Why Retail Can't Win | Regan & Mike, Lattice Fund

you can make a lot of money participating in token sales, right? I feel like there's always that meme people share of like coinless returns from ICO to present, and it's like, hey, Gary Gensler, like, thanks for protecting me from like the 500x that I missed on Solana. You think about turning $1,000 into half a million dollars like you could have in the Solana ICO. That's like life-changing money. And you think about why people participate in risk-on markets. They're here to make money generally, right? It's like the meme, like, yeah, maybe some people are here for the tech, but like the These are financial markets. You are here to turn a dollar into more dollars.

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Thank you.

Thanks for having us.

Yeah, uh, Lattice Fund— why didn't I know Lattice Fund until recently?

It's a good question. Uh, considering marketing was a key priority this year, probably, probably, uh, makes sense that you wouldn't have known us. We're relatively new, so, uh, in terms of crypto funds out there, um, still emerging in that regard, but definitely, I think, making a name for ourselves.

I think a lot of the investments we did from our first fund, which we raised in summer of '21, we were generally writing $250,000 to $500,000 checks. And so, you know, those are kind of like most of the companies that have like graduated to Series A, B token launch, And we always joke, you know, we're kind of like in like the, oh, it's Andreessen, like, and others. And like, you're in the end.

Yeah, we're often like, you know, I wrote an angel check and they're like, and some other people like, ah, yeah, I gave you $10,000.

You can't, you know, you can't even give me credit for it.

So, well, I guess I want to have you on to talk market structure. So you both spent time at CoinList before Lattice. You are two of the smartest people, I think, when it comes to like, what are the underlying structural issues that have made this cycle feel weird? I think everyone can kind of agree this cycle just feels a little off. And I wanted to talk about the, the kind of like structural issues, whether it's low flow to high FDV or token distributions and sales or whatever it may be. I want to talk about some of those structural issues on the pod, but maybe before we do that, Reagan, I could throw it to you. To kick us off, like, what is your high-level, like, almost market meta? Like, you had this tweet thread of why is everyone so miserable? Why is this cycle cooked? Like, what, what's going on with the cycle so far?

So I think that taking a step back, I think the biggest difference in this cycle versus prior ones is it's very like macro top-down driven versus like some novel crypto-native innovation coming out and that kind of being like the driver of market movement. So you had the Bitcoin ETF in what, like early or this year? You now have the ETH ETF one. You kind of have these like macro inflows without really having like something that new. Now I think we, we have meme coins and that's kind of been like the meta of the day. I think if you look at the data, like meme coins are not really what's driving the market volume-wise at least. And so it's just like it's a weird cycle, I think, because of that. It's just very different from how things were. Like, for example, I think you went to like a conference in 2020. Well, I guess we didn't have conferences then. It was COVID. But like, you talk to someone in 2020, you're like, oh, what are you excited about? It's like, oh, it's DeFi, right? There's like all these new yield farms. There's like all of this like innovation. There were like even new token launch mechanisms like Yearn. There's like something to be excited about. And Mike and I were at Consensus like 2 or 3 weeks ago, and I the vibe I left describing it as was like abstract optimism. It's like, yes, my bags are worth more than they were 6 months ago, so I am happy. But like, there's not really— there hasn't really been like a super new thing to get excited about. So I think that's just different than prior cycles. And I think the other big difference is that the things that have pumped kind of besides SOL have like not really been VC coins. VCs tend to be the loudest people on crypto Twitter, right? Like, how many people are going into like January were like overweight Bitcoin and meme coins? Maybe like Joe McCann, but like very few venture capitalists. And so I think that's partially why the kind of like crypto thought mafia has been a little bit grumpy.

Hmm. How much of this comes from like application versus infrastructure, do you think? Or is it due to other things? And maybe the context there is like, I remember in DeFi summer, you could actually play like, or Yams, and there's Sushi, and there's Uni, and like, and then a year later, you had like, and so those were things you could do, like you could go play, you could put your money in, and you could click the crappy little UIs. But it was like a fun game we were all playing. And it really did feel like a game. And then a year later, you had NFTs, right? We're like, again, it was a game, you're all buying these things and taking photos of them and putting them online. Like, how much of this is related to that versus something like a deeper problem?

Yeah, we talk about this a lot, and this is, I think, at the retail and institutional level. So if you're going out to institutional and you're like, well, you know, it's a pension fund or an endowment and they're asking, you know, what's new in crypto, it's hard to communicate to them something like EigenLayer and why that's important, why they should care about it. Similarly for retail, if they're brand new to crypto and trying to introduce something like EigenLayer and shared security, not something that's probably going to capture their imagination. At least they maybe they've like studied game theory in some capacity or computer science, whereas at the application level, those are always the things that pull in retail in some capacity. And that's even going back to 2017, 2018 with some of the ICOs, it was like more, more application-oriented, even if it was infrastructure, like something like Filecoin was like, oh, like file storage on the web, like anyone could intuitively grasp that. Whereas now, at the infrastructure level, those aren't things that probably retail or institutional can immediately, you know, grasp onto and say, okay, this is why I want to start investing or buying these things.

Let's talk retail for a sec. So, Reagan— oh my God, I'm going to keep botching your name in this podcast. I'm sorry.

I was— I've been called Reagan since I was a kid. Like, I, I actually—

fun little story for folks, the way that The way that we got connected is I mentioned a tweet thread that Regan had put out, and I completely botched your name about 4 different times in the podcast. And you said, thanks for— you DM me, said something along the lines of, thanks for the mention, but royally botching my name. So I'm glad to be called out on it. So you had one of your threads, you've had some really good threads, your Twitter's blown up recently, which is cool to see. You talked about how retail cannot make any money anymore. And I think maybe let's go there as it's a good kind of start to kind of get into this rabbit hole of the bigger structural issues. So why can't retail make money anymore?

