FIG IB to Crypto VC?

I'm a 1st year FIG IB analyst at a lower tier BB and it's around that time to start looking for exit ops. Would it be realistic to pursue Crypto VC from this position? It's a nascent space, and I would think more of a techincal background would be sought after, but I think it could be worth a shot. Any thoughts would be appreciated.

Comments (69)

  • Analyst 1 in IB-M&A
Dec 28, 2021 - 1:02pm

I wouldn't really call it nascent. A lot of VCs are building out dedicated crypto teams (or at least as a sub vertical of Fintech-focused funds). Your skill set will be in demand

  • Analyst 1 in IB - Cov
Dec 28, 2021 - 7:48pm

I highly highly doubt any of the "hard" skills we learn in IB as an analyst like building DCFs and LBOs will be relevant to being a good crypto investor. Most crypto investing right now is done at the earlier side of things.. so shocker its going to be helpful to be extremely knowledgeable and opinionated on the space, be at a good platform to even see quality deals, and honestly have some some or network/social media presence. Not saying you have to be an influencer or anything but a lot of these crypto investors have personal brands through substack, twitter etc. Just my 2c as someone with some close friends in the crypto space as either builders or investors. Not saying its not possible to go from IB to Crypto, but I think practicing modelling and your traditional technical skill sets will only get you so far. 

  • Analyst 1 in IB - Cov
Dec 28, 2021 - 9:09pm

I agree.. my group covers some of these crypto exchanges coming to market and I expect M&A/IPOs to heat up so I'm hoping for some relevant deal exposure. I'm trying to brainstorm what the best angle would be to get into the space and I haven't seen much written about the transition.

  • Analyst 1 in IB - Cov
Dec 29, 2021 - 12:44am

I have worked in a big cryptocurrency trading platform as a "product manager". Quotes because there is not many "crypto products" you can build. It's really just old finance stuff using crypto as hooks. 

Strongly advise against going into crypto VC, unless you somehow get into established, more of a traditional finance fund. Let's say Point 72 or Two Sigma somehow has a crypto venture team. Join that team if you can, otherwise please don' bother.

Reason being:

1. As others have pointed out, crypto investing is super speculative. You might think you should read the white paper first, do DD on the developers, the brain behind the project, think about the business idea, etc. No. The truth is, a lot of crypto projects make money by monetizing on this fervor and fad. I have 1 friend who coined her own NFT, which is one kind of crypto, for some shit she found in her living room, and she got ~$2,000 from it. The way people in this space makes money from non-mainstream tokens like Bitcoin and ETH is get in before others do, and get out before others do. Sounds familiar? The difference is when you get in, you have minimal information to assess the deal. Thus, speculative.

2. A whole lot of projects aim to take your money and run away. I've seen it happen to someone when she invested in Sushi. There was also a craze about Yield Farming. That someone was holding to a position that seemed profitable enough, and got wiped out within a week when Sushi Chef decided to run away. 

3. Trading platforms are tricky. Your account access might get blocked so the platform can reap cash from dumb idiots or overly-passionate speculators who somehow think they are saving the world by investing in this stuff.

Perhaps it's because I think the whole crypto space is scam and the only beneficial thing coming out of this is the blockchain technology itself. 

  • Assistant PM in HF - Other
Dec 29, 2021 - 3:13am

There is no one who has spent any time working in crypto who would say "I think the only good thing coming out of crypto is blockchain technology itself". That doesn't even make technological sense. Why do people LARP like this so much? 
 

OP to answer your question, the market right  now for talent in crypto is likely the hottest sub vertical in the job market there is. And there is a lot of demand for good, talented people who have a traditional finance background. This is for a few reasons, first almost every single major fund in the world is either already investing in the equity of crypto businesses or is gearing up to do it. Off the top of my head and in no specific order other than as I thought of them, I know KKR, Apollo, Goldman, Morgan Stanley, Thoma Bravo, Citi, Goldentree, General Atlantic, Point 72, Susquehanna, Two Sigma, Third Point, Declaration Partners, Fortress, Marshall Wace, Brevan Howard, Blackrock, Wellington, OTPP, Temasek, ICONIQ, Tiger, Ribbit, Natwest, Lightspeed, Tribe, Valor, Accel, Coatue, Blackstone, Bain, Insight, TCV, NEA, Fidelity, Holocene, Whale Rock, Baillie Gifford, DFJ, Soros, Raptor and DST are all somewhat publicly doing private growth equity deals in the space and some (Susquehanna, NEA, Two Sigma, Coatue, Tiger, Brevan Howard, Goldentree, Holocene, Thoma Bravo, Tribe, Valor, Light speed and more to come) are already doing private earlier stage deals where they take tokens in lieu of equity. That also doesn't include traditional early stage VCs who are doing a lot in the space (A16z, Union Square, Sequoia, etc). Meaning, in all these cases there are people already who value your skill set who are rapidly moving into the space and are often recruiting teams to do so. We are also seeing more crypto native funds get raised than ever before (Pantera, Multicoin, Polychain, Coinfund, Paradigm, A16z, Blocktower, Jump, etc are all successfully raising new funds) and crypto native talent isn't fulsome enough to fill the demand so they are taking dedicated smart people from tradfi backgrounds who have demonstrated an ability to analyze businesses. 

On the growth side, we'll see more deals happen in crypto this upcoming year then ever before and your skill set will be as valuable as it is in traditional growth equity. The ability to model and analyze businesses, to do due diligence, to dig into unit economics, to run processes, etc is the same as it is in any industry. In fact, most crypto growth businesses look and feel like non - crypto businesses in many ways and analyzing them isn't particularly different (just with some added variables). On the venture side, if you want to go somewhere more crypto native, your best bet is immersing yourself enough in the space to clearly know what's going on (if you don't know what's going on right now with Sushi or  YFI, you aren't immersed enough) and network hard. 

