Cryptocurrencies, the ICO Craze, and Institutional Investors (w/ Paul Veradittakit)

December 2, 2019 0 By Kody Olson

TYLER NEVILLE: Paul Veradittakit, partner
at Pantera, we’re really happy to have you back. We had Dan about a year ago on Real Vision. I’m really excited to get you here. PAUL VERADITTAKIT: Really excited to be here
for the first time. I’ve heard great things and our colleagues
love you guys. TYLER NEVILLE: Love it. Love it. Great to hear. So, why don’t you just give us a recap of
Pantera and how you began? PAUL VERADITTAKIT: Yeah. Pantera’s started by Dan Moorehead. He used to be at Tiger Management. He was CFO, head of global macro trading. Pantera used to be a $1.5 billion global macro
shop. And then since 2012, 2013, focused exclusively
on investing into cryptocurrencies and blockchain companies and assets. Right now, we’ve grown from a small team all
the way up a team of 25 people right now. We’re very, very institutional. We have guys with backgrounds from Bridgewater
and JP Morgan, et cetera. And a great team of just really experienced
investors with a good track record. Right now, we managed about 600 million of
assets under management across four different strategies. So, we have a Bitcoin Fund, which is like
a private ETF or a Bitcoin tracker. It just allows people to buy bitcoin through
us. They tell us when and how much they want to
buy, we do it for them. We manage everything in the backend. They don’t even know about it. They send us USD, and whenever they want to
sell their Bitcoin, they get USD back. We also have a VC arm, which invest into blockchain
companies that are raising equity. Now, the equity is purely equity, but sometimes
it could include tokens as part of it, but I think that’s going to be a smaller subset
of the fund. And then we have what we call our ICO Fund,
which is investing into presales. So, if you guys are familiar with ICOs, initial
cloud offering, before, you go out to the public with your token, whether it’s just
launching it to the public, where they can buy it off exchanges, or whether it’s directly
selling it through exchanges, before that, you need to raise capital to build up a team,
build up some product, maybe do some marketing, solve regulatory issues. And all of that is what institutional investors
like us will be investing into before the ICO, it’s called the presale round. And so, that fund invest into presale rounds
of projects. And then eventually, we’ll get out of those
tokens and go back into other presale rounds. So, it’s a pre-sale focused fund, call it
like early stage fund for tokens versus our fourth strategy, which is our digital asset
fund. You can call that our growth stage strategy
for tokens, where we’re actively investing into cryptocurrencies that are already on
exchanges. Just like anybody else, they can go and buy
them on exchanges. But the advantages were discretionary picking
tokens that we think are going to be successful lease in this short, if not the medium to
long term. And most of that fund is discretion, we do
have the opportunity to short positions if you want. And we also have the opportunity to layer
on different strategies. It is a multi-strat active fund where we can
also do some quants, we can also do some fixed income strategies, et cetera. TYLER NEVILLE: Interesting. Any ARB strategies? PAUL VERADITTAKIT: We’re thinking about that. Nothing is out of the question. I think with ARB, spreads are getting smaller
and smaller, and it’s not as scalable, but anything’s possible. TYLER NEVILLE: Gotcha. So, why don’t you give us a recap of the end
of 2017, beginning of 2018 up until now, how’s the ecosystem changed in Pantera’s eyes? PAUL VERADITTAKIT: Yeah, it’s crazy. I can’t even tell you a little bit about like
just when I joined Pantera, 2014, and how it’s progressed all the way until now. It’s been crazy. So, my background is mostly in VC. I’m being a VC now for nine years. And so, that’s what I brought the Pantera
like the hedge fund experience with Dan, you got Joey with the operational technical experience
and myself at the VC experience. So, when it was 2014, when I joined Pantera,
I think there’s only 10 companies in this space, I could list them all on a piece of
paper. And I was like, all right, which ones do you
want to hit up right now. And it grew quite a bit in 2015, we started
seeing a lot of exchanges, a lot of cross border companies. And then 2016 was the year where all these
enterprises, Goldman Sachs started making investments, JP Morgan started doing their
private blockchain stuff and things started slowing down a bit, there wasn’t any consumer
traction, whether it is speculation or whether it was store of value. And then 2017 was just like you mentioned,
it was insane. What really brought that on was- we had Bitcoin
as a store of value and then started off as a way to move money across borders, that was
like a big use case for Bitcoin and still is actually the biggest use case all cross
border payments are done using Bitcoin versus any other cryptocurrency and that’s where
it most liquidity is at. And 2017, or actually, late 2016, was where
we started diving deeper into Ethereum and the ecosystem started going, a lot of developers
