BBW24 – Day 2 – From Seed to Scale: The Boston Blockchain Venture Café

I'll start hey guys Rusty mattv I'm uh co-founder and GP of a group called current Ventures we're an early stage fund kind of focusing on the series a space uh not fully exclusively in the web 3 but very heavy in in the web 3 side uh also look at things like media entertainment AI kind of opportunistic uh interesting future Tech stuff um and also I happen to be an operator in the crypto space as well I'm the chief strategy officer of a startup called cxy U sure we'll get to that soon my name is John giny I'm a partner at accomplice Ventures we invest in everything from DraftKings whoop clavo all the way to even blockchain things and so I'm the token crypto guy pun intended and um yeah I've been in this space since 2015 and it's it's changed a tremendous amount great thanks guys so you both invest in very different points in sort of the Venture um Spectrum so pre-seed and seed and that has changed since you both been in the space for for quite some time so you know what did each of you look for in potential investments in each of the stages you look at and particularly how has that changed over time as the space is developed and matured we'll start with you rest thanks good question um yeah I mean it's funny to say the space is developed and matured because obviously it's overall pretty native yeah native space nent space um I mean personally I I I funny I look for failure in a big way right I look for how how Founders deal with adversity it's a little bit tougher in the web 3 space because for a lot of founders just experienced a you know a bull market in a very you know very like sort of inflated exaggerated uh type of levels of success and maybe haven't had the downside of things so you know that that's a differentiator for me is to see you know have you been a Founder before or have you you know dealt with any kind of failure uh and and how did you navigate through that did you pivot you know do you have a New Perspective from that like what you know what have you actually gleaned from that experience to now take onto the future so that's you know funny to say failure but that's one of the main things I actually look for yeah I would say um because we focus on pre-seed and Seed we're generally pre-product or at least pre-product Market fit and so most of our time is spent with the founders and getting to know them and getting to understand if they're the right person or right team for that job um given the space and its history and a lot of Bad actors you really have to invest in people that you trust and that you are excited to work with and that you would pick up the phone for at 3:00 a.m. or tell your wife or your brother or your parents to go work for them because they're great people um and if you're not willing to bet your career on the Integrity of that person given the history of the space you probably shouldn't invest in them um so I I've seen us just lean harder and harder into relationships and reputations that we have high conviction in because the space is guaranteed to change and only the people making the decisions at that company will stay the same got it um just to follow up on that John so how are you thinking about writing those bigger checks today particularly um with some of the challenges we face as an industry over the past few years regulation um some Bad actors you know what what gives you comfort um you know trusting some of these Founders what are some of the metrics you look for is it uh you know product Market fit is it Revenue you know what what what are you looking for sort of stage so the case in my head is when would you double down on a team right that's doing well and so I really try to look at three different things it's the team right like just talked about the the people behind it um the technology so what are they building is it tested is it proven and then the traction is anyone actually using this thing is anyone you know what are their kpis what are their what do their customer funnels look like and and how is that growing and then what's the bottleneck to Growing that is it more Engineers is it more um you know advertising or more features what does that actually look like and so it's trying to find those Milestones where okay the initial funding is to prove out we'll say Tech right and so maybe then you say okay we'll do an additional we we'll double down so they can prove out traction and then from there you can really get the fly wheel going on on growing a company great yeah that makes a lot of sense um in Rusty so as we think about investing in the early stage as we're talking about beforehand you know a lot of the later stage Investments are able to get some Equity maybe have a path to liquidity an IPO or a buyout it's not really the case in most of these preed stage companies so you know you're investing much more in early stage and how do you think about when you advise projects not only on their tokenomics but kind of go to market and how do they structure and think about um you know really launching and fundraising for what is you know essentially pre-product pre-revenue uh startups here yeah no it's again a good question I mean in general I lik in the pitch like even the very first pitch again maybe a cliche but I like to sort of see the big picture right I want to hear sort of start with the end in mind I want to hear like you know we all see the J curve and oh we'll be bought for this much money and the this company but really having a vision from the founding or the founding team founder or founding team to say like you know this this product belongs in the space there's a huge need for it and you know whoever so and so wants to buy this product will want to buy this product because it's going to be a necessity um there's you know that angle for sure is part of this in terms of the tokenomics I mean everything is very very different