Tangent Fireside Chat: Ex Top Fund Investors on Crypto Investing - Jason Choi, Darryl Wang, Mable Jiang Ep. 209 - Transcripts

August 19, 2022

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Three senior hires at top crypto funds Spartan Capital, Multicoin Capital and DeFiance Capital recently stepped down and started Tangent - an angel fund by founders, for founders.    Together, Tangent’s mentors have built billion-dollar...

Transcript

Ladies and gentlemen gentlemen, welcome to the Block Crunch podcast. They go to podcast for investors and builders in crypto and before we get started, just a reminder for you guys out there. The block crunch podcast is intended for informational purposes only. Neither the host nor its guests or licensed financial advisors and nothing discussed should be construed as financial advice views held by block crunches, guests are their own and sponsorship messages do not constitute financial advice or endorsement with that out of the way. Let's jump right in now before we get started with today's episode, I've got some great news for you now a lot of you have been asking for how I analyze projects that I bring on the show. That's why I decided to create Block V. I. P. To share with you all the heavy research that goes on behind the scenes now. Every week or so our team prepares an in depth research memo with things like sector analysis, technical concepts, made simple in depth, competitive breakdown and even interactive models. So you can learn about the most important projects before they become important and our team is putting in hours every week scouring, discord twitter forums and blogs to help you get an edge in crypto and understand the latest projects and themes at the deepest levels. That goes way beyond just an interview.

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Hey everybody, welcome back to another episode of the podcast. Now, this is a very special episode because this is a co production between Block Crunch and Hot Long, which is a podcast, you should definitely check out if you haven't already. And today with me, I have my two good friends, Darryl and also Mabel. So all of us are part of the angel fund called Tangent and we are all at a very interesting point in a career right now where we all kind of recently stepped down from pretty prominent funds in crypto to pursue our respective ventures and we're gonna talk about that in a bit. So this is very much a free flowing conversation with two of the smartest people I know in this space, so I'm really, really excited for this, but I'll pass it on to Mabel first in case you wanna kind of say anything to your audience as well.

Thank you Jason, thank you. Yeah, this is my first time doing co branded production as well. Um I'll just say very brief intro, thank you for coming back to the latest episode, how long this is Mabel junior host and then we have co host Jason choi here to join us. Um should we run a very quick round of intra verse elves or how should we do this?

Yeah, let's do it. Um why don't you guys go first? Do you wanna go first?

Yeah, so my name is Daryl, um I was previous, I'm currently a co founder of tangent along with Jason. So everybody here is sort of like family. Previously before this, I was a principle of defiance, Capital, where, which is one of the larger Asian-based crypto funds alongside Spartan. So uh and really helped build out the team there for the better part of 18 months. Um and left to start tangent with Jason in sort of March or April of 2022.

Cool, I'll go next. Um Hi everyone, I'm Mabel Jiang I'm currently the chief revenue officer at step in and also I'm a mentor at tangent, which is what Daryl and and Jason right now is full time working on um before step and I was G. P. At Capital, very excited to have some I guess chit chat today with with my two of my friends here.

Yeah, and for listeners of the show, you know me already and my name is Jason, I used to be a general partner at a fund called Spartan Capital and recently stepped down to start tangent with Darryl and we're really, really excited to bring on board Mabel as one of our six very experienced mentors as well. Um so why don't we jump right into it now? I think a lot of people are probably thinking, okay, why did we give up these amazing careers at amazing funds to, to go about our separate ways? Um, you know, what was the rationale there? Feel free to jump into it.

Yeah, go ahead, go ahead. You go first. You're the first one

Left. Yeah. So I guess, I guess this is sort of my fault to an extent. Back in sort of end of 20, I realized that I wanted to do a bit more than just, you know, the existing crypto investing in a conventional fund. I think After working in the space for 18 months, realized that there were a couple of pain points that VCS or crypto VCS didn't necessarily address something. The largest one was providing adequate portfolio support to, you know, the investment that they have made over the course of their life. Um, and so, you know, when we bring something, this is Jason, we try to find a way to structure a investing entity which could, you know, really address this point. And so in order to do that, you need to sacrifice the number of beds you made. So you had to concentrate basically the portfolio to an extent where you could really sit down with each and report for the company and really help them through, you know, the key problems that they're trying to solve at the early stage of their, of their lifespans maybe on the next?

Mm

hmm. Um yeah, no, I think that was quite different from the reason I loved multi coin for me, For me, I mean multi point was very interesting working there. Um, everyone was very smart. And then I always, constantly, I would say even until today, I feel like I can still learn a lot from all my colleagues there. Um, one of the major reasons that I love with more because I wanted to work on step in um, for multi coin for those who do not know, we actually are very focused on um, investing in protocol level stuff. And then we actually did not do much related to like consumer or like anything that's B two C. And I personally actually believe the next wave of big explosion would actually happen with regards to anything that's B two C. And then I actually think any, uh, there's like a little long haul. But I would say a lot of the opportunity would actually happen in asia if you look back to, you know, the web to kind of wave a lot of the new innovation at the beginning always happen from north America especially us. But then later on without a lot of the application layer stuff. Um, the Asian founders are actually very good and then they are very good at kind of think about the operational models and whatnot. So yeah, I know at that time was really just like a very interesting period when I you know, constantly question myself what is the next or what is the killer app that we've been looking for in our five year, four year career life of crypto and I never found that and I realized that maybe maybe it's not like something fully crypto native or fully on chain, it doesn't have to be like things that we constantly think consider as web 2.5 may actually be pretty cool to also you know, get the actual next 10 million or 20 million users into the crypto space.

Um and then I think like stepping is perfectly like that. Um and also obviously I started to develop a thesis of a super app um back in 2020 but then I was more thinking about like completely on chain and then like you know defy super app, 11 project work on everything but I realized obviously like all the compose ability factor and and they defied determined that actually it may not be the case. However, I think the real um super app, my thesis now has been modified towards that if you have a um you know, you I or a front end that can attract a lot of people then you can actually aggregate all kinds of other protocols regardless like who is providing that protocol layer. It could be many different teams working on the back end, the protocol layer but then the front end could still be the super app. Um So I thought Stefan was a great opportunity for me to kind of find out whether that thesis works out or not. Um So yeah it was a long long answer but I would say it's really because of the opportunity rather than I don't want to work on um the investment stuff. I still we're very excited about all the things happening in the space.

