How to Build an Investment Team That Eliminates Bias Entirely | EBC12

So, thank you for inviting us. Er, EBC. Em. And welcome to the discussion. Um, before we start talking about the very controversial topic of bias, I think it's important for people to know who we are and who's talking.

So, um who's talking. So, um , Andrea, would you like to tell us a little bit about yourself? Of course. Um, yes. Hello everyone.

My name is Andrea Bemert. I am the Managing Partner of SBI Ventures Europe. SBI is a 30- Ventures Europe. SBI is a 30- year-old traditional financial company. It is one of the largest financial conglomerates in Japan.

We own banks. We own stock exchanges. We own securities. We have insurance. We actually made analog finance digital in Japan many, many years ago.

However, um, we also started being one of the early investors in Ripple, in partnership with Solana, in partnership with Circle. We've actually spent a lot of money and time partnering, investing, and, um, buying players online, let's say, over the last few years. So, we are a truly traditional financial company with a large investment arm that manages over $6.5 billion in assets, with many portfolio companies, but coming from the traditional mindset of traditional finance, we are now convinced that the world is going to go blockchain, and we want to be a significant player in that. And I manage the European investment activities related to this.

Good. Thank you and welcome, Vinit. Good day everyone. I am Vineet. Uh, I've been working in the digital asset venture sector for the last 6-7 years.

Before that, I managed two funds, over 300 investments. I am currently a partner at Sigma Capital. Some of my investments are Sui, Solana, Ton, Casper Labs. You know, those crazy ones who have gone crazy in the last two cycles. Again , with Sigma Capital, this is a Dubai-based fund that is once again investing in digital assets.

We have made several investments, six or seven of them are being announced as we progress. Again , people say that cryptocurrency is dying. I think cryptocurrency is the best place for this. Its implementation is underway. Market prices do not reflect the utility of cryptocurrency.

And you know, in the bear markets, I was telling this to another gentleman. Two years ago I was at ATZU in Saudi Arabia when there was a bear market and the room was empty, like this. I said, “Next year it will be completely full. We just need to remember who is here in the bear market, and these are the guys who will build the future of money. Thank you".

So no, it's great that you're here today and part of the panel. So, obviously, we're here to So, obviously, we're here to talk about bias. Bias can be seen as a fairly broad range of issues that we face in the venture capital space, and that you face as well . So, I think we'll start with the most basic question: Can we eliminate bias? Is this a realistic goal?

Do we think we will live with an element of bias just because it is necessary? So, what are your thoughts on this, given your experience both in the traditional field and in the specific field in Vietnam? I mean, we're going to disagree on a lot of issues today, but I think we'll agree that the complete elimination of bias is not going to happen. I think that's , um, first of all, I think that's impossible. Secondly, I'm not even sure that's a good thing, because if we remove bias, then we'll all think the same.

And I don't think that's same. And I don't think that's actually great. I think diversity in all different aspects and in different frames of reference is actually critically important if you acknowledge it and know how to deal with it . But if that's the case , the answer is very quick. No, we won't be able to do that.

So, again, you know that the world functions on justice and greed, and wherever there is justice and greed, bias can never be changed. You know, emotions come into play. So, giving the example that everyone is talking about, suddenly you realize that there is this whole bias that will benefit this sector. If I remember, three years ago we were all talking about how games would become very popular, and today people don't even talk about games. Now, if you look at every conference in the real world, it's going to be great, and that's what biases one of the employees who will be evaluating the deal.

But then it's all about how we build a system of checks and balances to actually figure it out. Does this risky asset really have traction? You know, putting a building on the chain doesn't guarantee that everyone will come and buy it will come and buy it , because there's no liquidity, right? I'm buying part of the house and we can never sell it. None.

So can we completely eliminate bias? No, because we are also a retail-driven market . You might ask if there's any venture capitalist guy here, he might ask his employees half the time they're sitting on Twitter trying to figure out what's going on in the world. So bias cannot be completely eliminated. Checks can be set up so you know that at least decision-making is based more on data and analysis, not just random tweets.