All in all, it's doable, but you'll need to do more leg work and be committed enough to look for opportunities and be actually be deep into the space to know what's going on. 

Dec 29, 2021 - 1:07pm

Hey, I read your post and the lengthy argument you had with another user down below. You seem very knowledgeable about institutions entering crypto - would you mind DM'ing me to talk about it a bit more? I'm a big crypto enthusiast, currently trying to break into the industry, but I don't have anything close to the level of institutional awareness you have. If you're not interested, cheers anyway.

  • Assistant PM in HF - Other
Dec 29, 2021 - 4:23am

This battle has already been fought and won. Crypto as an industry is going to continue to grow and is here to stay. Any single shitcoin or project may fail, but you can't look at that list I put above and come to any conclusion other than "the best investors in the world now all believe in long term health of the industry". And the reality is that these things are self fulfilling prophecies, as billions of dollars continue to flow into the ecosystem from traditional investors the likelihood of the whole ecosystem failing (not any one business) decreases dramatically. 

In ten years we won't talk about crypto the way we do now, it'll just get consumed into the verticals we already cover and it'll just be a part of the story and value add for some of these businesses. 

Dec 29, 2021 - 4:33am

This battle has already been fought and won. Crypto as an industry is going to continue to grow and is here to stay. Any single shitcoin or project may fail, but you can't look at that list I put above and come to any conclusion other than "the best investors in the world now all believe in long term health of the industry". And the reality is that these things are self fulfilling prophecies, as billions of dollars continue to flow into the ecosystem from traditional investors the likelihood of the whole ecosystem failing (not any one business) decreases dramatically. 

In ten years we won't talk about crypto the way we do now, it'll just get consumed into the verticals we already cover and it'll just be a part of the story and value add for some of these businesses. 

If you say so. The battle hasn't been "fought and won". That will only occur when crypto is regulated, as it inevitably will be in time if it continues its growth trajectory. They will regulate the shit out of it, most of the fast + easy money will disappear overnight together with the rugpull and scam shenanigans. All of those are secondary points.

Primary point. Crypto has never existed in a macro recessionary backdrop. It was created at the outset of a new bull market post the GFC. All crypto crashes thus far have  been set in favourable macroeconomic environments which have facilitated expeditious recoveries. Let's see how crypto does/survives in the midst of a recession and multi-year bear market. We haven't seen it yet. 

Most Helpful
  • Assistant PM in HF - Other
Dec 29, 2021 - 4:52am

iggs99988

This battle has already been fought and won. Crypto as an industry is going to continue to grow and is here to stay. Any single shitcoin or project may fail, but you can't look at that list I put above and come to any conclusion other than "the best investors in the world now all believe in long term health of the industry". And the reality is that these things are self fulfilling prophecies, as billions of dollars continue to flow into the ecosystem from traditional investors the likelihood of the whole ecosystem failing (not any one business) decreases dramatically. 

In ten years we won't talk about crypto the way we do now, it'll just get consumed into the verticals we already cover and it'll just be a part of the story and value add for some of these businesses. 

- expand -

If you say so. The battle hasn't been "fought and won". That will only occur when crypto is regulated, as it inevitably will be in time if it continues its growth trajectory. They will regulate the shit out of it, most of the fast + easy money will disappear overnight together with the rugpull and scam shenanigans. All of those are secondary points.

Primary point. Crypto has never existed in a macro recessionary backdrop. It was created at the outset of a new bull market post the GFC. All crypto crashes thus far have  been set in favourable macroeconomic environments which have facilitated expeditious recoveries. Let's see how crypto does/survives in the midst of a recession and multi-year bear market. We haven't seen it yet. 

A few points: 

1) It has already been fought and won. It has outgrown the ability to be regulated into non existence (as an industry) and it's now enough of a political risk as to make any attempt to do so perilous for most in office. If the US were to say, make every dApp a security, the whole industry would just move offshore and the technological disadvantage the US would be at would quickly cause itself to correct (not dissimilar to what happened in telecom infra). 

2) Everyone (except for some degen traders) wants scams and rug pulls regulated out of the market. That only brings more institutional capital into the space, not less. It makes it more easy for institutions and retail to access. The closer we get to regulating and policing out the scams the more the growth accelerates. 

3) Right now crypto is actively touching and innovating around EV charging, IoT infrastructure, Telecom, Energy, Cross Border payments, Gaming, Asset Management, Mortgages, Primary issuances, banking, identity and verification, etc. If the implication that a global recession is likely to kill innovation in all those sectors, I encourage you to look at how cutting edge technology has performed in the years following previous recessionary periods. 

It strikes me your view on this comes mostly from "price of BTC and Doge does x", but that just tells me you aren't deep enough to know what's actually going on in the space. Apollo isn't raising a crypto fund because of the price of Doge, they are raising it because of the innovation that's happening in the space and the opportunity set it provides. A global recession might cause (another) large correction in crypto prices, but that's not stopping anything in the industry that is actually pulling in the world's best investors. 

Dec 29, 2021 - 8:06am

iggs99988

This battle has already been fought and won. Crypto as an industry is going to continue to grow and is here to stay. Any single shitcoin or project may fail, but you can't look at that list I put above and come to any conclusion other than "the best investors in the world now all believe in long term health of the industry". And the reality is that these things are self fulfilling prophecies, as billions of dollars continue to flow into the ecosystem from traditional investors the likelihood of the whole ecosystem failing (not any one business) decreases dramatically. 

In ten years we won't talk about crypto the way we do now, it'll just get consumed into the verticals we already cover and it'll just be a part of the story and value add for some of these businesses. 

- expand -

- expand -

If you say so. The battle hasn't been "fought and won". That will only occur when crypto is regulated, as it inevitably will be in time if it continues its growth trajectory. They will regulate the shit out of it, most of the fast + easy money will disappear overnight together with the rugpull and scam shenanigans. All of those are secondary points.

