Dragonfly: The Secrets of a Top-Tier Crypto VC - Haseeb Qureshi. Ep. 609

Transcript

Because venture capital, unlike trading, it's not a single player game, right? Venture capital is a multiplayer game at its essence, right? You're usually on a team and you're you win by helping people and you only win if [music] other people win. The other thing about it is that the the feedback cycles are extremely slow, [music] right? So, you make a VC investment and you don't know for years whether or not you're right. Doesn't matter. Like all that stuff is easy [music] to learn. The the hard thing, the thing that I can't teach you is judgment. But this ability to think very clearly, to question [music] obvious assumptions, and to like cut to the essence of something, I don't know how you train. It has to be that you have experience making tough decisions.

It can come from being a decision maker, building [music] businesses. It can come from competitive computer games. I think can develop that ability to make decisions. You know, if you've just been in [music] school for your entire life, I don't think that trains you very well to make decisions. When you're in school, you're mostly being told what to do and performing [music] tasks of memorization. you kind of have to build the reputation, the legend of yourself [music] as an investor alongside it. And I said, look, I want us to be one of the most technical funds in crypto. When I'm competing with Olaf to win a deal, who's who does a founder pick? Do they pick me or do they pick Olaf? There's two quadrants at which you can look at any investment. Consensus and non-conensus.

Now almost all the money in venture overwhelmingly gets made in non- consensus right. >> Hi and welcome to episode of the show which talks about the technologies projects and people driving decentralization in the collection revolution. I'm Brian Crane and today I'm speaking with Kureshi who is the managing partner of Dragonfly which is one of the best known largest um cryptovc funds. So really excited to have a today. So just before we go into it with Hib, we want to share a few words from our sponsors this week.

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Nosis, building the open internet one block at a time. Great. So, thanks so much for coming on, Hib. I'm really excited. I was sort of diving a little bit into your story and your background. I think there's a lot of like interesting things there. Maybe you can start there because I mean you started sort of your first you know real serious effort it seems like was in poker like when you think of today um what are the biggest things you've learned from that time that you know kind of like still shape you today?

>> Well so I played poker professionally from when I was 16 years old till I turned 21. And um you know when I was 19 I was ranked one of the top online null Holden players in the world. Um poker is a very it's a very unique game because there's nothing else that really teaches you how to think fluidly about risk and reward and about probabilities the way that poker does. Um it's in a way kind of surprising that we don't really have good ways to teach this to young people. Like I I sort of still can't really even imagine if I I don't have a kid, but if I did, I can't imagine how I would teach them how to think about risk the way that an investor does other than poker.

Like there's there's almost there's really just nothing like it when it comes to um understanding the way in which you you you cannot be too riskaverse and you cannot be um too emotional about making decisions. And a poker table is one of the rawest places that will test your ability to actually make decisions under uncertainty and under you know emotional stress. So that part I think was really valuable training for what I would end up doing you know much later in my career. Um as a poker player I went through a lot of ups and downs and actually you know at the end of my poker career um there was this big blowup that happened. Uh this this it was kind of a complicated story,

but basically there was this guy who was um who was cheating and he was one of my mentees. He was a a student that I was working with and um my reputation ended up getting caught up in this thing because I was trying to defend him. And uh that led to me getting um oustered from the poker community. And you know, I was I was 21. I was very young. All of my you know, I dropped out of school to play poker. it was all that I was doing with my life. And um it really caused me to really rethink what I wanted to do with my life and what um you know in a way poker it's it actually has a lot of similarities to crypto trading because

poker is a very single player game. You know you you obviously you're playing with multiple people at the table but you're not on there there's no team poker. you know, you play for yourself and it's you against the world and nobody really cares whether or not you do well. And so you're going through your ups and downs alone. Um there's this there's a saying in poker that uh always resonated with me, which is that everybody who understands doesn't care and everybody who cares doesn't understand.

Meaning, you know, in poker, you're always going through this volatility. You're always going through these swings of ups and downs because there's a lot of luck in poker in the in the short run. In the long run, it's a game of skill. In the short run, there's always ups and downs. And when you're going through those ups and downs, that's a lot of what makes it so psychologically challenging. And the people, you know, you think about your friends, your family, your your mother, um they don't really understand what it means when you tell them, "Oh, I just lost 100K today." Uh they're like, "Oh my god, you know, is everything okay? Like, should we worry about you? You know, should we call someone?" And you're like, "No, no, that's not what I need." you know, I just I just kind of need you to understand that like I'm going through a

tough time, but like I'm going to be okay. And the people who really get it, who are other poker players, um they don't care. They're just like, "Oh man, you know, you're complaining. I'm like, I have my own problems. I'm going through my own downswing. What, you know, I'm not a shoulder for you to cry on." Uh and so you you have to learn to be very uh emotionally and mentally resilient. And I think it's very similar for for a lot of traders is that um you know if you're trading in crypto you're you're on your own. You know nobody's looking out for you. Nobody really cares if you lose money. And in some sense like the only way they can make money is if you lose money. Um so that um for me it was it was really a cauldron I think that forged a lot of my my own

determination and my own um resilience. I I I think it's it was it was a very very difficult time after I quit poker because I I really didn't know what I wanted to do with my life and I was really questioning myself as you know was I somebody who actually could do something valuable in the world. You know poker is a in a way again very similar to crypto trading. It's it's a it's a kind of um I don't want to say nihilistic but it's a very selfish activity at the end of the day. You know like I I always reflected on the fact that as a poker player you know it's a it's a fascinating game. It has all this mathematical complexity and really beauty to it as a game.

But in in the raw reality of it, no matter how good I am, the reality is like, you know, the way I make my money is some guy sits at a table who's a, you know, a dentist or a doctor, you know, who did something actually useful for someone in the world and they come sit at a poker table and they lose money to me. And when you really think about like, okay, that's where I make my money from at the end of the day. Um, you know, I can I can I can glamorize it about, you know, the the intellectual contest of, you know, this game of risk that I'm playing against other people, but the reality is like, yeah, I got really good at a card game and that always really bothered me. Um, and so it made me determined after I quit poker

that I wanted to do something more valuable with my life and that's what ended up leading me into the tech industry and eventually um, you know, coming into into crypto. So yeah, I mean I guess one of the really unique things about because you mentioned the analogy to investing and maybe with trading it is a bit you have that fast feedback, right? But I guess >> that's right. >> The thing that's incredible about poker is just the the immediacy and the you know the amount of hands you can play and the amount of feedback you get. So I guess that's really hard to replicate anywhere else. >> Yeah, trading is the most similar.

Ironically, VC is actually quite different from poker. And it's one of the reasons why a lot of poker players find their way into trading. Very few poker players find their way into venture capital because venture capital, unlike trading, it's not a single player game, right? Venture capital is a multiplayer game at its essence, right? You're usually on a team and you're you win by helping people. You win by finding a founder, finding uh somebody who's building something and helping them to get there. And you only win if other people win, right? You you cannot win in VC on your own. like obviously by definition. Um so it's intrinsically pro-social in a way that uh both trading and and and poker are not. Um the other thing about it is that the the feedback cycles are extremely slow, right? So you make a VC investment and you don't know

for years whether or not you're right. And you get some signals early on. It's like, oh, you know, this person raised more money or they, you know, they had uh they're getting some momentum. They got some Twitter followers. But you know, being in crypto, you know, that's that's no guarantee of success. And if anything, it, you know, sometimes it's an antiattern if a project is getting all this hype really early kind of, you know, sort of gasses out very quickly if it if it leans too much into just purely building hype. Um, and so the reality is you you really it takes years before you actually get the full feedback loop, which means it requires a very different kind of thinking and a very different kind of um of uh mental adjustment than a game like poker or a game like trading where you get instant feedback, right?

