we are talking about RWA institution that is a main subject that you hear any part of this conference. >> Right, and maybe a follow-up point to that. You know, I think we're seeing a lot of our peers, you know, move beyond just purely crypto, right? Like you've had framework or paradigm and some of these other VCs becoming more of a frontier fund doing, you know, AI, robotics, etc. You know, how how how do you all think about your your your various funds and maybe mandate expansion beyond just maybe your your bread and butter or if we're doing early stage venture and maybe for our side, you know, we've looked been looking at,

you know, beyond crypto, there are new asset classes like compute markets, you know, coming up which which are very interesting. But, you know, I'd love to hear what what you all think about, you know, your your mandate over time. Maybe starting with Steve. >> Um I can break it down to maybe two layers. Number one, something that we don't change much. So, since we start the firm 2024 February, our thesis is a simple that we want to find most opportunity opportunistic in private market which is venture capital.

But, however, as things evolve, as as he mentioned, we have to look at some other opportunity like he stopped doing private equity. So, on us is we didn't change much, but make sure that we do see more attractive opportunity in liquid market which is public token market outside of venture because when the sort of bear market hits, there are a lot of lucrative opportunity if you do the fundamental analysis due diligence. There are a lot of distressed discounted asset you can invest. So, that's the number one. Number two is more broadly, I admit that it's very hard to work as a crypto only VC firm at this this moment.

So, but at the same time as a founder of investment firm, I'm very cautious about just changing or expanding mandate in in the short period of time. We are evaluating very close with the AI intersection with the blockchain and compute market which is a natural fit for a lot of crypto market makers advantage and strength. So, we are we are constantly looking at the different mandates outside crypto, but at the same time we want to make sure that our investment principle as a founder who set the culture and investment philosophy of the firm, we are little more careful than many other I think investment firm just to expand mandates.

>> Yeah, I I think we see that somewhat similarly where you know, for us we don't have any particular edge where there's no particular reason why we should assume that we'll win in AI or robotics just because we have done very well in the crypto category in particular. for us we see it by the time we see those deals, we're probably intended to be the exit liquidity or at least halfway there. I think that within crypto itself mandate expansion there's a lot of room to grow, right?

You got our venture book in our case, we have our liquid book that we started building out over the past year or so and now as you mentioned Steve, we're working on a private equity strategy that is focused on crypto. So for us I think it's more about expanding the types of deals we do rather than expanding outside of our core areas of competence. But >> And yeah, I echo a lot of what Steve and Asha said. I also think it's really exciting that our industry is at the point where it's actually suitable for private equity which means that companies are making money, always a great thing. Um for us, you know, we've heard a lot of VCs say, "Hey, investing in crypto is super hard right

now." But also when I look at investing in deep tech, that also looks really hard. It's very competitive, valuations are really high. Um and ultimately we are experts in crypto. We don't want to, you know, go somewhere where you don't have an edge. We have adverse selection, you're not a value added investor. It's like a surefire way to sort of lose. Um the way we think about it is how can we use our investing principles to sort of expand the aperture of the opportunity set. So, we've always invested on the principles of, you know, sovereignty, freedom, access, and agency. From there, you have privacy, security, opportunities in energy, longevity.

We also have some really awesome repeat founders from who have excelled at the crypto space and, you know, have sort of done their time and are now building companies in frontier markets who we are very excited to support. And I think this is actually sort of refining your thesis as a as opposed to just moving away from it in a very inauthentic way. And it's also good for the industry to think about it in through that lens because there's some diversification is good for like crypto VC funds. Like the the drawdowns of the last couple years have been really tough for funds because every asset is very correlated.