started building on it. And the first use case was being able to issue
a token to have a function within your product and technology and be able to actually raise
capital for your open source project, from not only private investors, but retail and
community investors. And that’s a great way to give skin in the
game or give value of your project to early adopters and have them go out there and promote
and sell your product and your company. And that just turned into wild mania. 2017- TYLER NEVILLE: Liquid venture capital. PAUL VERADITTAKIT: Liquid venture capital. And I think on top of just like the liquidity
part, but it was the global part too. Anybody could be- any retail investor could
be investing to any project all over the world. So, traditional venture capital, it’s about
like companies looking at certain way, companies being built in certain locations. Now, anybody could be raising capital from
anybody around the world, and there was less limitations, you didn’t have to be accredited. And on top of that, you can get liquidity
almost like the next week. And so, you put that all together like, over
20 billion has gone into this space, so a lot of it went in on 2017. And we’re seeing projects go out there, hit
the market, and raise their private sale, raise their crowd sale. And a week later, they’re already up 5, 10,
20X. I’ve seen some, like, within the span of weeks,
hit 100X, in terms of return. It’s insane. I still remember like we did a sale, or we
participated in a sale, and it was up 3X, and we were just so disappointed. TYLER NEVILLE: Triple my money? PAUL VERADITTAKIT: Triple my money. This is not great compared to the norm. TYLER NEVILLE: The government came in and
started hovering. PAUL VERADITTAKIT: Exactly. So, what happened in late 2017 and early 2018
was the government started sniffing around, the SEC started cracking down on some really
obvious scams. I think it’s the combination of the taxes
to the SEC stuff, which also- and then basically investors getting smarter and then I think
the fourth thing is the exchanges themselves. They’re being targeted by regulations, because
those guys are the gatekeepers in terms of who gets to access these cryptocurrencies,
in which cryptocurrencies are being offered to investors. And so, once the exchanges started to slow
down the listing of tokens, that in combination with projects, like actually putting up lockups
and investing schedules. So, one of the big things that you mentioned
that was really appealing about this space to investors was to be able to make money,
but in a quick way, generating high IRRs. And once that became gone, and there was a
lot more requirements and a lot of regulatory uncertainty, a lot of this scam projects started
to back away. And what we saw in 2018 was the prices dropping,
people are selling, uncertainty around the space, and then capital just starting to back
away. TYLER NEVILLE: As someone who is in the space
and is, well, probably the most venerated firm in crypto, did you guys know it was just
so much shit at the time? Or was it just like, oh, my God, the capital’s
coming in, if we don’t participate, we’re going to underperform? Was it a little bit of both of those? PAUL VERADITTAKIT: Yeah, there’s definitely
pressure to deploy capital into exciting projects, and knowing that there was liquidity there,
you can really just act more like a hedge fund a bit. But nevertheless, we had a ton of capital
that was coming in, and we wanted to make sure that we were getting it out there and
helping our company succeed, and really just taking advantage of this momentum. Nevertheless, we’ve been long term investors
in this, we come from more of- I come from more of a VC background. So, every single project that I invest into,
I want to try to help them maximize their potential. Obviously, some projects aren’t going to get
there and then you take a step back and you recalibrate and go into projects. But yeah, there was definitely a lot of pressure
to really go out there and hunt for these deals. And it’s tough, because at the time, there
was just a ton of capital, capital was a commodity. And I think for us, being Pantera and having
that reputation, having all that value add that you can bring to projects, we always
had the opportunity to participate at least in some way. But the clock was ticking, because every project
had so much available capital that they’d rather not spend a lot of time on fundraising. So, sometimes we get projects, and we would
have two or three days to make a decision. And if not, we lose our spot. And that’s not great. Because, as an investor, it’s hard to do great
diligence in two, three days and make sure that you are covering all your bases, and
so a lot of times that you really had to just work really, really hard to get these deals
done. And you’re right, there’s a ton of noise out
there. We were getting maybe 60 or 70 white papers
a week. And soTYLER NEVILLE: Just a pure supply of
it, probably. PAUL VERADITTAKIT: Just a pure supply of it. And you know how you get your best deals mostly
from referrals. I think that’s where that channel really mattered