Primary point. Crypto has never existed in a macro recessionary backdrop. It was created at the outset of a new bull market post the GFC. All crypto crashes thus far have  been set in favourable macroeconomic environments which have facilitated expeditious recoveries. Let's see how crypto does/survives in the midst of a recession and multi-year bear market. We haven't seen it yet. 

- expand -

A few points: 

1) It has already been fought and won. It has outgrown the ability to be regulated into non existence (as an industry) and it's now enough of a political risk as to make any attempt to do so perilous for most in office. If the US were to say, make every dApp a security, the whole industry would just move offshore and the technological disadvantage the US would be at would quickly cause itself to correct (not dissimilar to what happened in telecom infra). 

2) Everyone (except for some degen traders) wants scams and rug pulls regulated out of the market. That only brings more institutional capital into the space, not less. It makes it more easy for institutions and retail to access. The closer we get to regulating and policing out the scams the more the growth accelerates. 

3) Right now crypto is actively touching and innovating around EV charging, IoT infrastructure, Telecom, Energy, Cross Border payments, Gaming, Asset Management, Mortgages, Primary issuances, banking, identity and verification, etc. If the implication that a global recession is likely to kill innovation in all those sectors, I encourage you to look at how cutting edge technology has performed in the years following previous recessionary periods. 

It strikes me your view on this comes mostly from "price of BTC and Doge does x", but that just tells me you aren't deep enough to know what's actually going on in the space. Apollo isn't raising a crypto fund because of the price of Doge, they are raising it because of the innovation that's happening in the space and the opportunity set it provides. A global recession might cause (another) large correction in crypto prices, but that's not stopping anything in the industry that is actually pulling in the world's best investors. 

If you think that crypto has outgrown the ability to be regulated, you're in for a rude awakening. Whether that is regulation into non-existence or not is immaterial. Once regulators enter the picture, the extreme returns that have come from extreme levels of speculation will be moderated. When crypto becomes a more mature, vanilla "asset class" (can't even be called an asset class if there are no associated cash flows or any way to derive intrinsic value), the speculators that drove early crypto adoption into the public consciousness will take their ball and go home. Why wouldn't they? No risks, no returns, and no returns means it won't be worth their time. Do you honestly think the Blackrocks, Vanguards and Fidelitys of the world are going to drive the next chapter of the funny-money growth cycle alone? No. They're only starting to dip their toes in now at very small allocations because the water is still warm.  

  • Assistant PM in HF - Other
Dec 29, 2021 - 8:34am

iggs99988

iggs99988

This battle has already been fought and won. Crypto as an industry is going to continue to grow and is here to stay. Any single shitcoin or project may fail, but you can't look at that list I put above and come to any conclusion other than "the best investors in the world now all believe in long term health of the industry". And the reality is that these things are self fulfilling prophecies, as billions of dollars continue to flow into the ecosystem from traditional investors the likelihood of the whole ecosystem failing (not any one business) decreases dramatically. 

In ten years we won't talk about crypto the way we do now, it'll just get consumed into the verticals we already cover and it'll just be a part of the story and value add for some of these businesses. 

- expand -

- expand -

- expand -

If you say so. The battle hasn't been "fought and won". That will only occur when crypto is regulated, as it inevitably will be in time if it continues its growth trajectory. They will regulate the shit out of it, most of the fast + easy money will disappear overnight together with the rugpull and scam shenanigans. All of those are secondary points.

Primary point. Crypto has never existed in a macro recessionary backdrop. It was created at the outset of a new bull market post the GFC. All crypto crashes thus far have  been set in favourable macroeconomic environments which have facilitated expeditious recoveries. Let's see how crypto does/survives in the midst of a recession and multi-year bear market. We haven't seen it yet. 

- expand -

- expand -

A few points: 

1) It has already been fought and won. It has outgrown the ability to be regulated into non existence (as an industry) and it's now enough of a political risk as to make any attempt to do so perilous for most in office. If the US were to say, make every dApp a security, the whole industry would just move offshore and the technological disadvantage the US would be at would quickly cause itself to correct (not dissimilar to what happened in telecom infra). 

2) Everyone (except for some degen traders) wants scams and rug pulls regulated out of the market. That only brings more institutional capital into the space, not less. It makes it more easy for institutions and retail to access. The closer we get to regulating and policing out the scams the more the growth accelerates. 

3) Right now crypto is actively touching and innovating around EV charging, IoT infrastructure, Telecom, Energy, Cross Border payments, Gaming, Asset Management, Mortgages, Primary issuances, banking, identity and verification, etc. If the implication that a global recession is likely to kill innovation in all those sectors, I encourage you to look at how cutting edge technology has performed in the years following previous recessionary periods. 

It strikes me your view on this comes mostly from "price of BTC and Doge does x", but that just tells me you aren't deep enough to know what's actually going on in the space. Apollo isn't raising a crypto fund because of the price of Doge, they are raising it because of the innovation that's happening in the space and the opportunity set it provides. A global recession might cause (another) large correction in crypto prices, but that's not stopping anything in the industry that is actually pulling in the world's best investors. 

- expand -

If you think that crypto has outgrown the ability to be regulated, you're in for a rude awakening. Whether that is regulation into non-existence or not is immaterial. Once regulators enter the picture, the extreme returns that have come from extreme levels of speculation will be moderated. When crypto because a more mature, vanilla "asset class" (can't even be called an asset class if there are no associated cash flows or any way to derive intrinsic value), the speculators that drove early crypto adoption into the public consciousness will take their ball and go home. Why wouldn't they? No risks, no returns, and no returns means it won't be worth their time. Do you honestly think the Blackrocks, Vanguards and Fidelitys of the world are going to drive the next chapter of the funny-money growth cycle? No. They're only starting to dip their toes in now at very small allocations because the water is still warm.  