So, as the you know, the opportunity set matures, you have a lot more diversification and you have a lot more sort of, you know, uncorrelated hits, which is healthier for, you know, returns at the end of the day. >> Great. And then I think the double click on on on that, you know, I think there are a lot of new interesting sectors. I think Men you kind of touched on this with, you know, a lot of founders coming from other, you know, areas within tech and then deciding to build something in in in blockchain because the tech kind of works. You know, an area that we spend a lot of time looking at as I mentioned earlier is compute markets, right? It's a thing with a price where if it goes up

or down has enormous implications on, you know, the the capex for for many of the most important companies in the world. And I think the the market itself is very ripe for for, you know, some kind of sophistication to to grow in the market structure. So, that's an area that we're spending a lot of time on. I love to hear maybe from the three of you maybe two or three areas that you are very excited about within crypto and maybe hopefully there's someone in the audience that's building in this space, but maybe starting with Steve.

Uh what what are some some sectors within crypto that you think will grow a lot over time and you're hoping to back? >> Um I can I can mention in in three things. Number one uh trade finance tokenization. About but I I I want to add a one more layer. So, there will be a lot of tokenized assets already uh private credit and treasury and such, but what I'm more excited uh in that category is composability of those tokenized assets. If you just tokenize the asset on blockchain, I don't think it means much, but the blockchain's uh competitive advantage is you can use the asset, you can move the asset, you can use the asset. So, for example, I think it's more I want to see more projects that

leverage tokenized asset as a collateral and you can borrow against it something like that. So, I think that's a kind of um leveraging the competitive advantage of blockchain technology. That's number one. Number two is of course I want to mention the AI, but uh as I mentioned I would be careful with the pure AI play, but I want to see and I do believe in there's an intersection between blockchain and AI. So, where it is, I think um I have no doubt that AI agent to transact each other, the blockchain will be primary potential solution uh because I don't consider AI agent to put the password to log in

Chase bank account to send the money or something. It's too slow, too manual, you need a human. I think blockchain is just I mean, I think many people even outside crypto agree that blockchain is such a perfect solution for AI agent to transact each other. So, those are kind of application that I'm looking for. Lastly, there are a lot of a hacking and an incident by AI. So, I don't know what kind of format that that investment opportunity will be, but I want to see security firm that somehow prevents or a protect uh potential hacking and incident by AI attacking blockchain related companies.

>> Um a couple more I'll throw out. You know, obviously our industry does like casinos. We call them different things. We call them perps exchanges. We call them, you know, um prediction markets, whatever, but ultimately casinos are always going to be very engaging and always on the lookout for high-quality durable casinos like that. Um there's also DeFi primitives. I know it's kind of a a broad concept, but it relates to what you were saying, kind of like these building blocks to help link uh different parts of DeFi, TradFi with each other and with each other as well.

Always on the lookout for businesses like that. Um our first fund, well, I guess I said earlier our our fund is only 3 years old. Our initial investments that were very successful mostly in that category, Ethereum being one of the most notable ones. Um neobanks is also very interesting to us. Now, for the first time in recent history, uh a new tech stack is able to redo the banking experience um for a very, very high number of people in the world with fewer barriers from a technological and cost perspective than before.

Uh so, we're kind of at this inflection point where a lot of new businesses are going to come up on in that realm. And then if I had to pick like a longer-term area that's kind of interesting to me is I think DeFi will come of age at some point. Uh it as you know, it goes after the largest TAM. Um it touches so many different parts of business governance, uh um you know, it's kind of bring together different parties, resource allocation, capital formation. It touches a lot of different parts of the economy that I think eventually the building blocks will start to get built.

We're not there yet. This is like a 5 to 10 year vision, not not a 18 month vision. >> Yeah, there are some good ones that you guys mentioned. I think, you know, touching on the intersection of AI and crypto, I think I'm particularly interested in how they manifest in two areas. The first one is financial services and the second is identity. I think these are the areas we actually need the, you know, the verification, the privacy, you know, all the themes that really emerge with the intersection of AI and crypto. And the you know, for financial services, the combination of AI and underwriting and autonomous payments I think is really unstoppable and can just make a lot more business

processes more seamless. I think with Instinct and News we have seen how desperate people are to sort of automate a lot of everyday admin and you know, now they're like, "Wow, how do I how can I do this in a more secure way?" You know, because there's a big cybersecurity incident waiting to happen. I think that's where like, the combination of like, you know, crypto verification can really help. On the identity side, it's becoming increasingly pertinent as the likes of, you know, Hyperliquid are exploring how to get on shore.

