Help me start a 2ndary focused investment fund for crypto start-ups

Title says, looking for help on launching a fund that focuses on 2ndaries of start-ups starting with the start-ups that raised Series A or more in the crypto space.

I currently have an investment thesis and some idea how to calculate required AUM size. Need help understanding the operations (best channels for buying secondaries, competitiveness of bidding, likelihood of paying premium vs buying at a discount) to fill the gaps for the AUM size calculation, legal stuff (fund structure, Incorporation locations and terms, etc...), and fund raising strategies (who to contact, how much money to ask for each, appropriate number of LPs,etc...)


Below, I'm laying out why I'm interested in the space, what led me to think about investments, and some examples of qualitative analysis I did that could serve as starting points for a full investment analysis.

Last fall, I started to get interested in DeFi and the underlying technology. Ever since, I've been spending some time to understanding the space, particularly the implications to the financial world and the Web. (So called Web3 and DeFi). 

I've been carefully watching dveleopments in these spaces as well advancement in the underlying blockchain tech (I'll colloquially call this the crypto space).

After bouncing around couple ideas, I started working on a side project a few weeks ago on creating long-term incentives for liquidity stakers and traders on DeXes (it says I work in AM but my domain is in capital markets doing some quanty and product engineering stuff. Pretty niche position dealing with lots of trader use cases - agency shops, market makers, retail, and institutional  buy side).

I was hoping to launch a start-up but as I start to do more research, I'm seeing that most of my ideas are just starting to become realized into real products with real VC money by people who had 5+ years of head start on me in the crypto space.

For example, 1) I figured out that AMM based DeXes are essentially price followers and hence have limited scope on supporting traders - uncertainty of transaction price and possibility of impermanent loss really limits things + there's a cap on how much these things can improve without having price discovery mechanisms. Also means that impermanent loss is a self imposed issue that just goes away if your exchange becomes a price discover mechanisms or can follow other exchanges very quickly through faster arbitrage. This means that AMMs just can't compete with orderbook exchanges. But then I figured out that literally Sam Bankman-Fried and others saw the same issues 5 years ago and helped transition DeXs to be more Order Book focused...

2) Yields on Staking mechanisms are currently very hazy and not so very sustainable. Providing consistent staking models with risks well defined can be winning business. Alas, there is Compound...

3) When I started learning about Dapps, I thought "man all these are super jargon-y and difficult to use. I bet if you make an easy interface where all the Dapp functionality are super easily described in a way that makes sense to everyone that could help many people transition from traditional finance and Web2 to Defi and Web3". Last week I learned that Phantom just got $100mil Series B from A16Z for doing exactly that....

4) Also figured out that Non-custodial exchanges are the future of capital markets with better cost efficiency and Rev opportunities given how easy it is to support automated clearing and settlements, 24h trading, smaller decimalization, and more. But the underlying blockchain tech just isn't there to support the nano second level trades that equities require. Hence why decentralized exchanges are starting to target the derivative markets and going after CBOE and CME... Essentially, the winners among DeXs will be ones that can reduce trading cost as mush as possible, can provide the most secure ways to trade, and can trade faster. Also there will be couple smaller exchanges taking particular niches that support smaller (in volume) yet significant trading use cases (some of these might be untimely for now - ie. Not a lot of big institutional money is into the crypto investing and won't be all that sophisticated until it becomes a legitimized asset class with enough regulatory structure. So no need yet to support those use cases).

The pattern here seems to be that a) I can figure out what efforts need to be made at what times to advance the DeFi/Web3 space, b) But then I figure out someone already had this epiphany couple years ago and have just launched a Series A or B start-up recently, and c) I'm stuck here alone trying to figure out how to catch-up.

So I had this thought that why don't I start buying 2ndaries of these start-ups? There will be lots of new oppurtunities in the future as the space matures. Especially considering that A16Z, Sequoia, and Paradigm raised $2.2B, $3.5B, $2.5B respectively with plans to raise more, I figured market for 2ndaries are big enough for a new kid on the VC block.

I have a clear investment thesis - to invest in 2ndaries of DeFi and Web3 (+other blockchain infrastructure) companies that have raised Series A or B in the last year or so.

I'd like keep a 80:20 ratio btw spaces that i have a deep technical expertise in - the DeX and DeFi space- and spaces that I have a general understanding of where things are going and have some thoughts on (ie. I think that a market dominating wallet company would be ones that can bring DeFi and Web3 experiences to people in jargonless and easy-to-use ways and consistently introduce new features as consumer trends change. Or dominating Web3 infra provider would be ones that can provide a working privacy solution quickly and get 1st mover advantage. Infra play is sticky and changes in market dominance happens in much longer time frames IMO).

I'm pretty technical and detailed so I can do due diligence and company analysis. I just need help figuring out how to get through the legal stuff, raise money, and learn the operations behind running VC secondaries (like how and where do I go to buy shares? - is it on a personal basis? Can I just go to AngelList? Is the 2ndaries market competitive - competitive bidding that forces funds to pay a premium for secondaries? ). What should my first steps be?

If anyone is interested in helping me out, please reply or DM me. Thank you!


TL;DR: Feels couple years late to the crypto start-up game. Looks like early innovators used that time to find good theses for product-market fit and get funded. There is some series money backing these efforts - at least $8B from A16Z, Sequoia, and Paradigm of primary crypto funds. Capital to likely grow much more (A16z planning on doubling fund size).

I feel pretty good at understanding and predicting where things will go in the crypto space - particuarly the DeFi and DeX space given my expertise in doing quant-y product eng for Capital markets. Starting to realize I'm in a much better position to invest and observe first before doing a start-up. Would like to start with launching a fund focusing on secondaries but need help with legal stuff, fund raising, and operations.  Plz DM or reply if interested in helping! Thx!

 

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