So outside of meme coins, I guess I was going to say because I said that and then like all these people were like, dude, you're an idiot. Like I made a bunch of money on meme coins. So I want to be clear, I'm just talking about the like traditional VC coin side of the market. Clearly you can 100x things in meme coins, which I think Wyze is at least why some of the attention has moved there. So Mike and I worked together for 4 years before we started Lattice at CoinList. And so, you know, we were around all of these token launches from Filecoin to Near to Solana. And I think we've like seen the data firsthand and also just talked to users who participated in these sales. You can make a lot of money participating in token sales, right? I feel like there's always that meme people share of like, coinless returns from ICO to present. And it's like, hey, Gary Gensler, like, thanks for protecting me from like the 500x that I missed on Solana. But like, you think about turning $1,000 into half a million dollars like you could have in the Solana ICO, that's like life-changing money. And you think about why people participate in risk-on markets, they're here to make money generally, right? It's like the meme, like, yeah, maybe some people are here for the tech, but like These are financial markets. You are here to turn a dollar into more dollars. And so crypto was really well set up for that, right? But that meta has kind of shifted in a few ways. One is these things tend to go out at higher FDVs than they did previously, and the market has grown. So like maybe that's justified to some extent, but I think that is an important distinction. And the second is like generally these projects are not selling tokens to the public. Pre-launch, at launch, at all really. Instead, you kind of have this like gamified points airdrop-like game. And so with EigenLayer, like using that as an example, because it kind of was like the most hyped up airdrop-style token launch, you basically could maybe like double your notional value of ETH into points, but that's like over a long time, right? And turning $1,000 of ETH into $2,000 is a very, very different thing than turning $1,000 of ETH into $500,000. Right. You could double your money on Robinhood, right? Just like go buy Nvidia. And I think like crypto, where it had an edge amongst retail traders, it's kind of lost that a little bit, right? Because we've kind of like kneecapped the upside for retail participants. Now, the place where that's not true is meme coins, right? How have we kneecapped the Say more about how we kneecapped the upside by going public later, essentially by going public later at higher valuations and not giving retail any way to buy in besides these airdrops where you basically are kind of just like waiting on the Eigen team to decide what you get, right? It's like the upside is kind of fundamentally capped just because of the way these points are calculated, right? Like What's the max you really could make on Eigen? Maybe if Eigen is $100 billion, people are 10x-ing ETH they put in, but that's like a wildly bullish outcome, right?

That's in all likelihood in history. Yeah, yeah.

Retail participants are probably getting 50% to like 250% yield on the ETH they lock for 6 months. It's just a very different game than participating in ICOs. And so I think there's valid reasons we've moved toward this, right? The regulatory regime has gotten harsher, but we clearly have like just significantly capped the upside that retail can make in these markets besides meme coins. And so I think that's partially why, like, the meta has kind of shifted to that segment of the market.

Hmm. Yeah, there's the good Kobe piece that I'm sure a lot of people read, which is like just compares kind of the— it compares 4 assets: Ethereum versus Solana versus Optimism OP and StarkWare, right? Right, looking at the different multiples that you would have made if you could have invested, comparing the seed round versus investing when it went public. Something like Ethereum, when it went public, like the ICO returns were only 1.5x those available on the market when it went public. Solana was 10 times higher in seed, OP was 30 times higher, Stark was 138 times higher. And if you bought in the public markets for Starkware, I haven't looked at the chart recently, but you're either flat or down. So, Mike, what do you think about— I mean, like the— so I think Regan is saying like, okay, we go public, like putting quotes around like public crypto, public later and later at higher and higher valuations. But that's no different than how the traditional capital markets work, right? See, you know, Series A, Series B, Series C, D, E, whatever, then you IPO. And it's not like there's this like retail then buys it at the IPO and they're excited and like, hey, number goes up.

And retail holders of stocks are certainly different, different breed than retail holders of certain tokens. And I think that's going to be one of the most interesting things to see how that, um, plays out over time with some of the more recent token launches. Because in these bear markets, the people that stick around are the people that made money. Or they tend to be. So for instance, if you were in, let's say you participated in the Solana ICO, or you were able to buy Solana sub-dollar for multiple months in the prior cycle, you know, even if you held all the way down to, you know, $8, $9, you're still up meaningfully and you've probably made some life-changing money. And you saw it, you saw it in your, you know, your wallet. And those are the people through the summer when like everyone was like, Solana's dead. They're like, well, I'm still up almost 10x. Like, I'm gonna stick around, keep building, keep contributing. And like, there's just not— like, no one else is probably going to have that experience for a token that's launched in this cycle. We're like, listen, I've made a lot of money, or I've seen a lot of money on screen.

I'm going to be here for a while.

And if you look at in the past cycle, he's been going back to 2017. So you have things like Chainlink, like people could participate in the ICO, went all the way down. It was totally dead in 2019. But I think that's where you get the loyalists. In your community that stick around. And I don't think— I don't see that type of behavior from a retail community around most of the projects that are emerging at this point of time.

It's like everyone's mad about not getting enough free money, right? Like, it's just like, you know, I feel like every— like, all these crypto people hate government handouts and it's like, oh yeah, you just become like reliant on the state. And then you look at the exact same dynamics happening in the crypto market, right? Like, Eigenleger could have given everyone double the token and people still would have been happy, right? It's just like an obviously bad paradigm to launch these things.

Yeah.

What did you mean when you said we've moved from an uncapped upside market to a capped one?

The FDV these projects are launching at is higher. And so like you're getting a notional value of tokens that's tied to a higher FDV.

You're saying it's capped in that it's just too high, like Eigen going live at 100 billion is just too high for number to keep going up.

Yes. And you're also just reliant on what the team gives you, right? Which is never going to be like 10x the ETH you put in. It's just not how these things work, right? It's like you get some yield on your ETH. In Eigen's case, let's just say it was 100%, but you're never going to get 500x on an airdrop the same way that you are with, with a solid ICO. It's just not how these markets work.

Well, you're never really getting 500x on an air— like, that wasn't an airdrop. Like, an ICO was— ICOs are different than an airdrop in my mind. ICO is like a—

you're 100%, but I'm saying we've replaced ICOs with airdrops.

Ah, I see.

Yeah, and they're not even really airdrops because you are giving something, right? You are risking your ETH for 6 months, let's say.

How do you solve this though, if the— like, this does feel like— I'll try to play devil's advocate, like as the industry gets bigger, and people make more money, and there's more success stories, like more dollars come into the industry, LPs want to put more capital into the industry, more venture funds are started, venture fund, like, you could say this is the fault of the extreme amount of venture dollars that are sloshing around in the industry.

We are definitely contributors to this problem. It's your fault. We're not going to deny that.

But it is— Well, I actually wouldn't say it's your— I wouldn't say it's the funds like this. It's the— there are a few late-stage mega funds.

Yeah, I mean, I think it is interesting because we had this beautiful system which was anyone globally could participate in meaningful upside from this new technology. And what we did is said, no, let's, let's actually not do that. Let's go to another system which we already have, which is, you know, we have these gatekeepers and those are the people that can capture the upside for LPs. But look, you know, we're just going to keep using the EigenLayer example. They had that round with Andreessen a few months ago where they raised $100 million. Question is like, why couldn't they have done that as a token sale? They could have gotten everyone in at that same valuation. They would have no trouble raising $100 million from retail, but they chose to go with one investor. Now, I'm not going to blame them. There's a lot of regulatory risk here, and that's what we've all been talking about for, for as long as I've been in this industry is the regulatory risk. But, you know, if there was a fix, it feels like maybe that would be the fix, that for these growth stage opportunities, getting retail involved and giving them a meaningful participation opportunity would be, you know, one, you know, one way to address how does retail get, get access to the same types of opportunities that some of the large funds do.

