Crypto investment is all about founders, says Morgan Beller

Crypto investment is all about founders, says Morgan Beller

Author: The Carta Team
Read time:  29 minutes
Published date:  December 9, 2021
Flori Marquez, Casey Caruso, Morgan Beller, and Peter Boyce II share their thoughts on how crypto investment has evolved—and where it's heading.

Crypto is leading the next wave of Web3 development, even as the sector continues to face scrutiny from investors, regulators, and the broader tech community. This panel from the 2021 Carta Equity Summit brings together three seed-stage crypto investors for a discussion of the current state of the sector—and where they think crypto is heading. Flori Marquez, Casey Caruso, Morgan Beller, and Peter Boyce II share advice for how to get started in crypto investment, ways crypto founders can attract developer talent to their companies, and how their fellow investors can cut through the noise of “copy/paste” crypto platforms and support truly transformative companies. 


This transcript has been edited and condensed for length and clarity.

Flori Marquez:I’m super excited today to talk about investment trends in crypto. I’m the founder of BlockFi. We’re a company that makes financial products for crypto. We have over 500,000 clients all over the world, and over $10 billion in assets under management. We offer trading, interest accounts, and a bunch of awesome things for people who are looking to leverage financial products for crypto investors.

To get things started. I’d love to introduce Casey Caruso. Casey, do you want to give us a quick intro?

Casey Caruso:Sure. I’m an investment partner at Paradigm, which is a cryptocurrency investing firm. At Paradigm, I focus on Web3, although I’m looking holistically at the entire crypto sphere. Before Paradigm, I was an engineer at Google, where I did a lot of machine learning work. I’ve been programming since I was a kid, and I always thought I was just going to be an engineer. I fell down the crypto and investing rabbit hole, and now I do venture capital full time.

Flori: Thanks. Next up, we have Morgan Beller.

Morgan Beller:Thank you for having me. I’m a general partner at NFX, which is a pre-seed and seed fund—it’s more generalist, not only Web3. However, I spend 99.999% of my time on Web3. Without being too corny about it, NFX stands for network effects, and we believe there are a lot of network effects in Web3. Most recently, I was at Facebook, where I helped start the Libra, Diem, Collibra, Novi—you know, enter all the names we went through—efforts. Happy to be here.

Flori:Last up, we’ve got Peter.

Peter Boyce II:Hey team. I’m the founder and managing partner of Stellation Capital, which is a venture firm focused on release-stage investments here in New York. I’m coming to you live from my office in Dumbo. Prior to this, I spent nine years as a partner at General Catalyst, where I was lucky to work with a number of blockchain and crypto companies. And after having spent the last week at Basel, and having lost my voice seven out of seven days, I can safely say I’m excited to be a Web3 investor. So great to be here.

How crypto defied expectations

Flori:We’re glad you have your voice back. Last week when we were talking, one of the things that I think is pretty interesting about this moment in time is how different the landscape is for founders, for companies, and for people who are looking to build in the space. We were just talking about how things as simple as fundraising have fundamentally changed today from how they were five years ago. When I was first starting BlockFi, it was definitely a very, very different landscape, and conversations with investors were very different. It was actually pretty difficult to get investors to invest in companies that were touching crypto. I’d love to know from each of you: What was a prediction that you had five years ago for crypto that’s just been completely wrong?

I know that on my end, I definitely thought that self-custody would not still be a thing. I thought that people who hold crypto would move a lot faster into custodians. And I do think we see that trend—but I definitely thought the rate of adoption and how custody would be approached would be a little bit different from where it is today. 

Morgan, did you have any predictions that were wildly wrong?

Morgan:The first one that comes to mind is that Libra would be live. 

Flori:All right, Peter: What’s yours?

Peter:I certainly didn’t predict that a 16-year old could be a patron of the arts from the convenience of their own bedroom. I definitely wasn’t thinking about the way this world was going to intersect with creative cultural communities. And so I think that over the last five years, that convergence has been something super exciting that I didn’t predict.

Flori:And Casey, anything on your end?

Casey: I have two that come to mind. The first is that five years ago, I was definitely one of the  “It’s all about the tech” minds and voices. And over the years, I think crypto has transcended from technology to a culture—it’s really a movement. A lot of the best companies—we always thought they had to be uniquely enabled by crypto. And some are still uniquely enabled by crypto, but it’s a much more expansive definition of “uniquely enabled.” I know that sounds broad, but hopefully that makes sense. 