Yeah I think that that's super interesting because maybe I think you of the three of us have been in this space for the longest. Um And I think in the past few years the space is kind of fascinated between Asia is the future of crypto and then back to the U. S. And then now the U. S. Is like banning tornado cash and all that and then now people are like go back to Asia but then you've always been pretty consistent and steadfast about your Eurasia thesis and obviously played out with step in as well. So I'm really excited to see that. Um And we're definitely gonna dive into that in a bit but just to give some context around myself as well, I I stepped down from Spartan earlier this year as well. Um We have a great team, I have a really great relationship with my other Gpus kelvin who's been on the show as well. He's been a great mentor of mine, I've learned a ton from him and I think I continue to learn from him, but similar to Darryl, I kind of wanted to work closer with founders and it was increasingly hard to do at larger funds. You know, this is an issue that in any big fund will face, any venture fund would face. And the only way I could really get that intimate relationships with founders and really get in kind of the trenches, as Daryl mentioned is to be very concentrated venture portfolio and it's very hard to structure an institutional fund around that.

But you know, we thought, okay, maybe a type of structure makes more sense. But then Daryl and I are both a little bit bearish on taos, on investment Taos. So we decided, hey, why don't we take the best parts of a doubt. So we have the flexibility of including the best people we want without the rigidity of the fund and then also take the best parts of the fund, which is, um, the rigor of the due diligence, you know, having an actual process, having people at the helm to actually drive things full. Um, so we combine the two and then the tangent idea was born. So now we have, you know, very excited to have eight of us as angel investors investing in companies together. Um, so I guess on that note with regards to kind of companies, we're looking for, what are you guys mostly excited about? Maybe I know you're excited about consumer but are there kind of specific areas and consumer that, that you're mostly looking towards besides stepping?

Yeah, I'll answer this question in a little bit different angle, I would say. The way I pitched to other people to today about steppin is really, it's a consumer social entertainment conglomerate that is partially powered by Blockchain. That's really how I kind of pitch other people what we are because a lot of the things that we are producing are not related to crypto, but I think what's very important is that we should leverage Blockchain to the extent that it it actually provides like higher um, efficiency in a sense that say um all the account wallet or whatever and also like things, transactions happening on chain. Right? These are the things that are improving the efficiency, not decreasing not all the decentralization is providing better efficiency. Right? So I think, you know what we have done in the first step of building step in is really kind of like provide people a way to learn learn about how you adopt a non custodial wallet, which in the future I actually prefer not to call a wallet. I would actually prefer to call it a web three log in or account because like this is like basically the thing that you would use to navigate around different protocols layer or applications in the future and you can use the same one um whichever one that you you're interacting with. So I think from my perspective um step bend is really just leveraging the best of watching, which is the simple, the accounts system and also um you know, you can send transactions to different people, you know, without there's no kind of gap between tencent and and alipay, you can actually navigate through the Blockchain ledger, right? So that's like the absolute very kind of primary reason that a lot of us are attracted by, you know how um quote unquote efficient Blockchain is versus like you know, some of the other like decentralization may not, you know, be serving the best purpose for the mass adoption. Um so I think that's one um I think the other thing is that um I remember yesterday I saw someone was doing a poll on twitter and then Jason cam, uh maple leaves, like he was responding to other people. Like the guy was basically asking what is the most thing that you think, what is the one idea that you do?

I don't think there's any consensus around, but you firmly believe, and then he said he believes that stand a defi protocols do not need to be um existing stand alone, like they can basically just getting integrated within like a larger, basically the kind of um um idea that I just pitch you like you can basically produce a conglomerate and then you can serve all the other defi, I'm not sure whether that is the right way to explain for all of the other app because I still think if you're working on an order book for example like you would probably still offer it as a exchange product stand alone. But let's say you're working on a simple lending or if you're working on a mm maybe. Yes. Like you know the one that that any company that actually owns a lot of traction might actually just work on it themselves because it's very easy to fork. So I think that's another thing that I was very excited to see whether that plays out which is someone who owns who were able to kind of boost trapped attraction and then later on use that traction to kind of offer the kind of defy product to people who would actually never have have interaction with defi but then like you know offering that service through like a very day to day kind of experience I think you know move to earn like people are kind of cashing out from um the game and then trying to swap it into like and that was a perfect example otherwise like no one's gonna use that like a lot of these users are not gonna use the decks anyway right? So I would say that is another kind of direction I was kind of looking at as well.

So you're talking about how

stepping

plugs into I think it was, was it Orca? It

was so now we yeah so now we um we own our own deck, it's called door D. O A R. Um Yeah, that's the kind of thesis I was betting on. I'm sure there will be more than just ourselves. Um Obviously like you can like not everyone would buy this thesis because like people would say you can just integrate someone else and then like, you know, integrated SdK but like for for example, if someone owns attraction, I would say in the early days they might want to build it themselves, but it won't happen continuously because there's liquidity fragmentation as well. Right? You always want to make sure that, you know, you're using a decks to your offering a dexter users where um the decks has very deep liquidity. So I think maybe the first one or two or three kind of super app, they would work on their own decks but I don't think it's gonna happen again and again because yeah,

I think you're beginning to see examples of this, I think in a very slight variation in terms of app trains basically right with, with trains that are coming on board. I think that is the idea that some of them are trying to pitch but maybe, you know, not so, you know, forthcoming with, you know, saying ok if I'm a deck someone to introduce a lending protocol, I want to introduce, you know, derivative trading for example, but I think that's the sort of direction that most of these larger apps are beginning to take if you notice I think for myself, instead of ask like instead of answering what I'm polishing, I think I'll try and reframe it and say what I think needs to happen in order for the adoption to appear and recently in the last three months with luna's implosion. I think now more than ever we need the importance of a decentralized alternative. You know, money is extremely important like a decentralized stable coin I think is very, very important. Um If you were to imagine a world where crypto adoption has 10 or 100 x and you know, you have a billion users using web three, will you still be comfortable with you know, two or three large centralized providers owning the majority of stable coins in circulation in the market? I think that's absolutely crazy. Um So right now I think, you know, and this U S C C and U S C T are great, you know, sort of bootstrap being mechanisms in my opinion of like pushing out stable currency and encouraging adoption of stable coins as a use as a method of payment. But I think if we don't have a decentralized alternative, there will always be in a single attack Rector that you know, could end up in catastrophic consequences if any of them were to ever go down and you know, we've seen all the fight before but I think it's quite relevant. Right, If for example, can you imagine us dc holding a trillion dollars of market supply. Um I think like what kind of centralized risk does that pose to our very industry? Right. I think that's absolutely.

