Wyre Talks

Ep 49, Value Accrual in Nascent Token Economies — with Lasse Clausen of 1kx Capital

Episode Summary

If you ask 1kx Founding Partner Lasse Clausen, tokenized networks are better than free. And that’s why he has created a crypto investment fund around a token maximalist philosophy. Today, Lasse shares the 1kx thesis, explaining why their narrow focus attracts sophisticated investors how the team adds value for founders beyond the capital they provide!

Episode Notes

If you ask Lasse Clausen, tokenized networks are better than free. And that’s why he has created a crypto investment fund around a token maximalist philosophy. A fund that capitalizes on permissionless innovation and declining trust in companies and governments. The 1kx thesis is flexible enough to adapt to the fast-moving blockchain space yet focused enough that it affords the team conviction—even when tokens are out of fashion.

Lasse is a Founding Partner at 1kx Capital, a token fund designed to be the most founder-friendly and helpful source of early-stage capital for crypto projects. Today, Lasse joins us to discuss how his background as a software entrepreneur led him to create a crypto investment fund and offer insight around the current venture environment in the blockchain space. He shares the 1kx thesis for making investment decisions, describing how permissionless innovation and the omnipresence of trust inform their philosophy of token maximalism.

Lasse goes on to explain 1kx’s narrow focus around Ethereum and their advantage in being an evergreen fund. He also weighs in on the transparency he looks for in a crypto founder and the value 1kx provides its projects in terms of storytelling and investor relations. Listen in for Lasse’s take on the most interesting crypto subsectors, payments, DeFi and Web3, and learn about the strengths and weaknesses of the crypto ecosystems in Berlin, Silicon Valley and Asia.

Follow Thomas on Twitter: https://twitter.com/tomscaria

Follow Lasse on Twitter: https://twitter.com/lalleclausen

Follow 1kx on Twitter: https://twitter.com/1kxNetwork

Episode Transcription

Wyre Talks EP 49

Thomas Scaria: [00:00:00] Hey everyone, and welcome to WyreTalks, the Wyre podcast where we discuss all things crypto. So, whether you're a veteran or a crypto noob, we're all learning together. This is your host, Thomas Scaria. I have a very special episode today because I'm not in San Francisco. I'm in fact in Berlin for Blockchain week and as many of my listeners know, I'm very much into techno music and things like that, but as a hard stop rule of mine, I have avoided partying for the last 48 hours before recording any episodes. I'm very clear-headed right now, but we'll save maybe some of that for this weekend. Anyways, I'm very excited to be in Berlin, just was at Web3 Summit and I'm hanging out here with one of the well-known VC’s in this space. So, I'm very excited to announce that I have Lasse Clausen from 1kx Capital here with me as my guest. Lasse, welcome to the show.  

Lasse Clausen: [00:00:50] Thank you so much for having me. It's an honor. I really liked the podcast. It's great to be here.  

Thomas Scaria:    [00:00:54] Yeah, absolutely. And I'm very excited to pick your brain on the Berlin scene in particular. But before we get into that, I would love to learn a little bit more about your background, how you got into crypto and specifically into venture capital.  

Lasse Clausen: [00:01:09] I am a – was a software entrepreneur in Berlin. I've been here for I think 10 years and I'm also really a product nerd. So, in I think 2012, I really wanted to feel what it's like to pay with a mobile phone. At that time, I had only been previously to Japan and saw people being basically 10 years ahead of us. And at that time Bitcoin was the only way to do it. There was no mobile Paypal, there was nothing else. And so I bought a bunch of Bitcoin and got an out of store Android APK, which was the first mobile Bitcoin wallet in the world because we apparently have the first place in the world here in Berlin that, excepted that Bitcoin, that's the Room 77 burger bar. And yeah, went to pay for it before. Actually, this is funny, people would come with their laptop and like manually type in the public key to pay. So, this was really, you know, hardcore Bitcoin enthusiasts who, you know, obviously didn't care so much about the usability. And then, then yeah, at this stage when I was there, someone had built an out of store Android APK 2. So, the first mobile wallet. I used that to pay a couple of Bitcoin I think for Burger and fries and it was really great. It was very fast. It was very – I really loved the UX. I was really focused on UX of mobile apps at that time because we were, Chris and I, the other partner at 1kx, we build mobile Internet companies. And so, it was great but I didn't think there were going to win the adoption side. That dynamics of payment networks are incredibly difficult. You basically need 80, 90% merchant adoption first and then you also need to win consumers over. And we had, if you look at the conversion funnels of mobile apps, it's extremely depressing because you have around, you know, let's say a hundred people click on a link and say, “Yes, this app is interesting, I actually want to install this.” And then 30 will actually install the app. So, you have 70% of people are just like, can't be bothered. I think now actually the benchmark is 20% so imagine it was like 80% just like maybe they, they're not on Wifi. They think this uses a lot of data. I have no idea. It's so depressing. Anyway, so I thought, “Okay, you know, a monumental effort in, you know, converting a lot of merchants, then monumental effort and then converting customers, or new – and consumers to a new payment system.” And at that time Bitcoin’s narrative was only payments. The store value thing came later. And at that time, I was definitely not visionary enough to think that, you know, maybe there's a store value story here too. So, I essentially had useless Bitcoin left on my phone, and then I met Amir Taaki and I think some other people involved in Ethereum at a dinner in 2013 at the end or something. And I heard about Ethereum and that was, that seemed more interesting, much more interesting. They were very good at communicating back then already, kind of the big vision of Ethereum now. Then I thought, you know, just the simple fact that you could sort of, I know that picking applications is very hard, right? And Bitcoin was just one payment use case and Ethereum sort of presented itself as a platform where many different applications, insurance, you know, whatever, maybe payment itself, can be successful and I's investor and sort of the layer, you know the fat protocol thesis kind of originated from there. I think they pitched that and I thought okay, this is the much easier investment. And also if this turns out the way these guys are pitching it, I'm going to look super smart. And if not, nobody's going to know that I invested here. So, it was kind of a win to win for me. Participated in the ICO and watched the space very carefully in the sidelines. 

Thomas Scaria: [00:04:42] Which ICO was that?

Lasse Clausen: [00:04:43] Ethereum.  

Thomas Scaria: [00:04:44] The Ethereum one. 