more than anything else. A lot of the cold email is we’d have to- we
look at everything, but we really prioritize papers that were coming from really strong
referrals and really strong connections, because you just can’t go through like that type of
volume. TYLER NEVILLE: Yeah. Especially with five, 10 people at the time,
probably, more. PAUL VERADITTAKIT: Exactly, and only three
or four guys in the investment team and just focusing on investments, but then also trying
to help your companies. To be able to do all of that, it was it was
really tough. TYLER NEVILLE: And since it’s calmed down,
the one message that you guys have had throughout this whole time is, this is a long, we might
be in the first inning of a nine-inning game. And you guys have been there consistently
saying this is a long term investment. Can you talk about that, your competition,
like what happened to all the capital that was fast? Are those funds now just under? And are there more giant institutional funds
coming up to the plate where like you have Fidelity, I believe, is starting a crypto
fund, there’s a lot of giant mega financial managers getting in this space? Can you talk about that a little bit? PAUL VERADITTAKIT: Yeah, so you’re right. In 2017, we saw a lot of capital that was
looking to make a lot of quick money in this space, and a lot of it was coming from Asia,
but actually, a lot of it was in the States too, and all around the world, but definitely
a high proportion of them were in Asia. And once 2018 hit and liquidity went away,
and the ability to more easily make money in a short amount of time just went away,
a lot of those funds have just pulled back and shut down. And that plus when the market’s down like
that, a lot of their positions were in Bitcoin and Ethereum and other tokens, and their LPs
are not institutional. And so, they’re not going to be backing them
up and those things. So, a lot of those funds have gone away, and
the ones that have survived are funds like Pantera that have been doing this for a long
time. And I think the great thing that we’ve done
is we’ve continued to be very transparent, not only with our LPs, but with the community,
and we tried to educate the market on what is going on. I think the first thing that we educate them
on is we are stewards of your capital. And we’ve been doing this since 2013. We’ve seen Bitcoin go up to 1300, we’ve seen
it go down to $139, where everybody was pinging saying, hey, man, like I told you not to look
at this Bitcoin PE. It’s going down to zero. TYLER NEVILLE: Is that your indicator to just
cut a scoop some knowing Dan’s background as a trader? PAUL VERADITTAKIT: Yeah, exactly. So, for us, we’ve seen these cycles, these
cycles don’t faze us, we know what to do in every single one of these cycles. And that’s continue to invest, good prices
to get in, good valuations to get in, this is a time when most of the buildings can be
done. This is a time where the best companies are
going to come out of, and that’s how we see it. So, this is great. The competition is moving away, and we’re
going out there, and we’re getting the best prices, getting into the best companies. But you’re right that the best thing about
2017 was it brought a lot of awareness about this space, in a good and a bad way. The bad way is my mom, during Thanksgiving
in 2017, was like, hey, I heard about all these ICOs, my friends is telling me to get
into it. And I was like, Mom, stay away, stay away. This is definitely at the peak of the hype. And so basically, it’s gotten a lot of attention
to institutions. And that means that great entrepreneurs that
are trying to create infrastructure to help institutions get into this space, it also
means that institutions are thinking about ways to participate, whether that means like
starting to think about how do we hedge in trade derivatives to maybe even setting up
funds to be able to participate in this? And maybe the investing into funds, institutions,
endowments, funded funds, and now looking at Pantera and other folks. And that means other experienced investors
are also starting to branch off. We’ve already seen some other folks leaving
some of the top VC funds to start their own crypto focused funds. And so, we’re seeing the institutionalization
of the fund space too which is great. Your next question is like, how do we differentiate
from all these new guys maybe? I think for us it’s the track record. We’ve done this before. It’s the network and being able to provide
more resources than anybody else, whether it’s Dan’s background in institutional finance,
to Joey’s operational and technical background, to my connections doing VC for the last nine
years, especially in this space, where I think compared to any other US fund, Pantera has
invested quite a bit outside the United States. 30% of our investments are outside the United
States. So, that means that we’re looking at geographies
where we think distributed ledger technology and cryptocurrencies make a lot of sense. And therefore, we’re building up really deep
connections in all of these different communities. And what that means is we can provide a lot