Why did Eigenlayer just do that?

Talk to Shriram.

Yeah, I mean, look, if you just have to deal with Andreessen versus 100,000 token holders with like Reddit accounts that can like complain about your, you know, the roadmap and all that, right? Like it is logistically easier, but maybe that's also kind of part of why we did have this beautiful system that Mike talked about is there was just like a limited amount of venture dollars. And this is kind of the point Kobi makes, right? It's like you look at how much Solana, Near, AVAX, these teams raised pre-launch. Maybe $30 million max. Why does Monet— like, why does a new L1 need $250 million? You're building like open source software. It's like a protocol. Like, it makes no— absolutely no sense to me. And that comes at the expense of retail holders, right? Because like there's a limited amount of alpha in this market. And every time you raise the kind of floor on the FDV at launch, like you're taking away some of that alpha from retail participants. And so it's not like this is a silver bullet, but I think generally these teams launching earlier, launching at lower valuations that reflect that progress, and raising less money pre-launch, not setting a super high floor on like launch FDV, these things tend to give the community more upside in what you're doing.

Yeah. How do you guys handle that though, at Lattice? Because like, if I'm trying to— I've never been in the VC's seat here, like allocating this capital like you guys are. But if I'm in your guys's shoes, I'm like, okay, let's look at Monad. So like Monad comes around, and they raise it like 2 or 3— what do they do? They did the KOL round at $600 million, and then they did the venture raise at $2 or $3 billion. And you're like, yeah, that's a lot of money. But also, it's probably going to 10x because it's going to go— it's going to go public. I don't know the word for that. Token's going to— TGE is going to happen at 20 or 30, or maybe Eigenlayers happened at 100. So now that pulls Monad up to like 50, or maybe it's even more than that. So then that's like a 20x. And then your investors are like, hey, Mike, you, you had the opportunity to do this 20x in like 18 months and you didn't take it. Like, why didn't you do that? And you're like, oh, hi, FDV. And they're like, I don't give a damn, like 20x in 18 months. So how do you, how do you handle this in your shoes?

Yeah, I mean, there's another thing to account for, which is these tokens come out at 50 billion, let's say, but by the time investors like us actually see those tokens or can realize some of that value, you know, it's several years from now. So the question is, is like, if you're coming out and you're coming out of 50 billion, like who's the next buyer? And that's something we haven't really talked about. Like, historically it has been retail is the next buyer for some of these new tokens. There aren't mutual funds that are going in buying Monat necessarily. They won't be for several years. You either have maybe some liquid funds or some venture funds that put into liquids, but there isn't a really large institutional buyer base for mid to longer tail tokens that are coming out at $1 billion to $20 billion. So the question is, like, if that's a down-only chart, like, several years from now when Regan and I, you know, go in to claim our tokens, how much of this is actually going to be worth? So it's good for, good for Marks and going out and raising, raising funds, but like actually delivering returns to investors, not always, not always there. So just something, you know, something that we're always accounting for.

And I, I think we, we haven't really talked about Lattice much, but I think To answer your question a different way, like one of our theses when we started the fund is that there was just a gap of capital for day one founders, right? Most really good managers in like the '21 cycle sized up to multi-hundred million dollar funds where their minimum check size was like $3 million. And our view is that, you know, two founders in a room with an idea who wanted to raise whatever, half a million to like $2 million at launch, That was actually like the least crowded part of the market. And there is a lot of money for like these pre-TGE rounds. These Series As are like really competitive. And you see this with like Eigenlayer and Babylon in these large rounds. But like, we've chosen intentionally not to play at that part of the market. We want to work with founders on day one. Um, our last fund was $65 million. And I think like the strategy reflects that, right? Like how many managers can you name off the top of your head who have less than $100 million funds? Probably not that many.

Well, what happens though when you guys are successful with Fund 2 and then you go out to raise and you're like, nice, I take 2 and 20, why wouldn't I just go raise more money?

I mean, that's it, you know, right? That's a fair question. And that's like often what has happened in venture. But it hasn't always been the case. Like there was a guy named, I think his name is Steve Anderson. He runs a fund called Baseline. And he was like a day one investor in Snapchat and all these ridiculously successful companies. He keeps these like funds, $50 million. He's 10x'd almost all of them.

Yeah.

And he just has a strategy and he sticks to it. He hasn't scaled the team. Like he can kind of—

or Bill Gurley, right, is like a different example. Like Benchmark just sticks at $350 or $300 or whatever it is.

Like, and everyone who's been there is like probably ridiculously rich, right? Because like you can clearly do well if you have a strategy and stick to it. So I don't know, we, you know, our team's 4 people. Like, we like working with founders, we like keeping things small. It works for us.

What are the biggest things that founders who are thinking about, who are launching tokens, what are they thinking about right now? Like, when they come to you guys, you're like, they're like, hey, you guys worked at CoinList, like, we're launching this token in the next 12 months, like, like, help me. What, what, what goes on in those conversations?

It is interesting because I— maybe it's only because of Regan's recent tweets, but everyone, all founders seem to be looking for an alternative solution, meaning like they want something different. They don't just want to do an airdrop. They don't want to do a high, high FDV, low float token. But it doesn't seem like anyone really has a good answer or solution for this right now. In terms of what founders have the most questions about, it still seems to be legal, which is pretty tragic. Like, if the problem that's top of mind for most founders is like, how do I do this and stay out of jail? Like, we've failed collectively as a country. And that— but that's still what they come to talk to us about the most is like, how do I do this? How do I set up the right offshore entity? Do I have to move to a new country in order to be safe. But beyond that, like right now, like it still continues even though it's maybe not preferred. The tactic around using airdrops, how to do it, is still here. And I think until we get some more regulatory clarity, that's going to be the case, even if the desire is there to do something different.

So let's get into some of these structural issues a little more. Like one of the things you guys— I've seen you guys write about is like, so we're talking about massive raises for L1s and L2s that leads to these multibillion-dollar valuations pre-launch. That does what, two things, right? That you're saying a lot of sell-side pressure creates a floor on the launch FDV.

Yes.

Yeah. Solution in your guys' mind to that is anything, or this is going to keep happening. And if you're an investor, be a little smarter when picking tokens.

Well, look, I think embedded in every single venture investment ever made in this industry is a belief that the industry just grows from here.

Yeah.