My second thing is that I totally thought Ethereum was the de facto smart contract platform. I was just shitting on all the other players and now I feel very foolish about that.

Morgan:It’s so early—who knows?

Casey:That’s true.

Morgan:OK. I have one. I thought that Bitcoin and Ethereum were just going to be common denominators everywhere by now, like in Venmo. That was always something we had talked about at Facebook, but I was like, “That’s just obviously going to be an add-on.” I live in San Francisco—me and Casey might be the last ones left—where we think that everyone’s late to the game and that it’s over. Everyone has Bitcoin, everyone has Ethereum, but then you go and speak to a high school friend who lives in Chicago and you’re like, “OK, it’s still so early.” Bitcoin and Ethereum are still not constants in people’s lives. I was wrong about that. So it’s just a reminder that it’s still early.

What makes a competitive crypto company

Flori:Yeah. I think that Ethereum is definitely something that probably sticks out to everyone. And I think when we’re early in spaces, and a new idea comes out, it’s hard to imagine that someone could do it better, or that someone could come up with a different idea that makes it competitive. I wonder if there’s any advice that you’d have for people who are building in the space, or companies, that allow them to basically stay ahead. How do you remain a market leader in a space where there’s so much innovation happening? And maybe the inverse question is: What happened with Ethereum that allowed other projects to come into the space and be competitive?

Casey:I’ve been reading a ton on distillation as a topic; it’s been my weekly trend. And I’ve come to the opinion that we vastly overcomplicate pretty much everything. There’s often only a few important factors at play. I think what companies need to do is just really hone that level of focus. And something internally that we do is called the “most important question”—to make sure that we’re all on the same page. I think companies should really adopt that in terms of, “What is your value proposition? What problems do your users still have?” 

To your point around what happened with Ethereum, it’s actually super obvious in retrospect. The network got congested and users weren’t comfortable with the amount of money they were spending to have to interact with the platform. So of course, if a cheaper alternative came around—even if it was a little bit at odds with, perhaps, the ethos of the space—historically, it would be a really strong contender.

Having been in this space for so long, it was really difficult to see the difference in the ethos in terms of decentralization. We thought, “Oh, well, everyone’s aware of this ethos and it’s really not exactly what we envisioned.” The users are inherently lazy. We all are human beings, and they’re going to take the path of least resistance most of the time. So I think that’s what happened there. But yeah, I think there were a lot of reasons for it not to work, the most important just being usability and UX in a more general sense.

Flori:I love that, and I think it’s definitely something that I try to foster, which is remembering, “What is the problem that you’re looking to solve? What are we the experts in?” I think when you’re building a company, there’s so many shiny objects. You see so many opportunities and you see so many things that could be an add-on—or you don’t necessarily want to use a partner for it, because you think you could do it better yourself. But it’s so important to remember that time and resources are limited. So really just sticking to what you know is really important and a key to success. Peter, do you have any thoughts on that?

Peter:I think it’s an interesting reminder to stay humble and acknowledge the importance of simultaneous invention, a concept borrowed from evolutionary biology: Chances are there are three or four or five or 10 other people across the globe who have been thinking similar thoughts. It’s almost like an acknowledgement and a respect for that—that it’s bound to happen, in a way. That’s something that we’ve been experiencing—almost finding comfort in that.

And then I think the second piece is when you have examples that rewrite everyone’s definition of “How big is big?” or “If everything works out” scenarios: What can the impact and outcome of your work be? I think that that effectively educates the rest of the world around how and why building a particular project or dimension is worth doing. I think those are two properties that I stay true to—and trying to understand the how and the why.  A lot of what we just talked about—those predictions haven’t panned out yet.

How investors vet new crypto projects

Flori:Yeah. I think that you said the phrase “staying humble.” There’s no better way to stay humble than to start investing in crypto. It’s definitely a wild time out there right now. We’re seeing investors who have poured more than $23.7 billion into crypto companies in 2021—that’s five times the amount that we saw in 2020. So I bet a huge question that all of you get all the time is, “How do you know what’s real and what isn’t?” And if you are a first-time investor looking at different projects and different companies, Morgan, do you have any advice for how to approach that question?

