Pantera - What entrepreneurs should do during a bear market

Transcript

hey everyone how's everyone doing today glad that we are out of the heat so again can i get a sort of a show of hands of who are investors investors okay and then who are entrepreneurs i'm assuming it's the best okay so this is about a 50 50 crowd here well i just want to say thank you so much for all the organizers for this event um you know keiko and everybody else that really just put their effort to make this probably the best event of the year i think it's the best event of the year i mean who who complains about coming out to paris right i mean the the heat is a little bit of a detour but we'll we'll get around it but you know my name is paul bradatak

i'm a partner at pantera capital and you know with this presentation i'm going to walk you through a little bit about pantera capital who we are what we're striving to do how we think about our track record and sort of you know what we've done in the past but then also how we think about platform i think it's really important for entrepreneurs to think about who they partner with in terms of their investors and what they can kind of expect to achieve with some of their investors and then i'll talk a little bit about the bear market and maybe some of the things that do happen and maybe some of the myths that uh don't really happen uh during a bear market and then i'll talk about some of the things that we've instructed our entrepreneurs to think about doing a bear market um

to us i mean the bear market is a great opportunity and not a time to to sort of just lament and and you know try to uh sort of get lost in a bear market there's a lot of things that you can do so i guess a little bit about myself and i'll get a little bit into panter and our team too is you know i've been with pantera for the last eight years so i started in april 2014 so i've seen many bear markets and we can talk about some of the bear markets that i've seen in the past but you know i've been around the space for a long time and there's a lot of things that um you know really excite me about cryptocurrency and blockchain when i joined i joined because i really wanted to you know bring decentralization to the

masses i really felt like financial services emerging markets payments really needed disruption and decentralization was the way to do that so really excited about being with pantera for the last eight years being in the cryptocurrency space i think the most exciting thing about this space is that it's really early on and we're not sort of competing with each other we're competing with existing financial systems and you know the more that we can collaborate together and i can see a lot of collaboration here you know no unsold tickets uh this is the best place to really build off of learning from each other and really you know go out there and strive to be the best so a little bit

about pantera you know our vision is really to be the premier investor in blockchain technologies and cryptocurrencies uh so what does that mean that means you know when we started off we start off with bitcoin now we have uh ethereum and many different decentralized applications whatever we want to do we want to continue to push forward and launch products to give investors exposure to all types of strategies and all types of companies and assets within the cryptocurrency space so our vision first and foremost is is not really sort of an investment firm it's really a product a platform that services our clients

our clients you could think would be our limited partners and investors but it's actually really our entrepreneurs we are building tools and services to really service entrepreneurs and enable them to achieve their dreams so the first and foremost we don't really look at trying to sort of make money and make money is sort of an offshoot of basically servicing our entrepreneurs um i remember people would say oh man like your funds are doing so well and really it's it's not i think it's you know maybe a bit of luck on my side but it's really just betting on great entrepreneurs and really putting the resources behind them to succeed so you know that's our motto really service our entrepreneurs uh so a little bit about pantera at a

glance i mean we manage about four or five billion dollars we've invested into over 200 portfolio companies interestingly enough it's actually been 50 50 50 on straight equity infrastructure type companies and about 50 in token related companies so we do both equity tokens and you'll see we do a bunch of different spaces within both of those buckets we are located across four different offices about 70 employees and i guess what's sort of neat about pantera is that it was started by dan moorehead who used to be cfo head of global macro trading and tiger management so he's got that global macro background which i think during the last six to nine months has been very very helpful especially

around the liquid markets and non-crypto markets but then you know he was sort of early in launching the first cryptocurrency fund in 2013 which is our bitcoin fund i was buying bitcoin was bitcoin was about 40 so the return of that fund is about sixty thousand seventy thousand percent returns and you know that's our flagship starter fund but along the way we launched the first vc fund focus on just blockchain 2013 uh 2015 actually my colleague joey krug launched the first dap on ethereum called auger you guys may remember auger the decentralized prediction market and then in 2017 we launched the first exclusive early stage token fund so a fund that invests into

early stage projects just doing tokens so that would mean we were the one of the first investors in xerox and that was a decentralized exchange protocol and then we were also early in some other protocols around the same time so you can take a look at this slide right here and you know there's obviously some some fairly large numbers being sort of the earliest investors in some of these companies and protocols so this is some of the things that we like to look at uh we like to look at infrastructure so alchemy uh we led the series a i'll talk a little bit about them but uh we took a board seat i'm on the board of alchemy and they are a leading developer platform for multiple blockchains