Okay, it's great to hear the fact that we shouldn't just be guided by social media or emotions, or the fact that we're just looking at data that isn't very reliable. So if we talk a little bit about one element of bias, which is a potential financial incentive to influence deal selection, right? This is an important factor, is n't it? So how do you distinguish a true belief from something that, you know, might not necessarily be right? You were talking about decision making, actually understanding, you were talking about checks.

How do you actually distinguish between a true belief that this is the right option to focus on? So, again, maybe there are colleagues here who are looking for what they should focus on so they don't invent emotional bias because of what's happening in the pub, let's do that. How do you guys handle this at home? So, I think one of the examples I give is like getting married, you know? You don't meet someone at a nightclub and ask them to marry you the next day.

You know, it takes time to understand another person, because ultimately you need to see if your minds align. Similarly, when it comes to investments, you need to meet with the founders three or with the founders three or four times. A lot of people, like Sequoia, one of the largest funds in the world, have a three-month process of meeting with founders, understanding what they're trying to do, what their motivation is for doing it. I had founders come to me on the first day and say they want to change the world, and then on the third meeting, which was in Dubai, they said, "Once our token is successful, we'll buy a Ferrari." I'm like: " Ferrari."

I'm like: " Really?" The bottom line is that Really?" The bottom line is that you really need to meet the founders, understand what they do. Do you need to understand whether they have the capabilities and potential to build a billion-dollar company? You know, everyone, even my, as you call her, maid, wants to build a billion-dollar company, but they don't have the capabilities and potential to do so.

So, you need to figure out all these things and based on that decide where to go and where not to go. So now we're talking about bias, because I always find it so funny when people come to me, and I personally think that when it comes to the crypto world, people say, you know what? There is a possibility, you have two days. Go, decide, throw away your money. Four hours.

Well Four hours. Well , two days is too much , two days is too much . Okay, you see, here it is. No, but I had a really interesting conversation with someone yesterday who said, well, you guys actually want financial information financial information , a data room, or some kind of information. I gave you a presentation with six slides.

I mean, that should be enough. And I say: "No, that's not true I say: "No, that's not true ." I mean, you are 100% right. This is largely about the founders. You need to meet them more than once.

You need to have conviction about the founders, first of all, that they really know what they're doing, but also that they know how to build not just how to raise money, but how to build and secure the essence of it. How can they go and take it to the next level. And, um, in our traditional world, yeah, it's pretty good if we can somehow go and somehow go and maybe talk to the client, or somehow go and review some documents. I mean, ultimately, I think there are two different levels. two different levels.

First, we, as a team First, we, as a team , need to be convinced , need to be convinced , and then we need to be able to justify it to our investors. And in my world, unfortunately in my world, unfortunately , I am convinced that this is not enough. I need to back this up with some research, some data, and it's just not true. possible in 4 hours, and it is also not possible just by talking. I need evidence.

No, that's fair. And, listen, I'll be honest. I was on a panel yesterday and I talked about trust and how it takes time to build. So if someone is really willing to give you money, or, you know, you're raising funds, it's not going to happen tomorrow, it's not going to happen in 4 hours, or maybe in a couple of days. You need to develop this level of respect and the fact that you know each other from the perspective of the owners, the founders, the fact founders, the fact that you have the right data to back up the information, and therefore you can have a foundation for what is being built.

But now we were talking about bias. We talked about one element of bias, which was decision-making, but there's also liquidity, which is a major issue, right? And there is an element of how to convince LPs throughout the decision-making process. Now I realize you've run into this again. What are the critical pain points or challenges that...

you've seen there from a bias perspective that you think need to be addressed? So if you could share that, because again, that's an element of bias that might also be present. So, if we tie this into LP and the fact that there is an element of bias, what is missing or needs to be addressed, what is worth talking about today? I mean, there's a lot to say about this investment team . So, our LPs want to know that we have a team that has access...

First of all, access to the best deals. And if you want to have access to the best deals the best deals , you need to be present. You need to connect with top founders who introduce you to other good deals, hot deals. You know, you need, you need all of this. This means you need to communicate in the language.