So I think like we kind of are all just hoping that like, you know, more participants come in, more liquid funds get raised, the industry just keeps growing and like everyone is kind of happy. And that'd be awesome. Like, I would be happy with that. But I think right now a lot of the problems are really just a structural imbalance of flows, right? You had a lot of money go in in the '21 cycle, and that money needs to be paid back at some point. And so I think like there's been a lot of talk about all these like new tokens launching this cycle. I actually think the flows there you can't really see because investors are generally still locked. But you look at the flow, like the tokens that launched over a year ago and what's happening with them right now. And clearly, like regardless of what these teams do, Arbitrum is a good example. Like they are executing. Everything is going right from like a, like a strategic perspective. But you have like a billion dollars of tokens hitting the market every month. And like, you look at Coinbase's last quarterly reports, retail trading volume is still 70% below what it was at the peak of '21, right? It is just a fundamental mismatch of inflows and outflows. And like, regardless of what you do as a project, like that matters more than anything else.

All right, let me throw a thesis at you that, uh, and I want to see if you both, you guys agree or disagree with it. Um, so I went to the Coinbase State of Crypto Summit last week, and Cathie Wood and, uh, Samara, who's the CIO of their, uh, of BlackRock's index business, both share this number: 80%. And 80% was interesting because it's the percentage of flows and buyers that are self-directed investors, a.k.a. retail, for their ETFs. So I think on crypto Twitter, you see ETFs, Bitcoin ETF is here, institutions are here. What they're arguing is, look, what people don't understand is that 80% of the buyers for this ETF, they're actually self-directed retail people in their own brokerages. So then that makes you think about, okay, in this cycle, I saw the Coinbase earnings and retail is still much lower than it was in the last cycle. Therefore, the thesis— therefore, the takeaway is that retail is not back yet and they will come, and that's good for everyone's bags. There's another idea, which is, hey, the more ETFs we have, if you can just go buy Bitcoin and ETH and then maybe Solana and then maybe AVAX in your Fidelity account, those are the thing— people don't, people don't just jump into crypto and say, I want to buy that like 70th asset on CoinMarketCap. They buy Bitcoin and ETH. On Coinbase and then they say, ah, I made a little money, let me get a little more risk on with it. So maybe that actually makes it so that retail doesn't come for a lot of the insert tokens 10 through 100 on CoinMarketCap. Agree, disagree?

I generally agree that anything that increases accessibility for the head of assets, is going to increase the number of both people and the amount of capital that's flowing into it. When I look at some of my friends that are not into crypto at all, have never used MetaMask or Phantom, they're pretty comfortable. Like, oh, now that it's in here, I feel like this is safe. I can buy it. I've always thought about it. Now I'm just comfortable because it's in my Fidelity account. So I would expect if they add Solana, more assets into, into brokerages, like you see a lot of capital inflow. The question would be like, what is that? How does that change things for venture investors? Because we're not necessarily investing in those. We're investing in these longer tail assets. How many of them, like, which are, you know, a lot of these teams are still trying to find product market fit. Like, are they good? Are they going to create ETFs for a token that's, you know, on the second page of CoinGecko, maybe doesn't even have good product-market fit yet, but has like a really strong community. They've got a good roadmap because that's like, frankly, that's still where a lot of returns come from. Even if you look at this cycle, which has been kind of interesting, like a lot of the AI tokens have been the ones that have done well, and most of them definitely don't have much of a product, right? But they've been some of the best performers overall. So like, people still want access to those, and that's still where a lot of the returns are generated for, say, venture and like what we describe as like traditional retail versus maybe this new version of retail, which is the casual sort of crypto participant.

And I think like maybe, I mean, we kind of started the conversation with like, why is this cycle different and weird? Maybe this is kind of like an early preview of what flows are going to look like in the future, right? Where like '21, it was like, oh, you bought some ETH to like punt on NFTs, you bought some Ether, Solana, and were doing DeFi stuff, and then you kind of just like hopped around crypto and bought some alts. But maybe now flows are different where like, as you said, it's just like, oh, I just have this ETF and the price of that asset may go up, and that kind of creates like an underlying wealth effect that flows down the, uh, the beauty that is the CoinGecko top 100. But it's just different than like how these flows have moved before.

Yeah, it's interesting. I remember at the very beginning of this, like, kind of run, like the start of this cycle, my co-founder was saying to me, he said, look, I think ETH is going to struggle. I was like, no, ETH is going to rip. Don't you understand? And he said, no, look, there's, there's too many options now. In the last cycle, if you wanted to get exposure to ETH, you just bought ETH. And now it's like, do you buy the L2? If it's an L2, do you buy Arbitrum? Do you buy Optimism? So if you take let's take $10,000 that a retail person might have to buy ETH. In the last cycle, you just bought ETH, and now it's like, okay, maybe you take like $3,500, you put it into ETH, you pay— you take like, I don't know, $2,500, you put into OP, $2,500 into OP, $1,000 into ZK now, whatever, $1,000 into Stark. Like, now there's, um, this like dispersion of tokens that you can, uh, it's just like a broader array of tokens that you can allocate to. So Hey everyone, Santi and I have been talking about Solana a lot recently and we're excited to have a Solana sponsor of Empire. Marinade is a staking protocol in Solana. I remember when they launched, I think it was back at a Solana hackathon and they were funded with this $80K grant. It's super cool to see how far they've come. They're the only stake pool today that delivers auto-rebalancing, MEV rewards, and automatic downside protection with their new protected staking rewards. You can stake natively or liquid stake with Marinade and get the same high-performance delegation strategy that thousands are using already to stake your SOL to over 100 of the best Solana validators. Marinade has been live for over 2 years, and they have audits completed by 4 of the top security firms in crypto. The delegation strategy is a first of its kind. So if you're staking your Solana, if you want to start staking your Solana, if you want to get some yield from your SOL. Start staking today with Marinade. Go hit the link in the show notes. Big thanks to Marinade for everything that they've done in Solana staking land. Go check them out. Go stake your Solana with Marinade today. This episode is brought to you by Avalanche. Avalanche is a leading network of blockchains giving some of the world's largest financial institutions the design space to explore new use cases and business models while leveraging completely customizable infrastructure.

Infrastructure.