Lasse Clausen: [00:04:44] The Ethereum ICO and watched the space pretty carefully, but on the sidelines. And then, end of 2016, we had another hype cycle sort of coming up. And I actually think they're very necessary to push a new technology into the awareness of mainstream consumers. It's just very difficult, takes a long time and you need a lot of momentum and things like that. So, it's like, okay, this is great. And then Chris and I, who was my CTO at the time, we looked into basically blockchain to see if we as application layer entrepreneurs can build something there because that's where we saw our forte. So I would say probably like 70% software or 60% software and 40% sort of markets, commercialization roll-outs. And then we realized that it's a little bit too early for something, let's say like the Uber on the blockchain, et cetera. And that sort of was our specialty and that the protocols are, you know, still a little immature. So, there's still a lot of work needed for protocol entrepreneurs and which, you know, we're, we're not protocol entrepreneurs. That's really a hundred percent tech, but it got very, very excited about the fat protocol thesis and just as an investor, because we know on average, VCs all lose money. It's extremely hard to predict which applications will win and consumer or even enterprise adoption. VCs don't know how to do it either. I would make that claim. I think you have some VCs that have exceptional brand and in the A round when it's kind of clear already that this is actually, you know, this is a hockey stick, there is this demand for the application, then you can sort of, you know, muscle your way in with brand or money anyway. So, I thought this is going to be way easier. So, as an investor I can participate and move this space forward. And at that time we really just thought about that too, move this space forward so that we can come in as educationally entrepreneurs and the rest is history. Now that sounds like too much, but yeah, that's like 

Thomas Scaria: [00:06:32] No, that's a really good overview. And when I have come to Berlin, I'm totally, I'm totally noticing like the distinguishment between the Berlin scene and the San Francisco scene. San Francisco scene does admit that in fact, you know, even still it's quite early, but they are focused more on and thinking more about the user and building consumer facing applications and proper businesses that are ready to go. But here in Berlin, I've noticed that the entrepreneurs here are still focusing on the lower layer problems in the space, right? And engineering, maybe even over engineering, and thinking about a sustainability. Like how can these inherent design tradeoffs that we're making now be ready for the next 50 years of blockchain? Right? That's kinda the key difference that I've noticed in this space. Would you say it's still too early to get into the application layer business at the state of blockchains as it is?  

Lasse Clausen: [00:07:25] I think it's actually advanced pretty fast and there's definitely applications now that are super promising and we're starting to see the first – I just, someone just showed me, I think it was Pedro from WalletConnect just on the sideline showed me Argent and how you can actually sort of have just a mobile bank account, mobile savings account with all these transactions such as token allowances, et Cetera, all abstracted away. Just a couple of clicks and you've deposited money into a savings account. So, I think there, I would say, I think that that's how the whole stack came together. I think you have Ethereum pretty slow, but that's fine. I think for high value, low transaction volume, Ethereum is fantastic. The whole scalability debate was a little bit maybe misguided or too early. I don't, you know, honestly, we don't really need crypto kitty on Ethereum. That's fine on a, you know, DPOs chain or something with lower security parameters. I think that's fine. Yeah, so I tell you sort of decentralized finance, maybe simple application of a savings account there, we have the whole stack together and –

Thomas Scaria: [00:08:27] It's coming together. 

Lasse Clausen: [00:08:28] It's coming together and you see good sort of application layer entrepreneurs coming in.  

Thomas Scaria: [00:08:32] Which is the key difference I think from just a couple of years ago, you had to be technical to be in the space and to be a CEO in the space because there's no proper APIs or any abstractions on top of the low level technology that makes it easy for a product person to come in, or you know, God forbid a sales guy to come in and try to run a business. You have to understand what's going on there because in the low level code, because you're directly interfacing with low level code and it's starting to get a little bit better, there's some APIs for I think, like Set Protocol for instance, has an API where he can just kind of pass it like a regular JSON, right? And you don't have to work with Web3. They have their own sort of wrapper around Web3. So, in that sense it's coming together and now you're seeing a different breed of entrepreneur.  

Lasse Clausen: [00:09:21] Yeah, we're actually really excited about that type of entrepreneur coming in. We had, yesterday we had a small investor summit and it was talking with Nicholas Braun from Lake Star Partners – is a huge, I think the biggest late stage VC fund in the space. And sort of in Europe, we not quite yet have these sort of typical venture entrepreneur coming in, which I would say right, 50, 60% software, but a lot of sort of understanding of markets rollout and strategy and commercialization. I think globally we're seeing the first really good ones come in, right? We have, Instadapp, I think would be an example. However, they still actually have to build a lot of smart contracts with solidity. We actually have initiated the podcast purely focused on depth developers called the Wizard of the Dapps, and the founder of Instadapp was on it and said that simple things like, you know, they integrate with, Maker and Kyber and they are on different Testsnets, so they had to deploy to Mainnet to actually start testing. Right? So, there is actually still some pretty basic stuff missing and there's, sort of a smart contract layer is actually pretty thick still. But I think we're getting there. I would also make the claim that Argent probably would also have really good smart contract developers. But I think we're getting there and I'm very, very excited about the, I think with Livepeer we're starting to see the first sort of abstraction that you have a separate, typical for-profit venture entity on top that, yeah, builds sort of the second layer software that makes it easy for an enterprise developer to interact with. Because enterprise developers will probably not interact with protocols directly. That's too difficult. We're pretty excited about that. We're monitoring that very carefully because I think that's sort of the next stage that you have, you know, really good entrepreneurs from venture that are just seeing this as the next platform. And they want to build on top of that and hopefully even independently sort of, you know, as we see with the Ethereum and there's very organic – tons of developers that just building on top of Ethereum versus, a few others, I think EOS for example, was like, “We have $1 billion and we're just going to buy developers.” And I think, and you know, I think it doesn’t work that way. Like even these ecosystem funds were very bearish on them. And, you know, it reminds me of SAP had a high HANA Fund, I don't know, five, six years ago. And they were like, “We have a three million dollar fund, and we’ll fund startups that were built with SAP HANA database.” And it just attracted like absolutely the worst talent because I think really good talent, software talent, they want to have the freedom of technology choices, right? That's actually what developers fight the most about is like actually technology choices, which technologies to use. And if they have a mandate, which is use like, excuse my French, some shitty database that corporate is pushing on top of them and it'll drive them nuts. Or it's some, you know, sort of mercenary type developer that just doesn't care anyways.

Thomas Scaria:: [00:12:06] Mmhmm. They don't want to compromise their vision and constrain it to one platform that's paying them money. Because even if they are that type of person, some other platform is going to come to them and offer them $1 more than the last guy, right? And then they're going to hop over to the platform, offering them more money. So that strategy of just being the guy with the biggest checkbook like doesn't often work in crypto because the real true crypto heads – they're very, very passionate about the permission-less technology and the ability to build applications for anywhere in the world and interactivity and you know, the whole spiel, and they're not willing to make that trade off for dollars. 

Lasse Clausen: [00:12:43] And I would say this even applied, this applies to software. You want, visionaries, not mercenaries. This was a statement from I think Paul Graham about Airbnb and then the rocket Internet here, which is really a bunch of mercenaries. You know, it was Airbnb versus whatever called they, so stomped out of the ground. And in the end, Airbnb won. So, I think even in traditional venture tech, you need missionary founders and not mercenaries. And I think you have the same in crypto the because you really want, you want to be a platform. If you're talking about smart contract platforms that attracts these, sort of, what we call like 1% type of engineers. They're all mission driven. They all have, you know, extreme sort of need for autonomy. And someone telling them like, “No sir, you need to build this thing on EOS,” is just not going to work. 

Thomas Scaria: [00:13:32] So, I think we covered a lot of ground here on what – in kind of a back handed way but what the current venture environment looks like, right? We're seeing more of these founders that are more product oriented. Things are looking like layer three could be a possibility 

Lasse Clausen: [00:13:44] Slowly starting to see the first promising signs. 

Thomas Scaria: [00:13:48] Yes, yes. But if you take a look at your thesis online in it, and you know maybe this may be one of those things where you don't update the website for three years, right? You're very focused on crypto economics and token models and that kind of game. And I was talking –in your Crunchbase, in the past investments you've made and there it's all very like layer two protocols there, one blockchains, things like that. How have you shifted the investment thesis to accommodate more of the style of entrepreneur? Kind of where the market is right now? What's the new investment thesis, if you will?  