Morgan:Yes, but first I just want to rewind 30 seconds not to answer your past question, but just to say my reaction to what happened to Ethereum. Ethereum’s still Ethereum. It’s not dead, it’s still Ethereum. I work for a fund called Network FX [NFX]. I think there’s a ton of network effects to Ethereum and we don’t know where the chips are all going to fall, but it’s not going away. So it’s an “and,” not an “or,” and I think there are more “ors” than maybe we previously had predicted.

Flori:I definitely agree with that. Right now, we’re just seeing scaling and usability challenges. And I think that at the core of any company or asset, success is not necessarily “Do you not run into challenges?” but, “How do you overcome it? And how do you change to respond to consumer and market demand?”

Morgan:Completely. Okay, advice for what’s real: There’s a lot of bullshit out there. I think it depends on the stage. I do primarily pre-seed and seed—even though I don’t know what those words mean anymore, because everything is a moving target. You have an idea, you haven’t quit your job yet. So there’s not much to diligence. Whereas if you’re a growth investor, you could do a bit. There’s more tangible, real and not real. So for me, the only real fixed variable I have to work with is the founder, the people. 

I was a statistics major and captain of the math team, and I used to use my brain for harder things. And then my brother tells me I’m all soft, and I just read people all day. But that’s kind of the only thing you have to go off of. And I think it’s challenging now because crypto is so hot, Web3 is so hot. Venture funding, as you mentioned, is like 5x-plus what it was last year. You’re getting a lot of what my partner calls fruit flies: people who I think are coming to it for the glitz and the glamor and the Ponzis and the whatever.

So for me, the litmus test is, “Is this person in this because they like this and for the long haul? Or are they in this because it’s the hottest ticket?” That is definitely challenging, because I think on one hand, you see a lot of people coming into this world who might not be native to this space but whose hearts are in the right place—which you have to suss out from people who are tourists. I’m just speaking on the people front. I don’t know if someone has a better answer on how you suss out if the technology is real or not. 

One more thing, though. There’s the people part and the technology part. I think as far as where we are as an industry, the first step function of adoption was Layer-1s and all of the things that sounded like sci-fi five or six years ago. Now with network effects, you have the ones that we’re getting, most likely. So we are at the application phase where you’re seeing things have way less technical risk than maybe the pictures I was seeing five, six years ago. So the part that is real or not real is almost like a fixed variable now. And then it’s like, okay, is “Shopify for NFTs X” or “Shopify for NFTs Y” going to be the one that wins? But the technology risk seems lower—I don’t know if people agree or disagree—for a higher percentage of things that I look at.

Flori:Sounded like Peter had thoughts on that, too.

Peter:Well, I was going to add on the people piece. I was just going to complement exactly what you’re saying, Morgan. For early stage, you remain focused on founders. But that’s where you pay attention to triangulating different sources of perspectives. So referencing some of those proxies for length of interests or curiosity, depth of engagement, assessing sources of learning. My immediate answer is that I call Morgan and I ask if it’s real or not. You know what I mean? That’s my style of triangulation.

I think about triangulation, I think about some of those proxies for trust and curiosity and authenticity being really important. And calling friends, you know what I mean? And connecting with folks—and again, triangulating to the source. If Casey, Morgan, and two other folks are all like, “Hey, this is where the smart folks are concentrating,” I can easily drop everything and head straight that way.

Flori:Casey, are there any projects that you’ve looked at recently where you’re like, “This is real, and this is the next big thing,” and it ticked all the boxes that Morgan and Peter just talked about?

Casey:Definitely, but I don’t know what I’m allowed to say! I will add on the realness part. I love the points that have already been brought up. I think that what I’ve come to realize is it’s all real in a way. I used to write things off as, “Aw, that’s never going to work.” And I’ve really been forced to retire that line of thinking, especially in crypto. Things that I thought were totally out there—they come to fruition in a way that I just would never expect.

I almost take the view now that everything is real—I’m probably missing something. Crypto natives don’t run the world anymore. There are regular engineers coming into the space and I need to be a student at all times instead of a teacher, and just keep my ears open. I know that doesn’t really answer the question, but those are my thoughts on that.