If you enter into a trade, especially if you're a short-term trader, you know very quickly whether or not you made the right decision. Um, and the same thing is true in poker. Although there's uncertainty and there's some randomness and that's also true in trading. Um, but directionally you're you're getting this, you know, reward signal that's pushing you in the right direction. Uh, in venture it requires a lot more um using a lot more fluid intelligence to understand it. Did I make the right call last week, last month, last year? Um, and a lot of times the answer is that you really don't know. and people who look like they made great decisions in one vintage in retrospect it's like actually that was an absolutely terrible vintage and the people who sat out from this particular trend whether it's you know metaverse investing or whether it's

you know uh NFT issuers or whatever um for a year or two those people can look brilliant and then you know 2 three years later all of a sudden the evaluation of who did well and who did poorly completely changes and that's happened in crypto so many times that It's really in a way quite fundamental to the way that VC works. >> Yeah, I definitely want to get into into that a lot more. I'm curious. So you said you had this phase of being kind of lost and then you in the tech industry. I I read so you also into effective altruism, right? So were this kind of connected?

um >> they're very very much connected is um so when I was when I was young I I made a lot of money at a young age uh as a poker player and I was surrounded by a lot of people who had made a lot of money very young and the thing that I noticed pretty quickly I think sooner than a lot of people get to learn this lesson is that money doesn't make people happy and if you're if you're in the poker world it's it's obvious because you see all these people who are making all this money and they're miserable you know and uh and you realize like okay I know all these people who are like you know my the classmates who I was going to uni with who they don't have a lot of money and most of them are are actually

pretty happy even though they're you know scraping by they don't you know they don't have a lot of cash uh but they're having a great time and people in poker world who are like you know sitting down hunched at a casino you know they're staying up late they're working a lot of hours they're they're just kind of they're miserable you know not all of them obviously but many of them and um and that very quickly broke this connection in my head between money and happiness And um I realized pretty quickly that I was not somebody who's who's very motivated by money. You I don't spend a lot of money. I don't really have a lot of need for flash things. Um but but I realized um coming across the philosophy of effective altruism. This was around like 2012 2013 that I first came into touch with these

ideas. Um it incredibly strongly resonated with me that okay, money might not matter very much to me and I don't think money is going to make me happy. Um but money has tremendous power in the world and that the effect of that money is very very asymmetrical, right? That that money can do a lot more good in a developing country than it's going to do for somebody like me who lives in America and like okay well I can have a nicer TV, I can have a nicer car, but it's not really going to change my quality of life in in a substantial way. Uh but a relatively small amount of money, just a few thousand dollars can be literally life-saving in another part of the world. And that was what ended up getting me on the uh the train of

thinking, hey, um I one thing I know that I'm good at is making money. Uh I was able to do it very well as a poker player and I bet I could do it again. Um and so if I go into a field that's lucrative and is something that I'm also driven towards and excited about and care about like like technology, um I think I can donate a lot of that money and have a lot of impact, a lot more impact than I could just have on myself personally. And uh that was what made me decide that when I came into the tech industry, I was going to donate a third of my income to high impact charities. So I decided that in like 2013 and 2015 is when I first came into the tech industry and ever since then I've been donating a third of my pretext income.

Um now the the funny thing of course in crypto you can't talk about effective altruism without talking about SPF >> because of course the most famous the most famous effective altruist in the world was SPF. And it's funny because I actually met SPF. The first time I met SBF was in 2014 before he was in crypto. He was still at Jane Street at that time. And I met him at um an effective altruist summit in San Francisco. Um so he was, you know, just a scrawny little trader, you know, had the crazy hair wearing the shorts.

And I think I met him in a hallway at one point. I recognized him because he was somebody who who was himself a very active donor in the effect of altruism space. And I was an aspiring donor, you know, I I hadn't I didn't have any money yet. So I was like, you know, so I hope to someday have money, but right now I'm I'm, you know, pretty broke. Um, so but I I I met him and uh the next time that I would meet him would be many years later uh in Berkeley when he had started elev it's like crypto, right? It went through such a massive upswing in reputation and then absolutely cratered with the collapse of FTX and it was very

unfortunate that the industry ended up putting all their eggs or not the industry the movement ended up putting so many of their eggs into the basket of this one man. Uh because at the end of the day there are a lot of people who are effective altruists. You know it's it's a movement that probably spans you know 50 60 maybe even 100,000 people. Um and most people are are not that loud about it. You know they they just kind of do it. they don't make their whole identity around it. You know, like I'm I'm an effective alter been doing this for many years. I don't tweet about all the time. I don't try to make a big dog and pony show when I make my donations at the end of the year. Um, but the, you know, the the the essence of effective altruism is is is really quite simple,

which is just this idea that, you know, you think you're you're you're giving your money can can have a lot more impact uh if you think about it in a more rigorous way. Um, SPF was in in many ways the the worst element. It's it's like a good example of what happens when you take anything to an extreme, right? Um, any philosophy can be taken to an extreme. And at those extremes is when you start really untethering from uh kind of normal common sense morality, right? If you start being convinced that hey um you know effective altruism is so important I shouldn't I shouldn't take care of my friends and family or I should give away everything that I own and and kind of live as this weird aesthetic um or you know I should I should steal people's money in an

exchange in order to donate more to charity right like when you start really getting off the deep end um you get into extremism and there's you know there's there's uh there's there's religious extremists there's philosophical extremists and SPF sort of now serves is this cautionary tale to everybody in the effect of altruism world of like hey you know everything every everything should really be in moderation that includes effective altruism so um anyway I thought I would I thought I would um just give that thought but I don't know if you want to dwell on the effect of altruism connection >> it's okay I think [laughter] >> okay yeah yeah fair enough >> let's talk about uh crypto investing so you got into that through metastable

which probably not a lot of people know today, but it was one of the first uh crypto funds. Um probably one of the first certainly more like hedge fund like structure if I remember correctly. What was it like working there and what were sort of your biggest learnings from that? So I came into metastable actually before I came to Metastable I was um well I was working at Airbnb came into crypto full-time worked at a company called 21 which became earn.com that's bolog's startup um they got acquired by Coinbase I left and then started my own startup [snorts] and uh that was when I ended up meeting Naval so Naval of course founder of Angel List very well-known angel

investor sort of influencer life guru Silicon Valley um and He ended up convincing me to shove my startup and join Metastable as a GP. So Metastable was one of the very first funds in crypto. I didn't know anything about investing at the time that Naval recruited me. Like literally my own portfolio I just had in you know index funds. I don't think I'd ever made really a serious stock investment. Like even stock picking is something I just didn't do. I was just like no just index invest. read all these papers that you know nobody can beat the market so just do passive investing [snorts] and uh Naval was like hey you should become you should become a VC and I was like I'm a VC I don't know anything at all about you know finance I don't know what a

term sheet is I don't know what carry is I don't I literally didn't know anything and Naval was like look it doesn't matter like all that stuff is easy to learn the the hard thing the thing that I can't teach you is judgment but if you have judgment the rest of it is you you're a smart guy. It's pretty mechanical. I can teach you the rest in just a few months. Um and uh that you know in the beginning when I first came into Metastable I really thought this is going to be temporary. You know I'm going to come into Metastable. I'm going to kind of hang out learn a few things.

Uh but then of course I'm going to go back in the startup world. I'm going to go build something because I saw myself as a builder but also you know psychologically I just thought like well building is obviously the real thing. you know VC is like this kind of you know whatever uh sort of you know [ __ ] job that you do in the interim um of like early retirement or something you know it's like a waiting room before you have a good idea and uh over time I I came to appreciate more and more um that venture was actually something very very interesting and unique in its own right compared to what I was doing before and and the way that Nal described it is something that still resonates with me which is you know if you're if you're building a startup Um, you know, you imagine crypto is like

this uh this wave that's coming to shore. And we know the wave is going to hit and it's going to transform the the beach. And if you're a startup, you are like one grain of sand in that wave trying to make your way to shore. And you might make it, you might not. And like it's you against the world. And you know, it's like, okay, this is the this is the titanic conflict that every startup founder feels like they're in. Um, but to be an investor is to pull up a chair at the side of the beach and to take bets on which grains of sand are going to make it shore. And in a way, okay, maybe there's there's there's some element of diversification you get as an investor, but the more important thing is that it's actually really the best seat in the house to watch the wave come

in because there's no better place that you're going to really get to see what actually happens to the world and uh to be able to test your intellectual ability to predict how it's going to play out. you know, you know, I I came into crypto in 2017 full-time and at that time, you know, people were talking about the ICO boom and, you know, the way in which uh you know, IoT was going to get transformed and all, you know, I it's funny because one of the very first podcasts I was listening to is actually this one, epicenter because there wasn't a lot of technical content back in 2017 and um you know listening to the show, I was very studiously would listen and you know, try to understand like oh you know what's uh uh what does IOTA do, what does foam do, you know, all these

projects from from that that era. uh um you know you dutifully listen and understand and really try to predict is this is this the future or is this mirage right is this wave going to make it sure um as an investor that's fundamentally your job right and there's a lot of other stuff that goes into it about sourcing and you know building relation founders and helping them out um but but this is the core of what investors do and to be better at that at being better able to predict where the future is going and how technology will evolve um I've come to appreciate is the most interesting thing to me of anything that I can do. Building is fun. It's very satisfying to to feel, you know, your thing uh turning into a real product out in the world that people

use. Um and in a way, building a firm, building an investment firm is is is similar in many ways. Um you know, having built Dragonfly, you know, we're like 45 people around the world. We're a big brand. You know, we do a lot of we do a lot of things that that any company has to do in order to establish itself and to and to build a strong reputation. At the end of the day, investing is really about predicting the future. And to me, there's no uh there's nothing that quite resonates as much with me anymore as getting to do that for a living. >> So, you mentioned the the judgment thing as this, you know, crucial thing an investor has to be good in. Is do you think this is something you just had?