Lasse Clausen: [00:14:18] Yeah, so this is sort of, I think one of the most critical things as a fund. So, we think about it this way: that if you understand blockchains, the core feature they provide is trust. Trust is a super abstract concept, but it's omnipresent. Just think about when you crossing, you know when you're doing a pedestrian, you're crossing the street, right? Your trust that the traffic light system works, you trust that around 30 people around you are gonna use it as well, right? And if one person doesn't, you get run over by a car. If you have food, right, there's so much trust implied into it. And so, there is obviously the opportunity to then, yeah, I think there's also a pretty interesting number that it's around. It's estimated to be around 28 trillion actually a year is spent on establishing trust globally. And that number comes from that 35% of US employment is actually trust, establishing jobs: auditors, judges, law enforcement, attorneys, et Cetera. Anyway, so it's really huge and it's omnipresent because trust affects almost everything we do in society and commerce. And so, then there's also tons of confusion, right? So, everybody wants to use a blockchain for everything. And we just saw that that also blockchains mean a lot of different things for a lot of different people. And so, we thought, okay, we have this complexity that that blockchain could be, you know, applied to almost anything. Plus, it's a very volatile space. You know, it's like estimated that crypto, the finance ecosystem is about 25 times faster than legacy financials ecosystems. You've got a volatility that would make like an actual gas trader dizzy. And so like, how do you navigate this and have like a, you know, a strong thesis that's still flexible to adapt to this really fast changing space, but also like, it gives you conviction when the market's temporarily turn against you and it doesn't kind of make you flip back and forth with every sort of narrative or meme that typically lasts about four to six months in crypto. Right? They change very quickly. And we've seen other people in the space and funds kind of try to chase those narratives and it usually doesn’t work out. So, yeah. So, I think our thesis is that we're token maximalists. We actually just ordered new shirts, and they say “Token Maximalists” on the back. There's a pretty simple reason for that. We just – A: software networks, software's eating the world. So, software networks are becoming ever more important and bigger. And there's some software networks that are just extremely important for society in the world. They have sort of high public importance. And we would question whether the typical for-profit company is hierarchical, you know, vertical for-profit company, is the best structure to accommodate that. And we have especially two doubts. The first one is complexity. So, there's just like a limit of software code complexity that a typical company can handle. And then stuff like Equifax happens, right? Very serious mistakes. And I mean it's, we're getting numb to it, but very massive data leaks happen all the time, right? So that's the first one. And the second I think deficit we see for these companies, as being the structure for these large public important software networks is incentives. So, as a for-profit entity, essentially you just want to sell the cheapest thing at the highest price and as quickly as possible. And then we have a very specific examples like Boeing and the recent very tragic crashes where they wanted to beat Airbus to the market in this very specific segment of airplanes. And they also wanted to cut costs. So, they outsourced very critical software functionalities to like $9 an hour dev shop. And that was, that caused the crash. And then so, you know, two crash went down, a lot of people died. And so yeah, we were like, I think we questioned whether for these very large software networks, a typical for-profit company is the right structure. And then on the other side we have a very hard time seeing how a normal company like that will be able to compete with these crypto networks, token networks, whatever you want to call them. And the short way to say that is imagine Bitcoin or Ethereum had been a private company, I think nobody would've cared. That's like the very quick way to summarize that. We see specifically sort of three reasons why these for-profit entities going to have a very hard time competing with and you know, open source, fee-less protocol, tokenized network. And the first reason is that they're almost, they're better than free. So, I remember once a VC told me it's really hard to compete with free. That's like the most dangerous thing in the world for, you know, when your typical Silicon Valley style of for-profit kind of venture, anyone, right? So, they're better than free. And why I'm saying that because you have now a token that grants you the right to use it, or the utility, or you know, sort of the access to be a supplier on the network, but then it's a digital cooperative kind of, right? Once you have that token, which is itself tradable and an investible asset, but you have that and then you, it's almost unlimited use of the network either as a user for the utility or as let's say a supplier on this like tokenized marketplace. And there are like fees, but the fees are not to enrich anybody. The fees are, for example, just to prevent spam, right? This is sort of the idea behind gas and there's overall, the network actually has strong incentives to reduce the fees constantly because it's an open sort of competition globally. At the same time while we have this token right, that might actually be an upside. That might be sort of the price develops if there's more demand for it. And might grant you governance rights, some sovereignty over a very important contentious decision of the network. So that's the first reason that we say they are better than free. So that's really hard to compete with as a company that kind of has to squeeze out margins from wherever they can and profit and ideally just increase that. The second reason why we think it will be hard to compete is basically innovation. Innovation is a numbers game. The more experiments happen on top of the platform, the more likely you find a use case, a killer use case, or a killer use case develops. So, you can see in the App Store, one in 10,000 apps is successful, right? So, it takes 10,000 apps that just sit there and die. There were developers behind that. They put, you know, their heart, blood, sweat and tears into it for years, but it just didn't go anywhere. And then one of them does. So, if you have permission-less innovation, meaning like anybody can build anything on Ethereum, for example, et cetera. And there is no editor process. There is no, you know, it's completely permission-less. It's just hard to compete in the sheer number of experiments that happen on top versus you know, you a review process, et cetera. It just doesn't scale to this number. So, for us it's just a probability game that the more experiments happen on top, the more likely amazing new use cases develop. And when your permission-less you were just get more higher numbers than –

Thomas Scaria: [00:21:00] So do you want to invest in the experiments or the platform facilitating the experiments? 

Lasse Clausen: [00:21:04] The platform facilitating the experience. 

Thomas Scaria: [00:21:06] Okay. All right. 

Lasse Clausen: [00:21:07] And then the third one – and I know I'm taking a long time to explain our thesis… 

Thomas Scaria: [00:21:10] You guys have a long thesis.  

Lasse Clausen: [00:21:14] We are actually working on kind of, exploring having a very succinct blog post about this and then shorten it down 

Thomas Scaria: [00:21:21] I would be the first to consume it, by the way.  

Lasse Clausen: [00:21:23] And the third part is actually trust. Roughly if you understand how the blockchain works, and they really are trustless, which means that product is trust. So, if you want to build a very large network, you need buy in from almost everyone what from what used to be your customers or suppliers. But now they're more than that. They are stakeholders, right? Because of this token, this sort of digital cooperative token. You need buy in from regulators. You need buying from the government. And you can see how quickly they pushed back against a Facebook coin because companies are not trusted and especially companies like Facebook. You need buy in from the media, from pretty much anyone else. And trust in business is actually declining rapidly and it's almost at historic lows. So, we think that a network, and we've seen this right with Ethereum and Bitcoin, they just have an easier time gathering trust than a for-profit entity.  

Thomas Scaria: [00:22:12] Yeah. So, I'm going to try to summarize all this, but basically what you're saying is there's trusses at corporate trust, corporate mistrust, government mistrust, all of that. People's expectations from these different structures that we're all participating in are sort of just at all-time lows. And we have this new elegant structure that allows trust to be in the product, right? And it's also cut down costs to a very low level. And so, it's almost like a 10x better, you know, I think a YC always asks if your product is 10x better than the original product that you're trying to disrupt – 

Lasse Clausen: [00:22:47] This, by the way, is why we call it one 1kx. So, we actually think that some of these networks are going to be a thousand times better than what exists, not just 10x. Yeah. 