of value add when companies want to scale their teams globally, or want to market globally,
or want to get liquidity, which again, most of the top exchanges are outside the United
States and all the exchanges doing IEOs are out of the United States. So, those global connections are really helping
us stand out from all the rest of the firms that are based in Silicon Valley. TYLER NEVILLE: What’s an IEO? PAUL VERADITTAKIT: Yeah, it’s a new thing. And actually, it was funny. Also, I’ll tell you what an IEO is. And I’ll tell you something that happened
today, which is pretty interesting. So, an IEO an initial exchange offering. And it’s the new version of the initial crowd
offering. So, the two goals are the same. Both strategies are wanting to get tokens
in the hands of consumers or retail traders or day traders, or just mainstream folks. And with an ICO, you would set up a website
and you would offer your tokens to people, people would subscribe, and then you would
distribute those tokens back, but you’re doing all the KYC yourself, you’re taking on that
liability. With an IEO, you’re going through an exchange. Yeah. So, you’re basically telling the exchange,
hey, we want to sell this amount of tokens at this price. We want you guys- you guys have already done
all your KYC. You know who all those users are. We want to target these type of users. We don’t want the US because of regulations. We don’t want China because the regulations
over there. And we don’t want any of the other. But we want these folks and then basically,
let them subscribe to it. And it just gets chopped up in small chunks. And it’s offloading the liability and the
process. And maybe even the technical and security
risk of doing a crowd sale to these exchanges that already have the license and the process
to do it. And right after they do the IEO for you, they
also listed on your exchange. So, that two-step process gets molded into
one. TYLER NEVILLE: So, almost like the brokers
Morgan Stanley, Goldman Sachs just got boxed out in exchange, the New York Stock Exchange. PAUL VERADITTAKIT: Bingo. Bingo. And so, it’s a pretty big trend now. Because before that, there was just uncertainty
on how do you get your tokens out to the crowd? And that’s where a lot of the demand pushed
up the price. Now, this gives token partners a way to get
liquidity and also get consumer demand all in one. And so, one of our projects, they went out
today, actually this morning did their IEO on Bitfinex under a platform called tokenize. It’s first IEO on Bitfinex and they raised
$5 million in 11 seconds. Yeah. TYLER NEVILLE: So, it’s coming back. PAUL VERADITTAKIT: It’s coming back. Yeah. Just different form. TYLER NEVILLE: Yeah. Interesting. Hopefully, it’s more long term this time. But fascinating stuff. PAUL VERADITTAKIT: It’s fascinating. TYLER NEVILLE: So, let’s pivot. Are you guys getting inbound capital from-
you mentioned endowments and pensions? Is it happening more and more as growth rates
in the public markets steep lower and lower? PAUL VERADITTAKIT: Yeah. TYLER NEVILLE: Because I know a lot of like
hedge funds are seeing redemptions left and right in public equity long, short funds. And I think that money is trying to find a
home for returns. And are you beneficiaries of that? PAUL VERADITTAKIT: Yeah. So, I’m hedge fund side, even with the market
being bear in 2018, we actually haven’t had too many redemptions on a hedge fund, it’s
us going out there being really transparent about our thoughts in the ecosystem, even
having these like monthly conference calls, almost like these AMAs, where investors can
ask us whatever they want about the space, we tell them what are the trends and what
we’re seeing in the feature. So, on the hedge fund side, it’s been great. On the venture fund side, we continue to-
that’s where most of the institutions are clawing into in trying to figure out like
the best way to get in because a lot of these guys are- they’re familiar with investing
into private equity VC funds. And they’re trying to figure out tokens and
to be able to stomach the volatility, they just like, I don’t know if the nav is going
to move on a daily basis like this, I don’t know if our investors, I can get this past
my investment committee, but they typically had allocations for PE and VC. And so, with our VC fund, yeah, endowments,
pension funds, funded funds- they’re really more receptive than ever. And we’re seeing this across a few of the
different top players in this industry. And I think we’re going to see a lot more
of them make a bet, and it’s not going to be a huge bet. It’s probably going to be 1% or less of their
AUM. But I think that it adds up, yeah. They see this as something that is not going
to go away, it’s going to get much bigger, and it’s non-correlated with the traditional
markets, the S&P 500. So, it’s just a great- they think about it
as portfolio diversification with asymmetrical returns. TYLER NEVILLE: Interesting. And then let’s talk about deal flow. How’s your deal flow work? What’s the process that Pantera uses on that? PAUL VERADITTAKIT: Yeah. We want to continue now, first and foremost,
to build up a great brand, a trusted brand, that institutions will want to park their