depending on the use case I mean we've all seen we've all seen tokens out there that you know have no utility and they're just sort of hype and and and attention and you know Meme coins and that kind of stuff and then we've seen things that you know truly purely have some kind of intention so it's hard to give like a you know a one sort of binary answer to to to that um specifically to that but not over engineering the overall you know like not depending Al sorry one more call out there I've seen a lot of projects put a ton of resources and time and you know Capital into their token structure into launching their token into the foundations that you have to launch and I think that's something that everyone that's founding companies now will benefit from because it's not net new I mean yes we're still operating in a little bit of a gray space and launching foundations and the Cayman and whatever is happening but trying to jump off of that and take advantage of like the last whatever decade or so that companies have been doing this so again there's no right or wrong answer it's more so like is there a vision and utility for the token is this token even required and again completely different answer for is this is a meme token but usually we're not investing in that space so um this question for for both of you guys so the meta in the environment is this slow flow High fully deleted valuation sort of launch for these tokens today and the gold standard used to be hey let's get a binance listing let's get a coinbase listing and our token will will go up and um you know we'll eventually have the unlocks over time but we'll settle in at a reasonable valuation um as we talked about I think you know most tokens that launched on binance this year are down about 90% of them what's the sort of best way to think about token launches in this sort of environment iOS return to icos is it um you know other distribution mechanisms or is it you know we're not we're not able to do things the right way using the token mechanism through a fair launch in this ecosystem maybe we'll start with with you John yeah I think to to get to more of the fundamental question I I think that again you should only use a token where it makes sense for your business model at the end of the day you want to have some ideally open source software model where you have a token that Acres value to those that use it or contribute to the software something like that and I think what we've seen a lot of with these token listings that have done the march to zero in the past year is it's simply an expedited cap table and people are just rushing for liquidity and instead of it being the beginning of a tokens Journey when you're get listed on coinbase it it's now almost become the end of it right and um so I think that that's gotten fairly toxic and you're starting to see more of these Fair launches which are interesting because there there's no VCS involved in it right it's generally you go and you stake eth and you earn this token and it's a linear unlock so no one feels like they're um you know no one feels like they're the bag holder at the at the time that things go liquid so I think getting Community alignment is very important and I don't mean that in a in like a meme Way community alignment I mean it in an actual like long-term value to those who are contributing and using it um but part of the reality is that you're seeing a lot of these tokens do this this kind of um listing with that dynamic because Founders that raise with tokens generally get a premium over those that don't because you're seeing a lot of investors who would pay almost 100% premium for a round that is a uh token round as opposed to an equity round right a a $10 million seed would be a $25 million token raise and that's just the reality of it and there's a lot of bad dynamics that go with that so again if you're going to do that you should just make sure that it makes sense to your business model and you're it's not just a cash grab that's going to hurt the investors at the end of the day out there yeah no good good jumping off point I think it's an opportunity for a Founder to really demonstrate quite you know their sales and marketing skills about building in community uh you know to John's Point whe you know if it's not a fair launch which I think is definitely a good model I remember our CTO at at um at my startup at the startup uh the crypto startup definitely wanted to do that and we just had we were in the bull and we had a lot of demand from from you know from investors so we didn't go that approach but like if you came to a seed or preed or early stage investor and you you know were able to demonstrate we have this many community members or this much pre-sale or we've already sold this many tokens and now you know now you're coming into the game there's you know that's again an opportunity for a Founders so that's that's excellent um you know T take it one step further if you could you know if you're building a you know play to earn gaming company and you're able to align with like a you know an Anoka brands or someone that's in the space that you know it's going to affect their portfolio and there could be a lot of synergy also great you know Great Value great demonstration to um you know to show other investors and even again the the invert of that of showing the community look we have these groups involved they're going to this is going to be part of the gas fees or whatever again whatever the toonomic Dynamics are great um so let's pivot to markets you know I think we all are waiting to see uh you guys Shine off your crystal balls and give us all the AL for the rest of the year so um you know how do you see the current state of markets for the rest of 2024 I think we've all been waiting for the Q4 bull market that everyone's loved to talk about on on Twitter and other forums but how do you see 24 25 for the market your projects