Building great crypto teams

Flori:I think it does answer the question. It also hits on another huge change from five years ago, which is, as you mentioned, regular engineers moving into the space. That’s also something we’ve all talked about, which is just how different it is recruiting for crypto today versus four or five years ago. 

When we were first posting jobs and hiring our first 10 employees, it was a pretty strange move to want to put BlockFi on your resume. Our first client service hire told us that his friend was like, “You’re joining a scam”—to your point about just assuming that maybe you can’t see what it could become. And then that person’s friend ended up joining BlockFi a couple years later, which I thought was pretty funny. But I think a really interesting topic is, “What is it like thinking about the talent that’s moving into the space? And also, what are the positives and negatives of having people who have not built in crypto before building for crypto projects? I don’t know if you’ve seen that happen, Casey, in your portfolio companies, and what those shifts have meant.

Casey:The number one pro of Web2 engineers coming into the space, hands down, is that they haven’t been indoctrinated with all the shit that we put up with, so they can call our BS. 

I’ll just give a concrete example: Etherscan, a horrendous product, awful to use. Somehow, we’ve all decided that we will continue to use this crazy UX where if you want to get the ABI or the contract, you actually have to go in to copy and paste it. There’s no JSON. I could just rant on it, but I will say I really feel very passionately that we should be replacing this. And a lot of my Web2 engineer friends will come in and be like, “We could build a better one, and this is exactly how we would do it.” And I’m just like, “Wow, I’ve really been sitting in this space for so long that I’ve become, I don’t know, numb to the problem.” So that’s definitely the fresh perspective pro.

I don’t think there’s an immediate con. I think it’s amazing. I love it. One of my favorite parts of what I do is chat a lot with Web2 engineers about where to start, what to do—and I continually just have to keep an open mind to it. We used to use crypto nativity as almost a vetting criteria, because it gives you an incredible distribution base. If you’re already in the community, you’re in the right discourse, you’re in the right Telegrams, and you pretty much have a user base from day one. But as we spoke about, I think if you look back in history and chart the most successful crypto companies, crypto nativity actually isn’t the best signal. So you just need to remain really open-minded even if they’re not super connected today. Smart people learn fast.

Peter:Yeah. I love that. Casey, feel free to share those signals, if that’s not the one.


Peter:I think one of the things I would say is also a little bit of a case study of what Casey just shared. So in 2018, we did an open call for blockchain projects across universities, where university campuses invited students to submit their ideas. We backed a dozen teams. With many of those teams, after six months of chipping away, things didn’t end up working. They went and joined traditional Web2 companies, and now they’re coming right back, which is exciting. So, thinking about the recycling of that talent. So you were tinkering with a group of incredible engineering friends at Berkeley and didn’t get commercial success or enough traction, so you’re going to join the team at Airbnb or another organization, and then coming back around. Paying attention to talent flows like that—I also think that’s interesting.

Flori:Yeah. And I think one thing that I believe in, and hope to be proven right, is that anytime there’s a new shift in society in terms of a new industry getting built, I do think it gives us the chance to rewrite who gets to own this space. I think that as a society in the U.S., we’ve seen that there’s this appetite for people who haven’t traditionally been considered investors to start learning how to grow the amount of assets and wealth they have by investing in this new type of technology. 

And because we are here for Carta: They do their equity report, which showed that only 14% of founders who raised funds in 2021 were women, and only 10% of fintech founders identified as women. Black and Latinx founders only make up 16% of all startup founders funded in 2021. Are we seeing this ability to create new projects from the ground up as an opportunity to change who gets to play in this space? How do you think that we can encourage more diverse founders to start companies in this space? Morgan, do you have any thoughts on that? It’s a big one.

Morgan:This is a big one. I had a very female crypto-heavy morning, which is definitely not representative of most of my days. I feel lucky that I worked on an NFT project called Stoner Cats with four amazing women. We had our weekly sync this morning. We were looking around at other projects and felt like we were unique in that aspect—which is not necessarily a good thing. And then I was speaking to another female founder right afterwards, who was on a similar rant. So I am coming off of three hours of those conversations.