You know, I think the SEC has issued some really great guidance in the last couple months on how decentralized wallets and protocols can operate on in the US and how they can enable sort of 24/7 trading of like, you know, different tokenized assets. It's all really promising, but we don't really have a great way for identity right now. And the same way like, I really hate sending my passport on email all the time. It'll be great if, you know, I have an agent um can actually just verify those details for me um and ensure that you know there's that's done in a provably correct way. So, I think my identity is something that we've kind of struggled

with as a industry for a long time because there's been a huge preference for like the Cypherpunk kind of decentralization, but now as things move more like regulated um you know, we want um we want access to more TradFi assets and that's a prerequisite for it. I think it's a a great time to be investing in identity solutions. >> Great. This one is for the founders here in the audience. I think what we've noticed over time is an evolution in the archetype of the founders that are coming into crypto. I think we've kind of alluded to this earlier, right? I think it went from maybe the past few cycles to just have a very young and ambitious people that just want to build something and maybe there's a function

of being early um and willing to take the risk when when you know, crypto is low status and not accepted by you know, the system. But over time as you know, the industry matures, the archetypes of the founders that are coming in tend to be a lot more institutional, right? Instead of a a crack college dropout, you maybe you'll have someone that cut their teeth in another industry for like 10 20 years. I'm curious for for you all, do you see that change happening in the kinds of founders that that you choose to back over time?

Maybe starting with with Min. >> Sure, yeah. We've seen a real change. I mean, I think founders crypto founders these days are absolute killers. Um you know, I see a lot of repeat founders and for for the last decade, I think a lot of founders uh in crypto sort of saw it as a big identity, you know, I'm part of this big crypto movement. Um and I think that's really great. However, I think sometimes like you know, that's insufficient when it comes to creating a really successful company. Um but founders today, I think they see it they see the technology for its potential, its usefulness. They're really using it as infrastructure.

They're super focused on execution. You know, anecdotally I would say even our portfolio and we're pre-seed and seed investors, our founders get to product and revenues within 12 months, which is definitely not what we saw in 2021. So it's great to sort of see the space still attract like really good founding talent, especially with what's going on in the AI market and I think the opportunity set is better than ever. >> Yeah, I think on on average the founder quality has improved better I think track records than before for sure.

See people can ship more quickly, they're pivoting better. Also, we've all been humbled. Earlier batch of founders were often independently wealthy from crypto itself, a little bit insulated from the successes or lack thereof of their businesses, but that's a little bit different now. They have a little bit more riding on the success of their of their business and also many have seen dark moments. There've been the FTX type crashes, there've been, you know, a few crypto's dead moments.

And I think for us that's one of the most important signs that we look for from a founder is the ability to come back from the dead. I agree with all the great parts. So maybe if I have a put corner corner corner points to that will be what hasn't changed much is still I think the founders in crypto are inclined to chase the waves. One hand I agree because if you don't wear the suit, if you don't talk about argue with tokenization today, you will be dismissed. You will be disregard into the large extent. So you somehow

those founders I've known for 7 or 8 years who who used to wear the flip-flop and t-shirts and jeans suddenly wear the suits. So I do understand to survive because you have to do so. But on the other hand, I want at least, you know, if you had to be RWA or institution or whatever the waves are coming. Prediction market 6 months ago, beam coin 12 months ago. It's okay, but I think that you have to focusing on what your competitive advantage at. What the differentiation you are against other founders in the same category.