and the business in in general start um yeah let me take out that crystal ball um you know we're we're in an interesting period of course um there's a pending election and that that will help determine some of the stuff uh one way or the other um you know just by the nature of where I'm sitting and my bias lens I I'm optimistic in general right I don't want to advise anyone to go and you know put out their life savings into memecoins or into into the crypto Market but uh in general I I'm bullish I think that you know even though there's going to be cycles that come through of of of turnover and all that stuff even maybe with like you know layer ones um you know there's G there I have conviction that there's necessity for this technology and for these markets and so you know I think that it's going to all come up whether it's in 25 or or Beyond you know um one of my partners does a lot of writing on this space and you know whether it's just hyping up and say you know every day it's the Bull's coming you know the future is here and all that kind of stuff but I think um you know there's going to be some consolidation perhaps some full turnover and and again net new uh net new coins or even again perhaps layer ones but in general adoption will come whether it's through institutions whether it's you know Banks and and political processes and sports and fan engagement and all the you know all the retail all the things that we've even seen like you know the Starbucks odys of the world that have come and gone they will come come back like there's just there's too many good use cases and too much potential for better efficiency and better more upside for all parties involved for it to like you know just just go by go away yeah so I think given the uh regulatory ambiguity there's a lot of good opportunities out there because people are fairly riskof into the election um so that's one area that there are a lot of things that you can look for and find some value dare I say and um on the other side I would try to avoid those sectors that are over hyped and overheated um you know you really don't have to name them out loud because everyone everyone knows them and um I think one of the undervalued areas are those that are um tangental to the consumer use cases right a lot of things about personal data things like that um just because there hasn't been a tremendous amount of monetization around them I I think doesn't mean that it will never happen I think consumers are getting more and more aware of privacy issues and you saw the you know telegram CEO get get detained in France and um I I think people are going to become more and more aware of some of the the issues around that especially as AI gets more prevalent and and the context of your data defines how your queries are returned regardless if you're looking for news or you know looking to buy things online so just a double click on that you know where what are areas you guys are encouraged we are seeing product Market fit I think stable coins are basically the only thing that has somewhat of a product Market Market fit today mcoins as you mentioned Rusty maybe we call that product Market fit for gambling um you know what are other things you guys are excited about specifically in the next 18 months or so you see could start to catch on you mind if I take that yeah please uh one thing that's really interesting is um onchain attestations about attributes about users or or things um timestamps proof of completion or something like that um a good example is I don't know how many people use straa or you know that the running app there's an application called receipts doxyz and you can go and um prove on chain that you did a certain workout and you can have a leaderboard with your friends or family and it keeps you accountable that you actually are working out something simple like that that adds a social Dynamic um in one of our portfolio companies it's called Icebreaker and you can essentially create um a profile of all of your different pointers of a testation right so your your GitHub or your your LinkedIn or you know proof that you had a meeting with somebody using all these different ethereum attestation service Integrations and I think that um you know in the future if you're looking to fill a remote role it'd be better to say okay I'm just going to search through this find people that are first or second degree contacts that I can actually get the proof that they contribute to open source projects right now if you get a resume there's a lot of faith that what you're reading is is real and true and if they got that GPA or went to that school or you know worked at that employer like unless you're going to call and check and and you know call the registar to school and confirm grades that's a lot of work and um it would be nice if you could have pointers from oracles that verify those kind of things whether it be on you know for for recruiting or for you know investing or even on a dating app right I would love to say I was six feet on a dating app but that's not true um and someone might feel like all right it'd be great to have verification of that that's that's a joke of a use case but um in all seriousness you can you can do more of the uh verify rather than Trust on you know third party transactions online it's the the other acronym for VC right the verified credentials uh yeah that that's definitely a great use case um you know we all remember the days of sort of the single sign on and the you know like the sign in with Facebook and the pixels and all that stuff I think that's that's naturally an opportunity it's it's a really interesting dynamic or like double-edged sword because an anonymity is pretty big in in this space and so it's like this balance of transparency and anim anity the idea it can work in both you know both ways and in terms of your question uh Tom I mean you know you mentioned gaming obviously