I think that there are levers that push and pull, probably not good and bad. The things that push are: It’s generally intimidating if you’re trying to enter the space, regardless of ethnicity or gender, because there’s a lot of people who have been in the space for a long time and those people are very loud. And those people use a lot of acronyms and a lot of phrases as if you’re supposed to know what they are, and you don’t know what they are. So I think if you’re new to the space, regardless of who you are, you might be intimidated. And of course, there’s research that shows that if you are of certain groups, you succumb to the intimidation more easily. So that, I think, is bad.

I don’t know how we lower the education barrier, but I’ve been speaking to some people about how I think one of the most important projects that the whole space should be working on to bring more people in is just more education and more resources that are less intimidating. I think a lot of crypto resources are for crypto people and assume a baseline understanding. So there’s an amazing woman who I spoke to in New York, who’s working on something like that—to just make it less scary and more welcoming.

And then the plus side and the positives are, it’s much easier to start a project or a company. You get involved in a Discord when you’re sitting at home on your computer. You can throw up whatever avatar you want. You can ask whatever dumb questions you want. Someone doesn’t necessarily need to know who you are. It’s very different from going to a conference and having to shake someone’s hand in person if you’re shy. So I am hopeful that will bring more people in who might have otherwise been scared to walk up to someone and ask a question in person, or lived in the wrong location and couldn’t make their way to Sand Hill Road. So I’m net optimistic, but there’s things on both sides right now.

Peter:To add to that, I’m very optimistic. It goes back to just how early we are. We got the chance to basically shape what this community looks like. I’ll give you an example. During NFT NYC, as a complement to Morgan’s point around the digital communities, there was a dinner for Web3 artists, investors, founders, friends—all women and people of color. And literally, I funded the founder I sat next to two weeks later. I think part of it is also just continuing to community build. Leaning into supporting our friends and the people around us, I think, is going to be really important.

I’m in a conversation with a group to basically spin up a DAO to just focus on supporting projects of this flavor. That culture of inclusivity and community and feeling like everyone can still just be a student in learning, all of us continuing to bring along the other folks around us—maintaining that culture is going to be what we need to make sure we preserve.

Expanding the crypto talent pipeline

Flori: I definitely think the point that you guys are making about the fact that everyone is new—that should hopefully lower the psychological friction to making the jump into crypto, either as an investor or if you’re looking to join a company. Because you’re looking at the fact that everyone is reinventing themselves and everyone is new, and so we’re all at a very similar level—versus, for example, if you’re a teacher and you’re interested in jumping into finance, the friction is decades of experience that other people have on you. So I’m very hopeful. 

Someone on a panel I was on said something like “You can’t be what you can’t see.” I think it’s really important to bring to light the changing demographics. Even if the percentages aren’t really there, we can be loud and try to make sure that we’re calling in diversity that way. Casey, do you have any thoughts on the subject, as well?

Casey:Yeah. I used to not have thoughts on this topic. And then, after being the only female in the room, many, many times, I have formed a thesis, which I’m happy to share. 

First, there’s an amazing paper called “The meta-analysis of risk taking and gender.” And it’s given me a lot of understanding around what’s going on. The high level is that from a biological standpoint, men actually handle risk a lot better than females, traditionally. Specifically, there’s different types of risk. One of the worst ones for females is intellectual risk. We’re actually okay with health risk—that’s why smoking rates are actually pretty similar gender to gender. When you think about taking intellectual and societal risk, we really historically struggle with that.

That, to me, is the primary reason we don’t have equal distribution right now. And I think being aware of that bias—I don’t have very strong views of why that is, I’m just telling you the data. I think there’s a lot of reasons that has come to be what it is. But it’s good to just know that. 

I love my parents so much for what they’ve done, but maybe the number one thing I will be eternally grateful for is not instilling fear in me as a young child, and giving me the freedom to just do whatever I wanted and be OK with risk. As we mentor females, and as you just interact with females—everybody should be encouraging risk taking.

I don’t know if this made sense—I didn’t really draw back to crypto. But crypto is a huge risk. It still is a risk. It’s an emerging market. It was a lot scarier a few years ago. So all good to say, I think the problem will dissipate naturally as we become less of a risky industry and people feel okay saying “BlockFi’s on my resume, and that’s the way it is.” It’s a sad reality of the data, but my hope is that it fixes itself in the next half decade. I feel like Peter’s looking at me like, “Maybe not.”