capital with, that entrepreneurs want to partner and getting in bed with. And so, that brand, obviously generates deal
flow, these incoming cold emails, people send us deal flow. And that’s great, we’ll take a look at every
single one that comes through. But the best deal flow is the ones that come
from people that know the entrepreneurs themselves, can trust the entrepreneurs, have experience
with the entrepreneurs. And so, a lot of that comes from other investors
especially since our last fund was a seed fund. We’ve partnered with a lot of the top VC funds
out there, and a lot of times, with their outsource CIO, anytime they see a blockchain
related deal, they’re like, oh, well, why don’t we just call Pantera? They know the space, they know all the competitors
in this space. They’ve probably done like market sizing in
this space. So, they just keep sending stuff over to us,
which is great, because we don’t want to take the entire round the thing, we just want to
partner with VCs as something or investors as something different. So, I would say other investors is one strong
category. Another strong category is our portfolio companies. Now, that we’ve built up a track record, we
have over 100 portfolio companies. And when you add value to them, and if you’re
an entrepreneur and you’re getting into this space, you’re going to talk to investors to
maybe get a market map of what’s going on, but you’re going to talk to entrepreneur friends
that you know and you can ask them, hey, how is it to start a company in this space? What should I think about for my business,
et cetera? And those entrepreneurs are going to be yeah,
yeah, this is what I’ve done. And in terms of capital raising, we raise
in Pantera and Pantera has done this for us. And they’re awesome. And oh, yeah, once you reach a certain stage,
or if you want to, I can ask them if I should connect you guys. And so, portfolio companies have been a great
source of deal flow for us. And then, outside of that, it’s just continuing
to build up our network within this ecosystem. And that just means like helping people out
whenever they need it. TYLER NEVILLE: What are you most bullish on
right now in terms of projects? PAUL VERADITTAKIT: I’m most excited about
a few different categories. We all know that there are a few different
things that are holding crypto from gaining mainstream adoption. One thing is scalability. And we made a few bets in scalability, whether
it’s layer zero, layer one, layer two. I won’t get into details, but basically at
different types of ways to scale blockchains and distributed ledger technologies. And so, a lot of those projects, they take
a lot longer to go out there and launch because not only do you have to launch a product in
technology, but you have to get folks using it and building it on top. And there’s already an existing player, Ethereum,
that has, by far, the largest community of folks building real applications on top. So, you’re really going after a big leader. And those projects are very technically complex. So, it takes about anywhere from one to three
years to launch one of those. And a lot of them started in 2017. So, they’re about to launch, or just have
started launching this year. So, I’m really excited to see if any of those
players really start taking up market share and start enabling more use cases for cryptocurrencies,
maybe things around payments, maybe things around micro payments, maybe things around
gambling transactions, enabling more gaming applications on blockchains, et cetera, things
that need a lot more throughput. And so, I’m really excited to see how those
launches do. And if anybody starts taking up some market
share for the scalability side of cryptocurrencies. Outside of that, I’m really excited about
more and more consumer-facing applications for cryptocurrencies. And that could mean it just seems like it
starts off with speculation. So, just easier and easier ways for people
to get exposure to cryptocurrencies. And that could mean maybe through baskets
of cryptocurrencies and maybe even ETFs or easier ways to rebalance your portfolio and
be able to get in and out of assets and trade and things like that in a more consumer-friendly
way, and maybe even like stock twits for cryptocurrencies, different social networks, things like that. I think that’s going to be pretty exciting. And I also think that there needs to be just
easier on-ramps for cryptocurrencies. And we’re excited about folks that are making
it easy for you to use your credit card to get into cryptocurrencies, or use your debit
card or things like that, and basically remove things like meta mask, or basically, make
it easy for you to create a wallet and be able to get money into your wallet and be
able to spend it easily. And so, that plus I think developers need
easier ways to build applications. So, we’re going to start seeing a lot of people
focused on developer tools. TYLER NEVILLE: Yeah. You mentioned in your blog, I believe, which
I highly recommend reading if you’re into crypto. Apple created a kit I believe? Can you talk about that? PAUL VERADITTAKIT: Yeah. So, I think we’re going to see a lot more