So so I do think that we need something like that to happen and I think the market is sort of ready for it, right? I mean with luna's downfall that is pretty big gap in the market there and we have some alternatives right now. We have died with facts but you know, I want to see a stable coin that really has a valid use case that really makes people want to use it. Um And I would say so far we haven't really seen that happen yet. So I think that's one thing that I think we definitely need is an industry in order to accelerate adoption. Ah and the second one that really drew me into crypto was the concept of decentralized ownership of assets. So I think this is really comes into play and got me really excited in the form of play the game five where you could basically decentralize, you could create virtual economies and then begin to use begin to distribute virtual assets which previously were just, you know, pretty much useless. But now with the concept of allowing trading, allowing plato, I think, you know productive virtual assets are very, very interesting to me and I would like to see this vertical bill be built out, you know in a way that can rival the physical real counterparts. I

think the stable coin part is really interesting because on one hand you could argue that terra imploded because there was no regulation, there was no one you know monitoring the risks and making sure that this model works and with us D. C. Is technically regulated. But I also understand the other side of the argument which is you know, if U. S. D. C. Penetrates the entire crypto market and its trillion dollar market cap and regulations suddenly come down and say hey we're gonna band like this region then we basically cripple an entire sector of defi in one go. So we need some sort of anti fragile, decentralize stable coin which I absolutely agree with. I

might have a very different view on this because you know tether has a lot of holders in asia particularly in china. So we all know there's a lot of in transparency around tether but then it's so I think before this cycle like it was actually the most widely used among all the stable coins but none of us know like what is at actually behind and actually no one cares what is really supporting it with the social consensus I would say for us D. C. Like at some point when it gets adopted by a lot of people. The reason that is supporting its existence is not because the reserve back or whatever it is part of it. Sure. But I think it's also because like everyone recognize it as a quote unquote stable coin. Um I think the same kind of rationale behind how I thought I um you know tether was going to last for longer and then there's like a lindy effect. Right? So um well I mean obviously like heather has something behind it and you can't you can't have like nothing behind it but as long as you have something and then people are using it, you know like all the defi protocols are having you know the U. S. D.

C integrate input whatever that actually adds to its robustness. So I actually have a little bit different view on on this one

mm That's we should we should bring SAM from frank's on for a future episode

because yeah

so

for for the listeners SaM is the founder of frank's is a billion dollar, algorithmic, stable coin and he's one of the mentors a tangent. Um And he's one of the first people to to really talk about this idea of partial collateral ization and I think that's a really you know genius model for for the algo stable coin um which you know we can save for another episode. Um But before I kind of go into what I'm interested in, I want to go back to your point as well maybe about the aggregator thesis because remember I thought the same as well back in the defi summer and then I saw you know, projects starting to vertical eyes. Right? And every project was starting to build out their own like decks are more lending arm. Even like one inch as the aggregator they build up their own a mm Mooney swamp but no one really used it. And um I haven't really seen a successful example of vertical integration yet. And to me it kind of contradicts the thesis that you know, compose ability is one of the best things about crypto right? You can just look into other apps. But it seems like the incentive for founder is to vertical eyes and build out their own uh, you know applications, layers of the stack instead of you know leaking value to someone else. So I'm curious you know how you reconcile those, do you think this is you know how things are going to go all founders just gonna building their own neo banks and you know, just siloed from each other basically like almost re creating web two. Is that like a concern that you have?

Yeah, I think that's exactly what I was saying like early on I thought defy super app means one team building out everything. But I I said I don't think it's the case. I think here for step in the way or like the way I think it would work is that we identify, identify a need where user actually used to, sorry needs to use the D five for for the mm case for the Orca case was that they actually need to use Orca to cash out GST. Or maybe like you know by some other things like there to kind of in order to play, right? So that's really um it starts from the demand. So at some point if people are saying like I'm having too many souls in this wallet and I don't want to transfer it out. Maybe it's also okay to integrate solar and first and we don't have to build everything ourselves. I'm just saying that whoever owns attraction like could have like could leverage the attraction to do a lot of things including providing these protocols themselves. But I don't think it works the other way around. Which is like you kind of start defi app and then like you try to build out everything because like maybe you don't you're not really serving the actual need. But then if you're seeing your users from from our case because you're seeing the users happen certain needs to kind of like that. And then you build it and I think that's a different kind of logic if that makes sense.

Yeah. And I don't know if you guys agree with that but that that's kind of the thesis that we we had when I was still back at Spartan we invested in consensus because I thought that meta math is probably the most valuable product in all of crypto today because every single person except Selena who uses crypto uses meta mass so they can literally build out their own lending. They have built up their own swaps and I think it's pretty profitable as well. So that was like one of the only growth stage deals we've ever done at Spartan because we think that a mass is just insanely valuable because of that. Um and I guess that kind of uh yeah, go ahead.

You know, I was, I was gonna say I agree with you but then also like I want to get back to the kind of Web three login and account point a little bit more because I realized I didn't really expand on that. So I think first of all um people kind of already start start to forget about smart contract wallets but I actually think this is actually extremely important for mass adoption. Like it has been always failing, you know, among a lot of people who tried it before because like you know the gas during the five summer is crazy. No one's gonna use that. But actually if you want to help user like in a non custodial way to access Blockchain wallet in a very simple way that the smart contract wall, it's almost like the the only option and then now we have all these ability of all the L two S and whatnot. So I thought maybe the next cycle smart contract wallet would be a really interesting kind of play, I don't know who's who's actually gonna play out. Um even just things like, you know Taurus, I mean, sorry, web three off like this um the private keys management, all of these, I think these are gonna play out for sure. Like this is one thing that's really um kind of relate related to web three log in. I think the other thing about um the like account system, like the identity is on chain credential. I think we talked about this many times before. Um you and I, we both kind of invested in Galaxy at some point and then I think not just project Galaxy, but there were a lot of other kind of play players were trying to work on something around that. But I do think if you want the user to be able to navigate around like the whole ecosystem with some sort of um badges either on chain and off chain.