Again, I think the disconnect here is just that you're ignorant with what's happening in the space and how investors are playing it. I don't mean that in a derogatory sense, there are so many articles with headlines about Dogecoin speculative riches that you actually have to care enough to get passed it and learn. But a few thoughts: 

1) I didn't say it can't be regulated (in fact it's actively being regulated!). There is more money being put into lobbying efforts, political campaigns, legislation drafting, and education then ever before. The industry is actively working on helping itself become more regulated! It's literally spending time with the regulators and legislators to educate them, it's helping Co sponsor bills, and its starting to set up very typical lobbying machines (with help from a lot of the non-crypto native funds I listed above!). 

Your point about "it's immaterial if it can be regulated into non existence" is just a silly statement. Regulation =\= bad! It's, in fact, good in many cases. Overburdensome regulation and punitive regulation (meant to shut down innovation in and industry) = bad. Whether or not crypto is passed that very real milestone of being regulated out of existence is, quite obviously, very material. 

2) Who cares about early crypto adopters (all already wealthy retail) leaving the industry? What does that have to do with anything? I don't give a shit about whoever used Netscape, MySpace, Napster, Pets.com, AOL, etc. Those were all great companies in their time that helped push forward innovation and now they aren't, did that stop the internet from growing exponentially? Why would it matter to crypto building and innovation today if those early adopters left when there is tens of billions of dollars of capital from the best investors in the world flowing into a space that is also seeing rapid talent growth? It doesn't. 

And do I think Blackrock and fidelity will still be there when there are more founders and more capital flying into the space than ever before and most other industries? Of course I do. That's how markets work. Blackrock has put several hundred million to work in the space this year. So has KKR and Fidelity. Apollo slightly less so, but has actively hired a team to go raise a fund. Temasek, GA, Accel, Tiger, Coatue, Thoma Bravo, Brevan Howard, Marshall Wace, Goldentree, Third Point, etc etc etc have all written tens to hundreds of millions of dollars into the space this year (in private equity, not liquid tokens).  Do you think all of those guys will lose interest because of regulation? Or they aren't engaging in active dialogue with regulators? That they haven't considered how a bear market would affect their portfolio companies? 

Again, this isn't how private and growth equity works. Maybe it's just that you and I have an experience gap, but your position only makes sense in a world where all participation is retail focused (Wealth/Asset Managers and their retail customers) and it's clearly not as evidenced by the billions of dollars flowing into private investments in crypto linked businesses by non token investors. 

Also, the idea that there is no way to find intrinsic value in the space is, of course, laughable (again, is KKR writing $150mm checks with no intrinsic value to be found?). But that again tells me your focus is entirely on how Doge is trading, and you have yet to actually read and consider what I've written (and what is actually happening jn the space). I would encourage you, since you do seem to care, to spend more time considering he space and less time focused on meme trading (which, btw, lots of institutional investors got their faces ripped off shorting meme stocks). 

Dec 29, 2021 - 9:01am

My responses to your thoughts are in bullets 

Your point about "it's immaterial if it can be regulated into non existence" is just a silly statement. Regulation =\= bad! It's, in fact, good in many cases. Overburdensome regulation and punitive regulation (meant to shut down innovation in and industry) = bad. Whether or not crypto is passed that very real milestone of being regulated out of existence is, quite obviously, very material. 

  • Regulation is inherently bad when the vast majority of your userbase/traders/investors made their returns in the Wild Wild West early days of an industry that was attractive precisely because it offered massive return potential commensurate to massive risk. Once you eliminate much of the risk, the returns go down in lockstep. Risk-adjusted, it's no longer worth it. For better or worse, Wild Wild West speculators and fringe institutions have been the crypto investment community and they are in the driver's seat of your industry. John Smith and Sarah Jones living in Kansas are not allocating a portion of their bi-weekly checks into their Crypto 401K. The common public at large does not view cryptocurrency as a legitimate investment alternative for a meaningful portion of their assets/retirement funds. All of the points I mention should be fairly simple to grasp. Regulation takes the wind out of the crypto sails, and it's coming.

2) Who cares about early crypto adopters (all already wealthy retail) leaving the industry? What does that have to do with anything? I don't give a shit about whoever used Netscape, MySpace, Napster, Pets.com, AOL, etc. Those were all great companies in their time that helped push forward innovation and now they aren't, did that stop the internet from growing exponentially? Why would it matter to crypto building and innovation today if those early adopters left when there is tens of billions of dollars of capital from the best investors in the world flowing into a space that is also seeing rapid talent growth? It doesn't. 

  • Regarding early adopters, see my paragraph above. It's quite an obvious point that I'm not sure if you are willingly covering your eyes with your hands because of a vested interest, but whatever. Regarding the comparison to AOL, Yahoo etc.--aka the early internet pioneers--that's just laughable. From the very beginning, those services provided a valuable use-case to the end-user and had tangible benefits to the public. 11 years after its creation, cryptocurrency still does not have a single mainstream use-case outside of being a means of facilitating speculation. If blockchain technology was as useful as crypto fangirls purport it to be, it would have already had a mainstream application in society, for the benefit of the public, literally years ago. Yawn.  

And do I think Blackrock and fidelity will still be there when there are more founders and more capital flying into the space than ever before and most other industries? Of course I do. That's how markets work. Blackrock has put several hundred million to work in the space this year. So has KKR and Fidelity. Apollo slightly less so, but has actively hired a team to go raise a fund. Temasek, GA, Accel, Tiger, Coatue, Thoma Bravo, Brevan Howard, Marshall Wace, Goldentree, Third Point, etc etc etc have all written tens to hundreds of millions of dollars into the space this year (in private equity, not liquid tokens).  Do you think all of those guys will lose interest because of regulation? Or they aren't engaging in active dialogue with regulators? That they haven't considered how a bear market would affect their portfolio companies? 