enterprises really. They see an opportunity here where developers
are wanting to build applications in this space. And these guys, whether it’s Samsung with
their phone, Apple with their hardware devices, those devices themselves, they have your identity,
they have your location, they have your information, and they could basically house secure wallets
within those devices. And then basically, help you prove who you
are, by knowing where you are, by doing facial recognition, things like that. And so, to be able to have everybody with
a wallet that can support crypto right there and tied to you and easily available to you,
and then be able to have that be a portal to other applications, other games, other
decentralized things that you can do with blockchain technology, it becomes really powerful. But at the end of the day, you have to build
the right tools for people to actually integrate their applications onto your platform. And I think by Apple creating a crypto kit
or a Samsung, enabling wallets within their new phone, it’s a step in the right direction. Wallets start first and then from wallets,
you have other sorts of ways to be able to use other applications. TYLER NEVILLE: And then Facebook also is trying
to get into the mix as well, right? PAUL VERADITTAKIT: Yeah. Yeah. Facebook, they have a billion monthly active
users. And so, I think June 18th will be a pretty
big milestone in terms of them actually going public with what they’re doing. But with that user base, and with the social
networks that they have, not only Facebook, but also Instagram, and also WhatsApp, it
allows people to easily communicate with each other. And once you’re easily able to communicate
with each other, then you’re easily able to make payments to each other, payments to each
other, payments to merchants, et cetera. So, it could be digitally, it could be physically,
and so they have the users and they have the platform, why not be able to go after payments
too? So, that’s what they’re doing. TYLER NEVILLE: Does that counterintuitive
to the decentralized for a centralized model? How does that play out? Because it seems like conflicting ideologies? PAUL VERADITTAKIT: Yeah, you’re right. We’ll see, I’m not going to assume that it’s
not going to be as decentralized as everything else. But it does seem like it’s a hybrid, where
these guys decentralize, they’re starting it and they have a foundation, we’ll see how
much influence that they have, we’ll see how decentralized the blockchain architecture
is. But nevertheless, if they do enable people
to make payments with each other, and fees are lower and things like that, it could take
market share away from the Visa and MasterCards and give these people lower fees and more
incentive to actually use this payment network versus- in a decentralized payment network,
but maybe not, versus all of the pure centralized one. So, I think it’s one of those things where
we would love a world where everything is done in a decentralized manner, and there’s
nothing but just me and you transacting, and there’s nobody that has any governance. But to get to that world, I think we’re going
to still have a bit of centralization, but like a mixed with decentralization, and we’ll
see some hybrid stuff going on, and then hopefully, we’ll continue to move more and more towards
decentralization going forward afterwards. TYLER NEVILLE: And then let’s talk about the
Kik, SEC debacle that’s going on, do you have any color on that? PAUL VERADITTAKIT: I’ll give my high level
view of just the SEC wants to protect consumers. And it seems like ones that are a little bit
more public-facing, ones that have done a public crowd sale versus just going after-
the trend now is to not really even go out to the public unless you’re doing an IEO now,
but without an IEO, you mostly sell it to private accredited investors, a lot of them
are funds. And so, in the past, people have sold to the
public, and those that have sold to the public are going to be under a bit more scrutiny. And then Kik also did one of the most high
profile ones. TYLER NEVILLE: There was again? It was likePAUL VERADITTAKIT: It was like
100 million dollars, and it was the largest one at a time. Now, you get the Telegram- so, they didn’t
go out to public yet. I think they’re coming up with interesting
ways to do that. But most of those was private. Kik did actually have a page where you can
go out there and subscribe to the sales. So, I think that generated a lot of attention. And then I think, for them, they are dealing
with SEC stuff. And they wanted to just bring the community
involved and just bring some transparency into what is going on with them. It could be applicable to other companies. And so, it gives people some awareness. And if people want to chip in and support
the cause, that may potentially help out other companies, then they’re happy to take donations. TYLER NEVILLE: So, for all the ICOs that actually
raise money during the big boom, are they still working on those projects? Or did some of those companies die? Because I think the funding mechanism change
to more of a venture model because it’s a longer term. But just curious about those projects. PAUL VERADITTAKIT: Yeah. So, you’re right. Right now, the shift has been to ways smaller