I do think, you know, having those

infrastructure build out will also be very important. I just want to add these two points. Hey guys, I'm really excited to tell you more about one of my favorite products in crypto right now. D. Y D X. This is a team I've known since 2018 and they've built one of the best exchange venues out there that also happens to be decentralized and mobile friendly now listen until the end because there's an opportunity for savvy traders out there as well. And here are just a few reasons why I like to I. D. X. Over other exchanges first is very liquid, it processes 2 to $3 billion every day and volume and has 35 perpetual swaps as of this recording which means you can trade things like ethereum Bitcoin does Selena and most of the most popular assets with up to 20 X leverage in the venue today. The second it's also extremely cheap and if you're down bad from the bear market you don't have to worry about gas fees at all because there is no gas fee on Stark wear layer to where do I. D.

X. Is built on now. That brings me to my next point as well. It's incredibly fast. Unlike other layer two and high speed texas, you don't actually have to wait to withdraw your assets anymore. And as an additional point by using Stark wear. Dy DX also provides user with increased security and privacy. And my personal favorite feature is to cross margin feature which means I can see one account with us dc and trade across multiple markets from there without needing to start sub accounts because I really hate managing so many different sub accounts and their IOS mobile app is also live right now and it's amazing because it's compatible with meta mass coin based wallet, coin 98 wallet and a lot of the most popular mobile wallets out there and it's available for people outside of the U. S. Or sanctioned countries today. And one last thing, one exciting opportunity is their competitions, the most recent tear in the $10,000 equity tier have won over $95,000 in rewards and you can get started with as low as $500 in equity to compete for prices. So if you're already trading might as well get paid to do it.

So if any of that sounds interesting to you, I highly recommend that you head on over to dy dx dot exchange to learn more and I thank them for sponsoring this episode. Yeah I think that makes a lot of sense. Um And I don't know if you remember but we we actually looked at quite a few wallets like a few months ago and I think one of them was pitching this quite interesting thesis that uh you know users only care about convenience of decentralization doesn't matter. So they were actually creating a custodial wallet for games. Um So I expect to see more interesting wallets with like vastly different trade offs come to market. But I'm also curious like why we haven't seen more adoption of like smart contract wallets. I don't know if you guys use like Argent before but I thought it was an amazing mobile app. Um And you can like access defi applications within the app itself and there's like a guardian system as well so if I lose my seed um you know, I can actually recover it. Um So I thought it was a great product but I just don't know why people haven't started using uh you know, smart contract wallets more.

Yeah, I was just saying, I think it's because user behavior for web three related activities are still very heavily focused on the desktop as opposed to on the phone. Like I don't know anybody who like, you know, uses the dust takes on trained by the phone. Right? Just because you don't have a cold wallet to battle itself. So but perhaps you know, the circle I work with is you know, the more crypto native sort of guys and But at the moment I think you need to crack, you know, getting getting users on the mobile in a seamless in a safe and secure way before we really see more of that happening. But I I would like to say as well I think with the amount of new protocols that are starting out there focusing on security, focusing on on boarding Web two participants went through. I think in the next cycle we we we we already see a number of solutions that will really help take off increased adoption.

Yeah, so a lot of phone baby we're gonna order

one. Yeah, I was gonna say like in this cycle we just didn't have enough number of the mixed like Web 2.5 kind of app like for though a lot of those like you would actually need the smart contract wallet to onboard people because like that's the easiest way for for them to interact with the application, right? Like even for us because the performance of Blockchain is really hard, so you have to have both this, the noncustodial side as well as the custodial side, which is the spending account where people would just perform things in a centralized way. Um and I see there are going to be more and more applications like um what will be operating in this mixed kind of manner?

That yeah, that's a really good point because I almost forgot Stepan is completely mobile and I think it's the most used mobile app in crypto right?

I don't I'm not sure, I don't like, you know, it's really tricky for me to answer this because I don't know other people, but it is quite widely used.

Yeah, I

guess like, besides exchange, right? Like not counting, like accepts, it's got to be up there, it's gonna be like 54 people want to know more

I think people Yeah,

sorry, go ahead.

So we just

want to say we were like a memo about stepping in and how it works, so in case you guys are wondering what what Mabel meant by the spending account and all that. We did explain it in that memo link in the

show notes below,

but um yeah, it's a great point, kind of mobile mobile use case as well. Um I don't want to make sure that I'm not kind of copping out of my answer as well. Um so in terms of like what I'm bullish on, I think a lot of what I'm interested in is, you know, I think I share a lot of the commonalities with you guys. I'm looking for, you know, identity solutions. I'm looking for interesting um games that could bring on board a lot more users than just crypto natives. But I think one thing we didn't touch on so far was N. F. T. Finance. Um so far we actually see quite promising metrics. Right? So on things like N.

F. T phi, which is a landing protocol, they recently had the record month in the bear market. Um and then, you know Daryl and I are both big fans of the guys that pseudo um which is this a mm build specifically for for N. F. T. S, which we think is a superior design compared to, you know, existing ones at N. F. T. X. Um and then there's some interesting stuff happening I think one called like Putty Finance which allows you to like buy put options on FTSE basically as an insurance for N. F. T.

S. Um and then we talked to so many teams that are building like Neo banks for N. F. T. S. Right? So basically you earn yield through N. F. T. S. And as tangent um We actually, in our previous batch we invested in this style called Goblin Tax, which experiments a lot with like N. F.

T. Finance ideas. So the first product is basically writing loans and underwriting loans on NF defy and they're you know, earning a ton of interest just from doing that and then they're expanding to other verticals. It's still extremely early. Um But it just combines my interest in defi with my curiosity, N. F. T. S. Um So we're you know, actively looking at stuff in that vertical and you know, every other week I think we get a pitch in that vertical. Yeah,

but that vertical is pretty hot right now.

Yeah. Um And I think we should jump into kind of talking a little bit about tangent as well. Um So I think that was probably the best person to answer this. But why did you start tangent in the first place? Like why what what what what made you come up with the idea?