  • Horribly naive take here. The bottom line is these institutions for all intents and purposes are testing the water. Hundred of millions of dollars for Blackrock is literally a pittance. Are you familiar with SPACs? Blackrock, Fidelity et. al. also put forth billions of dollars into SPAC PIPEs 2020-2021. That doesn't mean they suddenly think that SPACs are the greatest thing since sliced bread. It means that they are the world's largest asset managers with trillions of dollars in AUM and they need to diversify their investment allocations and strategies. By the way, those institutions are down hundreds of millions of dollars in their SPAC PIPE investments because SPACs have shit the bed. Crypto is just another strategy for them to dip their toes into the water. Don't be a child and read too much into it.

Also, the idea that there is no way to find intrinsic value in the space is, of course, laughable (again, is KKR writing $150mm checks with no intrinsic value to be found?). But that again tells me your focus is entirely on how Doge is trading, and you have yet to actually read and consider what I've written (and what is actually happening jn the space). I would encourage you, since you do seem to care, to spend more time considering he space and less time focused on meme trading (which, btw, lots of institutional investors got their faces ripped off shorting meme stocks). 

  • How do you determine the value of any coin, "blue chip" or shitcoin, that throws off no cashflows and isn't securitized/collateralized by anything? I am asking this as a pointed question, not rhetorically.
  • Assistant PM in HF - Other
Dec 29, 2021 - 9:57am

1) The VAST majority of volumes are institutional, not retail. And in the US it's largely regulated institutions who are actively working with Latham, S&C, DPW, etc etc to do the Howey test and advise on risk profiling. Over 60% of Goldman's Asset Management clients are actively exposed to crypto (the tokens, not even the equity). Fidelity found over 52% of their institutions were actively exposed to crypto (and it's surely risen since then) and as of August over 70%! were planning on being exposed within the next twelve months. In Asia, over 70%! of institutions are already exposed. When referring to the equity of crypto companies, it's even higher for all the above numbers. Wealth management is a further step behind but still over a third of all individual investors globally are exposed (all emergent technologies get institutional investors before large scale retail exposure, that's the way the american system is designed).  You're view is one based out of headlines and ignorance, not facts. 

2) Crypto companies (with tokens themselves being being a crucial part of the protoco) are already being used as part of mortgage and HELOC securitizations (billions of dollars worth), cross border remittances in parts of Africa and Latin America, incentive structures and payments of one of the largest social networking apps in the world India, as hotspots in telecom networks with tens of thousands of customers, music royalties, online advertising payments, payroll providers (a top fast food company is actively trialing real time crypto powered payroll as a way to get rid of payroll cash advances), and, of course, investments. 

This is all 5 years after the invention of the smart contract. It's not slow, the rate of adoption is MUCH faster than the internet age. Again, this is literally just an issue with you both 1) being too young to know your history of the internet (it took over 15 years for anyone to really use it!) 2) your arrogance and ignorance regarding crypto. 

3) People (including Apollo and Thoma Bravo) are raising DEDICATED capital to the space. That's not "dipping their toes", they have to deploy that capital. Again, you keep misunderstanding the difference between institutional investors and retail asset and wealth management. Hundreds of millions is a pittance to Blackrock in their retail AM book, it's sizable in their prop capital.

4) If you can't figure out how to find intrinsic value any of the businesses that raised at unicorn valuations this year (FalconX, FTX, Kraken, Gemini, Binance, Amber, Bitgo, Ledger, Consensys, Figment, Blockdaemon, Figure, Blockfi, Paxos, Republic, Taxbit, Crypto.com, Blockchain.com, Starkware, Alchemy, Bitfury, Circle, Bullish, Deribit, Anchorage, Copper, Fireblocks, NYDIG, Moonpay, Dapper, Opensea, etc etc) then no one here can help you. Or even, for that matter, figure out mental models for the economics of YFI, UNI, SUSHI, The Graph, Livepeer, Theta, Helium, any Layer 1, etc etc, then again, the issue isn't you haven't had the appropriate training, experience, or thoughtfulness. These things aren't hard and are fairly obvious. 

I think we've probably exhausted this conversation, but what's clear is you're both arrogant and dismissive on a topic you don't know well, which is always a bad combination. I've almost certainly spent more time in both traditional markets and crypto markets than you have, so i'll leave you with one piece of wisdom, which is simply that when you're emotional about an investment idea (lots of people were with AMC and GME!), especially one where you're presented with evidence that shows you don't have a well formulated thesis on it, it's a good time to reasses what is driving your investment decision making. 

Controversial
Dec 29, 2021 - 10:34am

Final responses in bullets below

1) The VAST majority of volumes are institutional, not retail. And in the US it's largely regulated institutions who are actively working with Latham, S&C, DPW, etc etc to do the Howey test and advise on risk profiling. Over 60% of Goldman's Asset Management clients are actively exposed to crypto (the tokens, not even the equity). Fidelity found over 52% of their institutions were actively exposed to crypto (and it's surely risen since then) and as of August over 70%! were planning on being exposed within the next twelve months. In Asia, over 70%! of institutions are already exposed. When referring to the equity of crypto companies, it's even higher for all the above numbers. Wealth management is a further step behind but still over a third of all individual investors globally are exposed (all emergent technologies get institutional investors before large scale retail exposure, that's the way the american system is designed).  You're view is one based out of headlines and ignorance, not facts. 