and multiple rounds before going out and launching. And that also means some of these rounds have
lock ups, especially the early rounds. So, that’s one trend that’s happened. And a lot of these rounds are now private
sales, private credit investors, which means that instead of taking crypto, you’re actually
just taking USD or just fiat currency, because you don’t need to take crypto. It’s not from retail investors, these guys
are going to be paying their taxes anyways, and you need funding for operations. But in the past, a lot of this was done using
the crowd. It was all done at once, and it was in crypto. And so, there’s two things that happened to
companies since then. There’s some that are still chucking along,
and they’ve raised enough, and they’ve been able to manage their Treasury. Some haven’t been able to manage their Treasury
and they’ve raised it in Bitcoin and Ethereum. And their hope is that we think that this
space is going to get even bigger, and we’re just going to hold a lot of it in crypto,
and a lot of them have struggled, such died because of just bad and poor treasury management. And then, of course, other ones being able
to raise that much capital and going public without having much of a history, companies
go through founder conflicts, companies go through struggles around execution, things
like that. And so, yeah, we’ve seen quite a few companies,
I think most companies around that era have died either from execution, founder conflict,
or bad treasury management. And then there’s some subset that are continuing
to go on, that they managed things well, that they continue to execute, but it just takes
a bit longer to reach product market fit. TYLER NEVILLE: Can you talk about performance
from a high level? I know it’s tough to- what’s been your best
investments so far? PAUL VERADITTAKIT: On the venture fund, we’re
in some pretty top companies like Bitstamp and Zapo and Ripple Labs. Those have all generated tremendous encircle,
generate tremendous returns for us on the early side. Some more recent investments, we’re in Polychain
Capital, we’re in the GP of Polychain, that’s turned out very well. They’ve turned into a pretty large successful
fund out there. And then we’re also in Corbett, which is a
Korean exchange. We made a pretty good return off of that. So, I would say, and then chain also, Soto,
Stellar. And so, I would say, most of our exits have
been around the store of value. Zcash, we’re like the first investors in Zccash,
first institutional investors. So, it’s either been new cryptocurrencies
like that on the venture side, or on-ramps in exchanges, that have been early on have
been able to generate quite a bit of AUM, quite a bit of transactions and dominate their
specific vertical, while on the ICO side, we’re in companies like ICON that did really
well. OmiseGO did very well. So, a lot of the Asian ones that got out really
early and had built up a really strong, because the AsianTYLER NEVILLE: Are we talking like
50X or 100X? PAUL VERADITTAKIT: We’ve seen some- one of
those went up to over 100X before. And another one went up to 50X. So, the ones in Asia are really good at building
community. And that’s what gets the initial pop. We’ll see which ones end up becoming like
the Amazon or the Google or the Facebook, but those ones have generated some of the
larger returns so far. We’ll see what happens in the future. TYLER NEVILLE: Yeah. So, fast forward five years, what’s your prediction
of crypto and where it is? PAUL VERADITTAKIT: Just like we have a few
platforms that are really dominating right now in the traditional web, we’re going to
have maybe three or four scalability projects that really become underlying platforms that
you would build upon. And I think from there, we’re going to have
as many companies, hopefully, as we see on the traditional stock market. We see all these decentralized applications
being just like traditional companies are just building on top of decentralized infrastructure. And hopefully, we’re going to see- my hope
is that we’re going to see a lot of infrastructure being built, that’s what we’re investing into,
become really successful. So, all the guys that are providing the fiat
to crypto connections to enable consumers and institutions to get access to this and
we will speculate on this and do cross border payments. And then hopefully, we’ll see a decentralized
Web3 vision where a lot of these applications are just being built on distributed ledger
technology where we’ll see people being able to interact in a peer to peer way, whether
it’s cross border payments, whether it is peer to peer gambling, whether it’s peer to
peer gaming, and really remove a lot of the intermediaries that are out there with traditional
marketplaces. TYLER NEVILLE: Cool. Well, thanks so much for your time, Paul. It’s really enjoyable. I really enjoyed it a lot. PAUL VERADITTAKIT: Thank you so much. That was a lot of fun. TYLER NEVILLE: Really great conversation with
Paul. It’s always nice getting a really genuine
perspective from one of the most venerated firms in cryptocurrencies.