Yeah. So I think it came up because I felt that right at the moment um despite all the innovation happening on the D five front of the Game Five front in crypto on the investing front, the process and structure was still quite arcade, right? A lot of, you know, conventional, all the structures basically in in in in investing which is basically borrowed and copied and pasted from traditional finance right? You had conventional VC investing with 2 20 structures hedge funds, I think the most, the biggest variation regard was like open ended hedge funds that had the ability to double dip in the primary market as well as the secondary market. I think that was like the biggest difference versus conventional traditional finance firms, but I realized that with, with crypto um and the most important distinction distinction here with tokens is the time to liquidity, which I think drastically changed the risk reward uh metrics for primary market investors. And that was, I think people caught on to that in 2021 where Murad of different crypto seed funds started launching because everybody wanted in on the very lucrative, see uh crypto see deals, but you know what with with, with this in mind. Um I thought instead of just trying to be extremely PVP and extremely exploitative about it, we could use this uh and sacrifice, trade off other other concepts of other elements investing to provide the best value proposition for our counter parties. So, I think in terms of thinking about tangent, I wanted to think of it as a service or product as opposed to as a fund. Right? So to me, um I am a, I was, I was having the philosophy of being an entrepreneur selling my service to found this and seeing whether they were interested in what I was offering as opposed to saying, I'm fun, here's my money you wanted or not. Right? So I think that was the main distinction when, when I was trying to conceptualize tattoo.

So right now. So in using the trade off earlier time to liquidity, what we could do is we could scale down the number that we have to make because in a conventional web to fund, for example, ah As a seed fund, you wouldn't be able to write, you know, 10-20 checks as a fund and expect to survive. I think diversification, you know, the law of large numbers basically indicates that you will need to have, you know, 5200 bets in order to be able to hit, you know, one or two of those four months because the 90, of your bets are just simply going to fail and you're just not going to see any other eye on it. But for tangent, because of the earlier times of liquidity, we could afford to scale down the number and which is why eventually what the number we came up with was 15 to 20 bets every every year that, that's what it works out to, which is, you know, 80 to 90% smaller than what your conventional funds are doing. Right? So, and so the trade off there. So we're using the earlier times of liquidity and what we're giving back to the founders is basically a superior portfolio support level, right? Or service

level, right?

So that is the service that we're offering because now with smaller number of portfolio companies we can really sit down with each and every one of them create a bespoke structure to advise them on what they really need help with that you know, and with every, every sport is different but we have the time when we have the resources to do so. So I think that was really what I felt more strongly about when starting tension ah and curious to see whether you know, that was sort of the philosophy philosophy for us. Well Jason

yeah, I think very similar philosophies. Um, I think just to clarify as well, I think with the earlier time to liquidity, you know, we, we are also, we kind of brand ourselves a permanent capital because we don't actually have to sell. Um, but it's just the fact that there is liquidity and you know, we are able to at least see some on paper returns on our fund to know that you know where we stand as a fund that makes it easier for us to make this kind of concentrated model. Um, and I think that the the good thing as well is because we don't have a fun life were not forced to sell in like five years when the fun ends we can hold onto it forever if we want to. Um, so I really like the flexibility but the most important part for me is is finding a tribe. I always noticed that a lot of friends in crypto tend to just congregate and tribes that there's, you know, a bunch of people from Singapore very close to each other, they're a bunch of people in, you know, silicon valley very close to each other and as someone based in Hong kong, you know, a lot of people were leaving the Hong kong ecosystem, so I actually really want my own tribe um and I didn't, I didn't want to want to do a DAO thing because as I mentioned like we're pretty not confident on executing, especially at least in an investment context. So we basically created this group of people, you know who are friends or people, we've worked with people we trust and respect a lot and we invest together. That was a simple idea um and I'm really curious, you know, which part of that resonated with you Mabel when you decided to join the board because multi coin I think is known as one of the investors who is like truly hands on, right, especially um you know, I think Spartan and multi and Solano had a lot of dealings before and from those dealings, we can, we, we were, we got um I guess pretty familiar with how Kyle work the multi coin and we know that you guys were extremely hands on and it seems like that's something that's really important to you to Mabel

for sure, I, I think um people in multi coin, I think we obviously, it's not like what Daryl was mentioned, you know, just giving out checks and then leave it there because we don't, we're not like a beta focus fund by beta focused fund, I meant you just raised a very large a um and then

you kind

of expect that whatever thing that you invested average like just get 3 to 5 or maybe smaller, like u 24 kind of times of return and then you'll be fine because you have a very large a um like then you can afford to just have a very low, it's not sorry, not very low, a relatively lower um kind of return compared to some of the other smaller venture fund um for us, I think we want to work and we're very clear, we only want to work on things that we care about, like I think one of the key things we ask um and I see during like those periods when I still participate in the, was that are you truly excited to work with these people? That was a big factor within all the investment, I think that matters a lot because if you're not excited to work with these people and then like probably shouldn't, should not be leading and then later on, even if we were at, you know, just 100 million size where everyone else was actually 200 or whatever, like the venture fund to was 100 then venture fund three was um 4 30 I think both are not very large compared to our peers at the same. Um but we intentionally chose that because we wanted to make sure that we can lead every single deal most most of the deal that we, we like and then try to be be sure that we are very handy and then we are very concentrated with you know, whatever time that we're spending with each of the portfolio. But I think, you know to answer a question about um why am I interested in intention? I think there's a few other observation also I think come into my mind one thing is that I would say not just paradigm or multi point, I think there's a trend and basically all these fund in this space have to like strive for deals like you can't like you know the age of like you just sit there and then give out checks has already passed its, it's very hard to do that anymore even if like after your interest rate has hiked and then there's not as much liquidity today, but so you have to kind of prove to the founder if you're especially to the good founders that you are worthwhile for the allocation. So I think this just like becoming more of a trend and then so like everyone are almost like forced to really pick their rabbit hole and then be very good at certain things. For example, multi column is known for good at investing in protocol level stuff. Infrastructure level stuff and then we can tell people that we have this other portfolio that can also have like huge synergy with you. So then that's like the rabbit hole that you know, bolting was really good at right versus maybe some other um, investor like Jason cam, like he's very good at application layer stuff and then he has a lot of insight from his past investment um, experience as well. So like those are also like the special people, you, everyone would have to find some of their own rabbit hole or like the kind of the critical brand name so that they can get, you know, a lot of other good exposure, like it's really, really hard to become a very, very generalized fund these days. That's one kind of observation. The other thing is that I realized um, over the past 24 months or so, a lot of the deals are basically done in a way that one of the mega fund lead or one of the large whale elite and then the rest of it is just angels like, and then most of the angels are all founders.