Did you learn it in some way? Is it something that you do you try to develop it and like how? I don't have a good answer to that. Like honestly, um, when I look because we obviously hire a lot of investors and we interview a lot of investors and and I'm now on the reverse side of the table. I'm where Nal once was when he was looking at me and having to determine does this person have judgment, right? Obviously, when people come in and they're and they're junior, they don't know that much about investing. They don't know that much about VC. Um, you know, we'll often ask them a case study of like, hey, you know, would you make this investment? Write me a memo about why you would or wouldn't make this investment. and you read this memo and uh some of them are very polished. You

can tell, okay, they've thought a lot about investing before. Some of them are very unpolished, but most of the time you can really kind of see through to does this person have that spark of insight that they can think for themselves. They can think very clearly. They can cut through to the center of the problem. And it's sort of like do you get there in one cut or do you slowly kind of trim around the edges and maybe eventually you'll get there? And that question when you when you see it you you know it instantly that okay this person has good judgment and um is it I it's not always connected to the fact that they've been an investor before. A lot of people who are very good at this and can think very clearly and lucidly about um making good

investment decisions don't have training as professional investors. Um, but this ability to think very clearly, to question obvious assumptions, and to like cut to the essence of something, um, I don't know where it comes from. I don't know how you train it. It has to be like almost certainly, you know, when I think about it, it has to be that you have experience making tough decisions. And where would you get that kind of experience? I think it can come from many different places. It can come from being a decision maker, building businesses. It can come from can come from games. Um, I think games are one of these places that do actually if you're if you're competing at a high level in games, um, I think it can even be true for for, you know, not things like poker, but even just, you know, competitive um, like, you know,

competitive computer games, I think, can develop that ability to make decisions repeatedly um, very well. But most people who are, you know, if you've just been in school for your entire life, I don't think that trains you very well to make decisions. I don't think you're making a lot of decisions when you're in school. I think when you're in school, you're mostly being told what to do and performing tasks of memorization and you know largely conformity, which is can you go home and like do the thing I ask you to every single night and memorize this stuff. But the reality is that you know being able to memorize things is totally useless in investing. There's nothing you need to memorize in investing. You know on some level you need to have a just general background knowledge about the world and about okay

you know I need to I need to think about how big of a problem is this that's worth addressing but very little memorization is involved very little of what you learn in school is going to be applicable to something like investing in crypto um it's mostly your ability to teach yourself to think fluidly about new domains uh to really be able to again u make difficult decisions that nobody else is going to explain to you how to the more that you've done that, the better you're going to be at this. And uh that's one thing that I think for poker, you know, for poker, it's not just that when I was playing poker, I was making tough decisions at a poker table. It was also that the era in which I started playing poker. And to be

clear, I think poker is actually very different today than it was at the time that I was playing it. Um poker was not very developed as a game when I first came into into playing poker. Meaning that the you know a lot today you have these game theory optimal strategies that are very well worked out. You know people do studying alongside these solvers which are these programs that will basically output the game theoretic uh optimal dash equilibrium for a given uh poker situation. And mostly what people are doing is they're studying what the computer is telling them. The computer knows the answer. It's like chess, right? Poker has become much more like chess in the last 10 years. Um poker was not at all like that when I came into the game. poker was still in the process of being developed as a fullyfledged game. And as a result, a

lot of what we were doing like what I what I see us uh like me and my peers in that generation was much more like science. It was much more us trying new things, developing different parts of the poker meta and um really challenging a lot of the assumptions of the poker players who came before us. Right. It was it was actually like when I look back of what I loved the most about poker, it was that it was us kind of opening these new frontiers and and experimenting with new strategies that nobody had really tried before and proving that they could work in different ways. Um that skill most people don't have. If you went to school, you've never done anything like that in your life. Uh unless you, you know, at a post-graduate level, you're a

researcher or something like this. Um, that skill is the skill that I think most translates into being able to be a good investor. Because being able to be a good investor means, okay, the year is 2021. Play to earn was just invented. What the [ __ ] is play to earn? How does it work? Where is it going to end up? Right? There's no book you can read. There's no there's no expert that you can consult. There's no amount of learning you've done in your life that could prepare you to answer that question. You have to think for yourself from first principles where you think it's going to go and you have to make a bet on it.

>> Yeah. Yeah. Do you think your ability this kind of judgment is developing much today? In what way is it evolving? >> It's a good question. I think my um I would say that my ability to make decisions within investing is getting better. As I as I get more data, as I have more experiences, as I make more mistakes, I'm learn and and as I have more successes, I'm learning from all of these things um you know, patterns and uh behaviors that I'm I'm realizing are more and more important.

Right? So just to give you one example right now, uh I have a portfolio company that's going through a co-founder breakup. So two people started a company together. They were they were very good friends. Now they're splitting apart. They hate each other. Um and navigating a co-founder breakup is one of these things that the first time you do it as a as a VC, you just have no idea what you're doing. You know, it's like it's like a divorce, you know, and you're like the you're like the friend of both of them and you have to somehow safeguard, you know, what's going to happen to the kids and what's going to happen to the, you know, the all the stuff. but also okay these two people who I also care about and I want to make sure that they're going to do okay. It's better for everyone if they do okay. Um

you have to navigate that and it's almost like being a mediator but then also being an investor and also being you know you do a lot of different things at the same time. First time I did it no idea what I was you know it was just totally uh totally unprepared to deal with that. Um, now I've done it many times and the nth time you do it, the better, more solid, more capable, more fluid you become at being able to help people navigate those difficult things in a in a in a in a startup. Same thing with dealing with M&A or or dealing with some kind of strategic pivot or, you know, helping um a company, you know, figure out its hiring strategy. The first time you do it, you sort of stumble along. Um, you know, when I was at Metastable, the funny

thing about Metastable is because, you know, Naval um, you know, he's such a well-known person. and he was so famous uh obviously still is but you know at that time he was very very active in in in the crypto investing market everybody wanted his money and so when I was at metable you know uh even by the time I left I had never actually won a deal when we wanted to make an investment so I was like okay you know so at metable we did the seed round of avalanche and um I was like hey I think we should do this I think goon is great let's let's do the seed round um you know I knew goon and I had a relationship with him but at the end of the day he didn't want my money, he wanted Naval's money. And so Naval was the one who went out to

say, "Okay, Naval, we want this much allocation." He would go and he would go win the deal. And uh it was at Dragonfly that I had my first ever actually, okay, Hib, it's your job to win the deal. You have to convince the founder to take your money. And why would you take my money over AS6 and Z's money or Paradigm's money or Polychain's money or anybody else's money? And it's intrinsically like a very um you you sort of have to be this goes against a lot of your instincts uh if you're somebody like me to say like hey I'm amazing.

You should work with me because I'm a special guy and like I'm exactly the person you should work with over everybody else. Everybody else sucks and I'm the one who's going to, you know, solve all your problems. Um you have to do that. You have to sell. You have to fundamentally convince the founder that you are special compared to everybody else and you will solve their problems in a unique way that nobody else will. And that skill is a skill that you can only get better at through practice, you know. So, um the judgment thing itself, I think at the end of the day, um I don't actually know that my judgment, you know, at a core level has really gotten that much better over the time that I've been at Dragonfly. I think my judgment as an investor has gotten better in the same way, you know, as a

poker player. I got better and better over the years at playing poker. Um, but would my judgment translate? I don't know. Um, I think that the one thing I have noticed in myself since I became a VC. So, you know, I I before this I was a I was a software engineer. I was a builder. I was of course a poker player. I only ever played um again largely single player games. So, you know, when you're a poker player, you're playing for yourself. You know, you don't really need to be a social butterfly to play poker. Um, and of course being a, you know, if you're a software engineer, it's like the most quintessentially antisocial job is writing code. Um, but, uh, VC is hypersocial. You know, all you do all day is talk to people. And, uh, when I first started, it was just

exhausting for me. It was very, very difficult because I was psychologically and mentally quintessentially a builder. Um, and now that has really changed kind of who I am. And it's something that all my friends and my family just they can't help but notice is the way in which becoming a VC really changed me. And I think in that respect is very is very good for me because when I first started I I could not handle a day full of meetings. Like literally I would collapse at the end of the day. I'd be like I have to cancel. I cannot do another meeting. Like I'm so exhausted talking to people. I just want to like read and you know go read a white paper.

you know, like that just sounds so nice to me compared to having another [ __ ] meeting. Um, but uh leading a firm, building a team, um, and on some level, you know, part of what you have to do as a VC is to build your own brand very intentionally because, you know, at the end of the day, VC is a people business. you know, on some level, yeah, okay, Dragonfly is a brand and people care about Dragonfly now and okay, it's kind of cool if Dragonfly is your lead, but at the end of the day, um, funds don't really have independent brands of the people, right? Like if I bounce from Dragonfly and like everybody leaves and we turn over and there's a new team at Dragonfly, you know, it's not like Airbnb. You if Brian Chesy leaves Airbnb, nobody really cares. You know,

you'll still use the product. Like I don't think anybody would even be like, "Oh, you know, I don't know if I can use Airbnb anymore now that the CEO has changed." Um but at at a VC fund it it kind of is right. The VC fund doesn't really mean anything without the people there. And so at the end of the day like you kind of have to build um the reputation and the legend of yourself as an investor alongside it. Um and that was something that would have been very difficult for me uh four or five years ago and it's something I've gotten a lot better at. So when when you started Dragonfly, what was the kind of company you wanted to build and how did you want it to be different from the other crypto fonts?