is a very really low hanging fruit one to point out to the whole earn um earn to play or excuse me play to earn I think I heard someone say on a different panel uh a company called step in there're talking about you know a company like sweat sweatcoin or the fitness economy so very similar to what you know John was just saying where you do a workout and that's you know that's proven and you're able to check in and whether it's working with you know bio um like you know with a whoop or with one of those types of companies that's tracking you you you really get to have that attestation and proof I think that's a great use case um the gambling world there's a lot of I mean there's use cases across the board I love this like retail space so you know I think that makes a lot of sense um yeah I mean Endless Possibilities yeah there's a lot of possibilities I think people have been calling for gaming for quite some time I think we're all bullish for a few games that are coming this year um and you know it's interesting you mentioned uh step in in some of the fitness apps we met with a company the other day and I you know was thinking oh man sweatcoin really hasn't on but this country um India had this app called grow fitter that had millions of users and never even heard of it I was like wow okay maybe you know we're more geographically diverse than I think we uh we remember so um I want to leave time for questions for the last few minutes but um just one last question for both of you and feel free to take it or pass love one um non-consensus thought opinion um broadly about the space about verticals about projects that you see a lot of folks talking about that you um would push back on or or take the other side of um and I'll open it up to either of you to to start or we can pass it on to questions I could take that um I think people are always saying oh you need to make the user interface more human friendly right better user interface because right now it's terrible but I think if you look ahead and you you follow the thread of okay if you have autonomous agents interacting on chain should the interfaces be optimized for humans or you know some kind of programmatic actor more of like a CLI or you know API style interface and so I think you have to decide whether or not as a builder you want to build for humans or computers and I think that you'll probably get a lot more usage if you're building for things that don't have have to manually click right and don't have to visually see things and can just read through your API endpoints I think that that's a general non-consensus view because you often hear how people say you need the killer consumer app but I don't think that that's really how you you're going to scale usage for um for maximum throughput yeah that's great I'll give you a I laugh because the user interface thing is one of the first things I was actually going to say too a little bit of a not too much contrar to what John was just saying but I you know depending on what you're building and where you're at a lot of people in the space are you know call them Deens are like you know really in in the space and so like that user experience is just sort of secondary you you see all these like sayings of how do we onboard the next you know 100 million or billion users um you know I I think a lot of it is familiarity a lot of it is actually closer to like can you get use cases that people are comfortable with comfortable with and used to and can you get the crypto out of the way I mean that's not that part maybe is not super contrarian but in terms of like on a daily basis or on a weekly bases the amount of decks or you know pitches we hear and see there's way more that are super in the weeds and like in the you know web 3 crypto space and addressing that demographic versus trying to in fact even the groups that are saying we're you know we're trying to do a web to or consumer facing thing they're not it's not they're not building it that way at the very least so I I you know I personally still think that that's a necessity and again not a super contrarian point but I think like that that that is in fact still the path if you're building consumer related stuff is to actually get out of your own way get it out of the way and put it in the background and make it just you know super frictionless for people to use it doesn't matter if they've never heard of metamask or know how to use a wallet make it you know make it venmo make it super easy Etc yeah two fantastic points um love to open it up we have five minutes left here to questions from the audience uh we can Naval gaze a lot here or just go questions uh I'll start with the front did you oh okay perfect y uh thanks for the talk by the way um how do you establish valuations I know there's a negotiation involved but preed SE it seems like it's pretty difficult to do that great question yeah I I think it comes down to um you know what's that let's talk about preed I think that's the easiest one what's that Founders reputation do they have a good track record for executing have they had positive exits in the past what's the going you know what's the market generally look like at that time for that kind of thing so it is more of an art than a science in that way but it's it's very much based on the experience of the founder their track record and the confidence that you have in the team and and how much of the company they want to sell just to add to that it's very Market dependent as well right things that were were selling seed stage uh seed stage fully deleted valuation at 25 30 million valuation suddenly we're 50 60 70 as the market ticked up so it naturally is a comparables game um For Better or Worse even though sectors projects teams could be very different um so it's it's fluid Dynamic and depending on tokens in equity um good question though how's it going guys my name's Calvin thank you for your Insight um I