The reason that, you know, these, these um deals were raising from the founders is because like these founders can actually provide some sort of synergy to their own startup versus like maybe um, giving the allocations just to a smaller fund may not even get to be the case. So I feel like that's another kind of observation that I've seen and I think tangent exactly kind of shows this, which is like, you know, all of us have different sort of expertise or resources, um, a lot of us are actually founders right, like, you know mackey or the, the guy um state, right, and then also like Sam and also um myself as well, Natasha exactly, so all of us worked on different projects, have different experiences and resources can bring different kind of skill sets to the table and I think that's really the kind of um way you can have really help out the project to grow. So um, I thought it was a very interesting model for everyone because it's not force that you have to participate in a certain thing, you only invest when you feel like you can truly help. So, um, I really like the model

Yeah, and we really kind of thought about this from the ground up and I think uh, I forgot who said this, but someone was joking to me that this is like the Avengers model where we find like the best superhero from like the respective franchises

and

a good one.

Yeah, so I think it's, yeah, I'm really excited about the model and and it's interesting to hear you talk about the investment process and multi coin as well because I don't know if you noticed, but we actually borrowed some lessons from how you guys do it. I really like the fact that I think you mentioned before that you guys are very writing driven. So someone writes on the memo and then everyone comments in. So that's kind of what we carried over to tangent. We basically just share, you know, a memo after Darryl and I have done the work with the D. D. The reference check and all that. And then we write the memo and share all the mentors and then everyone chimes in with their questions and try to poke holes. And that's something that I really like. Um and I'm really interested in Darrell when you were at defiance as well. What was the investment process like and were there elements that you've brought over when we were looking at like the 300 or so deals that we've looked at so far?

Yeah, no, I think, I think I really got my trial by fire at defiance because prior to defiance, I had almost no VC investing experience. Um and one of the very good things about my previous boss Arthur was that he was he really let us take the reins when we were there. So that we had, you know, the highest opportunity, the most opportunity to learn as fast as possible. And so over basically there. I think one what I think Arthur was very good at identifying certain narratives and being disciplined about allocating capital. So I think even, you know, as even as the portfolio expanded in defiance, Arthur was always very conscious of not spraying and praying. And I think valuation was one thing that he always was very hesitant to sacrifice. So we would always be looking at valuation as providing that reasonable margin of safety for the deals that we did, which is why, you know, I think, you know, now I still respect and really admire him as an investor. So I think that that that was the biggest takeaway for me in terms of process. I learned to develop a lot of things on my own, actually outside of outside of defiance previously, when, when I was working for University Fund back back back when I was still studying. But I think I learned a lot actually from you, Jason from the way that you operated, given that you learned you were in space a lot earlier than me. You had, you know, a lot more deeper VC experience.

So, you know, after today I'm still learning, right? So, so it's it's a pretty unique experience, I feel.

Yeah, I think it's uh, yeah,

I was gonna just ask you guys other than the writing process was there. Like you told me that you have what, 300 in total for applicants, right? So then we're there something I'm sure that you could screening them in a relatively fast manner. But at the same time, maybe be looking at for some important stuff out of the team. What would be some of the things that you look out for? I was just curious about that in the screening process.

Yeah, I can take a step first. So, um, just go to the very beginning of the process in terms of filtering. So we do have a cold application form that people refer to us that people used to apply, but we strongly prefer people who come with referral. So I think between you and myself will probably have connections with like hundreds of founders. And then if you add Maple as well, we have like hundreds and hundreds of connections in this space. So whenever someone we know or we worked with the respect or investors that we've co invested with refer a deal to us. That's usually a very, very high signal. So we put it to the top of the list. So that's how we gonna filter out the best kind of companies first. Um, and then the second, uh, so there, when I came up with this way too, um codify our heuristics. So I realize it's very, very easy to fall to biases when we invest. So when we look at founders, if it's someone that's like young and talks fast, usually from the west coast, we're like, okay, this guy knows what he's doing and then we realized, okay, there's, they have no clue what they're doing.

So in order to remove that kind of subjectivity, we actually have a scoring system with different weights that we've back tested with a lot of the deals that we've done at both defiance and spartan. So across two portfolios, um, and we wait founders across several metrics like founder market fit whether this founder is actually, you know, fit for this market, the size of the market to the tam the serviceable market today. So for instance, just because defies total addressable market is finances massive. Doesn't mean that the market is massive. So we take that into consideration as well, obviously evaluation vesting. Um, so we rate all of those projects in the same metrics. Um, and I think we've done probably like 100 now just to back test it. So that's our sanity check to make sure we don't succumb to subjectivity. Um, and then finally, we're really looking for founders that we can work with. So, you know, a lot of the founders that we talked to, we even met up in person, you know, over several meetings and sometimes they don't work out right. Sometimes they don't need to deals, but we really prefer to get to know the founders before we pull the trigger. And I think the good thing we've learned from the first deal, which for batch one, which announce soon is that because founders understand our value add, we are able to come in very late in the process and actually have, you know, have all the other funds coming already and the founders are still willing to to fit us into the round because they understand, well, every dollar we take from tangent is much more impactful on a per dollar basis than, you know, a really large fund.

So that has been an advantage, like we are able to have a pretty drawn out D. D. Process if we want to, but typically because we're so small, we also move pretty fast. Um yeah, curious if you have anything to add there there.