  • Institutions come in various shapes, sizes and flavors. You're a funny guy. The collective global market capitalization of cryptocurrencies is $2.3 trillion. Less than the market cap of Apple. This is why I noted "fringe institutions" above. Just because some fringe institutions are raising relatively minuscule funds--compared to AUM floating in the debt and equity capital markets that is being invested in legitimate assets--and speculating on some tokens or token-derivative equities does not give even a small hint of credibility to your argument. Again, the collective market capitalization of cryptocurrency is a meager 2.3 trillion. Further pointing to the fact that households and major asset managers do not view it as a legitimate asset or investment alternative. Period, full stop. This may change when regulators enter the mix allowing the crypto market to grow exponentially, but I have already outlined my thoughts above on what I think will happen when that occurs. Anyway, I will repeat this point: The collective global market capitalization of cryptocurrencies is $2.3 trillion. Less than the market cap of Apple.

2) Crypto companies (with tokens themselves being being a crucial part of the protoco) are already being used as part of mortgage and HELOC securitizations (billions of dollars worth), cross border remittances in parts of Africa and Latin America, incentive structures and payments of one of the largest social networking apps in the world India, as hotspots in telecom networks with tens of thousands of customers, music royalties, online advertising payments, payroll providers (a top fast food company is actively trialing real time crypto powered payroll as a way to get rid of payroll cash advances), and, of course, investments.

  • That's great that you are able to package together an amalgamation of buzzwords on how crypto companies are serving practical purposes (crypto being used "as part of mortgages"??, "cross border remittances in Africa"??, "incentive structures"??, etc.) but what point are you trying to make? Crypto does not have a mainstream use-case in and of itself today. No one cares about the BS you wrote about. If you are going to use cryptocurrency as an analogy to the internet which you did above, "cross border remittances in Africa" and "incentive structures" isn't going to cut it. Bottom line: sorry, I don't buy it. I was an early user of the internet in the 90s too so you shouldn't assume my age. 

This is all 5 years after the invention of the smart contract. It's not slow, the rate of adoption is MUCH faster than the internet age. Again, this is literally just an issue with you both 1) being too young to know your history of the internet (it took over 15 years for anyone to really use it!) 2) your arrogance and ignorance regarding crypto. 

3) People (including Apollo and Thoma Bravo) are raising DEDICATED capital to the space. That's not "dipping their toes", they have to deploy that capital. Again, you keep misunderstanding the difference between institutional investors and retail asset and wealth management. Hundreds of millions is a pittance to Blackrock in their retail AM book, it's sizable in their prop capital.

  • You sidestepped my point above entirely. So I guess I'll repeat it again. Dedicated capital is meaningless if it's <1% of your AUM.

4) If you can't figure out how to find intrinsic value any of the businesses that raised at unicorn valuations this year (FalconX, FTX, Kraken, Gemini, Binance, Amber, Bitgo, Ledger, Consensys, Figment, Blockdaemon, Figure, Blockfi, Paxos, Republic, Taxbit, Crypto.com, Blockchain.com, Starkware, Alchemy, Bitfury, Circle, Bullish, Deribit, Anchorage, Copper, Fireblocks, NYDIG, Moonpay, Dapper, Opensea, etc etc) then no one here can help you. Or even, for that matter, figure out mental models for the economics of YFI, UNI, SUSHI, The Graph, Livepeer, Theta, Helium, any Layer 1, etc etc, then again, the issue isn't you haven't had the appropriate training, experience, or thoughtfulness. These things aren't hard and are fairly obvious. 

  • You sidestepped my question above entirely. So I'll ask it again, since based on your response you don't have an answer, and if you can't answer without sidestepping then you are a charlatan. I don't care about the equity of companies that base their business models on the cryptocurrency industry. How do you determine the value of any coin, "blue chip" or shitcoin, that throws off no cashflows and isn't securitized/collateralized by anything? I am asking this as a pointed question, not rhetorically.

I think we've probably exhausted this conversation, but what's clear is you're both arrogant and dismissive on a topic you don't know well, which is always a bad combination. I've almost certainly spent more time in both traditional markets and crypto markets than you have, so i'll leave you with one piece of wisdom, which is simply that when you're emotional about an investment idea (lots of people were with AMC and GME!), especially one where you're presented with evidence that shows you don't have a well formulated thesis on it, it's a good time to reasses what is driving your investment decision making. 

  • John Paulson also thinks that crypto is worthless as do many other prominent investors, I guess they just haven't done enough research or are too emotional about the subject. As for your time spent in any industry or years of experience--entirely irrelevant to the discussion. You can't answer simple questions directly without deflecting nor can you respond to simple points. That leads me to believe that you, like 99.9% of folks involved in crypto, are charlatans who are trying to keep the music playing as long as possible. Nothing wrong with that. Good luck. 
Dec 29, 2021 - 12:27pm

>11 years after its creation, cryptocurrency still does not have a single mainstream use-case outside of being a means of facilitating speculation. If blockchain technology was as useful as crypto fangirls purport it to be, it would have already had a mainstream application in society, for the benefit of the public, literally years ago. Yawn.  

Do you genuinely believe there is not a single use case? That is an unbelievably strong statement which would require expansive knowledge of all the sectors that comprise crypto, no? BTC, ETH, alt L1s, DeFi, NFTs... you're completely sure that you know all of these sectors and their developments over the last few years so well to be able to completely dismiss them?

Dec 29, 2021 - 11:36am

Would strongly advise against this. Crypto is too correlated to bitcoin at this point. Wait until after it decouples. You will also be fighting against DAO's which are coming after VC's lunch especially in crypto. 

  • NA in IB-M&A
Dec 29, 2021 - 11:53am

While there are some correlations to bitcoin among certain tokens, you are way overgeneralizing the market. Everyone has a viewpoint on bitcoin in crypto venture, but for the most part, it's a useless technology when compared to Ethereum / new Layer-1 networks which have actual use cases via smart contracts and dApps. Now, the DAOs are a different story, but I don't see them coming after VC's lunch. Let's say we have a truly autonomous group of people who have $100M in capital to work with - there will be coordination problems on where to invest it, and that's not a ton of money in this space. HNW individuals and other traditional LP's want the white glove service of a venture firm, not to actively participate in DAO governance and decision making. While I think your concerns make sense to a degree, they are really not core worries of those in the space right now. 