So you need to... So you need to... So, from an LP perspective, they want to know that you have access. Then you can evaluate the possibilities. Then you can...

convince the founders to take your money, because a very good founder has a choice, not that desperate, and can choose who to take money from so that you really have a value proposition that suits them. Yes. And then of course it's about how can you actually profit from this ? What do you do after investing? How do you do it?

And I think in this world of transitioning from traditional to on- traditional to on- chain, with all the different kinds of this rapidly changing world rapidly changing world that's happening, I think it's incredibly important that we convince our partner partners that we have the right skill set to actually go and do this, and that we can prove it. So partner- partners can become interesting, especially cryptocurrency funds. You know, because a lot of my partner partners are billionaires, they have a lot of money, and cryptocurrency fascinates them. For example, there was a guy who had about $400 million in Bitcoin. He was not a Bitcoin investor.

Someone accidentally advised him to buy Grayscale when he was...50% off, and he ended up making 400. The problem with the cryptocurrency market is that even retail crypto traders, once they invested in Bitcoin when it was 1,000 and today it's up to 40,000, still ended up poor because when it was 40,000, they started investing in Shiba Inu and XYZ without doing enough research on what they were investing in. So when it comes to LPs, I see them thinking they know it all because they got big in Bitcoin, and suddenly their investments go crazy. You know, when you tell them we're going to invest in XYZ because the founder is great and because there's something like that , they ignore it just because they want to hear on Twitter that the Shiba Inu is going crazy.

So the bottom line is that it's a different strategy. You also have to make them understand how you are progressing, and it is a four-year process. For us, you know, I just sent out... A letter to investors saying we're down 10% and Bitcoin is down 50%, and the first question LPs ask is, LPs ask is, "Oh, you're lucky." No, we were out of luck.

There was a thought process when they realized that Bitcoin was expected to fall by 50-70%, and that's where , you know, it's a four-year engagement process where, in the second fund, they finally feel confident feel confident that you know what you're doing. Your team uses real data and understands where to invest and which trend to follow. That's what I do. I have a completely I do. I have a completely different view of building trust over a period of time.

Sorry, but what I find interesting about this answer is that we are sitting here on the same panel, not talking about a similar topic, but we are still talking about completely different categories. We're still talking about worlds touching , but they're not quite like his LP quite like his LP , they won't become LP in my world because of a certain bias. Also, of course, since there are different expectations for profitability, there are for profitability, there are ...different time frames, etc. And I think that's a big question too.

It's like: how do we make sure that these worlds start to converge so that we actually start to get some skills and thinking from this world, which, as I said, I don't think is a bad thing. It's just different. And transfer quite a lot of that into my world. And maybe some of these things, like let's actually check things and facts from my world into this world. And I think that's something we really need to work towards.

Yes. And Andrea is right, because And Andrea is right, because , you see, for me, partners are more like individuals and family offices, but for her, they can be institutions. Because, you know, the motivation for an individual partner is a multiple , while for an institutional one, it's institutional one, it's eight or ten. I'll take any money from any crypto billionaire. I mean, please introduce me.

I will gladly do that. No, but a crypto billionaire...No, but a crypto billionaire, the problem is, you know, I went to this guy and he says, "How's your fund?" says, "How's your fund?" So, my previous first fund grew 13 times, and my second fund grew 6 times, which is amazing in 2 years.

So I tell this guy that if you put capital into my fund, we will make it 4-5 times over the next 5 years. I said five times just to be safe. And he says: “No, you know, I’ll invest in Ethereum. He will do it 10 times." I say: " times."

I say: " Okay." I haven't seen Ethereum grow 10x in the last 2-3 years. So their expectations are too high. And they also think they have access to deals. For example, I recently had this LP, literally 3 days ago.

And he said, "You know, I'm making this deal that's supposed to be announced next week. This is a top- week. This is a top- 40 coin. This is a liquid token 40 coin. This is a liquid token .

And I tell him that this is a deal you should make." He says, “Sure, put my name in. I'm sure I'm a billionaire. They will accept my agreements." But they don't understand But they don't understand that gaining access is not that easy.

Getting these 10 "x"s is not that easy. In a bull market, every child has money. No one has access. Perfectly. So, I think we're almost there.