>> So that that was actually very central to my decision to join Dragonfly. Um so I I actually I joined Dragonfly about like six months after they first started. So I wasn't there at the very very beginning. The the fund wasn't it was like half raised at the time that I joined Dragonfly. So I just I just left Metastable and I was kind of a free agent deciding what I wanted to do and I was funny enough I was actually working on a course. Um so back when Bology after he left Coinbase he started this thing called Nakamoto which was this like uh publishing thing. I don't know if you remember this uh but I I created this course like of you know blockchain 101 and I was working on this and I thought I was going to write a book uh teaching blockchain so long ago

and you know in a way this is also when the educational materials in crypto were much worse than they are today. So thankfully that that gap has largely been made up. But at that time there was really only uh podcasts and one textbook which was the Princeton textbook uh which you know that that's how I learned about crypto was reading the Princeton textbook. Um and so uh so I was that's what I was doing at the time and um you know Bo ended up approaching me and uh trying to convince me to join Dragonfly. And Dragonfly at the time they didn't really have much of a brand. I don't think anybody knew them in the west. um you know they they were kind of this they'd invested in other funds. They invested into, you know, Polychain and uh Paradigm and, you know, a bunch of

other uh funds and they did some deals like, you know, kind of follow on investments uh alongside some of their other managers that they were backing uh but they weren't really doing direct deals, right? Investing directly into into companies um and they weren't leading any deals. And so, uh you know, Bo pitched me on this vision of building a global fund. And when I say global funds, you know, at that time I had never actually been to East Asia. Never been to Japan, never been to China, never been to Korea, never been to Singapore. Um, this was this is back in like 2017, 2018. And I knew that crypto was big in Asia, but I kind of knew it intellectually. I was sort of like, well, you know, now that I know this, I

can make decisions on that basis, but I don't really need to go there. And like I don't need to meet a minor. you know, I know mining exists, but you know, what does it really matter the details of what they do? Um, and uh, and Bo was the one who convinced me that no, no, no, no. If you want to understand what's really happening in crypto, if you want to understand like this global phenomenon, you have to be able to see the whole elephant, right? Like, you haven't seen it with your own eyes, you don't really get it. And all the VCs in crypto at that time were were almost to the last man based in Silicon Valley. Um certainly in 28 you know before co everything was in Silicon Valley and um it was out of Silicon Valley that people were investing in this thing that's

happening all around the world right and and I was very much that I was you know at Meta Stable we were in San Francisco we we never invested in anything that didn't come to SF to meet us and um and Bose's vision was very different and it really resonated with me that like hey actually why is no one doing it this way why is nobody opening the aperture and looking at the whole totality of what's happening in crypto globally um and what would it look like to build a firm with that being the the initial animating hypothesis that actually if you if you could see the whole thing you would do it somewhat differently. Um that was the pitch that he made to me and and I told him like look I'm potentially down to join but I have um some demands and if you can meet those demands then I'll

join. The first demand is that so you know at the time Dragonfly was not a technical team. there was nobody technical on the team and I said look I want us to be one of the most technical funds in crypto that's what metastable was metable was led by uh Lucas Ryan who was um you know he studied uh cryptography at Stanford under demonet and you know the way that he taught me how to invest and how to diligence stuff was you know you go into the GitHub like you actually understand from a protocol level what they're doing what the attack surface is how robust is this technology um like if you can't run it yourself you don't understand And uh that that kind of technical approach to diligence like really nobody in cryptovc was doing at that time. Uh

this this is before ACC crypto before paradigm. Um you know most of these teams were run by people who weren't technical u in the in the uh VC world. And so that was the first thing is that I want us to build a technical team. I want us to known I want us to be known for being technical. Um second is that uh we got to start leading deals. I want us to be actually competing with the poly chains of the world with the pantas with with the A6Zs. Um, and third is uh we're no longer going to invest in funds. Everything that we do from now on is going to be direct. We're going to work directly with founders and we're going to be known as being one of the premier funds in crypto. And uh Bo said I'm down. And that was how I ended up

coming into Dragonfly. So that was that was the original thesis of the kind of firm we wanted to build. And now at the time we didn't have a lot of resources you know and again we were we were flanked by the poly chains and the pantas and the A6Zs who were much bigger much better resourced. I mean at that time those guys were huge you know my goal originally when we first started Dragonfly was to someday beat Poly Chain. Now you know today that might seem really bizarre of like a Polychain why why Polychain in particular it's like no no you don't understand Polychain at that time they were the number one fund. They were the only people who had a billion dollars of AUM. They had backed almost everything from the first generation of crypto. You know, whether it's, you know, Makerdo, Polka Dot, uh

they were an Avalanche, they were so many things, you know, Cosmos early, they had did so many wins. And um you know, looking at Polychain, I was like someday, someday we're not there yet. It took a long time for us to climb that mountain, but someday we're going to beat Poly Chain. and uh >> chain in terms of getting into deals or in terms of the >> Yes, exactly. As a as a VC, the way that you think about like what's the actual head-to-head is when I'm competing with Olaf to win a deal, who's who does a founder pick? Do they pick me or do they pick Olaf? Right? At the end of the day, that's the headto-head. You know, it's kind of like in poker, we call it playing heads up, which is 101. Um, like if you want to ask like who's the better

player, who which fund is winning, the answer on some level it's like, okay, did you make better investment decisions? Obviously that matters, but it's hard to quantify that. It's hard to tell because like I said, all this stuff takes years to play out. But the one thing that you can know as a platform, as a brand, um, is my fund winning? At the end of the day, the number one determinant of who ends up getting the better returns is who can get the better deal, who can win. And uh the way that you you know there there's um one way to think about investing is that there's um there's two quadrants at which you can look at any investment. Okay, those two quadrants are uh consensus and non-conensus meaning that everyone

agrees this guy's going to be the winner and or maybe you see something other people don't. Right? So an example of a consensus deal would be something like um uh you know take take open C, right? Right. So, the OpenC series A was incredibly competitive round, right? This was like in um I don't know what was this like early 2021. Uh OpenC was growing like crazy. Everybody knew OpenC was going to be the winner and everybody was competing to try to win that deal. Everyone gave them a term sheet. Every single VC you've heard of. Um or take for example um you know the Mega ETH series A incredibly competitive round.

Everybody was giving term sheets to to Mega ETH at that time. And um this is a consensus deal. Now there's non-consensus deals as well. So, Nongus says deal would be like the Salana seed round, right? Salana seed round was not competitive, right? Salana pitched everybody. Multicoin won it, but they didn't like win it because everybody, you know, they beat all the other people. They won it because everyone else said no. And so, okay, Multicoin won it. Um, same thing with Salana Series A. Everybody, they pitched everyone. Everyone said no except for Multicoin. Um, and so you have these consensus deals, non-consensus deals, and there's consensus right and consensus wrong, right? Right? So there are times when everybody is, you know, everybody has consensus on a deal and the deal is correct, right? It is, it is the winner and everyone knows it's going

to be the winner. Um, and then there are times when the consensus is wrong. Now, almost all the money in venture overwhelmingly gets made in non-conensus right? That's where you get the 100x's, the 150x's, the the 500 x's, right? And everybody knows ventures a power law business. And that means that the really really big outcomes are the ones where you make the lion share of the returns. Um but a lot of money also gets made in consensus right? And um there's then there's consensus wrong where you know you're going to lose money and then non-consensus wrong.

That's where you know you're making crazy bets out there that don't pay off. Um so non-consensus right is where your brand doesn't matter. You don't need to have you don't need to have a great brand in order to do non-consensus right deals, right? And in a way, if you think about early um one confirmation uh or early multicoin, they they didn't have the best brand of crypto, but they were able to win these non-consensus deals and they eventually able to parlay that into building a great brand. Um but uh consensus right deals are consistent money makers, right? That's where a lot of the money in venture gets made. It's not where the really incredible outcomes generally happen, but it's places where you you you'll consistently make good money. And that is purely a game of brand.

