Latest / Success Story with Scott Clary / Lessons - Angel Investing vs Crypto Investing | Chris Dixon - Entrepreneur, Investor, Cryptocurrency and Web3 Evangelist

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Lessons - Angel Investing vs Crypto Investing | Chris Dixon - Entrepreneur, Investor, Cryptocurrency and Web3 Evangelist · Success Story with Scott Clary

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  In this lessons episode, discover the unique dynamics of investing in crypto and blockchain versus
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  traditional angel investing. Learn why frontier tech demands a contrarian mindset and the power
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  of earned secrets in uncovering breakthrough opportunities and understand how resilience and
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  strategic support drive outsized outcomes in volatile markets.
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  I'm curious when you're looking at when you're looking at investing in crypto blockchain,
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  what are the similarities, what are the differences between traditional angel investing into
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  any other category pick a category that's maybe maybe not as like bleeding edge. I mean ARVR is
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  probably there's a lot there's a lot of bleeding edge tech and there's probably a lot of uncertainty
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  as well. But yes, speak to that. I'm curious because I don't know I know a lot of investors.
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  I don't know a lot of investors that are just so niche down and hyper focused on blockchain
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  and crypto. So there has to be some differences and similarities. Yeah. Yeah. Well, I think you
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  hit on one thing, which is when you're doing things kind of at the the quote frontier,
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  people call some it's called frontier tech. There's a different approach generally because you're
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  doing something that hasn't, you know, that hasn't that isn't as predictable. So just to,
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  you know, like just generally when I do any of these kind of cutting edge sort of frontier,
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  like when I did VR stuff or, you know, blockchain stuff or AI before, you know, back before chat
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  GPT, you would have these, you're sort of dependent on these external factors. Like when will the
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  generally these technologies kind of go through two phases. They have kind of an incubation phase
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  where you have lots of early adopters. And like the case of blockchains, like they're probably like
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  30 million kind of hardcore users right now, which is sound like maybe a lot, but it's actually tiny
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  on the scale, the internet. Now, and then you have a moment where kind of like chat GPT or the iPhone
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  where you have sort of a breakout product and suddenly the the space transitions from
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  from kind of this, you know, early adopter phase to going more mainstream. And so when you're
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  in that early adopter stage, you just have to sort of behave differently. And so for example,
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  you have to, you know, when you typical, if you're building a typical like accounting SaaS
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  company, you might raise venture capital and land for like a two year kind of budget,
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  then assume that if you hit certain metrics, you can raise more money. It's a very predictable
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  financing market. If you do certain things, you can raise more money and it's much more stable.
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  Kind of what the metrics need to be and the patterns. When you're in these emerging areas,
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  it's, you know, you'll have these massive waves of like excitement and then kind of bull and bear
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  markets. And if you get a bear market and you don't have the cash, you know, you won't make it,
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  right? And so you just have to like operate. So like Coinbase, for example, they would be,
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  they were very good at about this. They would just raise a lot of money and save it and then kind
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  of endure through like tough times. You have to have a thicker skin and you have to
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  be willing to kind of power through. I've seen just so many cases in my career or in technology
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  where, you know, people that stuck with something ended up doing very well. Like so many of the
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  entrepreneurs that you see today that are successful, you know, like sort of the outside view is like,
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  there's some kind of overnight success when in fact they were just trudging through many different
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  ups and downs. And so you just, so the entrepreneur needs to be ready for that. The investor needs to
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  be ready for that. The, you know, the, the company needs to be structured, you know, you end up
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  capital for that. You need to have the team for that. Does it just a different way of thinking
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  about the world? They're sort of free, kind of, you know, pre growth, you know, kind of incubation phase
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  and then mainstream breakout phase. I mean, that's the hard part. The good news, that's the bad
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  news. The good news is when you do that and you're willing to do that, you tend to be one of the very
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  few who are willing to do that. And that's how, you know, that's how you have outsized outcomes,
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  right? That's how you have as an investor, outsized outcomes, that's how as an entrepreneur you do.
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  If you just kind of follow the consensus, you know, if you're the, you know, if you're the 10,000
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  company building a wrapper on chat GPT, like, I don't know if that's, you know, going to be,
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  like, that's just the consensus strategy, right? And so, yeah, to be right, you can't just be
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  non-consensus and, you know, contrarian and wrong, but, but, you know, so, but that's to me the
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  interesting part of technology. That's where I've always gravitated towards is kind of like, that's
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  why I want to be at the frontier in doing that stuff. I assume that once this kind of, like,
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  blockchains go mainstream, I'll probably move on to something else. And so, you know, there's just
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  different, it's a different approach. There's a lot of value in doing the other thing too. I mean,
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  we need people to, to kind of do, you know, do kind of later stage technology as well. And I think
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  they're, they all have values. I'm not making a value judgment. I'm just sort of saying that
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  this is where I'd like to operate. Hey, yeah, this is a very different way of operating. And I,
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  it's a skill I developed and, and, uh, well, you done it well. You've done it. You've done this.