Everything that Avalanche has been building the last few years has culminated in this moment where today you have institutions and developers able to essentially have limitless possibilities with the chain. They've enabled developers to build cross-chain swaps or create gaming environments where one subnet can unlock features in another or can use USDC as a native gas token. Onyx, for example, by JP Morgan or Citi or DTCC's digital assets or the Australian New Zealand New Zealand Banking Group. They're all building on Avalanche evergreen subnets. Really cool stuff. Big thanks to Avalanche for sponsoring this episode of Empire. Go explore Avalanche subnet ecosystem at core.app/discover. That's core, core.app/discover. Thanks again, Avalanche. This episode is brought to you by Mantle. Mantle is an L2 backed by one of the industry's largest treasuries. At the time of recording, it's valued at $4.5 $4 billion. The Mantle ecosystem engages in a lot of early-stage exciting projects such as Athena and EigenLayer, and they give out actually the rewards to the Mantle community. There are two airdrops I want to tell you about. The first one, it was with Athena. They offered 2.5 billion Athena shards to holders of their native token MNT. So the reward station program distributes these presale token allocations to MNT holders who stake the tokens. The second one they have going on is with MISO, M-I-S-O. That gives out over 90,000 MISO tokens worth about $50,000 today. That starts on April 25th, runs through May 2nd. If you want to check that out, you got to stake your MNT and you can check out the reward station at mantle.xyz/rewardstation. Big thanks to Mantle for sponsoring Empire. Low float, high FDV. Big problem, not as big of a problem as people say. What are, what are your guys' thoughts around this?

I think coming back to what I mentioned earlier in terms of who sticks with these projects during bear markets, it's people that made money. In a high FTV, low float environment, there's just, there's just no one other than the VCs. And then the VCs move on to the next project they want to invest in, or they're selling out on the other side. So the team can definitely contribute, continue to ship and deliver a product. But like, if you don't have that base of people that are going to stick with you like ETH had in, in 2019, 2020, or Solana had in this, this most recent bear market, I think the longevity of those projects is going to be challenged. And the only people that are going to be, you know, continue to work there are like the core team that are you know, happy to get paid and receiving tokens as part of some vesting schedule. But there just isn't that rabid base that will stick through it.

I think the other thing we, we hadn't talked about is like, you think about who's the natural buyer for any of these tokens post-launch, right? And we've established there's not a ton of like institutional allocators buying these liquid assets. It's generally retail. The other issue with airdrops is that like it just sucks a ton of buy demand out of the market, right? Like what is the Venn diagram of people who want Eigen exposure but like didn't participate in like the airdrop or points campaign? It's probably not that high, right? If you wanted Eigen exposure, you probably already had ETH, so you're probably farming the Eigen points campaign. I'll use myself as an example. Like, I got some Eigen— I got some Eigen points. Hopefully I didn't just like destroy my airdrop application here.

What am I going to do? You have been coincidentally removed from the list. Yeah. What am I going to do?

Go buy more liquid at like a $15 billion FTV? Like, of course not.

Yeah.

So like, it's like just so bizarre that like we would just like shoot the main retail buyer and just be like, actually, we're just going to give this to you for free. And not only give it to you for free, then we're going to make it so that if you want to buy more, it's going to be at a really expensive price. And so like, I think it just creates a bad structural market. But I also think that like the low float, high FTV thing is kind of a red herring in that like I actually don't think the floats are that different than they were last cycle. Um, you look at like the L1s that have done well— Solana, AVAX, NEAR— none of them really launched at more than like a 20% float. Um, and I think Kobe made a lot of good points in his last piece that like, yes, these FDVs are higher than they were before, but like you look at like the benchmark assets like ETH, those are also way higher. It's like maybe these things are launching at an appropriate FDV I really think the issue is just like this mismatch of inflows and outflows, and people are kind of looking for like something to blame. And so we've kind of like centered on this and meme coins as like the two, two villains of this cycle so far.

Hmm. What did you— I mean, you guys worked together for 3, 4 years at CoinList, right? So you've spent more time on token distributions and token sales than anyone. Like, I know we talked about it briefly. I want to go maybe a little deeper into that. Like, What are the learnings and takeaways from the, from those years at CoinList and just working with different founders on these, on these airdrops? Like, why are— I think it's fair to say you guys would agree that most of the ways, the way that most people are doing airdrops today is not done well. So, and you guys have briefly touched on that now, but like, maybe take me deeper into your guys' thoughts around airdrops.

Yeah, there's a guy that we used to work with at CoinList that now runs a company called CoinWise. Much that helps teams navigate the market maker selection process. And his line from 4 years ago was always, the token is the product. And if you think of, you know, traditional Web2 companies that are doing product development, they're trying to find product-market fit, it's like find a group of customers that just love your product, find them, and then expand from there. Like that's how you do it. So if you, if you, if you bring that over to Web3 and you view the token as the product, part of it is like finding that base of people that just love you and love your token. And probably the way to do that is to help them make money. So looking back historically, basically all projects, like the people that were able to make a core group of users money early on, they have that rabid fan base that then goes out and kind of tells the story to everyone else. And I think, you know, just looking at the token sales on CoinList, the ones that like Solana is such a good example because Solana kind of wasn't the darling that everyone thinks of it now. In 2019, 2020, when Rajen and Anatoly were going out to fundraise, like they weren't— they were struggling. Like people did not want to invest. They were kind of like the mid-tier L1. Like everyone was like, oh, I want ICP, I want Polkadot, like I want something else. This high-performance, fast Layer 1, which seems really logical now. Everyone was like experimenting with different designs around governance or maybe multi-chain thing. And so it was cheap. They made people a lot of money. They found loyalists. Engineers wanted to build there. Like, that's how things evolved. So, you know, just on the project that we launched, I think the teams that just were able to help early contributors make money was probably the most important factor in their long-term success.

On airdrops then, like, would you just not do an airdrop? Because that also has the risk of upsetting the community in a different way, right? Where they're pissed because they've been using your— they've been farming the airdrop, they don't get an airdrop.

So yeah, I think, I think airdrops are good as a marketing tactic and for user acquisition, get people, point them in the right direction for getting them to actually use the product, uh, but probably not how it's being used now, which is the primary token distribution strategy or the only one. Uh, so I think things can still be used. It should be just part of a broader toolkit that, that's available. And I think, um, Kobe's talked about it. I think Santiago talked about on one of your podcasts previously, it was this idea of using points even potentially as a way to give people access to token sales in the future. So maybe you get an airdrop, but you also, you know, if you hit some threshold of points, you get, you know, $1,000 allocation in the token sale. So it's a good way to like get people involved, but also sort of modify the behavior after, after the points campaign is done.

Regan, do you have thoughts on this?

Yeah, I think really you want to give your early users and like community uncapped upside. And I think token sales are kind of like the most logical way to do that. I think there is a lot of like talk about like the hostile US regulatory regime, and some of that is right. But I think if you go back, like we talked about Solana a bunch, this was really 2020. Like none of the CoinList sales in the last 4 years have had any US participants. Whatever entity is selling tokens, always outside the US. A lot of compliance around like not having US people participate. And so I think like it's easy to just say like, okay, yeah, like whatever, our lawyers are telling us not to do this, we're not going to. But I think there actually are a lot of ways to do this in jurisdictions that are more friendly. Europe has a lot of new rules with MiCA around like facilitating kind of compliant ways to do this. And I think it's just easy to kind of like be like, okay, well, like everyone's just doing this airdrop thing, so we're going to do it. And not really try to innovate on it. But I think it's a big mistake because, as Mike said, like in a lot of cases, your token is the product. And if that price chart like only goes down, it's very hard to have a sustainable, you know, project.