uh companies like bitso and ftx and amber so how do we get cryptocurrencies how do we you know store them how do we move across them go into different types of products structured products et cetera and then we get into d5 you know one inch is a a bunch of european founders we're also investors into ave and liquidy and so we really do and one of the earliest investors in bitstamps we really do want to support the european uh you know european ecosystem and then we go into other types of financial infrastructure and scalability like near and staked and then lastly and we'll probably have more examples of this later on but we are looking at decentralized marketplaces web3 so we're

one of the earliest investors in the audience a lot of other great use cases around music and media that uh you know decentralized social media lots of great companies going out there and tackling that particular space and we're really excited about that so i'll tell you a little about alchemy just to give you sort of a case study on how it is to work with investor really early on and sort of what happens along the way so we led the series and alchemy and at the first they weren't even really a developer platform they were a data platform for cryptocurrency we were working with them and really saw them execute on product and customer service and felt like this was the right team to sort of build

infrastructure to support all developers on all different platforms so we led the series a and i took a board seed and since then we've helped them out with recruiting we've helped them out with technology business development and business model at the time they had a paid business model we switched them over to a freemium business model a stripe type business model and really helped them focus on the best ways to monetize at this time and going forward and now they've basically are servicing about 60 of the ethereum applications out there 90 of the nft applications uh just moved over to solana and you know over 105 billion on chain transaction volumes and we

support them along the way we're the only investors that invested every single round since the series a uh series b was by code two series c was uh by andreessen and then series d was by lightspeed so they would say that we earned the right to really sort of continue to invest and we want to continue them to invest until they either you know go ipo or maybe they decentralize more some of some other way we'll see what happens but this is the type of of company that you know we want to continue to support and follow along and actually the value add changes over time you know in the beginning it's really roll up your sleeves let's figure out the sales plans figure out the business

model to now it's really educating them on what's going on in the market so that they can see upcoming competitors and really you know how to sort of shift their product strategy going forward so i want to talk a little bit about this this bear market as you can see uh since 2017 we've had a few different bear markets and i guess i'll i'll talk about the bear markets from from my experience and then also you know the last big bear market that is worth noting so i've been in the space since 2014.

i remember in 2015 when the price of bitcoin dropped to 139 and everyone was questioning why why are you still doing this this scam thing on bitcoin it's really not going anywhere and then of course you know we had a little bit of traction in 2015 and then 2016 enterprise blockchains just kind of slowed things down a little bit and and then in 2017 ethereum and all of these decentralized applications started to come about and then you know this is the start of where this graph goes and you know we had a bunch of icos in 2017 early 2018 and you know that was really driven by retail and retail kind of went away after

you know a lot of icos got washed out sec came in institutions were still kind of waiting on the sidelines and that's when we launched our adventure fund 3 in 2018 during the middle of the bear market lucky that we got the capital in and we waited for companies to start building valuations to reset and now from that fund i mean we've invested into i think probably almost 10 unicorns of that fund since 2018 companies like alchemy nier audius winter meet which is also a european company and uh starkware arbitram all came out of that batch so you know the best thing about these bear markets is you don't have your

employees making a lot of money on the side and deciding that they want to start their own vc funds like everybody's focused people that you're hiring are focused on building and it really does lead to a really really large success and uh you know i think with this fund that we launched during that time it uh it's gonna be probably our best performing fun so i think right now we'll get a little bit more into what you can do during this bear market but you know you can really sort of see from the past that this is really the best time to be investing and really the best time to be building so we're really excited about this a little bit about the team so you know more about pantera i mean pantera 19 investing professionals we have a

trading team uh you know legal team et cetera so uh you can see that it's pretty well balanced and actually a lot of the investments that we do are companies that we actually already work with and so you know being customers of those companies really leads us to making investments because you know one of the questions you ask as investors you know what how is this product how is it to be a customer if you're already a customer it's very very easy to sort of leapfrog that part of diligence what do we look for i mean we're looking for great teams of course big visions and a community i think what's different is if you're starting a token and a protocol

you know you go public fairly early and you really have to build a very strong community and what that usually means is being very very transparent right from the beginning and over communicating i think that's really helpful in terms of building a community especially during a bear market you can imagine that our funds in 2018 the price of crypto dropped 90 and we barely had any redemptions uh we basically started doing these monthly investor calls to all these all these amas to basically let people learn about crypto during the bear market so that they can understand what's going on and once they have context they will stay it's almost the same thing as you know launching a token really early on when things aren't going right you let people