If it's consensus, right, everybody knows, you know, the the classic examples of Google Series A. Everybody knew Google was going to win. Uh but only Sequoia got to got to play, right? Because Sequoia Sequoia, they they had the brand to be able to win that deal. Um so that's where brand matters and that's why it's very important to cultivate that that ability to win head-to-head against another VC. Um if you look at our biggest wins, you know, one example of this is um the uh the Athena seed round. So we led the Athena seed round that was non-conensus. Now, why do I say it's not consensus? One, it wasn't a super competitive round. Um, second, it was after Terara collapsed, right? We we led the Athena seed round after Terara collapsed, after people thought DeFi was uninvestable,

and especially people thought that an algorithmic stable coin was completely uninvestable after the collapse of Terara. Um, and so it was it was our ability to identify that, hey, no, no, no, [clears throat] no, what's happening with Athena is different from Terara, right? We never invested in Terara. We passed every single round of Terara. uh because we understood that the mechanics of Terra were fundamentally insecure. They're fundamentally uh something that as it went to scale, it was going to break with probability one. Uh but something like Athena, no, Athena is a cash and carry trade. Cash and carry trade has been around forever. This is the oldest thing in history, you know, like I I was I was talking to hedge funds that were pitching the cash and carry trade back when Dragonfly first started, you know. Um it's a very well understood financial product. It's not

like, oh, this is a bank that takes on more and more leverage the bigger it gets, right? that's where Terra fundamentally was. Um, so understanding that and being able to see through to the future is how a lot of the returns in venture get made. Uh, but the the the the measurement of winning is how most of the bread and butter of of venture uh works. And so that was when I when I say that I wanted to beat Poly Chain. That's what I mean. Eventually, you beat them in returns, but the first thing the first thing that you see as you become a better fund is eclipsing them in terms of being able to win it head-to-head.

But you still think like most of the returns if you think of like uh Dragonflyy's uh track record was more in this non- consensus right bucket or like to what extent was the consensus right also a driver for this? >> It's usually something like 7030. um is that 70% of your returns come from a very small number of non-consensus deals. Um and then 30% of your returns, which is still substantial, comes from your consensus deals. Um and most of the time, it's not always true, right? So it's not literally true that Athena had no other bids when we won that deal. Um but it was not the juggernaut, it was not perceived as the juggernaut that it

is today, right? Um it wasn't every single VC, every single neighbor VC bidding on that deal. Um, but there are a lot of times that like the the big winner can end up continuing to win and win and win and win and win. Um, you know, one example of that is something like Hyperlquid, right? So, we were uh we were one of the VCs that were was trying to get Jeff to take a VC check, you know, and we were this relatively early before their airdrop obviously. Um, we were um, you know, we we had built a relationship with him and we were really trying to win that deal. Uh, and we weren't winning it against other VCs like there was no round. it was us preempting and trying to get him to take our check because we thought what he was building was was really different and

really compelling. Um and ultimately, you know, he got close, but he said no. Uh that I don't want to take uh any VC money. And um you know, there were other firms uh other top tier firms that you know that were trying to do the same thing later uh of trying to stuff them with a term sheet, trying to give them a bunch of cash and say, "Hey, you know, uh let's let's do something even though you're not looking for money." um your ability to do that is ultimately constrained by uh how strong your brand is. But but at the end of the day, you know, you're never going to win all of them. No matter how good your brand is, right? There's always some hyperlquids out there that'll just say no to everyone. And no matter how good your brand is, even if you're, you know, A6

Crypto or Paradigm or Sequoia or whoever, you're always going to lose deals. And so the the the question is, you know, as a fund, do you have that feedback loop of, okay, we lost this deal? Why did we lose the deal? Do we actually understand why we lost? And is this a problem that we can learn from and get better at so the next time we go at this we're going to do better? Right? If you have that mindset like a product founder that you're constantly thinking about how to iterate in the direction of getting better then you know with with near certainty you will improve as a firm. Um the weird thing in venture is that you know one thing I realized part of the reason why we've been so successful in venture I think a few reasons. One is that we're just really persistent and a lot of

people just kind of gave up when crypto went through downturns or when things went badly. They just, you know, they just didn't have the resilience to keep going. Um, that's the honestly the most common thing that I've seen from all the VCs that I remember from when I first came in the industry. Most of them aren't here anymore. Most of them just bailed. Um, so so that that is the most obvious thing is just do you have the stomach to be able to handle an industry that's as chaotic and as cyclical as crypto. Uh but the second thing is like why did you get into venture? A lot of people came into venture because they think that venture is this you know gental job that you can just do on you know in the summers and you take the summers off and you you know you

work like 9 to5 and then you know it's like it's like ultimately a kind of early retirement for people. Like that's how they see it. They see it as this like high status job that you get invited to a lot of cocktail parties and you get to pontificate on Twitter. And that's not how I see it, you know? Like that's not why I got in the space. I came in the space to win. And I I come in the space to win. And to me, that means that every single day you're getting better. Every time you lose a deal, you obsess over why you lost. Every time you don't see a deal, you try to go understand why didn't I see this? Why didn't this founder come and talk to me? And if you don't have that mindset, like you're you're just going to lose.

You're just going to keep losing and losing and losing and not learning why you why are you losing? Uh and so that feedback loop, that iteration cycle that that founders have of getting better every single time, every single day, every single moment you get product feedback, how can we get better? How can we get better? How can we get better? Uh that loop I I learned with enough time that a lot of VCs don't do it and they just they just keep sucking as VCs and not ever really uh committing themselves to intentionally getting better. Um, and that's and that's why, you know, as as a firm, I've been continually surprised at how quickly we've lapped so many other VCs who have been doing this much longer than us.

>> So, you mentioned the ability to get into deals. Obviously, there is ultimate returns of the fund. Are there other sort of dimensions by which you judge the success of Dragonfly? >> I mean, those are there's ultimately three dimensions that you care about as success as a firm. So the first and foremost is returns. Returns at the end of the day is the northstar. Um the second is brand, right? Your ability to actually win deals when you're up and headto-head against another firm. Uh the third is ability to raise money because at the end of the day, you know, VC is a scaled business. So if you cannot actually raise the capital you need to go deploy your strategy, um then you know you're it doesn't really matter how

good you are, right? Uh because you don't have the money to actually go put uh all this stuff into motion. So, uh, you learn as as a as a VC is that, um, you you kind of have two different audiences. One audience is the founders and just kind of the crypto community, how they perceive you and how they understand what you're doing, um, and how they perceive your brand. The second is actually among LPs, which are a totally different world. You know, they don't read crypto, Twitter. They don't care, you know, how many retweets your your stuff has gotten. um for to them your brand is constructed by uh this totally different channel and style of communication which is to institutional investors uh or to family offices or whoever it is that you're raising your capital from. How do they perceive you?

What content do you create for them? Uh what are the things that you've done in this world that contribute to your brand? Uh and they care a lot more about uh things that nobody in crypto Twitter cares about. When I was reading through your blog, uh, one of the things you linked to was this post by Mark and Reese where he talks about, you know, people, product and market as sort of, you know, three dimensions by which you can evaluate uh, a startup and you know, he comes like hey the most important is market, right? If you don't choose the right market, like the rest kind of doesn't matter.

Um I'm curious like if you let's say you left uh being a VC and you had to start a company in crypto, what what would be I don't know one or two maybe three markets that you would focus on? >> Uh that's a great question. I I definitely can't name you three. Um I think so probably if I were to try to build something I would be spending a lot of time at the intersection of crypto and AI. Um I think probably the thing that I would want to build is to work on um AI powered wallet

automation. I think this is kind of >> wallet automation. >> Okay. So, you know, how can I get my wallet to be much more intelligent than it is today? And the reality is like we depend a lot like our security model and our UX model for wallets is very very highly dependent on humans catching mistakes whether it's mistakes in oh is this the wrong contract am I getting spearfished or you know like clicking through all these buttons to bridge from here to there's like oh make sure you come back in 3 minutes to like you know click do this other transaction and um clearly the wallets should be a lot smarter than they are they should be able to do a lot more of this such as a human being,

you're operating at a higher level of autonomy and direction giving compared to where the wallets are today, which are extremely brittle. And you know, there there's almost no intelligence that's baked into your wallet, besides, you know, a little bit of transaction simulation these days. Um, I think that is going to be one of the most titanic changes that we see in the crypto industry over the next few years because of AI. Um, and I think in order to get there, you need to do reinforcement learning at scale with a really robust um, data pipeline and simulation environment in order to do that. And I haven't seen anyone really try to tackle this today. I think it actually requires quite a lot of capital. And um, I think it's a very hard problem to solve. And we're clearly not there yet. Like we were not even capable of solving it

today because, you know, uh, uh, models cannot consistently order pizza. they can't even consistently book a flight. What makes you think they can consistently, you know, bridge assets and do dex trades and like not get fished, right? Like that's even harder than ordering a pizza. So, um you if you look at the latest generation models, I think if you look at uh um you know, the newest uh Cloud 4 Opus, um some of these agentic benchmarks, uh I think on ordering a pizza, it's something like 80% ability to order pizza and like 60% on booking flights, which is, you know, it's incredible compared to where they were a few years ago, but it's still abysmal. in absolute terms, right? Like if you had personal assistant who could order you a pizza 80% of the time, you'd

be like, "What the [ __ ] is wrong?" Like, "I'll just order all my own pizzas." Like, I'm not even going to deal with this. Um, so, but I think they will get there very soon. I would guess within a couple years, we're going to have these things consistently booking flights for us. and uh the g the the whoever wins this of being able to get AI uh and getting agents to work directly within your wallet and be as trustworthy as a self-driving car, right? If you think about, you know, I don't know if you ever taken a Whimo, but you know, today, you know, you take a Whimo in San Francisco or in Phoenix or in Austin, and it's just like this is I I trust this more than I would trust an Uber.