Yeah.

And it's— I think it's also important to point out that over the past 5 or 6 years, the inflection points as an industry were generally around when a new token distribution mechanism came out. So you had ICOs, then you had DeFi with yield farming, even things like Deepin with, you know, you plug a box at your home and all of a sudden you're receiving tokens. That's been where retail has kind of got excited, this new way to participate in any project, earn tokens, be a part of it. And it's good marketing. So when Uniswap came out with this, like everyone's like, like I get this airdrop, everyone's talking about it. Now it's like once it's been, been done for several years, I think you, you lose that marketing strategy and need to come up with something new that everyone's going to talk about.

Yeah, like whenever we get a deck and it's like the go-to-market slide and it's like points campaign, you're like, all right, like sure, like that's table stakes, right? But like how are you going to differentiate from the 10— you know, you're the 10,000th point campaign. How do you do it?

Right, right, right.

All the others.

What's next? What do you think is like the interesting thing?

Node sales, like, are interesting to some extent.

What are those?

Node sales.

Node sales. Interesting.

So I don't know if you've like tracked what Impossible Finance has been doing. They've kind of been like the leader of this, but they've had a few projects raised like $30, $40 million where you're essentially like buying, pre-buying nodes, basically like buying the right to run—

didn't Gala do this? Gala did this in the last cycle and it was like some colossal scam, I'm pretty sure.

Well, sorry, to be clear, I'm not— I'm sure like, like everything in crypto, there's a way to be— I'm definitely not endorsing that. But I think this idea of like pre-selling like validator services in the network and helping to decentralize it along the way is interesting. Maybe there's some regulatory unlocks there where people are actually doing work for the network. That's kind of been, I think, like the main, like, new approach we've seen. Mike, I don't know if you've seen anything else you think is super novel there.

There hasn't been much. The thirst is there. But, you know, I go back to this idea of using participation in the points campaigns as an access point for sales, because not only will you know, people want to participate in the sales, but it will incentivize them to, to act accordingly during the points campaigns to get access to them. So no one has tried that yet, but, uh, I definitely would like to, to see someone do it.

Yeah. What do you think about, um, so in traditional venture, they're like the seed funds, there's like Series A funds, there's like, or Series A, Series B, whatever you want to call it, Series C, who write like bigger checks. And then there's actually like growth stage, like Series D and Series E, like pre-IPO funds. And that doesn't really exist in crypto, actually, you could say. So the folks who led our round last year, 10T, 1RT folks, Dan Tapiero and crew, they are probably one of the only like growth stage funds, but they don't really do tokens as much. What do you think about— I mean, I just saw Paradigm raised $850 million. And before I read the announcement, I was like, oh, great, we have a Series D growth stage, like, token buyer here. But they're— but they're— but as they said it in their press release, it's like they're only focusing on early stage. So will we ever see those, like, the Series D and Series E funds that are deploying the billion dollars or $500 million into late stage, or no, because you have this like earlier token generation event.

I mean, I think if you think about what the best growth stage strategy would have been like over the last 4 or 5 years, it probably would have just been to like buy a bunch of tokens summer of '23, right? If you had like $250 million and you were trying to like 5x that, kind of like a do a decent growth multiple, you can get those multiples in liquid markets. So I think, I think these funds need to exist and I think they should. My view is that if we view TGE, it's like these companies are going public at Series A or B. Sure, you can be a growth stage investor, but you should probably just buy tokens or do these kind of OTC rounds for liquid assets. I don't know that I really believe there's a huge gap where protocol teams need $75 million Series Ds. Like, I don't think that's the biggest gap in the market.

There's also an element of just answering the questions, who is the next buyer? So in a pre-IPO environment, you know, Goldman Sachs is going out, they're putting a syndicate together, they're shopping around to all their high net worth clients. Like, they know that's going to happen here. It's like, oh, well, as a growth stage Series D fund, you're like, well, the next thing is an airdrop.

Yeah, we're going to, we're going to give it all away.

So it's just an interesting like, okay, well, like, who then who buys it? Or you have to wait for a bear market and then people will buy it.

What do you think? This is kind of related to the questions I was asked just on the, on the idea of, okay, Lattice is wildly successful. You guys raised Fund 1, then you raised the $65 million Fund 2. Did you guys see, um, who was it? I think Arthur from Defiance after Polychain raised, he said, uh, there's this tweet he tweeted out. He said, uh, big VC fundraisers are likely value extractive for the space right now unless they earmark a significant percentage of that raise for liquid tokens. Else, uh, else you should assume every big VC fund will eventually extract 3 to 4 times the capital they raised from the market eventually for their quotes, infra investment. I don't know if you guys had seen that or if you had time to think about that, but what, what do you think about that take?

I mean, I think that statement in and of itself is also true about venture capital firms in traditional markets, right? Like, the seed investors in Stripe will eventually extract billions of dollars from like the NASDAQ, like open strike lists. Like, directionally, crypto is not unique in that regard. I think really the gap is just, as you said, there's not a lot of like pre-IPO or allocators to liquid tokens in this market. And so you just have a big structural gap where like a lot of money goes into venture, not a lot of money goes into liquid markets. And so we have this very big like capital inflow-outflow structural mismatch. Is that directly a fault of like venture capitalists? Like, no, it's kind of like a market inefficiency. And honestly, like, people like Arthur probably do very well taking advantage of it. Um, so I think it's really like the burden is on smart allocators to put more money into liquid markets, which they should. Um, But I also do see his point in that I think like there's a lot of venture money that's gone into the space in the last 5 years. And if you don't have capital to kind of, you know, like take in those outflows, you just have a bad market environment and that makes it hard for a lot of market participants.

Yeah.

This, this, this could be where with more liquid tokens be getting converted into ETFs, you could start to see that change because as people have access to, let's say, a SOUL ETF, the expectations are like those, those are the people that actually end up buying it. And I think you're seeing that now with Bitcoin, where a pension fund or an endowment that maybe previously would've put all of their allocation to crypto and venture is now saying, okay, why don't we just buy Bitcoin? In this ETF. And if there's a dozen other assets they can do that with, then they'll buy those. And maybe the allocation of capital between venture and, you know, liquid markets will, will change.