have spent the last year watching a c number of low float High fdv VC backed coins just go to near zero uh one tip to look for for token distribution is leveraging existing communities where you use onchain analytics to see how long certain assets were held and some of the most successful launches we saw through the bare Market were through that type of fair distribution I did have one a little bit silly question about mem coins as they are clearly what the market has shown us they are the most interest and we all know the market is never wrong it seems like an opportunity for me to regain trust as a VC or build up your mind share in this growing Market if you were to put support behind an existing Community like that and I know you don't get in early you know you won't have the crazy gains but beyond the economic value it does seem like that is where most interest is going if you look at the liquid so I was just kind of interested on your guys take and if you see see any opportunities within mean coins to you know kind of reach out to the the people and the communities who are you know participating and having fun with these things yeah absolutely I'll start with that one so you know again I sit in a little bit of a unique position because I stradle both of investor side and the operating side we're talking to a lot of mcoin projects actually and it's kind of even difficult to say that we're talking to them because a lot of them don't have a central you there's not a CEO necessarily in those types of things but we're talking to those communities or like the leaders of those communities and trying to bring quite frankly trying to bring utility and some transparency to those you know to those communities again A lot of times the sort of myth myth and the aura not no pun intended on AA token but the myth and the aura of those things are in fact the fact that they're again Anonymous but can we you know can we give some Snippets uh of content even of behind the scenes of some of the intents can we and more importantly on again on my operating side can we bring utility can I can you buy coffee or or buy some you know some experience with a meme coin versus just you know purely going trading on the hype and I think that's you know seemingly again a first principles easy approach to to to take to where you know can we make it applicable and acceptable in in ubiquitous am of places one more um with minute and a half here left yes here you go hey guys uh my name is Steve Ley I got a question for you if you were in an elevator with a chief investment officer of a nine figure family office who does not invest in seed stage crypto Venture funds what's your 32nd pitch why is he going to cut you two million bucks to start like yeah I think that uh Venture funds get paid to take extreme risk so you know if you're looking to get if you're looking to have a 10year fund and 50x that you should look to venture and so I I don't know if if that's what a CEO would look did you say CEO or CIO CIO yeah I I would say just look at our track record right we were seed stage in um in DraftKings in in whoop in clavio uh and we've had a consistent our our methodology is take large bets early and if they're winning continue to compound in the winners you don't write lotto tickets um you know to the to the mem coin question we wouldn't do anything we didn't want to hold for the next decade so unless you know Shea Inu coin has a great road map and and Founders that aren't Anonymous I don't think we would touch it um but yeah I think it's more of a game of getting to know the companies extremely well so that you can compound in one winner that you're early at 40% gagger rather than um you know praying and spraying a tremendous amount of lotto tickets yeah I I'll add on to that real quick just to say first of all you know I'm personally not an exclusive web 3 investor and so diversification has to be part of this right I don't I would I would not recommend a web 3 only Approach at least as you know as as for myself um but at the same time this is a this is the wild west right in in a positive way this is one of the only sectors where you can you can really gain insane you know multiple in a very short amount of time like you know not a 10year horizon I wouldn't pitch it in the sense of saying hey I'll give you you know we'll give you dividends in six months but you could really get you know your initial investment out in a much shorter period of time and just ride the upside and still enjoy the access that we that we get across you know the web two and web 3 vertical uh verticals and you know take it on it's a sector you shouldn't ignore that's at the very you know to say at the very least and uh you know you're not going to see that kind of multiple in very many areas so like this you have to pay attention unfortunately I've had too many of these conversations being a former investment consultant for pensions endowments and Foundations um and I think it comes down to you own Tech and your portfolio right Mr portfolio manager okay it's a significant portion of your portfolio great but you're ignoring what could be 50% or 20% or even 10% of the technology economy for the next 20 30 years and if that's going to be your bet great that's probably not a great career bet but even if you totally disagree and you want to make this a half 1% position of your portfolio in the Venture bucket the tvpi all the irrs the returns and the crypto sector outperformed just about every other Venture sector to date will they continue to do that probably not to the same extent but certainly there's a lot more opportunity in a sector that's growing much faster than these other sectors so it's a nuanced argument and you're going to get a lot of nose but um I think we're all here and that we'll eventually be right sort of that uh that argument so I'd like to thank the panelists uh here thank you guys for for joining us and