It's kind of, you know, it's slower and it's more methodical today, but it's it's it's almost certainly safer than than going in an Uber. Um, so when are we going to have self-driving wallets? And those self-driving wallets are going to totally change our experience of blockchains. I think this will be one of the biggest um companies and one of the biggest opportunities because of the fact that it's going to change our relationship with blockchains, right? Uh not just that, okay, I'll be able to tell my wallet, hey, move my assets from here to there. It's that I won't even care where my assets are because why would I need to care? I just tell like, "Hey, I want to go trade on HyperLink.

Go go go go go get me uh uh, you know, a 5x long on Bitcoin and the wall will just figure it out." It's like, "Oh, well, my ass over here. I'm going to go bridge. I'm going to do this. I'm going to do that." It's just going to happen in the background. Same way, you know, I tell my Alexa, "Hey, order me diapers." And it just does it, right? I don't need to I don't need to deal with anything. Um, that will happen. You will you will trust the intelligence of your wallet enough to be able to delegate that task to it. And when that happens, how does that change a relationship with blockchains? How does it change your relationship with arbitum, with Salana, with all these things? When I no longer care what chain this thing is on, I no longer have even allegiance to say, "Oh,

well, I'll only use Salana apps because, you know, I love Salana. I'm a Salana guy, right?" Um, that I think is going to be the biggest shift that we see in crypto over the next 5 years. Um, and that I think that's the kind of scaled opportunity that if I was going to build something, I would want to go after. Yeah, I totally agree with you. I mean, I I think one one aspect of this that to me seems so crazy and and illustrates like how crucial this is, it's just like wallet security, right? Because it's so so hard and and it feels like it's actually gotten worse.

I I mean, at least, you know, back in the day, you know, everyone was like, "Oh, not your keys, not your coin. Self custody is the way to go, right?" And it was very much and like you know you don't people onto crypto and they're like you know you have to by then you see your own wallet. I think today with like you can often barely predict what what are you signing uh you have all of this fishing attacks hacks sophistication. it it feels like something where most people shouldn't actually use a wallet, right? You shouldn't do self.

>> Uh and I think the only thing that can solve that would be something like this where you can basically can say oh I want to do this and then it there's some some verification thing that well translate into a transaction verifies that this is really the right thing what you want to do. So yeah, I think some level >> if if you look at smart contracts, right? In a way, smart contracts, we talk about how magical they are and how amazing they are, but the thing that's obvious about them is that they're really not designed for humans, right? In a way, they're kind of designed for machines. Like it's a lot easier for a machine to parse um EVM by code than it is for a human being to do so, right?

And it's certainly easier for them to parse solidity with like a you know if you've got this you know diamond contract thing with like you know uh you can't even you look at the code you can't even tell what the hell is going on even if you can read code you can't tell what's happening um but a an AI can very easily go and parse the contract that it's interacting with you know simulate it interact with it um go see what are other deployed instances of this contract are there any wallets that have been poisoned by it check the DNS records make sure nothing's changed recently like all this stuff there's nothing stopping you from doing it. You could do if you were sophisticated enough, you could do it, but you just won't, right? You're lazy. It's slow.

It's timeconuming. Like, you just don't have that level of of patience. But an AI never gets bored, never gets lazy, you know? It's like it's like, you know, a Whimo. A Whimo never does a rolling stop. It's kind of annoying that it never does a rolling stop, but it never does a rolling stop because it never gets impatient, right? It's just like, okay, here's a stop sign. I will come to a complete stop and then I will start again. And you know we maybe we need to modify this behavior but at the end of the day it's completely configurable by us the level of scrutiny and carefulness that these AIs will take. Now there will definitely be attacks against AIs and that will freak people out when the first time you know an AI does something purely that an AI would a mistake only an AI would make and that a human being

would never make. Um, but eventually we will get to a point that AIS are safer than humans for self-custody and eventually and I think not not it won't take too long to get there that AIS will basically never make a mistake of that kind right um just because of the fact that it's actually pretty easy to understand hey the user wants to trade on unis swap the user wants to use this app the user wants to do this user wants to do that um and there almost every case not every single one but almost every case if a technical intelligent person had reviewed this you attack surface area. They could have figured out something went wrong, but just nobody is ever doing all those checks all at the same time, right? One of the one of the things I think that should be proud of as an industry, even though I I

agree with you that wallet security is is really difficult. It's really fraught, um, is that if you look at the amount of hacks that have taken place in crypto over the last 5 years, the amount of hacks actually at the smart contract layer have plummeted. Almost none of the losses that you see anymore happening on chain are actually smart contracts getting hacked. It's almost always spear fishing, wallet compromise, some kind of you know, malware, user error. And the reason why is that we've actually figured out how to write secure code now, which is you know, thank God, right? Um but uh you know, like if you even think about you know the Bet hack, which of course unfortunately happened relatively recently, one of the biggest hacks in crypto history, you know, full disclosure, we're investors in Bybit. um that hack um you know the question is

like okay well that you know that wasn't even uh notice like you know uh the the the smart contract itself was not compromised. it was the front end that was compromised. And if they had checked the actual hash corresponded to a clean computer hash of what they thought they were citing, they could have noted the uh non-correspondence between those two, right? And again, an AI could have done that. An AI could have, you know, went and, you know, spun up a virtual machine and go and uh verified that thing or, you know, ran the code itself. Um, but, you know, they they didn't do it. And maybe they would have if they had infinite time, but they didn't. Um, an AI could have also just read the front end. If you'd read the front end, you would have seen that there was a special case in the JavaScript on the

front end that said if your wallet is this, do this instead, right? That code was there in the JavaScript payload that they were served. And as a human being, you're never going to see that. You're never going to you're never going to check. But an AI will always check. And AI will always check. So that is my um fundamental intuition uh where that comes from of why wallet security in 5 years will be much better than it is today. Let's talk a little bit about the market. So, right now the market is in a kind of interesting position, right?

Bitcoin is obviously doing extremely well and at the same time most of or a lot of the rest of crypto is actually struggling a lot. I mean I think sort of the entire altcoin market a lot of the new tokens they're launching you know of course funded by uh VCs and where like VCs mostly invest right have basically struggled to find any buyers you know with with some exceptions. What are your thoughts on where the crypto market is today?

Well, there's there's definitely malaise in the altcoin market and you can see that um there's not a lot of retail activity in alts. Um that being said, I think in absolute terms crypto market is doing okay, right? If you look at where is that marginal retail buyer uh instead the answer is that they're in public markets. So you can see, you know, with the circle IPO, you can see with all these, um, you know, micro strategy and with all these treasury plays that are coming to public markets, um, that's where you're seeing a lot of the energy and attention really being driven. Now, crypto markets are very cyclical and we know that right now we're in a cyclical lull. Um, most of the attention is on Bitcoin. Uh, monetary policy is still quite tight, right? We if you if you

remember back in the beginning of of last year, we thought there would be six rate cuts last year. Instead, we got two. Uh this year, we've had none. Um and it's already halfway through the year, right? And again, we thought there were going to be more rate cuts this year. So, we're continually being disappointed on macro. And altcoins are by their nature very sensitive to interest rates because interest rates are are are basically just the the the cost of risk. they're the um you know when interest rates go down that means that risk appetite is higher almost by definition because people are being paid less to take less risk. So when people are being paid very little to be safe they're more inclined to go further on the risk curve and altcoins are pretty much the riskiest of the risky things

that are out there. So, all coins are by their nature going to be very sensitive to macro and I think you should expect that to continue is that um the the institutional bid that's arisen for Bitcoin um is is relatively unique, right? Because that that has has has come about for reasons that have nothing to do with the overall broad crypto cycles that we otherwise see. Um but if you think about where crypto was relative to the beginning of this year, you know, beginning of this year, um all coins are probably 2x where they are now. like you know Salana was roughly 2x where it is you know most altcoins are probably roughly 2x below where they were or 50% below where they were at that time. Um I think you will eventually see a reversion but it it's going to have to