Dec 29, 2021 - 4:11pm

I think part of the reason why VC's aren't as interested in bitcoin is because of its decentralized nature. VCs love to partake into the initial coin offerings and then sell them off to the greater idiot. In terms of BTC as a useless technology, I see your point but BTC doesn't strive to focus on smart contracts, its only about store of value and inflation protection. Sure there are other coins that could theoretically do this, but with the proof of work network, strong hash rate, thousands of nodes, first mover advantage, it has already won. Look what happened after China ban. Bitcoin hash rate got destroyed and then recovered. Find me another coin that can do this. Bitcoin is the next bitcoin. You brought up interesting points on DAO. Yes, i can see a problem with coordination conflicts but you could theoretically elect an individual to represent the interests of a group of people and then have those selected individuals coordinate. It's still in its infancy and I wouldn't be surprised if it catches on and changes. 

Dec 29, 2021 - 11:39am

More value in your brand as a prior FIG analyst than your skill set. I'd suggest just going hard into researching crypto and you'll see how different the work is. Perhaps for some funds / corp devs that are doing acquisitions it would be valued more, but it's all so early stage that you're more likely doing technical product analysis and VC styled TAM calculations

  • Intern in IB-M&A
Dec 29, 2021 - 12:01pm

Honestly when you look at the piece of shit crypto VC funds that exist and whose founders have a Twitter account with a bored ape/cryptopunk profile picture and a ".eth" name you realize that it's Pantera or bust if you don't want to crash your career

Dec 30, 2021 - 6:08pm

Two things - 1) banking gives you exactly zero skills to be an institutional crypto investor, 2) people in this thread have no fucking clue what are they talking about.

1) Legit crypto venture capitalists hire engineers, data scientists, tokenomics experts, self-taught blockchain wizards, hackers, etc. Not glorified Excel juniors who bought some Bitcoin via Coinbase. I'm sorry, but this is just harsh truth. Mainstream funds MIGHT have ppl from more traditional backgrounds, but you need to prove your value and expertise THOUSAND times more vs. classic VC.

2) Everyone here saying that 'this is a bad idea, crypto = Bitcoin' is an idiot. Most of the crypto hate comes from ppl who aren't involved and just don't know what's happening within the space. Amount of innovation and opportunity set is mind-blowing, and top tier crypto funds are the most coveted places to work in finance right now.

Jan 4, 2022 - 6:47am

You're saying people who say crypto = Bitcoin are idiots. Please explain to me how crypto isn't basically completed dominated by Bitcoin when Bitcoin is nearly half of total market cap of all cryptocurrencies. There isn't an analog in any other global market where a single asset is such a concentrated part of a market. If Bitcoin goes to 0 (or anywhere close to it), the crypto market will effectively be dead. And there are no regulatory mechanisms that can prevent it from going to zero besides the confidence of people/institutions buying on the way down. 

  • Assistant PM in HF - Other
Jan 6, 2022 - 6:47am

I've mostly started to avoid this thread because the discourse level is so low that it doesn't make for a productive use of time, but this one pretty obvious if you understand, not even crypto, but just technology investing and trends more broadly. There are almost 20k active GitHub repositories building in crypto and almost the entirety of them are not in Bitcoin. There was $33bn of venture funding poured into the space in the last twelve months and the vast majority of it was focused on businesses building things to serve non-bitcoin chains or demand. Headcount that is publicly trackable in the space grew by over 10k (likely number probably much higher than that as most companies aren't reporting headcount) last year and almost all of that brain drain from traditional tech and finance has moved to innovating in non Bitcoin related businesses. Bitcoin is still a large percentage of the market cap because it's the on ramp to a lot of the products that are offered to mass markets (today!) but it's obviously not the place where the innovation is happening. It doesn't take that sophisticated of an investor to read the tea leaves here. It's sort of like all the talk about how the internet didn't matter relative to the large tech companies in 1996 because only 40mm people had touched it worldwide and ignoring the fact that literally all of the growth capital, talent, and effort was moving away towards the internet companies. Or even the ignoring of Tesla and EV companies a few years ago because they weren't actually delivering a lot of cars yet. 
 

You're the most active person in this thread (and seemingly keeping it alive) and you're not just clearly ignorant of the space itself but simple logical thought processes to help frame thoughts related to both technology broadly and investing in technology specifically. If you were one of my analysts, we'd be seriously considering if you had the acuity to work at my fund. 
 

Dec 30, 2021 - 10:12pm

Yup being negative on crypto is like being dismissive of the rise of the  Internet. Banks will start trading bitcoin next year. I am just worried about futures etf and proliferation of paper bitcoins. I think that is a huge threat to the market. If bitcoin goes down the whole market will be destroyed. The spot etf has to be approved. 

Dec 30, 2021 - 11:05pm

What makes you so certain they'll begin trading BTC so soon. Rumors like this have been going on for quite some time now with little action taken by the street

Dec 31, 2021 - 1:16pm

Some good debate in the comments above. First off, a technical background will not be needed for Crypto VC and even if you thought a technical background might be helpful, FIG Banking isn't technical, being a blockchain engineer or having a PHD is Cryptography would be technical. Being in FIG gives your story a little more credibility, but ultimately, if you want a job in Crypto VC or web3 in general, the best way to get hired is to show passion. Start a blog, start a tik tok, write medium posts about your favorite cryptos, mint some NFTs, tweet about it. All of the things that are valued in normal VC are amplified in Crypto because it's such a new space and few have any more credibility than others. As of now, a well thought out position/opinion is all you really need, which is both good/bad.