Do you guys think we're going to see an influx of hedge funds in crypto? Because just based on what you were just saying there, Mike, like, it feels like we're, we're very overweight venture because it was, uh, I think it started probably from the blockchain, not Bitcoin era, because it was very easy to invest in. Like if you were, if you were an LP, giving money to someone investing in tokens maybe didn't make sense, but like investing in like BitGo or Circle was like, yeah, that's like, I can, that's kosher, you know? And then it turned into, okay, venture firms now start to do some tokens and then venture firms start to hold some liquid tokens. But at some point you got to imagine we just like, there really aren't that many just pure-play hedge funds.

The industry.

So you got to imagine that starts to happen. What do you, what do you think? I don't know if you guys have takes on that.

I think it's been— look, any industry where you have just like structural 80% drawdowns, it's really hard to run a liquid book in that environment, right? At some point in the bull market, hopefully you like clip carry, you set a high watermark, and inevitably at least if the markets continue to operate as they have, you will be down 80% at some point and your LPs will probably want to pull capital. So I think it's just been like a very hard environment to run a hedge fund, but clearly there is alpha to be extracted here. And I think like you are starting to see more financial institutions move in and, um, you know, operate liquid books in the space. I also just think over time, like I talk to more LPs, for example, now that own Bitcoin or ETH than they did 3 years ago. Right. I think like hopefully as the space matures, allocators kind of see like, hey, it doesn't make sense to have all of my crypto coverage just from venture funds, right? I might as well also own Bitcoin and ETH and not pay fees on that and capture a lot of like just category beta. So I think more people doing that will also just like help kind of fix this structural mismatch.

Yeah. Let's get into some of the opportunities right now. So I know you guys are excited about Deepin. I'm curious to get you guys' take on investing in apps instead of infrastructure. Like, maybe just take me into— I feel like this is kind of a depressing podcast talking about all the issues and the structural problems. So maybe lighten my mood a little bit and tell me, tell me what you guys are excited about right now.

Yeah, I can speak to Deepin first, which which as a category has certainly evolved quite a bit over the past couple of years. But we back in 2022 published a thesis on DePIN, or as we called it at the time, TIPIN for token incentivized physical infrastructure networks. And this was before really any of the other stuff launched. It was just Helium at that point. But our expectation was a lot more teams would come from some industry, whether it's energy, otherwise, wireless, wireless, um, wireless spectrums, uh, sensors, etc., and start to build out deep networks. And that's, that's definitely manifested. So we've invested in probably about a half dozen different companies, everything from CDNs, energy, uh, another project called Andrina in the, uh, in the wireless space. And most of them haven't actually gone live with tokens yet. So we do, um, you know, we do see a big opportunity because it's one of the sectors that not only retail can quickly grok and understand and get excited about, but if you go out and talk to any LP, pretty much all of them get excited about those projects first. So our expectation is just from an access point for people that want to get into crypto and are curious about it, whether that's you know, a family office or, you know, just someone punting on Coinbase, DePIN's a really good category for them to start with. So it's one that we've invested in pretty heavily. It has evolved quite a bit where I think now almost anything that doesn't clearly fit into the L1 trade or DeFi is now seemingly being categorized as deep end. And I understand that this is like, you know, even in 2019, everyone's like, oh, now I'm DeFi. Or, you know, later on it was like, now everything's NFTs because it's a good way to raise capital. And I think a lot of garbage will be kind of flushed out just like in those categories. But anywhere we have a team that has a lot of really good subject matter expertise in a space and they can combine that with the token incentives, I think it's is quite powerful. And, you know, we should see some good stuff in the year ahead.

Any, anyone you're most excited about in DePIN? Like, yeah. So actually another— well, before you get into that, DePIN's been interesting. So I've looked at some of these deals, and it's a lot of non-crypto native founders. And we have a— oh man, I'm gonna botch his name— Geodnet? Geodnet? Yeah. Mike from Geodnet from coming on the pod and Jason Yanowitz. Yeah, I've looked at a lot of these. And they're— it's a different class of founders coming into crypto, which is why I love it. It's like a really interesting, unique group of people. And I've invested in a few of these. They are not focused on community building in the slightest. Like they think less about community building and tokens. I think like, and token number go up, they think about token as like a in the flywheel incentive mechanism, but they think less about like community building and number go up token than I think any group of founders in crypto. Do you— what do you— I don't like— how do you advise these DePIN founders when they think like that?

The DePIN space has been interesting because for the first year of it, before Massari and Sammy came out with a name for it, it really was just all industry people that maybe where they were really into helium, they were already into crypto and they're like, okay, this is kind of cool and I can see where it can be applied to my industry. In the past 6 months, as the category has grown, what we're, what we're starting to see is just more crypto-native people that are like, oh, this is a really good way to make money fast. I can just do some random thing and get people to buy some box. I'll tell them that it's going to do something. And next thing you know, I'm launching a token. That was definitely not the case probably a year and a half ago. And a really good example of that is a portfolio company, Deemo. You had this really interesting cross-section of people that— one guy that had worked in the automotive industry, one guy that had worked for ConsenSys, and another person that had worked both in automotive and for Chainalysis. So just a composition of a team where you had some people that just understood the industry, you could talk to to talk, go out there and do the business development and understand what those people needed. But also the internal folks that could design token systems, knew, knew where to build. And that's, that's the type of founding team that, at least in the projects we want to invest in, is like where they have a good, good mixture between the two. But what I will say is we'd rather see them have good industry expertise because we think you can always find the crypto people that can bring the crypto crypto ideas to it. And frankly, like, if you offer people token incentives to do something, like, it's, it's pretty clear, like, they will do it, whatever it is, you know, put an antenna on the roof of their home, like, they're going to go out and figure out a way to do it. Hmm.

Regan, what do you like in the DePIN space?

Um, so I, I'll answer your question, but like, you know, we, you, you kind of segue this, like, talking about this being a depressing episode. I, uh, we're actually really excited. And I think definitely like our excitement comes across here. Look, we've been working on like network launches full time for like 7 years at this point. And so us inserting ourselves kind of like starting to talk about like current issues with token launches, the low float, high FTV thing, it's not like, oh fuck, the world is like falling. It's like, hey, this is wrong and everyone knows it's wrong, right? But like let's talk about it and let's like find a solution, right? And so that's really like where I think brainpower should go versus just like, oh, my tokens are down, blah, blah, blah, blah, blah, right? That's like much less interesting. So yeah, hopefully for anyone who's, you know, felt down listening to this episode, my enthusiasm comes across. I mean, yeah, Deepin generally very exciting. You know, our thesis from day one has been around products we think could expand the market or the infrastructure that enables that. And I think deep in is one of the first categories where we're starting to see that really hit scale. I think you mentioned investing in apps versus infrastructure. One thing we've been excited about this cycle is seeing applications with proprietary distribution kind of start to own more of their own stack and we think capture more value as a result. So two portfolio companies from our first fund where we were day one investors are Layer 3 and Galaxy. Both have built sort of two of like the top 10 most widely used apps in the EVM, both around kind of like product discovery.