ask you questions you educate them on what's going on with your company your protocol they'll serve your community community really well one of the things that we do really well during this time and actually i would urge you to do this with your investors i feel like people don't utilize investors enough for this is during a bear market especially as it gets more and more bare it does become tough to hire use your investors to basically provide an outside perspective on what's going on in the market and why they should be excited about your particular use case or you know this this you know cryptocurrency space and what sort of lies in the future you know for us i mean we have an in-house recruiting team we directly source full-time hires on

the c-suite uh especially things around product managers and smart contract engineers and we can tap in many different resources reach over 15 000 different candidates so recruiting is definitely important during this time portfolio partnership so one of the things that helps with us is we've been investing into space for so long that we've done over 200 companies and they can fall in many different categories but financial infrastructure technical development liquidity support these are all different types of companies that we can easily help plug into and i urge you guys to look at your investors and if you are servicing companies within the ecosystem or need a lot of support find investors that have portfolio

companies that can be really really helpful and around the business operations support so you know we'll definitely take board seats we'll definitely roll up our sleeves and be very very helpful around creating a sales process or creating a recruiting process etc but we also have built up a pretty large expert networking crypto servicing banks and law firms insurance marketing recruiting et cetera and then we also do a lot of webinars around best practices around security auditing how do you sort of build up a brand marketing build up community et cetera so i think this is starting to become more and more common for vc firms out there to really negotiate best

access to different type of resources for instance we can get any company security out within a few weeks that's uh that's pretty tough for a lot of firms to do right you know without any sort of help so these are one of the things that we really do focus on what are the biggest pain points for our portfolio companies and how do we accelerate their path to getting those resources and then on the visibility and connectivity firms do things differently for us we have a investor summit that brings about 600 of our investors together to learn from our portfolio companies one of the things that's unique about pantera is we actually have over 2 000 investors within our funds we've been doing it very early on it's almost like we did a crowd sale but we

didn't and you know we think our lps are actually resources they are some of the most active investors out there in crypto whether they are from the retail side or whether they're from the institutional side so we really do want to bring that asset back out to our portfolio companies and then we have our sort of investor letter with 120 000 readers um my blog that has about 20 000 readers and other sort of social media platforms but i think the big thing that we're trying to build up this year too is this space is going to get a lot more institutional and it's going to get a lot more uh you know it's going to draw a lot more interest from enterprises so we really do want to tap in the microsoft's and the googles out there and the facebooks that are trying and paypal is

actually that are trying to invest and build things in-house and then of course you know with dan's wall street background be able to tap some of the larger institutions that are getting into the space goldman sachs you know kkr all those other guys are really looking to get exposure to space some of them starting with d5 maybe some of them backing away from d5 now but there's a lot of other spaces that they're looking at to try to figure out like how to get exposure and then the last slide that i'll talk about is some of the tips during a bear market and i'll provide some extra context around this too and i'm also happy to send this deck afterwards to

everybody attending here i'll send it out to the the organizers and they'll shoot it out but really this is the time to really think about your cash flow situation i mean right now it's it's safe to have about 24 months of runway and if you don't have that there's three obvious things you can do you can stay lean and reduce burn you can opportunistically raise capital or you can um find a business model the last one is always the best one and look i mean sometimes you have a few different everybody has their budget everybody has their product roadmap sometimes you want to switch things around and start with something that can get revenue earlier

on and keep you afloat maybe build up a brand and then go after things that can maybe increase the market size yet you know uh was sort of something that you wanted to start off with but maybe you want to actually do that when you have a little more capital in the bank uh so focus on monetization business model earlier creating exit value i'll give you a use case around this so you guys may have heard of a company called block folio and we sold that to ftx great return got got some ftx uh equity in stock but uh with with that one really you know they're growing and building a huge user base which you want to do at the time similar to facebook ads ads are horrible just about the user base they

were doing that but you know once we get onto the bear market it just made a lot of sense to start figuring out ways to monetize because once you start figuring out ways to monetize either through ads or either through lead gen to trading and other things it opens up your doors to then acquisition from some of the larger exchanges and wallets and brokerages because they can see some early numbers of success on sort of bringing users over to potential ways of monetization so if it wasn't for the bear market we probably wouldn't have accelerated our monetization efforts but because of that led to a very huge acquisition it gave us optionality which i think is is sometimes good as an entrepreneur i think right now you can sort of reduce

excess spending figure out where you should spend capital maybe not as much around super bowl ads or things like that and really just focus on other ways to generate users and then think about like your service agreements and your partners and making sure that everything is very tight there and then i think the last thing is if you are a larger company this is a great time to be both hiring regardless of whether you're a large company or a small company because as you can see what is it gemini just laid off another 10 of their workforce there's a lot of great talent that's and people would say oh they're laying off like the their worst employees no i mean you know there's there's a lot of great town out there that is out in the market and so really going out there and