Thomas Scaria: [00:22:54] Okay. Okay. Not just 10x. So how do you, and I'm missing a lot of the thesis here as well, you're also token maximalist. How do you express all of these investments across the different opportunities that you're presented with? Like what happens for instance, over 2018 when tokens were essentially out of fashion, right? Or 2019 when tokens were, people aren't really selling tokens anymore, companies are more often selling equity. How do you begin to express your investments then?  

Lasse Clausen: [00:23:25] Yeah, very good question. And so, this is exactly why we felt we needed a sort of a guiding thesis. Simple, way to put it is large token networks. So, we invest in those. And then obviously it doesn't make sense at the time, right? I'm not, you know, as we mentioned, Uber on the blockchain, not just yet. I feel also there that requires a lot of buy-in from or understanding of this concept for the consumers and you know, let's say taxi drivers, and I think we're not just there yet. But for like one chains protocols where you can get a lot of adoption and traction from developers mainly who understand this kind of concept, I think it makes sense. But it's really always about token, opensource, fee less, token networks. And yeah, so you had in, you know, end of last year everybody was yelling like equity, not tokens and it wasn't fashionable anymore. And, we just actually bought a lot more because we saw the, you know, have this as a fund, you just have to kind of hopefully come up with a flexible enough thesis. But you need to have sort of a guideline and stick to it. And again, we saw people chasing first ICO since security tokens for a while. Everybody thought that was a thing. And then we saw these, you know, people were like, we're doing quant funds now, you know, like market neutral quant funds and yeah, that was great. And if you had that idea in 2017 while everybody was busy sort of buying tokens and ICOs, if you were kind of the contrarian and thought no, I think it's market neutral quant funds and you set that up – it takes me about a year – and then 2018 was great, but at the end of 2018, after quant funds have done well, you know, you start setting it up. Actually, now I would make the case that probably the quant funds are underperforming versus Bitcoin, right? Anyway, so yeah, you need to, we feel we needed to have a thesis that is flexible but yet gives us strong convictions when the market's like temporarily turn against us. And yeah, for a while, you know, tokens weren’t cool anymore. And I honestly felt that it was probably like a16z Crypto placeholder and us, were kind of the only ones that are really like, no, we have a strong, very bullish about tokenized networks.

Thomas Scaria: [00:25:27] Buy when there's blood on the street. 

Lasse Clausen: [00:25:29] Yeah. And it was great. As you know, the technology became so much better. The teams, the talents just became so much better and the prices were so much lower. So, this was like really a no brainer. I think, you know, if you're a, what I call like a natural contrarian, I think that can work out in very big ways. And natural contrarian, I mean, you're not just contrary because it's cool to be like, you know, always like, “Oh, what if it's the opposite?” And you know, like always try to be a guy– 

Thomas Scaria: [00:25:52] Being a pessimistic hedge fund manager is actually quite fashionable. 

Lasse Clausen: [00:25:56] Yeah. And you literally just like, you know, everybody's saying this, so I'm going to say the opposite and it's kind of, you know…but you see something that you think is true and most of the people just don't see it for whatever reason. I think that's a good way to be a contrarian. And you know, I think also as the narratives very quickly shift, we might actually be with our thesis. We might be not contrarian anymore. Maybe, I don't know. We have sort of, I don't like the term alt season, but you know, maybe we have sort of right now there's a strong Bitcoin dominance. So, a lot of people are like wondering, “Oh maybe we should put everything into Bitcoin,” and that might reverse as well, right? And that we have a period where, you know, it's all about tokens again, maybe. And then again, we're not contrarian anymore, but that's fine. That's just because we're following the thesis. We're not trying to be contrarian for the sake of being contrarian. 

Thomas Scaria: [00:26:44] Mmhmm. One thing we didn't cover is your time horizon, right? So, let's say alt season does come in a couple of years. Are you going to take some money off the table at that time or are you in it for…what's your long-term time horizon?  

Lasse Clausen: [00:26:57] In that sense, we're very similar to venture capitalists. So, a long-term horizons, very, very big outcomes. But we think this space will be much faster than a typical VC fund that has about a 10-year time horizon. We think it will probably be three to five years and for one specific reason that this space is so fast and it is because these token networks, because they have this sort of new alternative business model that allows them to be open source. And this is amazing and I think almost underappreciated for the whole sector. That means that it's built once and then used by thousands, right? The second, even the specs, right? They're not hidden behind closed doors or confidential, right? They from day one because they want to build a community that trusts them. They even, their specs are public, right? And immediately you have 50 other teams that are all over it and are integrating the best design decisions into theres, right?  And the same with the code they built. The second is like somewhere public and people take it. And so, we think this is just the, this is such a rocket fuel for innovation because if you think about it and then real economy, now how many companies are building the same stuff behind closed doors? Nobody knows what, you know, everything's confidential, it's all duplicate. There's really huge waste of resources. And this is also such a shift. That is a, it's something that makes me just, in a very macro sense, so bullish on what we call crypto.  

Thomas Scaria: [00:28:19] Yeah, I definitely agree with you. That is going to happen faster this time around. People always compare it to the adoption curve of the Internet and how quickly the Internet blew up. We already have the Internet, right? We already have delivery costs close to zero distribution to a worldwide audience. We have developers not having to move to Silicon Valley to start a company, all they need is an internet connection, right? So, I believe that any sort of technological revolution, it tends to sort of compound on the last one and, and, and that the timeframes are going to get shorter this time around. So, it makes me, it makes me very bullish. So, one thing I will ask you, when you're in investing in networks, oftentimes these networks are built on layer one smart contract platforms that are at least available and ready for, you know, for developers to deploy something on. So right now that's basically just a Ethereum, right? If you want to look at more of the trustless stuff that you'd like to invest in. Do you think of those as Ethereum projects or do you think that they have ability, these layer two protocols that have the ability to kind of hop over to other smart contract platforms given, you know, that's, that's the right move to make?  

Lasse Clausen: [00:29:26] Yeah, that really depends on very specific variables. Yeah.  

Thomas Scaria: [00:29:31] I'm thinking, you know, are you just really just long Ethereum right now?  

Lasse Clausen: [00:29:35] This is a really good question. I think, you know, developer mind share is probably our number one metric and not just sort of, again, this enterprise, a mercenary type of developer, but this sort of 1% missionary developer. And their Ethereum is very, very far ahead. We're co-codizers of EthBerlin. We judge a lot of the Eth global hackathons and it's really impressive developer community. Polka dot is very interesting to see what happens there. Yeah, I don't know. We generally, we have done a few layer one investments, but they’re usually quite differentiated or complimentary to Ethereum. I think doing this sort of, they're doing Eth 2.0 before Eth or something like that – we've shied away from that. 

Thomas Scaria: [00:30:20] Outside of Ethereum, do you invest in any pure play, cryptocurrencies, any liquid cryptos that are made at home to your portfolio?  