Um, is Galaxy a Layer 3 comp— I know Layer 3 and Brandon and co. very well and saw the raise, but is Galaxy a competitor?

Yeah, so Galaxy kind of started with this like Quest platform really product-like focus on emerging markets. They've had almost 20 million wallets like complete the quests and really hit scale, and they've kind of segued that into projects wanting to use their network basically for airdrops just because they had such a large base of users. They then rolled out some like identity verification tools like Galaxy Passport, where they now have over a million wallets that have like basically done KYC and then like issued a zero-knowledge proof on-chain to prove that all on BNB. So this is a million people who've actually paid to like mint a passport. And projects are now using that to basically like distribute tokens to like a verified group of users. So what we're seeing with both them and Layer 3 is they're starting to like kind of like commoditize the infrastructure they use and roll more of their own stack. And we think we'll capture more value as a result. I think Blur was kind of like one of the first people to do this, this cycle, right? Where like they needed a high throughput chain for the Perps product. They could have gone to like Arbitrum OP and gotten a grant to roll there, but they're like, hey, like, we own this category, right? We're not going to give you all the sequencer fees and protocol fees. Let's just run our own L2. And they've done that really well. And so we think what's exciting is like, we think the ceiling on where applications trade this cycle will rewrite as they basically start to like vertically integrate and kind of own more of their own infrastructure. So that's a trend we're excited about.

How do you think about Base and like, have you guys looked into Telegram? Like TON?

Yeah, sure.

Like just these L1s that are L2, whatever you want to call them, blockchains that I don't, I don't even know what we're calling Base these days. These networks that have baked-in distribution via something else, like Telegram obviously has Telegram, and then Base obviously has Coinbase users, like, how much does that impact? Like, how you think those will do relative to the folks who don't have distribution on this topic of distribution?

Yeah, I mean, I think distribution as an advantage will become more and more important, which is why we've invested in projects like Layer 3 and Galaxy, that it is the first touchpoint for many people when they get into crypto. They say, okay, I bought some, bought some tokens, I bought some ETH, SOL, what do I do next? So in both of those, it's like, this is a, this is the first thing that you can do to discover what else is available within crypto at the discovery point. Now you have behemoths like Telegram and Base that probably at this point, like, people are underselling just how important that is. And I think because crypto has historically been just a much more engineering-centric culture, people discounted the efficacy of things like marketing just as a strategy. So if you've accessed all the people, it almost doesn't matter what your tech is. Like, they're all there. That's the only thing that matters. Like, they don't care about maybe the ZK technology that you have or the FAT stuff. That's like it's— you're already there. Um, and that's probably just like— it is probably still discounted just how important having distribution baked into whatever it is you're offering, um, will be moving forward. Like, if you're launching a new L2, like, how can you compete with Base where that is the primary access— that will be the primary access point, and they can potentially even adopt whatever tech that you're, you know, that you're planning?

One question we get asked a lot from our LPs is like, hey, like all of this money's gone into infrastructure, right? Like what's, what's come out of that? And I think that's a question a lot of people ask, right? It's like, oh, there's so many infrastructure funds, where's all that money going? And I think the answer is like we're actually starting to see this now where like Coinbase, Telegram, I mean, both of those have some amount of technical innovation in what they've launched, but like it's become way easier to roll your own chain. Right. There's all of these rollups as a service. There's like a lot of data tools. You now have the OP stack. You are, you have Arbitrum Nitro. It's becoming easier and easier for, to basically take a proprietary audience and you can kind of just like pick and choose whatever tech you want. And so I think we're now starting to see a lot of innovation move away from like the pure technical side and more towards just like, how do I build a unique audience? And I think we're starting to see more venture dollars flow into applications as a result. Which is awesome, right? Because I think you look at what catalyzed a lot of interest in the last cycle, and it was things like Axie and Stepin and Helium, where it was just like some very novel combination of like financial incentives and some kind of cool new thing you could do. And that just like blew up and catalyzed a lot of interest in the space. So I'm optimistic that like all venture fund money flowing into SocialFi and new deep applications and all this stuff, something cool that like really levels up the industry user-wise is going to come out of that.

Yeah. How do you, how do you guys think about expressing these investments? Like, are you, are you only C, like early-stage venture? And if you are only early-stage venture, do you do things that don't have tokens too, or it's only early-stage venture with a potential token? Like, how do you express when you see an opportunity? How do you, how do you express it?

Our general core strategy is pre-seed and seed. About 20% of our fund is liquid tokens we've bought in secondary markets. Some of that is supporting projects we've invested in on the private side. Some of it is just other projects we like. Um, but generally the core strategy is like backing founders from day one. And, you know, we've written a lot of smaller pre-seed checks, for example, where like we'll double down in a proper seed round or double out in a Series A. Generally, our view is like crypto-native value capture is where the most opportunity lies. And so generally, like, our focus is products that we think will have token.

Nice. Cool, guys. Good pod. Uh, anything else that we're like clearly missing from the, the Lattice brain dump here?

Mike, let's hear like a super optimistic vision, vision for the future to, uh, get, get everyone excited.

No pressure, Mike. No pressure.

So I will say in the— call it the first half of this year, it was a little bit discouraging in that it didn't feel like a lot of new innovative stuff was happening. People were rinsing and repeating. But in the past 3 months, like, I've been really blown away by some of the founders coming into the space at this— maybe it's just the inflection point that market is getting better and building really interesting stuff. So maybe like 3 or 4 months ago, a little pessimistic on like what was happening. We were just getting a lot of rinse and repeat, you know, let's take a forked version of this DeFi app or NFT marketplace. And I do think that's starting to change pretty dramatically in our, you know, our deal flow. Our deal flow pipeline has increased pretty significantly, not only in like new sectors and new use cases, but also just the quality of entrepreneur coming in has gone up in the past, you know, past 6 months or so.

Nice. Cool, guys. Well, this is a pleasure. Hopefully see you guys at Permissionless later this year in October. You guys coming?

Is it Austin or—

No, it's Salt Lake this year.

Oh, cool. All right. Yeah, we—

Mike, how's your pickleball game? I saw you're hosting a tournament there.

Yeah, exactly. So I don't know how you guys' pickle game is, but hopefully see you guys there. I would have preferred skiing, but, uh, like a month or two, it's in October, so it'll be good. Like biking and hiking and, uh, the soft things for you, Mike.

Yeah, sounds good to me.

Yeah, thank you. Uh, thanks for having us on.

Yeah.