I think that's something that we strive to look from and I want the founders to show off the most. >> Great. I think it's a wrap. You'll have the last question for today. I think, you know, there's always a question as to where value accrues within the company with between the token and the equity. The Clarity Act unfortunately didn't pass you know, this year and I think we see many cases right where a token only company is thinking of going private or maybe a company without a token is saying should I even launch a token? And I'm curious for the three of you, how do you think about you know, deciding between token and equity? What one makes sense to do one over the other

and maybe I'll start with Steve. >> In bear market, most investor prefer the equity portion more because you are less confident about token price action. But on the other hand, if we are going to look at the bull market and next year or end of this year, I think people want more token portion. That's a human nature. So I think my answer to the question will be it is a right balance. Right balance means that of course I as an investor at as of today we prefer equity plus token warrant structure the most cuz you take the both side. But I think it's not a absolute answer. I think it depends on the project, depends on token design or type of your business model. I think token

makes sense more or less. So for example, in crypto today there are more and more narratives that people looking at the fund fundamental of token value or fundamental of token price. So that's the one narrative such as pump that fund, hyperliquid, Ave, all those guys who are buying back or making a revenue. But I don't think that all the crypto project can follow that model. So I think every project should define their business model clearly whether and then communicate to the potential investor transparent manner that where the investors should focusing on whether equity value or token value.

And last point I will make it is still I believe that crypto token is a innovation of what the blockchain industry can do. And token is some revolution product to me that that entitle with the ownership and etc. So I still believe that there is a value of doing token investment but just make sure that founders do understand their business model and adjust their adjust it to make sure whether token value capture that or not.

>> Yeah, I'm sure everyone's who's on the investment side is seeing the same kind of thing where there's a lot more equity only deals nowadays than there were a year and a half ago. in many cases that makes sense, it's rational. A lot of these businesses in the past didn't need tokens. Um to your point they often were just kind of like treated as free options, right? By investors, you know, do an equity round but also throw in a token warrant just in case. Um, nowadays I think people are being a little more thoughtful of whether they need a token or not.

Um, it it just depends on each business model, you know, there's some cases where the token has an actual use case to help coordinate many different parties together in some capacity. Um, there's some businesses where they have recurring cash flows that are uh more easily packaged for a sale in 5 to 7 years when the business does very well if it stays equity only. Some cases they might uh it might make sense to do a token but it's better to sell the dream of that token to these new acquirers. So, I think, you know, it's just kind of a case-by-case basis. Uh and part of the reason again that we launched our private equity fund which is to go after both alternatives, pure play equity equity plus token and then just pure token through our VC fund.

>> Yeah, I think uh Akshat and Steve mentioned some great points. Um, ultimately for us, we're we love tokens, our companies issue tokens, we buy tokens. I think the differentiator is is the token part of your product design or is it your exit liquidity strategy? Because if it's the latter, it just doesn't work anymore. So, you might as well save yourself the trouble. Um, to for us, we see it as uh we see tokens as tokenized equity. They're now both valued the same way as uh discount of future cash flows of the network or the companies. So, it's just moving, you know, value from your left pocket to your right pocket and you should also save the yourself the trouble. And if tokens have a purpose and it doesn't mean it needs to have

real utility. Like, you know, you could launch a token as a company like a meme coin. It's like selling t-shirts. That's totally fine. Um, but I think, you know, being up-front about that is honest and it's now become quite expensive to companies to launch tokens considering, you know, the the heydays of these like crazy launches are way past us right now. We've also found a number of our companies who have launched tokens that actually want to do away with the token because now they've pivoted, they go towards enterprise and institutional clients, um who are a bit deterred by the actual liquid token. So, that's something to consider, too. But, otherwise, we still love tokens. We hope

companies launch more tokens. We hope there are more meme coins. Um I think they're great. >> Great. Uh final thing, um what's the best way to reach you? Starting maybe with Min. >> Sure. Um I'm on Twitter at _mintio, and you can also find us at etherealventures.com. >> I'm also on Twitter at akshat, that's akshat_hk, and I'm based in Hong Kong. So, if you know where to go in the Hong Kong nightlife scene, you'll see me around sometime.

>> [laughter] >> Uh okay. Twitter and LinkedIn, both xxstevelee. Uh I'm usually based in Miami Beach, sometimes in New York. So, that's how you guys can reach. >> Great. Uh 0xduck.ie, uh based in Singapore and Dubai. Thank you everyone for having us and for your attention. Uh that's the end of the panel.