hiring what you need and acquiring what you need sometimes if you're really looking to scale during this time and sort of push yourself out as a market leader you should be making acquisitions if it makes sense so i think this is a great opportunity to kind of go out there and really build out your workforce pantera is actually doing the same thing when it's really busy doing a bull market it's really hard to sort of figure out what types of hires you need and then be able to go out there and train them so pantera just hired six people in the last like two months regarding both investing and platforms so we really see this as an opportunity to build up our staff train and really push forward both in

terms of investing and providing a platform so outside of that i mean that's all that i have for slides happy to answer questions or go in any sort of direction yeah hello um maybe a usual question for this time so you were talking about extending runway for crypto funders to at least 24 months but it's a thin line on how do i make some concessions on the quality of

my investors because i want cash or trying to build my product a bit more for example we're going live in something like in the summer we went public last week so a lot of investors are reaching out so we're beaten in delhi mana should we get more money now or should we try to go live and get a really high quality investor i don't know if you have any advice in this area yeah that's uh that's a gray area that's the uh it's one of those things where you know it's always great to have a bit more capital but of course if you don't need the capital then you know

you can wait and try to sort of garner a a higher valuation but i'd say right now at this point in time sort of looking at what's going on with the macro markets and seeing that it's probably going to last for a bit i would probably urge maybe not to raise a large round right now but to definitely seriously consider at least raising a bit more depending upon your i don't know how much runway you have but let's just say if you have 12 months or less knowing that this could last for another 12 months i would at least think about maybe raising some sort of bridge if you can sort of see that there's an

opportunity to push forward if you see that there's some data around the launch going well and there's sort of a clear path on you know growing your your company then i would probably try to take in a little bit more capital both from sort of a safety perspective but also from a scaling perspective thanks hello i'm chris duffes from phone bank uh would you mind expanding a little bit more on your thesis around marketplaces yeah so i think for us we've seen a few different marketplaces uh that have already been tackled whether it's you know social media or whether it's something like audience

around music or maybe even things around um you know freelance marketplace and whatnot so i think i think or brain trust even a talent marketplace so we've made a few investments in the marketplace category at the end of the day i mean with these marketplaces they all take 30 to 40 percent fees and uh these are likely three three sided marketplaces where you know at the end of the day i mean if you can find a way to decentralize these marketplaces uh entice folks to be able to contribute directly with each other instead of having to go through a third party a lot of these times the third party

usually gets paid for things around safety and arbitration but if you can incentivize a community around you to do some of the work around what these centralized marketplaces are providing in terms of connecting both sides of the market we believe there's an opportunity to have community-owned marketplaces where you can remove the fees and have you know and and part of it is really you know how decentralized you want to be i mean you know but at the end of the day to really remove those fees and have all of these transactions and all these services all being done by both sides of the marketplace and the community itself so you know we believe that this is eventually the future some marketplaces probably will take a

little bit more time to do versus others like for instance i don't know if we'll see a decentralized uber anytime soon there's a lot of things that kind of go into the infrastructure for that but we are excited about certain certain verticals okay let's do one more question and then we'll move on yeah thanks uh thanks for sharing appreciate it um so vasily from velvet capital building device at management protocol we just got accepted into binance labs and kind of in the middle of fundraising so curious to hear your thoughts about having a lead investor versus just much many more smaller investors because i think the social convention is always to have like one big lead is that something that you still see in the

market or should they like try to decentralize even the vc investors as much as possible yeah i really do think that part of that is is really where you are as a founder and where you are as a company the benefits of having a lead investor that we've seen is that the lead investor is a bit more incentivized to spend time with the founder and so if you are a founder that wants a bit more guidance and also potentially wants a bit more downside protection when things don't go wrong it's the lead investors that step up and i've had to do this many times to be able to provide emergency capital for funding and everything like that so

i think as a first-time founder i would highly suggest having a lead investor because it really does give you the guidance and downside protection where you don't need elite investors maybe you are able to raise a much larger round and you're a bit more experienced and you know you can kind of just get to market really quickly and you don't need that much help and it's really just about maybe building a cap table that gives you the best access for the widest amount of business development or the widest amount of brand or that sort of thing so i think i think that's the difference between having a lead versus not having a lead but i do want to thank you guys so much um you know again like we're really excited about being here to

support the european ecosystem so uh if you want to contact me it's just my first name at panteracapital.com and uh or you just follow me on twitter at varieta take it but thank you so much again and thank you everybody else for organizing thanks paul thanks a lot alan we're gonna we were scheduled to have a little coffee break and