Peter:No, to be clear: I think it’s so important for us to work together on this, because I feel like it’s still so early. If you think about this like the initial conditions—we have to get it right, right now. Because it’s almost like the big bang. Everything is going to emerge from this moment in time. I’m so optimistic and so hopeful. And that’s why, whether it’s the hosting, or just even just like Morgan—I’m literally going to ask you afterwards who that founder was that you were chatting with this morning, because I’d like to meet her.

Flori:One thing I try to do, especially on the recruitment side, is to really challenge ourselves as a society to redefine joining an early stage project. I don’t know if we’re thinking about that as “risky” in the right way. Because I do think that taking a chance on a novel industry and learning—even if the company or project doesn’t work out, you have invested in yourself and your mind, and the amount that you’ll learn as an individual because you’re going to have to wear 10 hats instead of just one in a giant, safer corporation. You are now more valuable as a person who can contribute to a project, and so your options for what you can work on after are actually exponentially higher, even if you gave up a higher-paying salary for two years—and also to know that that job will always be there. You can always go back to the safe route if the risky route doesn’t work out.


Flori:So kind of like hacking, what you’re about on paper—to not necessarily think about it in just terms of riskiness of company success, but also think about it as, “How am I investing in myself, and how valuable will I be coming out of this experience?”—even if it doesn’t necessarily work out from a straight monetary value.

Casey: I have one thing to add on that. So I love this thought, this is a request for a startup. I actually might publish this list. If I were an operator, there’s so many things that I want to build right now. One of those things is an accolade NFT project. A lot of the reason people go to Google or go to HBS or go to those “mark on the resume” situations—it’s to show that they can. So we should utilize NFTs where it’s like, if you got into Google as an engineer, you can get an NFT, which verifiesI’m We  that you got the offer. Then you don’t have to take the offer—because everybody knows that you could have gotten it. And then you could go to BlockFi or whatever it is. I genuinely feel like this would do really well. So if anybody listening to this wants to incubate this, let me know. I think it would be a good way to hash out the risk in a different way.

Peter:I think that in tandem with grants, resourcing that, so folks can have a baseline of financial foundation. I mean, we should do this.

Flori:I love it. I think we’re heading into the last 10 or 12 minutes, so I’m going to scroll through the comments and pick out some questions that I thought were interesting. 

Are we past the stage for investing in Layer-1 protocols? Is it just an arms race now for projects building on top of networks? 

Morgan:Never say never. Again, broken record—and I don’t get paid for using this phrase often—but “network effects.” I think there’s definitely network effects to the Layer-1s that are out there. I also think that from a regulatory perspective, there was a moment in time where you could launch a Layer-1, decentralize it enough, and you couldn’t put the genie back in the bottle. I don’t know if that is possible in the same way that it was because regulators have become more educated since. That said, there are some Layer-1s I’m watching that I’m excited to launch. So I think it’ll be harder, but I’m never saying never.

Flori:Peter and Casey, do you have thoughts on that?

Peter:I put my initials next to Morgan’s

Flori:We’re cosigning. So another question, from Nigel, was, “Is crypto risky as one of the components within DeFi? Can investors diversify to balance the risk between blockchain-based offers and NFTs and challenger banks and alternative financial services providers?” 

So, “yes” is the answer for building a portfolio. But I would maybe shift the question a little bit, like, “How do you think about diversifying your portfolio of investments, and what is a less risky breakdown between FinTech, NFTs, and blockchain-based projects?

Morgan:I want your answer for it.

Flori:My answer?

Morgan:Yours professionally, in this business.

Flori:I’m not an investment advisor and this is not investment advice—nodding at our legal counsel. He’s happy somewhere, shout out to Jonathan. But I’ve thought about this a lot, and I think that for investors who are new to crypto, experiencing days of 20% volatility swings in the price of Bitcoin is tough to swallow. What I usually say to first-time investors is to definitely start small, so that you can get used to the rocky ride—but also then get used to the fact that that’s historically been the best-performing asset in the last decade. So after the sleepless night of watching it go down 30% overnight, year over year, if you invested in the last year, it most likely is the thing that performed the best in your portfolio when you think about Bitcoin.