I realize that we were obviously coming off of a previous, uh, startup battle that was going on. So we're trying to catch up, but, um, one more question before we get into a more detailed review. I think you were talking about a convergence between two worlds. Thank you both for digital assets, but you still see a slightly different world between very local and fairly large financial institutions. So, what good things are happening in your world that the rest of the world should learn from?

So if that's a message that you might want to get across, because we would like to get across a message, because I understand that the audience is a fairly broad range of people who will be sitting either in the middle or on either side of this either side of this . So what would be a good message for them to take from your experience is that traditional financial firms are doing very well and we should learn from them, but also from cryptocurrency companies that are doing it very flexibly or maybe very quickly, uh, financial institutions should learn from that as well. So I understand that this may be a somewhat complex question, but I want the audience to learn something useful. So, specifically in the crypto space, and here's what I've learned over the last year. So, my path to the foundation was different.

Uh, 5 years ago, by chance, very by chance, someone gave me 10 million dollars. The next day I didn't ask for money. In the end, I became half a billion dollars. He gave it to me in 2 years. He gave me $100 million again , and it became $250.

It was completely by accident. It's like winning the lottery. I would say you win a lot say you win a lot . But last year I reached out to institutional organizations and tried to attract them to the fund. The problem, as I understood it, was that until we took money from the crypto brothers money from the crypto brothers , we would remain so small.

The Saudis have the real money. The real money is in different people, I don't want to name people, but I will say: yes, yes. So how do we get this traditional capital here, because unless I create a multi-billion dollar venture fund, because the average ticket size in cryptocurrency is $4 million . So, to build Uber, you need a billion dollars. A million, 4 million, and a billion million, and a billion are big differences.

So, unless I become a $10 billion fund within the next 2-3 years, no company will go for mass adoption. So, this is where the changes are happening, which is that we are focusing on traditional capital. Traditional capital was accidentally transferred to digital treasuries in the US, where they burned the capital. Yes. It was transferred to ETF.

Venture capital missed this train. But that's where I'm building up. And again , I don't need to do this today. This is a 10-year journey. I hope we will have that 10 billion by then.

Anything from you, Andrea? So, I think the actually good thing about my world is that we actually need to do our homework. The good thing about this world is that decisions are actually made much made much , much faster. And I wish we had more of these personal beliefs personal beliefs , rather than where we check all the boxes, and we have to check all the boxes to avoid negative consequences negative consequences . I think this world is much more growth-oriented, while we protect ourselves from negative consequences negative consequences .

And in both cases, as I said, I think we're doing a little bit more of our homework, but I wish we had more thinking about the positive and negative consequences. Now, that's fair. I think in terms of bias, I understand that there is an element of bias in that we look at the negative more than the positive, and it seems to be one world versus another, and therefore the direction that everyone is moving forward in right now. I realize that you want to say one last thing to the audience, given the industry you work in. 10 times, maybe 100 times.

I understand that this is not investment advice, because we are not authorized to do so, but no, so I personally believe that these two worlds will come even closer. And I think we just need to work at all different levels: at the entrepreneurial level, at the institutional level institutional level , at the investor level. I think we need to start communicating and collaborating more, trying to figure out how we can build these bridges. I think this is critically important. So my advice to everyone, and I say this publicly to everyone who is currently working in cryptocurrency and understands what cryptocurrency does...

being here and buying Bitcoin doesn't mean you understand what Bitcoin does. And I can test this with people, for example, I've met people who have invested hundreds of millions in Ethereum and today they can't answer what Ethereum is doing. They think that Bitcoin and Ethereum are the same thing. So my advice is: if you are in this space in a bear market and you really know what to do, then in 10 years you will have the power to control the future of money. If XYZ venture capitalist says I'm leaving cryptocurrency for AI, he'll come back as soon as the market hits 200,000.

So stop listening to people and start believing what you believe. A great way to finish. So thank you very much for your time and thoughts. I realize that you will be attending the conference. Any advice, but to be fair, I can't give any investment advice.

I'm sure people will ask you about this and the next conference will need to be invested in, but thanks again for your help and thanks for inviting us here. Thank you.