Lasse Clausen: [00:30:29] We actually don't. We don't hold Bitcoin. We don't hold Eth, no large cap. It took us a while to figure it out. But we are really, we're not in a fund for generalist investor that's kind of trying to understand crypto. We're really have some of the most sophisticated crypto investors themselves. Dragonfly Capital partners, L1 Digital, so very specialized crypto fund of funds. We have some exchanges that invested in the us. And so, for especially for these fund to funds, they like to compose a basket of different strategies. It's just much better for them to know, okay, tip of the spear kind of first money into protocol networks. That's one 1kx. And then they can build their portfolio, right? And they have quant funds that charge for arbitrage. 

Thomas Scaria: [00:31:09] Yeah, it’s better to be a pure play, investment manager because you’re often going to be paired with some other fund manager that doesn't have a correlation to your returns.  

Lasse Clausen: [00:31:18] Exactly. So, we have low correlation to Bitcoin. We have low correlation to other managers. And sort of the most of the money comes from these types of investors. They like that. Actually, we didn't start with that in mind. We started with just very strong beliefs on focus because we saw as software entrepreneurs how important focus was. And there’s one founder of Pinterest, every day wears a tee shirt with a just “focus” on it as like, it's so important. And that really, I remember that for years. I don't know if he still wears that tee shirt but I remember the story they were saying. I think also Paul Graham mentioned that like focus is so important because you want to try to, if you want to develop network effects, you have to try to be the best, whatever it is. And if you're not, then you just narrowed down, right? So, this is the, you know, I'm the fastest runner in New York and you'd probably think that's probably not true. Well, who runs on Union Square? And you're like, well, maybe you know, at one o’clock at night. Okay, I'll give you that, right? So, the idea is that you just, you narrow down sort of your scope until they kind of number one, okay? Once you're number one, you just have to be just a tiny bit better than a number two, but it matters a lot, right? And then you're just number one that attracts more deal flow, attention, et Cetera, whatever. And that's sort of was our thinking, why we wanted to focus on very technical token network investing and not, you know, trade Bitcoin or hold Bitcoin, et cetera. 

Thomas Scaria: [00:32:35] So, one part of venture capital I think that's not spoken about enough is you guys are managing really two different sides, two different relationships, right? Not only managing founders and sourcing deals and things like that, but you're managing LPs. And to your point about this, yeah, you want to be the number one specific niche fund in what you do, but you also have to convince your LPs that this is a sound investment to make holistically and appears well with the other hedge funds or VC vehicles that they may be investing in. What are those conversations like? What kind of partners do you need to get on board that understand your place in that market?  

Lasse Clausen: [00:33:19] Yeah. And this is something we learned. We spend a lot of time sort of with inbound interest, but people who are just kind of maybe thought they understood Bitcoin and then they just get completely lost. Probably also my failure, I'm, you know, you've probably heard, it took me a while to summarize my thesis and I think for most generalist investors you really need to tell them like, “Hey, it's going up. All the talent's going in there. You should invest in crypto.” That's it. Right? And so, ours obviously is a more complex sort of focus on thesis. And so, what we attract is very, very sort of specialist, sophisticated crypto investors who honestly don't want to pay 20% for me to open up account with Coinbase account for them and buy Bitcoin, right? They can do that themselves, usually they hold large amounts of Bitcoin. And again, like they said, it is their selection how they want to compose the portfolio. And we're just, that is sort of the expectation management venture style returns: high risk, high upside over a longer period of time. I think every once in a while the good ones you check in and the good investors we have are…they’re similar to investors and founders, what are some VCs, what I do you just every once in a while check in and just try to get a sense like, how do they feel about what they're doing? Are they biting their fingernails and wondering whether they should do something completely different or not? So just this morning had this kind of conversation, just very relaxed breakfast, but you know, just seeing if we still have the same conviction about what we're doing. And I think it's a very, that's a very good exercise always to do with your investors, to just like almost assumed from zero. Like, would I do this now? Like if I started from scratch, would I do the same thing again, that's kind of our experience with the investors. So, they're not very too specific or like tell us how to construct the portfolio. And they just want to know that we, we really 100% in what we're doing. And again, then they could post their portfolio, choose their exposure to that.  

Thomas Scaria: [00:35:10] And this is really important to get the right LPs on board because it all ultimately trickles down and affects your founders, right? If you have an LP that's expecting some sort of liquidity or things like that, you're going to make deals with founders that want to exit more quickly, right? So that there's sufficient liquidity in the portfolio and it ultimately, you know, feeds into the advice that you're giving to founders. So, it's very important.  

Lasse Clausen: [00:35:35] Yep, absolutely, right? It's the same for startups, choosing investors carefully if you can. Luckily, honestly, as a fund, it's much easier and with our structure. Because we’re an evergreen fund, so we can onboard new LPs anytime. And so that gives us, we didn't have the need to raise at a specific moment in time. Which also for startups was a huge problem when you had to raise because you ran out of money. And that usually happens to startups, just the runway gets shorter and shorter and you get more and more stressed and you have to raise or the whole thing's going to, you know, fly off the cliff. And that's the worst situation to raise from. And that usually ends up with an investor that have an incredible amount of influence directly or indirectly. And the same applies for a fund. For us, it's, we deliberately chose this structure, also with the help of Passport Capital – they are also an anchor LP of ours. And they had invested in early in a few of this Silicon Valley crypto funds. And I think back then nobody knew how to structure those things, right? We have things that are immediately liquid and things that are sort of interest locked up for a couple of years. And so, we have a very good structure as an evergreen fund that can onboard new LPs any month. And so, it's a very organic sort of a continuous process where we just, you know, people hear about us and they reach out and they already pretty interested in building sort of a portfolio of exposure to crypto. Yeah, we feel comfortable with that because again, the choice of investors is very important. That trickles down ultimately to the founders, right? If I get, let's assume a ton of pressure from like a very short-term investor, right? He pressures me to get liquidity and then it's going to influence how I talk to my founders and that's probably bad. Yeah, definitely.  

Thomas Scaria: [00:37:14] Yeah, definitely. I'm glad we're touching on this. So, let's talk more about founders specifically. You have a thesis, you have a view of how the a world is going to come together. How do you go about picking which kind of founders to back? Are you oftentimes looking, thinking about your vision in the world and then going and looking for projects and specific founders, or are founders coming to you? And when you do talk to those founders, what are some immediate qualities that you look for? 

Lasse Clausen: [00:37:44] So the process, the source is existing founders usually and some funds, we don't really do much blogging. We actually through zero blogging, panels, et cetera. In our experience, it doesn't, it's not high quality projects. So, our strategy is to be as helpful as possible to the best founders. And then smart new founders actually they don't go into spend $3,000 on a disrupt ticket and then try to hustle the VC that's on stage. They actually reach out to existing founders and talk to them, or they know them, or they were friends that went to high school or college together. And then if we were top of mind of the entrepreneurs that recommend us, you should talk to 1kx, you know? And that's worked out pretty well so far. So, actually, 90% of the stuff that people send us, it's all through the network we want to have a look at. First one is very easy, right? So, the 10% is you just look at the website, whether what they are doing even remotely kind of makes sense. And then is it the right team for that, right? If I think crypto is mostly young person's game. So, for example, right? If you have like three founders that are above 50, one calls himself the president, and they want to build a layer one protocol, I don't know, probably not a good fit. So, that's the first step. And then the second one is the founders. They are all really different. Yeah. It's hard as hell. A lot of it is instincts. So, I think when you've been a founder, and you've met many different founders, you know, they are coming in all shapes. It's really instincts. It's hard to tell. But yeah, you have to…   

Thomas Scaria: [00:39:10] It helps having been a founder before, right? It helps with the advice that you're giving to future founders. It helps you communicate with them. It helps you to determine what a good founder looks like.  