There definitely is some correlation between bear markets and all coins. I personally have not dipped my toes into NFTs yet, so I’m a little bit slower on the adoption side—and you guys can criticize me for it. I’m a little bit more towards keeping it towards the bigger projects. So starting with Bitcoin, and then adding in the opposite end of the risk spectrum, like real estate investments. You have that really slow, incremental return. And then also the crazy upsides that Bitcoin can offer.

Peter:No criticism here. We’re going to share projects with you, and we’re going to get you into the mix.

Flori:I want that.

Peter:That was a big part of what got me so primed, that cultural and artistic aspect, as someone who went from sneaker collector to NFT collector. But my rule around this is just, “Follow the most brilliant people you know, and pay attention to where they’re concentrating.” They’ve historically concentrated in places like fintech and consumer health, and other areas where the room for impact is so large. Increasingly, they’re concentrating and spending time here. So I follow the people. So I look at Trevor and Alex from FWB and I pay attention to that work. I look at Tess Rinearson joining Twitter as an example of a public company worth paying attention to as a result.

So my rule is to just follow the people and really take the opportunities to support the work that friends are pursuing. Because whether that works or not, the risk on that journey, you process that totally differently. To have a $1,000 disappear to a friend’s NFT project, to be actively supporting them and going along for their journey, can be valuable in and of itself. And then in the downside scenarios, those risks and those learnings when you lose your stomach prepare you for the next opportunity and give you learning. And so that’s how and why I’ve constructed my investing and my work with Stellation that way.

Volatility and risk

Flori:I also think Craig just put in a great point, which is that most people confuse volatility with risk when it comes to Bitcoin and Ethereum and some other old coins. I definitely think that’s an interesting topic to think about. Casey, do you think that volatility equals risk—and how can investors looking at Bitcoin and Ethereum think about that?

Casey:I do, but I think the caveat is that it’s always on a time scale: so, risk over what horizon. That’s always a problem with crypto: it’s never about, “Oh, did this project do well? It’s, “How well did this project do in comparison and in relation to the other projects I could have funded?” So I think, yes, volatility probably does equate to risk, at least in my mind. But just be really cognizant of your timeframe, and then volatility can graduate from risk to more excitement.

Flori:I think that also ties it back to what we were talking about in the beginning, which is when you’re looking at projects—and also what Peter was just saying, looking at the founders, or who’s creating the NFT and who’s controlling it. A topic that has come up a lot recently with some of our investors who are looking at early stage companies is that oftentimes, it’s not necessarily the original business plan that is the mark of success of the company. It’s actually the founders in the leadership, because the business plan is going to change and the whole point of building a company is that you’re listening to your consumers in the market and you’re being nimble and shifting that. So it’s very rare that your initial vision is exactly what you end up building. That’s why the strength and the character of the people leading it could be a better predictor of the ultimate success of the project. 

Morgan, have you seen that with people you’ve worked with, or companies you’re looking at?

Morgan:Well to come back to my corny answer of how you suss out the bullshit: It’s about the people. The way I describe seed investing generally is that it’s a complicated equation, and really the only fixed variable is the founder. Every other variable will change, whether it’s the name of the company, the markets, the idea, the price of Bitcoin. So I very, very much agree with that.

Flori:Peter, any additional thoughts on that?

Peter:This is my favorite. You were preaching as you were sharing that. The added things I would say: The notion of integrity was mentioned. Are folks basically pursuing and building their projects and their companies with integrity? I think that’s really important. The second is just the level of like personal identity connection, like how much of their identity, how much of the mission of the company, is something that’s deeply seated in them? I think that’s often a sign of someone who can go the distance through those ups and downs, because the ups and downs of the volatility, so to speak, is guaranteed in a way. But are you in it for the right reason?—that’s what makes it so that you can make it to the other side and get that long enough, to Casey’s point, that long enough time horizon, where it turns into opportunity and excitement. So those are the other aspects. 

When we’re meeting founders for whom it feels like they’re pursuing their identity missions—that’s where, with Stellation, my eyes brighten and I’m like, “Oh my gosh, I’m excited to join you on the journey.”

The future of crypto investing

Flori:With the last three minutes, I’d love to go through one thing for the future. My question is going to be: Over the next year—so in 2022—what’s one shift or one advancement that you’d love to see in the crypto markets? 