Yeah, I'll say that, I'm I'm I'm pretty satisfied without the intelligence process at the moment. I think it is quite a bit, I would guess that it's quite a bit better than the majority of funds out there at the moment. Um in terms of thoroughness and also to answer your question, Mabel about what we, what I want to see this. I think I really like it when we can identify founders that are uniquely positioned to solve a particular problem. Um like what, when we look at founders, we talk to them, we see their experience in the background, we see the motivation. So if everything comes down to everything comes down to answer the question, are you like, really perfectly suited solve this particular problem, like why you why this problem. Um and you know, do you have the energy and that motivation that we don't really see anywhere else? And it's very rare to actually get a yes on that. Um So so I Which is sort of why the you know, of the 3, 400 different applications were only really cutting it down to three or five different bets. But if I think if we can get consensus behind, you know, yes and that question most of the time is pretty smooth because I think that is the most important thing. But I also like the caveat that um I think in terms of our investing process, the thing that we look at the two concepts that we look at the most and we have the highest waiting on on our scoring metric is ready. The team so elected at the first question, are you uniquely positioned to solve this problem?

So if that's a yes that takes one box and the second box is actually evaluation investing because for us as a fund um with the concentrated model that we have, we cannot afford to get too many things wrong right? We need that margin of safety and that really is priority to us.

You know, I think all of us care about the validation very much. I'm extremely strict about valuation. I even have I have I have a playbook in my mind. Um I think you're not, I I didn't I know which one you're referring to but I do have a number of range in my mind like what like say pre traction should be whatever. And then maybe if it's extremely good founder, I can add maybe five years into that. Something like that. I know it's it's not supposed to work like that, but I always use a reference track and I think it's good. Um I I was actually for for this question I asked, I think I only have one thing to ask from my own perspective, which is um, I like to back back the founders who are able to grind but also know how to talk about a grind because I realized that in like in crypto, um I think I mentioned this in many places, but attention is the only scarce commodity, so that if someone is like willing to keep grinding, it's it's a very big factor in the success, but that's not enough. In my opinion, you also have to let other people know that you're also grinding. Um otherwise it would be very hard. I think Selena was a great example back in the days, like they've been trying to do a lot of other things. Um, a lot of, you know, the, the hard work in the early stage, but I think only after they started to know how to talk like due to marketing and stuff, they really started to take off.

So I mean, there are a lot of other um, kind of cases for this, I don't have to mention, but I think that's really like one rule film that I've been summarized over the years.

That's really interesting because I don't think I've heard anyone bring that out there kind of talking about the grind and I think it makes sense, right? Because especially for you focusing a lot of consumer products, consumers want to know that the products they're using will have new features that the team is, you know, there to answer the questions if they, you know, if they need support. And this reminds me a lot of SPF in the early days. He's like personally answering, you know, help requests that you could d m him on twitter and be like, hey, I can't execute this order LFTs and he will personally resolve it for you. So obviously now they're much bigger company, they can't do that. But I think founders that do that in the early days versus founders that are just kind of laid back or maybe founders that are way too product focused, right? You kind of engineers that build up a product and don't want to do any of the B. D. Um I think founders like that tend to have a much higher hit rate. So I absolutely agree with that.

Yeah, for for most of the consumer stuff you have to stay on top of everyone's mind. Um like think there's just there's just too many things happening at the same time. Like if you can't afford to lose people's attention.

Yeah, definitely, definitely. And as we're closing out right now and feel free to jump in with, you know, a digital questions if you have them as well, Mabel, but I really want to get your respective thoughts on the bear market just because it's been a pretty brutal bear market so far. Um and it seems like everybody's just watching the macro and trying to see when it turns around, but then with the merch coming up as well, seems like there's some optimism coming back to the space. So it's a very confusing time for for investors and for founders who are trying to plan out their next round of fundraising. So how do you guys think, like the next 12, months play out, what are some of the major things you're monitoring?

Sure.

Do you want to? Okay. I mean like, so, so, you know, as attention, even though we focus, you know, 1919 and 95% of our day to day on primary markets, we still are actively looking at the second markets as well. Um and so with that, you know, definitely paying attention to broader macro, um, in terms of the next 12 to 24 months, I would say that it's a pretty challenging period where I think what the price action over the last six months has caught almost every institutional fund of guard and either on the way down or on the way up. Right? I think a lot of funds were caught back holding too many positions as it went really from my four K and crashed on me to one K. Um and on the consequent moved up as well on this merge narrative a lot of funds were sidelined, um, just waiting for the broader macro fund to subside before you're putting on positions. So it's really a challenging time at the moment. I'm inclined to believe the most important thing to me I think, is to be data dependent and right now it's pretty clear from a crypto specific standpoint, mindshare is has not returned for the better part of retail for the better part of the world. So we're still within this microcosm of people who have not left the space. Um, and I think you need to look at when that mindshare starts returning, so that will drive crypto focus on crypto focused flows from the rest of the way into crypto right? And the second thing is obviously watching inflation prints, watching, you know, GDP prints as well to see whether the broader world is going into recession or not or whether we can navigate a soft landing for the for the Fed, obviously I'm not a crypto, I'm not a micro expert, so you know, the views that I have there will not really relevant to the viewers probably, but I think right now, if you're looking to say if the question is when is the next bull market going to begin?

It will be an amalgamation of both these two factors, right? When is mindshare returning and you know, how do we sort of play out in terms of micro an extra 24 months?

Yeah. I mean I haven't really been spending a lot of time on investing, but here's a few, I guess. Here's some two sons of mine. Um First of all I think Ive merged right? Everyone was focusing on this right now because I feel like this is probably the only kind of very hot topic these days and people don't who've been like chasing the growth probably haven't noticed that, you know, all of these N. F. T. It's like small 50 project that we call it the Apec or whatever. And some of the other ones that only like launched for not a long time, but then like has been on the secondary market, all of those has been very brutal. Um Like at least like, I don't know like 60 70% down like that's for the best. I think G. M.

T. Was a good example, like that actually didn't go down that much, but still it was already like 70% or whatever, like down from the top. So what does that mean? It means like there were a lot of capital. Um So sorry, let me, let me rephrase it, it means like whatever capital that was going into the east merge was actually just existing capital within the market. There is no new influx of the market And then if you couple that with all of these, you know increase the rate hikes and whatever, there's no way that there's new money coming in. So I think surely it looks like it's, it's, it's doing very well but I think it's just like whatever does exist and it's already like gone quite a bit compared to like the whole top. That's one observation. The other thing was that um I would say a lot of the very large projects including I don't want to name them but you know like in the past few months there were quite a few announcements saying like oh it was close to two billion valuation or maybe five billion valuation or whatever. Um and those are not even making that launch and then they are launching their main nest soon. Um At least one or two very smart hatch fund that I was like like cracking very closely. They were actually waiting to buy a lot of those on the liquid market or like maybe they just like buy it on otc right with a lot of those and you know basically that process has not happened yet meaning like people who bought, you know, maybe it started to happen but I don't think it played out completely.