As far as whether it's a good decision or not to pursue a crypto VC role, it's a good adult decision for you to have to make. Do you believe that web3 is coming and do you want to make a career bet on it? If so, then go for it, if you're more risk adverse, take an intermediary job and continue to observe web3. I'm somewhat in between the comments above, I do not think crypto/ web3 stuff is going away. There is already too much institutional adoption and the tech is too good/useful for it to get wiped out. With that said, I was around and fairly deep into crypto back in 2016/2017. I saw so many Crypto hedge funds and crypto startups get founded, only to get wiped out by the crypto winter between 2017 - 2020. The good projects survived and this year in particular has been great for cryptos, but I've seen it cycle before and there's a chance it could cycle again. The market is overheated and I wouldn't at all be surprised if some combo of politics, regulation, and/or the broader macro environment crush web3 in 2022/2023 and push out the broader adoption for a few more years. We're still very early with the utility of a lot of these web3 projects. 

No one really knows what's going to happen. With all that said, if you're not feeling PE or more banking, and have a genuine interest in web3, take the leap. Your career will survive even if things don't work out. If you think web3 is cool because you made a few hundred bucks trading memecoins in 2021 and you're caught up in the hype of making money fast, you might be better off waiting. 

Jan 10, 2022 - 6:10pm

You doing ok man? Sounds like the recent dip in cryptos must be having an impact on your mood.

If you read my post before launching into a tirade, you'd notice that I'm not in any way saying that cryptocurrency investing isn't a technical space. I'd completely agree that is requires more technical knowledge than other forms of VC investing. With that said, you make it sound like it's impossible to understand or invest in crypto without having some specialized degree in math or CS and that's simply not true. Do you think that every VC that's ever invested in a biotech company has an MD or a PHD in bioengineering? Do you even think that CEOs of some of these "technical" companies need to have a technical background in order to be successful?

The OP has a FIG background and said that he thinks that his "technical" background would prepare him well for crypto investing. I said that my opinion is that banking isn't really as technical as he thinks it is, but that with enough passion and interest, he could probably find a way to make it into the space, which is 100% true. Think of someone like Gaby Goldberg, she's made a huge name for herself in crypto largely by networking well, posting good content online and being active in the space. What about Chris Dixon? He's heading up A16z's crypto fund, I'm sure he would tell you he's not going home every night and building his own Dapps on various blockchains that they're invested in. 

We're at an interesting inflection point in Crypto where passion, interest, and enough hard work can earn a lot of people a spot somewhere within the broader web3 ecosystem. I'm sure it was the same in the early internet days as well. In 10 years, once we have specialized blockchain engineering degrees, smart contract programming courses, Dapp foundations, etc it might be different, but there's no need to try and act like crypto/blockchain is off limits to someone who didn't study math/CS. That's just not true. 

  • VP in IB-M&A
Dec 31, 2021 - 5:36pm

I'm a Fintech banker and have been looking at Manager/Director level positions for VC and Corp Dev roles at places like Circle and Coinbase, any of the listings I've seen (there are a lot) have prior IB experience as one of their requirements as to what they are looking for in a candidate so you should be able to gain some traction. I don't think a technical background is needed for a VC type role but you obviously have to have an interest in the space, probably have some skin in the game (shows true interest in the space), and be at least generally knowledgeable on a few topics or platforms.

Jan 3, 2022 - 1:46pm

There's been a lot of interesting debate in this thread, but it seems much of the discourse quickly becomes incomprehensible to a layman college student like myself. While I genuinely want to learn more about the space, information overload has been a significant obstacle (especially among literally thousands of blogs). Would any of the participants be willing to pitch in resources they think would be helpful for either A) familiarizing oneself with the space/budding use-cases/related industries or B) keeping track of ongoing events/trends. Much appreciated!!

Jan 3, 2022 - 11:40pm

I tried to answer that elsewhere in WSO: https://www.wallstreetoasis.com/forums/crypto-blockchain-and-defi-resou…

 tl;dr is that it takes time to familiarise yourself with what is a pretty colossal space grouped under the term 'crypto'. It's somewhat similar to someone asking how to familiarise themselves with 'finance' - certainly doable, but takes time, and it's worse because crypto moves incredibly quickly. If you've got any questions just DM me, more than happy to help

  • Prospect in IB - Gen
Jan 3, 2022 - 2:23pm

Lol it's telling that hackernews is full of people who recognize web3 as utter bullshit, and WSO is full of kids who say "a16z is investing all this money you idiot, how can it be intrinsically worthless?!"

Jan 5, 2022 - 12:45pm

Short answer: absolutely yes

Many of my friends joined the crypto space all the way back to 2016/2017 joining different platforms to do researches, ICOs, trading, etc., becoming institutional investors (this is the path you are now considering), doing their own infra projects... 

Anyone can join crypto space because that is what crypto space is all about, but I think you might want to be more specific about what you want from this position. If you want short-term $ return, you have to pick the right fund, because some give carries and some don't. Or do you want to stay in this space long-term build up your connection and become a founder yourself? These are the questions you need to think of.

You will need sufficient crypto technical knowledge (i.e. L1, L2, DAO, etc.) and interest in the space as crypto moves very very fast. Like many projects on How to DeFi are dead already. 

Contrary to many people in the post, I think tradfi experience could be useful long-term, but it is up to you what you can do and where you can implement your skill. Also many tradfi banks/funds are trying to break into this space, you might want to evaluate your opportunities staying in tradfi crypto related roles or Crypto VCs

If you have offers from VCs like Paradigm, I would say definitely go for it. It would be easier to "break into" (lol, tradfi terms, don't use it if you are talking to crypto people) top crypto vc if you have done projects before and have good connections (institutional investors, founders, KOL, ect.)

Also, be careful, a lot of shitty VCs out there investing in shit projects (mainly also due to most projects in the space now are shit), your job might not be as interesting as you think 

Jan 6, 2022 - 4:18am

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  • Intern in VC
Jan 6, 2022 - 5:43am

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