Lasse Clausen: [00:39:20] I think so. So, we had one sort of inspiration, a VC that backed us. He always gave us the feeling that he's got our back. And that was just so valuable because actually being a founder is pretty, it's not a nice life most of the time. It's really, yeah, it's very difficult. So, if you have someone, if you try to just be as supportive as possible, that is very, very helpful. And I guess it's something you can sort of apply as a framework, is do we feel like we're working with them? Is this like transparent, are they aware of short, like, you know, everybody has problems all of the time. Projects, companies are constantly on fire and that's fine. You just need to know does that person actually have a clarity of mind and like, do they see these problems and are not emotional about them, right? If you, someone's telling you that everything's great and the second you just, even for as an intellectual exercise, you point out a way that something could not work out and they get super defensive. It's just something you immediately feel, right? You just got this knot in your chest talking to them and I'm like, “Oh God, this is exhausting.” Yeah. It's not the right thing. It's usually very sort of academic or scientific way of, you're taking information or, or seeing what the situation is and then say, yeah, this could be a problem. And then usually they come up with pretty quick ways or suggestions on how they could fix those problems or make it better. I think that's the most general thing that as a framework of thinking and being very proactive of our problems and being transparent about communicating them and asking for advice and input. Yeah, I would say that's the most general framework it can apply to all founders no matter how different their personalities are. Yeah.   

Thomas Scaria: [00:40:57] Yeah, I'd like to get a little bit more specific here.  So, as you know, if your thesis is successful, ICOs may effectively disrupt venture capital as we know it, right? And capital is becoming more, what do you call it? More available, readily available. It's not the scarce resource anymore. How do you think about really adding value beyond the capital that you provide? Take me through, you know, very specific cases with founders and how you've added value.  

Lasse Clausen: [00:41:27] Yeah.  So, really the mission is to give them the sense like we've got your back, we’re with you and we're going to go through this. For me, that was incredibly valuable. You just said you do have sleepless nights as founders and to just know there's someone that's just not another thing you need to manage and handle, but you know and that you can confide and trust in. I think that was a huge relief. So, we just tried to be as helpful as possible. Even in the due diligence. Our two fantastic researchers also have taken this really to heart. Even the due diligence process should be super helpful. Even if we pass on them, they should have like hopefully it was helpful questions versus the typical VC come on, impress me kind of attitude. Because that always drove me nuts. I'm like probably 500 VC meetings and 90% of the time to just like, I just make me angry. They just ask questions that had, they were just really there I think for them to make themselves feel more important and like great. And they were just not even good questions at all. And so, I think just like not asking these types of questions kind of probably helps a lot. And then we are pretty proactive. I mean, I wake up everyday before my alarm clock and I just want to do this. There's nothing else I want to do. So, we just think a lot about these projects. And it varies, but some projects we've probably talked to them like three, four times, a lot of telegram, just like chatting, right? And conversations and many things. I think some is…I remember specifically there was one project that was fantastic but had almost, kind of just to be nice and open it on like a small public sale. But it really fell just in the hands of like complete flipper speculators and they just like started really getting aggressive in the telegram. They just wanted this thing to list to the flip it, you know, so open up node or direct buying up a lot of OTC and just saying, “Okay, you guys went out, no problem. We'll buy up everything.” Really clean up the cap table. So that's almost like pre-IPO work, right? And making sure that that sort of the investor base is just better for the team and helps them because if all day long they have to answer questions on, you know, when, no, we can't talk about exchanges. This is the fifth hundred time I'm saying this today. We can talk about exchanges. You know, if you can take that off their mind, that's already super helpful. Sometimes it’s a lot of it is storytelling. It's just how to frame it. A bit of our strategy is that we help European projects state 10, the quality tends to be very high, but then not as good as Americans at communicating and telling stories. And so, a lot of it is just making them aware that this deficit exists, and this is something they should work on and be more open and communicative. Because a lot of this space is evangelism and, you know, winning sort of hearts and minds is very, very important. It could be just that food for thought, look that this matters a lot and you know, it would really help you if it become world class at this as well because you competing with, you know, Americans who are extremely good at this. And also projects in Asia are also very good at communicating. Obviously the typical one is put together investment rounds, help the teams really understand which type of investor is a good fit, which one is not. Or even just letting them know like, yeah, talk to this investor. I know they like this. You could have a great investor, but they just don't at this moment they don't believe in this sort of sector or theme, right? It's very theme driven here. And so, you have some investors that just at the moment, this is not, you know, you should talk to them. I always liked this a lot and we tried to do this as well. Specific help on emails. Like you get an email from an investor, like how exactly should you answer. Because the messenger is ADD, and if there is something, you know, it needs to be an email that they can like on the phone, in the car, in the Uber look at it for five seconds and it kind of just like feels right and they want to proceed. It's actually quite a lot of art and skill to craft emails like that. So, something like that as well. It's a lot of like individual like operational things try to, I think there is a lot of high value stuff that is actually very easy for us to give cause it's just we've seen it before.  

Thomas Scaria: [00:45:23] I will say, you know, I'm friends with a couple of the founders that you've backed and they always speak very highly of the value you guys add. They just say they really care, and they just work with us every day. I think that just helps a lot. 

Lasse Clausen: [00:45:37] That’s great to hear. 

Thomas Scaria: [00:45:39] Yeah, I won't name any names. So, let's pivot discussion for a second. I think we've spent a lot of time on how you think about early stage investing, especially in the team and founders and stuff. But let's talk about specifically products and sectors and things like that. There's different applications or sub sectors of projects that are popping up on these terrain complete smart contract platforms, DeFi being one of them. Web3's another big narrative, gaming, right? How do you think about valuations currently, which of those subsectors give you a lot of confidence to invest? Is there sort of a fan favorite of yours? Yeah, let's start with which of those subsectors that you like to invest in right now.  

Lasse Clausen: [00:46:25] So, we see sectors emerging that are noteworthy: is DeFi, is Web3 and is payments. And I wouldn't maybe put them in the order of DeFi and payments, and then Web3 in terms of when they will sort of come to fruition. It's also then again like what do we think actually is, what is the timeline and how important are they and how big are there and then what sort of the rest of the investor community the narrative is at the moment. I think the narrative is starting to become that Web3 is a little bit farther out. For us very specifically, payments is actually the most mainstream ready. We are investors in Terra. 

Thomas Scaria: [00:47:04] And by payments you're talking about a stable coins? Anything built on top of stable coins?  

Lasse Clausen: [00:47:08] Yeah, sort of payment networks, pretty coin agnostic or they have a stable coin, right? And we have Terra, so for presentation, I just constantly have had to update the numbers. Say, “Oh they have a 20 to 40,000 users,” and then the next day is like, “Oh, actually that was like 300,000.” So, we seen actually with Tara is one of the most used blockchains now in the world within the first month. And so, I think if you're an entrepreneur that can use the technology but then also create layers on top, sort of middle layer software that makes it extremely easy for an ecommerce shop just to integrate it and use it. You have the adoption strategy, which Tara has very strong Li because –

Thomas Scaria: [00:47:45] I actually don’t know too much about, Terra. 