So I would say you know we might wanna watch out and the Otc desk and see like if there's a huge rack that fell off the high valuation VC deal of the shaft. And if that happened, I think that might be a good consolidation point where we could start to kind of think about the next run again. And then I think the third part of this is just that, you know, think about the, The valuation. The reason I really care about valuation was because I think it's a very good temperature check and it's usually slower than the secondary market. Like primary market could still, you can still see a lot of pre traction 30 million deal all the way around. But then like, you know, set secondary market isn't the case, but usually I would say take at least a few quite a few months reflect that, um, particularly because in the last cycle, a lot of these mega fund, they raised a lot of money. There's no way that they are running out of money anytime soon. So you probably see a delay of six months or even one year. Um, I would say the reel kind of bottom would likely to happen when, when we're seeing a lot of these, you know, deals, the pre traction deal goes back to the level where we were used to. Um, I'm just gonna pause here.

Yeah, no, I absolutely agree with that. Um, you know, that's one of the reasons that, you know, we're very deliberate and slow and deploying as well, right? We don't have to maintain the illusion of being quote unquote an active fund actually never understood why that's like a good thing when when, when people say that we're the most act investor in crypto. It just means you've sprayed and prayed into the most things. So it doesn't really mean anything. So we're very deliberate. We look at a lot of stuff. We talked to a ton of teams. We invest very slowly because we like to diversify across vintage, right? Because who's to say in 24 months? You know, seed stage valuations are not going to reset to like one million FTV. Um, so I'm very careful about that.

Um, so I think we share the philosophy there. And I think in terms of the bear market, I agree with everything that you guys said. I think it's going to be a very challenging two years for founders that are trying to raise. Um, especially if you are not coming from an extremely experienced background. It will be hard to raise. Um, and for, you know, founders who have already launched a token and the Treasury depends on the secondary price of the tokens. Maybe try to find ways to extend their runway, right? Try to get 24 months runway. I know some projects that have gone way overboard to like 70 80 months runway. But um, you know, who's to say that that's not the prudent thing to say. That's prudent thing to do. So.

Um, I am personally exercising a lot of caution. I think founders should as well but you know regardless what happens, I'm pretty sure we're still gonna stick around here,

yep I agree. Do you wanna Maybe just talk about one prediction that you have for for the next cycle or maybe just like you know the next 24 months,

24 months is hard but I will talk about next cycle. So the interesting thing is I did this um I think back in 2019 I was trying to predict defi T. T. V. L. And I think I was like oh it's gonna get $1 billion and uh and then I thought I was being way too exuberant but then at the top if you look back at the past few years I think the top was like 180 billion. So I was way off. So if I have another prediction, I'm calling for a trillion dollar in T. V. L. Like within the next five years in in all the applications combined. Um So we'll see how that pans out.

Interesting. I haven't really given many predictions. I don't think that usually it's just a finger in the air kind of

thing. I

think for me if I have one thing, I think the next bull market we will see um a game five related project reached 100 billion in market our F. D.

B. I

think that is um And I think I think I think actually was really the forerunner for what can be, and you know, obviously this has to be at the height of the bull market, but I think it's possible,

I actually wanted to echo you on that one, but I wouldn't call it game five because like these days people just keep using Game five social file, everything with the five that confuses me, I don't even know what those are, but I would say just the next, the next 50 million users, I was gonna say 10 or 20 million, but now I'm gonna exaggerate a little bit. The next 50 million users are probably gonna comment with some sort of social entertainment applications. Um and then there there definitely definitely interact, gonna interact with Blockchain with the quote unquote, like, you know what, three accounts? It's basically going back to my thesis at the beginning, I said um and I and I think I'm very bullish on on those and I would believe that the next wave of entrepreneurs may not be extremely um quote unquote, crypto native or well not carbonated is wrong work. It's probably the people who care a lot about the political correctness about decentralization or a lot of those ethos, like we used to care so much because they would actually care more about the UI UX. Um and I think that's really where we will get the large amount of users

cool, This has been a really fun one. so before we go, let's let's do some shout outs. I think people should absolutely subscribe to your podcast. Mabel. What are some ways they can, you know, follow you and follow your podcast?

Cool,

thank you. Um yeah, Spotify Apple podcasts and then for those who are listening um I think also google podcast as well, I didn't really upload it myself, I guess someone did. Um yeah, so anything that, that you used to listen to Jason's, I think you can find

me.

It's hot long.

Uh

sounds good.

I love that. I love that name by the way. Um, and, and Darryl for people who want to follow you, what are the best channels for them to do so or to reach out to you.

Yeah, primarily just twitter. I'm just a twitter guy. So um handles zero X on twitter, you can find me there. I have my little enemy ever tie with little bird on my

shoulder.

What is that bird actually? Is that a pet of yours that you call

back to? My very first logo, which the internet.

It was

interesting. I didn't

know. Um but yeah, so I, I guess if you're, if you're listening to the show, you probably follow me already. So just check out the social below and follow Mabel and Daryl as well. Thanks so much for coming on and it's been really fun to co host with you Mabel and really fun to have you both on the show.

Likewise.

Likewise, it's a pleasure.

All right,

that's it for this week's episode of the blockage podcast. So thank you so much for tuning in. If you enjoyed this episode, please make sure to subscribe on your favorite apps and in case you didn't know this interview is also available as a video on Youtube. And if you attack the block french on twitter this week and tell us what you liked about this episode, I'll be sure to respond to you as well. Now, if you'd like to go even deeper, we have a V. I. P tier where every week or so we write an in depth research brief or investment memo on a project and we'll have exclusive ams with myself where I answer all your questions as well. Now we already have analysts from some of the top funds and companies in crypto ask subscribers. So if you're serious about getting an edge in crypto, head on over to the block punch dot com slash V I P to learn more. And once again, thanks for supporting the show. And I'll see you next week

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