I’ll kick off with an idea that Casey actually mentioned earlier, which is something that drives me crazy. And I don’t think we’re perfect at it, but we’re working on it: It’s the lower bar for UX on crypto projects. We’re just so used to it as users: to have to do a million things to get through. So one thing I’d love to see shift in the future is holding blockchain and crypto projects to the same bar that we expect from any other app on our phone. And I think the outcome of that will be just more mainstream people who have not yet invested moving into the space for the first time.

Flori:Who has their idea? Casey, do you have a wish list for 2022?

Casey:Oh yeah. I have a very long wish list. Let me see which one might be relevant. I think that if you look at the crypto market and what the impact has been on society, there’s Bitcoin and there’s Web3, DAOs, NFTs. I think all of them except DAOs have a primary motivation of wealth generation. This is maybe a little bit of a hot take, but DeFi: you’re trying to make money. A lot of NFTs, it’s primary. There’s secondary: there’s social, there’s community. But people are buying these NFTs—I’ve done a ton of user interviews—to make money. DAOs, though, are different. And this is why DAOs are super exciting to me: They’re actually this like crypto-native construction that’s not dependent on people trying to make money. That’s just really exciting to me.

I think what Constitution DAO did—and for those who aren’t familiar with that project, people came together in 72 hours and raised like $40 million or something to go buy the Constitution of the United States—it ultimately failed, but that was this insane demonstration that people do want to coordinate more. And even though we could have done that—I want to make it short, but basically I think that in the next year, we’re going to see a lot more people come together to buy real-world assets. And it’s going to be this unique crypto thing—because no one has ever done this. I mean, there’s been like GoFundMe and stuff, but no Web2 product has really unlocked this, and it’s going to be massive. I am so excited, because I’m going to go buy a ton of stuff with my friends. I just think it’s going to be its own little category. Anyone building in that—I’d love to talk.

Peter:I love that. Just really quick: another example of that, Casey, because I’m also excited about exactly that: experiments and projects like Mad Realities—we can all dictate aspects now of a reality TV show. I’m so excited for that experimentation and what we’re going to see emerge next year.


Flori:Do you want to give us your wishlist for 2022, Peter?

Peter:My wishlist is the inclusivity dimension, which is the experiments around young, old, women, people of color—we have to ensure everyone is in the mix. So whether it’s the new projects that emerge or the community events, conversations like this one, made possible by Carta—that’s what I’m so excited about. I just want more things on that list to fill in next year. And I think we can all play a part in hosting them and leading it.

Flori:Awesome. Morgan, close it out.

Morgan:Well, all of the above, to start. On the product UI front, amen to that. I think we’ve all become very comfortable with eating glass. We’ve been in this space for a long time and met people new to the space where like, this shit sucks. 

So that’s baseline, but I would say in terms of things that I haven’t thought of before or things that don’t seem obvious—and I’m probably going to piss off a lot of founders, and not make a lot of friends with this comment—but where I’ve been bummed for the past few weeks and months was speaking to another crypto investor, who’s way smarter than me and who I won’t name. I was like, “Isn’t it madness? Aren’t you so tired? There’s so much going on.” And he was like, “Yeah, but when was the last time you heard a pitch that was actually interesting and not a consensus idea?” And this is where I’m like, “I shouldn’t be saying this,” but I think when the internet first started, you got because you had a pet store and people were like, “Oh, that makes sense. I’m going to put a pet store on the internet.” But we didn’t have the mental models to think of Amazon, Netflix, Uber, et cetera.

So I think right now we are seeing a lot of copy and paste concepts. There are a lot of net-new novel things, but there’s also a lot of like copy and paste concepts and products from Web2, like I mentioned—like Shopify for NFTs—which will exist. I’ve seen 27 of those. So I’m just excited for ideas that I have not thought of yet, for experiences and products that were not possible to be done in Web2 at all, that are uniquely enabled by this world—which, again, we’re starting to see some of, Constitution DAO being a great example. But I think we ain’t seen nothing yet, so I’m excited for that.

Flori:I hope that people listening to this call—to the point of what we’ve been talking about this whole time—who do have genuine passions and projects that are currently not being built to think about moving into the space and maybe not doing the copy/paste, but thinking about how this this new technology can give our society access to something we don’t currently have.

I really appreciated speaking with all of you, and I thought this was super fun. Thanks, everyone, for joining.

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