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  If you had, you've had massive success. I'm, I'm also just curious. I mean, you've worked with,
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  like, Mark and Dresden Benhorowitz, which, I mean, they're, you're a legendary investor. They're
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  legendary investors. Um, I can ask you the lessons that you've learned. But I want to ask you
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  the lessons that you've learned from them as well. I, yeah, I've learned a lot from them. So the first,
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  you know, five years I was at the firm, we would just do, it was like very, it was a much smaller,
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  we're now the firm's much bigger now. It's like 500 people back then. It was pretty small. And it's,
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  they were, I don't know, if seven or five or seven above, so it would just sit around a table,
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  like something entrepreneur would come in and then they would, you know, describe their, their
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  business. And then we'd sort of sit around a table and discuss it and make investments. Um,
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  and so I, it's hard to summarize all the very, I mean, I learned so much about just from them and
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  just from entrepreneurs, all the different aspects of building a business. So like, for example,
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  I'm not an enterprise software person, but I've sat in, I don't know, hundreds of enterprise,
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  they have not thousands of enterprise software discussions and just learning all the details
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  of organization building and sales development and just all the things you do there.
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• 9:04
  Yeah, I think we have a lot of kind of broad investment kind of lessons. I guess I'm one of
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  Mark and Ben's favorite phrases is invest in strengths, not lack of weaknesses. And so what does
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  that mean? It means almost every interesting startup will have issues. You know, when you're investing,
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  you know, when you're doing what we do, which is investing in early stage, obviously once you're
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  in bidier or something makes other issues are done, but then you're worth two trillion dollars.
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  But when you're doing kind of early stage investing, almost by definition, you're going to have
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  things that are messed up. And if you look for the biggest danger you can make in venture capital
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  is looking for some startup that's sort of good on all metrics. What you really want is a startup
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  that's great in a few things and probably really messed up in a bunch of other areas. And specifically,
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  you know, what do you grade at? Like what we really bias heavily towards, and this is another kind of
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  Mark and Ben thing, but is is technical product focused entrepreneurs. So what we look for are
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  people that have a deep insight. We like to say an earned secret. I think that's originally a
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  pewter teal phrase. The idea is that kind of most, you know, it's almost by definition a startup is
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  a contrary idea, right? Because if you if you had an idea that was like, I want to build, you know,
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  an iPhone with longer battery life, right? That's a good idea. But Apple knows that's a good idea,
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  and they probably have a thousand people working, right? So almost by definition, in a way, a startup is
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  a good idea that appears to be a bad idea because it appeared to be a good idea. All of these
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  incredibly wealthy companies would be investing, right? So you have some kind of contrary insight,
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  and that's usually that that's what Peter Teal calls a secret, but it's also an earned secret,
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  because you don't just come to these things like walking down the street, right? You often come to them
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  through, you know, years of of I've been working in the apparel industry, and I, you know, there's
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  this thing I've discovered that's that's this crazy thing that needs to be fixed. And I have a way
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  to fix, right? Or I was in a PhD program, and I developed a breakthrough way to do large language
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  models. And now I'm going to go do that. You know, so it could be a technical secret. It can be a
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  business secret. And so you want it. So you when you I think when you do venture investing, you want
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  people that have those earned secrets, now those people that have those earned secrets, they're
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  often they're not often people that know how to at first run a company, right? And they may have
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  hired badly. They may have made some bad decisions. They may have bad press. They may have, you know,
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  I don't know, financial issues like, right? And so if you kind of look at the mistake you can make
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  as a venture investor is going and saying like, I want somebody who's got all buttoned up and
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  everything's working fine. What you really want is someone who's got this sort of deep secret,
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  who's obsessed with the problem, who has deep knowledge of the domain. And very likely the rest of
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  it is sort of a fixer upper, right? And so that as a result, we structured the firm. This was a
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  this was kind of a novel thing and really is kind of still somewhat novel in the venture industry,
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  which is we'll find those great entrepreneurs and then we'll we'll layer in services that help
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  them fix those other issues, right? So as an example, it's very unlikely that you're sort of the
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  be like a brilliant inventor, but and also spend all your time out of conferences meeting
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  and connecting with 4500 leaders. So we have a group of, you know, dozens of people whose job it is
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  to connect you with people of Fortune 500 companies because we sort of assume that these
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  technologists founders that we invested in won't already have that network. So we try to supplement
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  their network. And so we just do a very, you know, we help them with legal and policy. We help them
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  with recruiting. We help them the comms. We help them with financial stuff. And so so that that's
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  kind of the core thing now. Now, what I described is very general. There's a lot of details. And
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  this is like adventure as as like in some ways is like people talk about a fox in the hedgehog,
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  you know, the hedgehog knows one thing, the fox knows many things. I think of the venture capital
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  and startups as a fox thing. There's like a million little things to know and it's very hard
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  to summarize all of it. And so and each domain will be different, you know, blockchain is different
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  than consumer internet is different than enterprise software is different than Vintech.
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  And each one has patterns and people and lessons. But that sort of broad framework, I would say,
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  is something that, you know, I learned over the last 10 years. Thanks for tuning in. If you found
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  this valuable, don't forget to hit that subscribe button so you never miss an episode. And if you want
• 13:41
  to dive deeper into this conversation, check out the links in the description to watch the full
• 13:45
  episode. See you in the next one.