Lasse Clausen: [00:47:47] So Terra is a tenement fork that is a payment at work. Has its own stable coin, has actually has many different stable coins. And their value proposition is actually very simple. It's if you're an ecommerce company in Asia, you're lucky if you have 50% 50 basis point margins. Usually you're fighting with some other over overfunded startup and you're losing money and you're paying, I think he said the numbers yesterday around 250 basis points, payment costs. And then it'll open down to around a maybe a hundred for that potentially 10 basis points in the future and next day payment. But you know, you need a very strong commercial strategy. What I didn't want – what I saw lacking in Bitcoin back then, we saw that with Terra, right? So, one of the cofounders was a founder of Ticketbonsta, which was at the time the largest Korean ecommerce player. And so, off the bat they had in the lines of 15 ecommerce companies in Korea or Asia, sorry, with around 25 billion in sales that was going to integrate this, right? So very strong adoption strategy, software licenses. They talk a lot with regulators. They have the equivalent of money transmission license, e-payment service licenses, et cetera. And they just sort of use a payment network that's blockchain based and use the advantages of it to really offer a very compelling product who e-commerce shops and customers who just want to buy diapers and don't care about blockchain. So, I think the other project that has been able to do that has been Flexa in the US. So they, it's also basically a payments network – 

Thomas Scaria: [00:49:16] Which you guys are also investors in that? 

Lasse Clausen: [00:49:18] We’re also invested in that. They use the existing gift card rails for merchants, have a custodial wallet SDK that any wallet in the world can integrate. They are token agnostic. So, you can pay with Bitcoin, DC, a DAI, whatever, and it just takes, it creates a onetime gift card code. So it's like a QR code that's essentially a gift card for these merchants. So, the amazing thing about is that they, no new hardware, no new software, no employee training. And that's incredibly important for merchants. They don't want another iPad piling up on the counter. And so, you just scan this QR code and for that moment it's paid for the merchant, the whatever, five DAI are taken from my phone or from the wallet that has the SDK integrated and is sent to them, they sell it, and then in the evening they send a wire transfer to the merchant. And so that's a game changer for retail payments. And so, we see those that are actually really ready and are probably the ones that are getting the most mainstream adoption right now. But it took, there's another very exciting project in Silicon Valley where we see that potential as well for online payments in the US…

Thomas Scaria: [00:50:21] By the name of Wyre.  

Lasse Clausen: [00:50:23] No, it's actually called EKO, and I think the name is out. I think they announced it and sort of, it's a great team. It's really a – and their Silicon Valley is very good at building sort of like stripe, right? They were just really good at building a developer experience for an enterprise developer to make an incredibly easy to integrate payments. And so, we see payments as very ready and actually if the right team comes together, you know, incredible adoption and traction. Then I say DeFi has a lot of traction mainly within crypto sort of users, possibly very sued and consumers because some like Argent, etc. just makes it as easy as a mobile banking app to sort of participate in DeFi. For that, we really like Nexus Mutual, which is a mutual insurance where you can insure against the risk, the smart contract risk of these DeFi protocols. We liked that for many reasons but we also liked it because it's almost like an index bet on DeFi. I don't know if Compound Maker et Cetera is going to win, but a portion of that value locked up in or being handled in this financial ecosystem is going to be insured through Nexus Mutual. So, it's almost like an index bet on DeFi. And I think they're a, you know, very strong traction within crypto users already and with the potential to break out into the mainstream very quickly. It just takes someone like Argent and plus like a banking license for example, maybe in Europe, which is actually not that hard to get. Good Facebook marketers, Instagram marketers, whatever. But when you've got to saving accounts that can be used by people who don't care about crypto, they just want really great savings, you know, compared to negative interest rates, this is pretty compelling. And then we have Web3, which is, to summarize, is we really like this concept of protocol marketplaces for computing. If you look at what we think is, creates a lot of magic and something pretty unbelievable is the fact that you have a permission-less perfect competition supply side protocol. Let me, let me rephrase that. So you basically, instead of AWS, sort of day support, you know, you rent servers from them, computing certain computing functions, they set up the servers, they, you know, rent them to you for three times the price it cost them, and every once in a while they have an innovation cycle but they kind of just running there. And, you know, in theory you have competition through, you know, my cloud, et cetera. But it's hard because once you have a, you know, a very serious infrastructure with a lot of traction on one platform is hard to move over. But compare that to let's say something like Bitcoin, proof of work mining, right? It's permission-less. Anybody in the world can plug in there. There supply side can compete on that. It is perfect competition because there's no transaction costs in terms of onboarding. You don't need to negotiate. You don't need to sign agreements. There's no friction in the sense that this guy took me to the strip club, you get the deal, you didn't, you don't get it, right? That's always friction. That is something that hinders competition. The transaction costs are really zero. There are no fees in the middle. And pretty much every five minutes, there’s a global competition for the Brock awards, right? And so, this perfect competition just has amazing effects on innovation. So, in the last six years alone, so since the beginning of ASICs, the energy efficiency of Bitcoin mining went up 130x and we think it's because of that when you have this perfect competition, it really drives down prices amazingly and creates a lot of innovation. And so we're making the case that we are extrapolating that towards different forms of computation and storage. And I think we have another data point that supports this is with Livepeer, where it's a video transcoding sort of protocol marketplace. It's the same common concept. Because it's open and even there's incentives behind it and try to innovate around it, some Bitcoin miners figured it out that while they're mining Bitcoin, it can actually also do this computation, this rendering at an incremental 15 cents of electricity costs for something that AWS right now charges $144. 

Thomas Scaria: [00:54:19] Yeah. So, in that specific sector where computation, storage, bandwidth, essentially are being commoditized, are there specific token models that make more sense or value accrual? 

Lasse Clausen: [00:54:32] In a very general sense, obviously we look for low velocity. That's sort of the, you know, the monetary theory that you will have more value accrual. If it's just a payment token, it's probably not that good. If it's really just sort of, they buy it, give it to the miner, the miner sells it – 

Thomas Scaria: [00:54:48] Makes it a point of friction. 

Lasse Clausen: [00:54:50] Yeah. Well not necessarily. That can be obstructed away by something like Kyber, et cetera, right? You can have wire, if you had onboarding that connects them – Kyber converts to the token— can all be abstracted away, but it's just that really people buy it and then the miner immediately sells it. Which sort of in theory right now you have with Ethereum, you have that with Bitcoin. That's really not the best token model. So, locking them up for staking is to generally pretty good. I know it's not that hip right now. So people, some of the investors like, well I was thinking we don't know if the value accrual happens here, so what is next? We’ve seen some very, very interesting token models. Novo has a very interesting token model without going into too much detail. Fluency as well. That's another project of ours that sort of essentially building a decentralized cloud or a DC2 as we call it, instead of EC2 AWS, a DC2. And they have very interesting token models that also incentivizes developers to innovate on top of the platform in terms of components. We're really amazed at the innovation in this space because again, right, your ideas teams, they spec him, they put it out there, they want feedback, and 50 other teams are looking at it and say, this is great and we're going to take what we think is the best parts of it, and then integrate it in our models. So, I'm constantly surprised about the ingenuity when it comes to that.  