be macro that leads first. In absolute terms, it's very obvious that the positioning of the US government, which has been, you know, the most powerful government in the world, waging war on crypto over the course of the last year, um the fact that that's completely reversed and now we have, you know, the most positive and constructive government we've ever seen in the US about digital assets or almost about any tech industry. um that obviously should mean that alts are worth more than they were 6 months ago or like if you just think even before Trump was elected als they are now um so I I think what's happening right now with the alt market is an anomaly I think it will eventually correct but macro has to lead and that might mean 6 months might even mean 9 12

months before uh we see that change but the one thing that you can know with absolute certainty is that the cycles in crypto are not over there are more cycles to come and and that that's something I I lose no sleep uh being confident in it. >> So the the environment for crypto VCs obviously has also been challenging right because if you benchmark to something like Bitcoin you know which at this point is like super easy to buy for you know anyone really. uh then I think you know few funds have outperformed that and you know I think the sort of the DPI so the amount of uh money returned from funds has mostly not been so great. I think fundraising has been very hard for VCs. Do you think the

crypto VC market is going to change a lot and like how how does it need to evolve? >> I think it's almost certainly going to change. It's already begun to change. Um so I think that change has taken place largely because most of the funds that were raised in cryptoc were raised in 2021 2022 and that was peak zer. Zer stands for zero interest rate policies when all the central banks around the world were setting their rates to zero or even below zero in many places and that just meant that money was burning a hole in your pocket. you had to put your money to work somewhere and that meant a lot of risky capital a lot of a lot of risk seeking capital found its way everywhere into private equity into VC into you know obviously cryptovc was one of those uh beneficiaries so uh those

funds have largely run off now uh you know usually in in venture you have a 2 to three year fundraising cycle and then you deploy your fund and then you go raise the next one uh almost everybody who raised big funds during that time is now coming back to market or they're already back in market and those funds in 202122 have been drawn down. Um so once those funds are over you see that you know the next vintage if you can't raise that amount of money anymore um then you have to downsize or you just have to fold you just have to go you know find some other line of work and that for a lot of VCs that's the answer is that it's not just that oh they can't raise as big of a fund as last time that they can't raise it all

you know if you raised 150 million and now you can raise you know 20 those economics mean that you have to fire your whole team right you can't you can't run a fund uh you can't keep your team you can't you know do what you were doing for um and so a lot of people I think just quit if they realize that they can't really do that anymore. Um now we're in a relatively fortunate position that we have a strong brand, we have strong returns and um you know there are a lot of LPs that that know us and want to continue working with us. Uh but I've seen even a lot of the brands that you know and love um really struggling in market to be able to get um you know fund vintages that are even comparable to their previous sizes. You can see for some of the funds that have

been announced significantly smaller than they were in 2021 um for you know a lot of these name brand VCs who've come back to the market. So what does that mean for the industry? Um a few things. One it means that uh there's a lot less money and a lot less froth in investing into companies both in the early stage and the late stage. Um now that may correct as you start to see other forms of capital come into the space. So if you see more growth capital and more um you know preipo investing I think that's likely to be actually pretty robust because there's you know growth capital that's willing to touch crypto now especially in the fintech stable coin space. But in the crypton native stuff, that's where it really is just the the crypto native VCs that that invest into, you know, layer 1's and layer 2s and

things like this, uh, dexes and so on. And, um, this capital is much tighter and everyone already feels it. Um, so I think what it means is fewer VCs. I think it means uh, more rational pricing. I think it means that uh, founders the bar to to raise money in crypto and to and to be a successful founder is higher than it's ever been. And many people were thinking that oh well there's going to be mean reversion like it's going to go back to the way it was things going to be hot and crazy again because you know alts just haven't moved and if also good DPI and so on uh the reality is that the environment we had in 2021 will never come back

like we're not going back to zer again and we're not going back to the amounts of money and the splashiness that you saw in 2021 where deals are getting done with no diligence, super fast term sheets, you know, half-baked ideas, getting, you know, $10 million. Um, that is not going to come back even if asset prices do much better. It does mean that valuations will go up, but those valuations will be fought over by a smaller set of VCs moving at a pace that's more akin to what traditional venture has always looked like. If you think about it from the perspective of someone starting a crypto company today, also feels like a very different environment, right? Where it's a lot more mature. It's a lot of things have become very competitive.

Um, as you pointed out, the fundraising environment is more challenging. What What's your sort of main advice for someone wanting to start a crypto company today? What should they keep in mind and what has changed about like how we should approach this today. >> My very glib answer is nothing has changed. Uh the reality is that founding a startup in crypto was always hard. Every single moment that I can remember, it was always hard. Uh founders never thought it was easy to start companies and to build things in crypto. Um even in times in the past, like if you think about 2017, 2018, which was, you know, the golden era where a lot of the most

important projects were first built, I remember what it was like. I remember how those founders felt at that time and the answer was that they felt like [ __ ] They felt like it was really hard. They felt like they were struggling to get access to capital. They felt like, you know, the world didn't care about what they were building. Um and and you might think even, you know, 2021 was the party years. You know, that was when everything was crazy. Money was really loose. You know, everything felt uh kind of wild and splashy. But even then um you know I remember when uh a lot of these companies were raising their seed rounds and they were struggling and it's just like yeah okay I can get some vanity metrics or I can get a bunch of Twitter followers but can I actually get people to use my product? Can I actually

go hire a team? Can I actually go you know build something that the world cares about? The answer is that it doesn't really matter where you are in the cycle. Building companies is hard. Building products is hard. Um, just even the act of deciding I'm going to go leave my job, stake my reputation and my future career on the success of this crazy idea that nobody believes in but me. That's hard and it will never not be hard. So, at the end of the day, you don't know where markets are going and you can't time things right. Nobody in 2018 was like, you know what, that was a great time to quit my job and go all in on crypto. Uh, turned out to be right.

Nobody at the time thought it was a good idea. um and same thing in 2021. Turns out that actually it was a terrible time to start a company. Most of the companies in 2021 are failing miserably and do all the time, oh it's a great time to quit my job and go, you know, do some crazy thing. So the reality is that you just don't [ __ ] know. And at the end of the day, starting a company and going into, you know, building something and staking your reputation on it is an immensely personal decision. And that's where your conviction and your uh willingness to do it should come from. should not come from, hey, I think the market's good timing. It's this and that, blah, blah, blah. Who gives a [ __ ] You don't know. I don't know.

Nobody knows, right? If you have a good idea, if you really believe in it, and you believe in yourself, go build a company. And if you don't, >> don't. >> Cool. I have two more questions I want to ask you about. So, >> before before you ask that question, you know, Brian, you you are yourself an entrepreneur. >> Yeah. >> What would you say? I mean I feel like the you know just the key is to find something I mean I would always use that approach if I wanted to start uh another company at some point you know I'd want to find something that of course one I'm like deeply passionate about and that I would be willing to keep working on for like 10 years right

because and I think that is one of the things I wasn't like I wasn't so cognizant when I started course one example was just that like okay once you go down uh a road right once you choose something right like you have to stick with it right like you have to you have to stick with for a really long time so I think that is one thing that I think is like super crucial and then I mean I am personally very like aver like I have a strong instinct of like wanting to go somewhere that is kind of overlooked and ignored and not hot and where I'd feel like okay this is something that you know will become really big which you know I think

a lot of people have the opposite instinct right lot because maybe a lot of people very good at execution and they're like hey this is an obvious opportunity let me go and compete with everyone else and uh you know some people can succeed that way but I think right now you just see so much uh copy cats Right. It just feels like a vast majority of stuff is, you know, just people saying, "Oh, this worked over there. Let me do the same thing over here." Or and that's it seems very shortsighted, right?