Thomas Scaria: [00:56:04] Yeah. It makes your job a little bit easier too because you can essentially rely on a network of other people to apply to all these different token models and…

Lasse Clausen: [00:56:13] Yeah. And sometimes it's coming back to how we try to be helpful. So, we've had this with one specific project where we just said, have a look at this project, which is also in our portfolio. They've just released their design and it's really interesting. They took some really good components of it and integrated and they're own model. They adapted it. You can’t just copy it one-to-one, doesn't necessarily make sense, but yeah, it's amazing. It's, I mean it's just personally, it's so much fun to follow in this space.  

Thomas Scaria: [00:56:41] Let's talk about the scene in Berlin in particular. I know you guys are global investors. You're not specifically just focused on in Berlin, but what kind of projects tend to be out here and find a home here? What do you see more of a specifically in Berlin?  

Lasse Clausen: [00:56:58] It's generally really brilliant technical founders from mostly Europe, but kind of all over the world. And they come to Berlin and they build their projects here and they find amazing developers here or they bring them in. Germany has a massive advantage. The immigration system is very efficient and we did this before as founders, you can bring in a developer. There's so much talent engineering talent east from here, Poland, Ukraine, Russia, incredible amounts of talent and it takes about six weeks and 250 euros to bring that person into the country, they have a work visa and they are here and it's predictable. It's annoying as hell. So, tons of paper shuffling. But if you have a person that takes care of that, you can bring them in and it's predictable. And so, this is what we see really good founders that build out their teams here. Germans themselves, we also had this with tech and Berlin, actually the German founders, they generally tend to be more business types. So, they did like fast follow copy-cat sort of stuff in the venture space. In crypto, we don't have them yet. I am, you know, they’re agnosis, they're driven guys, but they were in Silicon Valley before. So, I would also not count them as a typical German crypto founders. So yeah, it's very technical, brilliant people. Someone like Evan Wood, someone like Sam Williams from Arweave, and they come here and they'd build out the project here.  

Thomas Scaria: [00:58:16] Do you see any American founders a find a home here? 

Lasse Clausen: [00:57:20] We were one of the initiators of this blockchain week here in Berlin. And this is sort of the idea. I mean, American's always nice, right? So, they always compliment you on the city you're living in. But we do get a lot of people saying, man, I, maybe I shouldn't live here and move here. You know, if it makes sense, we're not, I don't have like some sort of subsidy agenda that I need everyone to move to Berlin and, you know, become the new Silicon Valley, blah, blah, blah. But, you know, it's great that people come here, they experience it and they can see what it has to offer if it's a good fit. We've recommended some projects to move here and they came here. Yeah, yeah.  

Thomas Scaria: [00:58:50] We've talked about this earlier, maybe it was right before we started recording, but most of the Silicon Valley based founders tend to focus on users and growing substantial businesses. And it's mostly because of the VCs. They're also focused on, hey, build something that users really want to use and to VCs are often hounding to make sure that the value is accrued, things like that. Do you find that those kinds of founders, if they were to come here, they would be kind of against the grain or against the ethos of more of like the Berlin blockchain scene?  

Lasse Clausen: [00:59:22] Yeah, they are. So, this is really interesting. The Silicon Valley was okay. They looked like pretty early into Bitcoin, mainly in 2013 and 2014, a few. It wasn't really investible, some did this sort of blockchain, not Bitcoin investments, but it kind of didn't go nowhere. And then they were kind of late, like sort of early 2017 Silicon Valley really started piling into it, right. And some of their mega ICOs and that kind of like jumped on the train. 

Thomas Scaria: [00:59:45] Yeah, mostly lead by Polychain and Pantara. 

Lasse Clausen: [00:59:50] Yeah, a few of those funds. And what I really like though is that it changed the ecosystem, the global one that was basically now we also have this input and sort of thought from Silicon Valley. And as you said, they are very focused on building something that people want to use, right? Build something that you want is Y Combinator drills it, hammers it. And they're very, very, you know, they make sure that they hammer this into everyone's head. And I think it is incredibly important. And especially in Berlin sometimes you would have even the tech space before founders who were just like building something, they think that they like without getting any validation ever, if everyone ever wants to use as other than asking their Mom and their friends. And so, we actually really liked that crypto as a global ecosystem got some of that food for thought and sort of some of that influence from Silicon Valley, which is very user-focused. Yeah. So, I think that's actually, I'm very glad that sort of now we've been able to enrich the global crypto ecosystem with Silicon Valley and their ways of doing it. On the other side, I think maybe one legacy back that Silicon Valley had is just so established and so successful in venture capital and one sort of very strong narrative was raise as much money as you can when you can. And I think that is actually extremely detrimental to crypto projects for a number of reasons. I think we've seen, we're seeing that play out actually where, you know, it was just so ingrained to raise a lot of money from two, three great name VCs and that was great for venture capital. It actually made sense and was the best way to do it, not for crypto. So, I would say that maybe might've been a disadvantage, that sort of the, the first Silicon Valley based projects had. But other than that, it's a great input. It's now I think San Francisco with Berlin is the, in my opinion, you know, those are the two most important, more technical ecosystems. You have Asia as a whole, it's just far, far ahead in terms of adoption and something like Terra, they're integrated I think with 13 out of 15 Korean banks, direct partnerships. I think, and it'll be a long time before that happens in Europe and I think even in the US, ELB hard pressed to find that much corporate collaboration, etc. Yeah, and I think now it feels, it's still that no ecosystem has, you know, has it all. Which in tech Silicon Valley really had it all. You could just be there and that's it. But these were global networks and Berlin, I would describe it as that Berlin is probably the most authentic sort of cipher punk, hardcore technologist, decentralization enthusiasts or proponents. Ecosystem, very high technical talent, and we have very down the stack. Silicon Valley is kind of in the middle, sort of has some of the really, really good researchers and, and protocol talent, but then also stronger commercial sense. And then Asia has, it has some but very few really world class protocol teams, but very few. Really the strong suit is the commercial aspect of it. Integrating with corporates and working with them and not just some stupid POC, exchanges, OTC desks, et cetera. Far, far ahead of Europe and the US. 

Thomas Scaria: [01:02:57] Yeah, definitely. Well this was a very enlightening conversation. I'm sure our audience is going to love it as well. Last very simple question I have for you Lasse, where can people get in touch with you? Read about the work at that 1kx is doing?   

Lasse Clausen: [01:03:11] Yeah, that's a good question. We actually don't write yet. We don't, we don't find the time. I always wonder how everybody else does it. I'm really jealous they have time to write these really thoughtful Medium posts. Maybe we'll get around to it at some point. I think it's actually just to follow us on Twitter or me on Twitter. We're not very public. We don't, we just try to help the founders all the time and that kind of keeps us busy. Yeah, I guess Twitter would be the way to do it.   

Thomas Scaria: [01:03:33] Okay, I'll definitely put that in the show notes. Thanks for joining us today. Please remember to subscribe to get the latest episodes. If you have any questions or comments, reach out to us on Twitter, Facebook, LinkedIn, or the Wyre blog, whatever works for you. If you like this episode, share with your friends and colleagues. Thanks again for listening.