Because >> yeah, >> even if if maybe you have some initial success and it's probably a lot easier to get initial traction with a lot of this stuff because well it's already kind of worked somewhere and you can replicate it then I think that to actually converting to something that like works in the long term really hard and I think the other issue I see is I think people are just going to get bored of this stuff right and they're like ah this is kind of lame right the thing I'm working on and then I think that's That's the worst thing, right? Because then I think the the founders will get bored. It will be harder to hire people or the people will be very mercenary and kind of come and go and move to the next thing. And so I think it's

and and I think crypto has uh I guess one of the things we are seeing which I think is a is a challenge for the industry is that it's become more something that people see as hey this is an industry where you can make a lot of money quickly and there a lot of opportunities. So I think it attracts a lot of those people and then a lot of people I know you know who've been in crypto for a long time I feel are increasingly not that excited about it anymore. So I think this is actually for the first time like last year this year where I see a lot of people I know who've been around for a

long time who are kind of like ah maybe I want to do something else uh something like crypto anymore whereas you know a lot of these people were like so passionate and so driven and like so ideologically motivated uh and so I see that as a you know big challenge for the industry as well. >> Yeah that's very well said. There's a line by Sam Alman where he talks about uh you know when he was at YC um originally he would talk about uh a very common advice would be okay don't try to come up with some super crazy extremely ambitious idea because it's just too hard and you'll never be able to tackle that as a startup [snorts] and after he came to open AAI he said that he realized that he'd been giving bad

advice at YC and that actually when you when you pick something that's really ambitious that's like really crazy and that like okay you know we're going to build AGI it's like okay it's so unlikely to succeed it's so capital intensive it's crazy for a startup to want to do that but the one thing that you will do with almost certainty is you will attract followers to your cause because people want to work at a company that's ambitious they want to go do something crazy they want to go do something that will change the world and you will be surprised at the level of credul that people will be drawn to and they'll say like [ __ ] yeah I don't know if we'll pull it off but like let's try let's go try to build AGI um and that is something that's resonated more and more

for me in crypto is that a lot people like you said, they try to play small ball, you know, they think like, oh well, you know, someone did this thing on this exchange or on this this chain, so I'll go port over to this chain. And it's like a very safe approach to building a company. And it's like, I'll probably win. But you're absolutely right. It doesn't attract great people, doesn't attract great investors. And like at the end of the day, um the really like the things that really energize people is always first and foremost ambition. And that's what that's what you know employees want to see. It's what investors want to see. It's what the world wants to see. Like the world will reward you for having an ambitious idea.

It might not succeed, but it it'll be a hell of a lot better of a ride for you than going and building, you know, the M Y on on a Z. >> Yeah, absolutely. I heard this other interview with you where you said that you think discipline was like the most important contributor to your success. Like how how do you think about discipline? How would you define it? And what's your advice for someone who wants to become more disciplined? >> Oh, damn. This is very [laughter] this is very like general life advice. Um I don't know I don't know how good I am at at this, but I'll give it a shot. Um so I I I would consider myself to be a very

very disciplined person. Um I think I've been that way not all my life but for much of my life. Um, you know, I I work pretty much all the time. Um, I don't drink anything but water. I kind of eat, work out very follow a regimen very assiduously. And um, like my ability to stay focused on one task. Uh, not not just one task, but like one meta task, you know, not just literally, okay, I'm, you know, writing and I'm going to write for the whole hour, but just, you know, I'm going to be a great investor and I'm going to learn everything that I need to in order to be a great investor. Um the discipline to just keep doing that over and over again for years is very rare.

Um and so discipline I think it's something I intentionally cultivated when I was younger because there was something I knew I didn't have. Um you know when I was in you know I was younger I was in school. I I was a serial procrastinator. I was super lazy. You know I just played a lot of computer games and and I didn't really give a [ __ ] about a lot of things. Um, and uh, it was something I really didn't like about myself is the fact that I was very undisiplined. Um, I was I think I was obsessive when I really, you know, catch my teeth in something. You know, I'm the dog that can't let go and, you know, just gets dragged by the tailpipe, by the truck, you know, for many, many streets. So, I've always had that quality in me. But being able to

intentionally think like, hey, this thing that I don't want to do, that kind of sucks, I should just go do it. Um, so I think that is one of the qualities that I that I have and that also intentionally cultivated myself. And I think um if if you're asking the question, how do I become more disciplined? I think the answer with all these things is just practice, right? So how do you practice discipline? The answer is okay, what's something you think you should be doing? How do you how do you create a system that forces yourself to do it? So I'll give you one example. Um I know that as a VC, it's very important to me to build very important for me to build my public brand, to tweet, to like kind of be out there, right? and and um you know over the last few years I've I've you know my

my voice has very much risen in volume and and in um uh you know having a spotlight within especially crypto Twitter and that was very intentional right it was not an accident that I was able to cultivate my voice in that way um but one thing most people don't know about me is that I actually I don't read Twitter uh I I actually block all feeds on my phone I have a rule no algorithmic feeds on my phone ever uh everything that I try to do is pull based rather than pushbased. Meaning I don't want to be told, hey, read this, read that. D I want to intentionally go and choose. I'm going to read this. I'm going to go look for this information, etc. Um, and so my relationship with Twitter is like literally I block it. I block the feed.

I have a like browser extensions that block all feeds on my on my browser and I don't have the mobile app installed on my phone. Um, and nevertheless, I'm tweeting very regularly. I tweet actually I have a rule. I tweet once a day um every weekday uh at least once a day every week. And if I don't any given day, um, I have to pay somebody $100. And I've been doing that now for years because honest to God truth, I hate tweeting. Really don't like social media. Um, but I do it intentionally, cultivate it, and for a long time, the way that I did it is that I would force myself to do it, right? And like, how do I force myself to do it? The most excruciating thing you can do is to send $100 to your friend and be like, "Look, don't donate to charity. don't do

something good with it, go waste it on something that that's going to really piss me off. Um, and uh, I've been doing things like this for years as a way of cultivating this habit in myself of just tweeting regularly. And now it's like a muscle. Like now I just, you know, oh, I got to tweet today, boom, boom, boom, you know, get it out there and and, you know, try to try to write something that I think is going to resonate with people. Um, so this kind of thing, you know, just multiply that by, you know, everything that I'm doing in my in my in my life that that I I find is important. Um, you can do that. Anybody can do that anytime they want. It doesn't have to be $100. It could be $5. Um, but it just has to be like look, you know, the

things already that you wish you were doing that you're not doing. And um, in a way like how can you create the one thing that you've learned in order to actually cultivate discipline? It's not about being disciplined, right? Like one thing that you have to assume about yourself is that you are a lazy piece of [ __ ] You know, that is how I model myself. I am a lazy piece of [ __ ] And the only way that I will do things is if I have to. If I either pre-commit myself to doing it such that I can't back out of it or I've created a structure that is going to force me to do it. Right? A sort of environmental design. Um these two things to me are the core of how you ultimately cultivate discipline is by either making public commitments that

you can't go back on um or by creating these structures around you that are going to force you to do it. And uh if you keep doing those things, eventually people will look at you and they'll call you disciplined, right? It's always like when people look at me and they call me disciplined, I'm like that is not how I perceive. I'm I have a lazy piece of [ __ ] I know myself well enough to know that if all these structures fell away, I would just, you know, I would lie in bed and play video games and smoke dope or whatever. Like I would be I'd be absolutely useless as a human being. So this um uh the these things come from what you put into it. that that's the best answer I can give about how to cultivate discipline.

>> I think that's a fantastic answer and it definitely resonates. Maybe just a final one. So do you you know you're someone who's very curious, right? You like to explore different things, learn I mean you've made you've had some you know very uh fundamental changes in you know your career and focus. Do you think you'll always be an investor or do you have something in your mind of like okay one day this is what I want to do? >> I I will always be an investor in the sense that um I will always be investing into things but will I always be a professional investor? I doubt it. Um I think I'm somebody who uh I naturally

have moved through many different domains in the course of my life and I'm almost certainly not done. Um, that being said, you know, I'm I'm very committed to building Dragonfly and to investing into what I see as the, you know, generations of of crypto technology that are still yet to be fully fully done. But there will come a time when crypto's basically done. Uh not that crypto is not going to change anymore, that's there's not going to be new founders or new startups, but you know um if you think about like for example social media, social media um really stopped being venture investable after about 2010, right? Um now that being said, social media companies between 2010 and 2025 became the most important companies in the

world. Social media won. The thesis was absolutely correct. But um there there's really nothing more to do as a VC, right? Almost every single social media company was already built before 2010. Um and so I think I think that that's probably going to be true of crypto at some point. I don't think it's true yet, but it will be true of crypto at some point that all the most important companies/protocols are basically built and the growth is going to happen in public markets, not in private markets, the same way that happened in social media. Um and I think that will be the point at which we say we were right. We won, right? all the things that that you know you and I when we first came in this industry, all the things we were saying that nobody believed us, we were vindicated. Um, but there there's

nothing more to do as a VC. Like, you're done. Hang up your hat, go do something else. Um, I don't want to overstay my welcome as a VC. Uh, I don't want to be clinging on and raising funds when I don't really believe that there's still this um this golden era of opportunities of companies and protocols to be built. I think there very much obviously still is and you can just see how much turn you know Salana just went from nowhere to being a dominant chain in the span of like a year and a half like that just happened so very clearly like we're not done there's still an enormous rate of change in this industry but is it going to last 10 15 years I don't know maybe not and if not um I will hang up my hat and go do something else

>> cool all right well thank you so much this Steve it was a huge pleasure to have you on really enjoyed the conversation >> and thanks for having coming on. >> It was an honor to be on this. Uh if I if I had told myself 7 years ago that I'd eventually be on Epicenter, um I think I would have been elated. So, thanks for having me. >> Thanks so much, Shib.