Investing in The Post Web with Morgan Creek

Speaker A: Foreign.

Speaker B: And welcome to the Outlier Ventures podcast. I'm your host, Dimitrios Satzian Agnostu, partner and uh, chief investment officer here at Outlier Ventures. Today I'm joined by two incredible respected voices in our industry. Mark Jusko, founder and chief investment officer of Mormon Creek Capital, and Xavier Segura, general partner at Morgan Creek Digital. We're here to spotlight our exciting new partnership, the second one, uh, within a year, um, and what it means for founders, uh, the ecosystem, um, why we've chosen basically the way we've chosen the partnership, the next generation of ah, web infrastructure investments we're looking into. But also we aim to talk about the current market, the industry, uh, right now and like where the opportunities lie and how we think of um, the overall investment, um, landscape moving forward. Mark, Xavier, great to have you both here. Before we dive into the partnership, I really would love to uh, for you to share uh, your journeys into Web3 and also how Morgan Creek evolved into this powerhouse of investor it is today.

Speaker C: I came out of the endowment world and as an endowment manager, one of the things that we leaned in on was investing in venture capital, uh, early stage, seed stage, and around technology innovation. And I don't know if that was intentional or unintentional, but it's kind of what separated Yale Princess, Stanford, Harvard, Notre Dame where I was and then UNC when I got there. And so I just got lucky, you know, happy accident that in 96 I was at Notre Dame allocating to at the time, not famous firms in this guy Michael Moritz, who would been a Wall Street Journal reporter. Now he's one of the best investors of all time. We invested in a bunch of companies that I remember our board was like, those are dumb names. I mean Yahoo's a dumb name. Google, why would you Invest in the 21st search engine? What they didn't understand is most of us didn't even is that they were reinventing search. Google doesn't search the Internet, they index the Internet. It's a very different innovation. And uh, so came down to North Carolina, you know, built up the venture program there. And then in 2013 I have a close friend, Dan Morehead, known him for 30 plus years from his days at Goldman and then Tiger. And he called me in 2013 and said, hey, come to San Francisco, buy a dinner, okay, dinner with my friend. And uh, we had been early investors when he spun out a tiger to form Pantera Macro. And he said, hey, I'm shutting down the fund, I'm gonna send you your money back. And Uh, I. Dan, why would you send back a billion dollars at 2 and 20? So I'm gonna do this, this fund in bitcoin and blockchain. I had heard of bitcoin, but I didn't really get it. I kind of got blockchain because blockchain was the evolution of technology. It's just an operating system for the base layer of computing. But I should have got bitcoin, but I didn't. And so I did a little work and I wrote about it and our clients were like, you're an idiot. We don't want to hear about magic Internet money. So uh, fast forward another couple years. I met Xavier and his partner Sachin and we had co invested in, in a deal of called uh, Figure Technologies that integrates AI and blockchains. We'd always been investors in other funds, particularly in venture. And then we would co invest in their best ideas. And then companies said, hey you, you've been co, Would you invest directly like on our cap table? So we started investing directly and we started doing special purpose vehicles and, and then I got approached by uh, a young guy in 2017 who said, hey, let's just start a venture fund. You can't just start a venture fund. Well, yeah you can. There's no competition. There was Pantera Ventures, there was Blockchain Capital and little old Morgan Creek Digital. So I founded Morgan Creek Capital 21 years ago, then in 2017 founded Morgan Creek Digital. And uh, we've now raised four funds and done a m much stuff. So that's too long. But that's the origin.

Speaker A: Yeah. And I think at that point it really picks up, you know, in kind of how we all met, which was across the deal table. And you know, actually remember Mark, uh, speaking at one of the DAS conferences in New York and was really blown away at his, at his command of the industry. There was so much enthusiasm and excitement, uh, around this idea that I started rallying behind it. And it was around that time that I got into venture as well. And I, I would say that I moonlighted as a vc, so I was, you know, full time in Oracle, also wrapping up the MBA at Columbia. And on and on my lunch break, you know, I would take these venture meetings to try to figure out what the pulse of the startup world was in New York. One of them, one of those meetings was, was figure where I met Mike Cagney, uh, at our bank, which no longer exists, Silicon Valley bank, which is right across the street from, from Oracle. Uh, and it was one of those moments where you feel like you found a secret that nobody really knows about. Right? And I think hear Mark kind of speak about that loudly and to see people's reaction to it gave you the conviction to say hey, this could be a really big thing. So the idea to kind of jump in with, with two feet such and I launched, launched our fund and we're finding ideas around blockchain and AI and after doing a couple of things with Morgan Creek, one of which was Libra, which was supposed to be this sort of global takeover of a company. You know the Facebook enabled blockchain would have had largest uh, adoption of anything just given the install base of, of Facebook. You know, we would kind of be the, the tech behind that. Morgan Creek would be the capital behind that. And really while it didn't come to fruition because of you know, regulators, it taught us a really valuable lesson that you could have a uh, one plus one equals three. So we kind of came in at a really Good Time Launching Fund 3 and Morgan Creek Digital with the idea that we can use blockchain and AI to just create a better Internet and kind of capitalize off of that excitement. You know, fast forward to where we are now in Fund 4. We've realized that and then some because the idea is this is a global play. This is a play that uses a lot of different technology and one that is not just private anymore. They're publics utilizing all of these strategies and approaches. And it's up to the venture guys to spot these ideas first before you have your, your deep seek moments that can throw publics off of their, their track and their path. And so it's really one of those things that um, we couldn't be more excited to talk about today.

Speaker B: Mean you guys are OGs basically, right? It's like fun four. Um, you've been across different cycles. Um, and before we move into like more talking about the sort of like current market, what remained, what would you say remained like constant in your like investment principles across all these cycles now?

Speaker C: Wow, such a great question. And the cycles are inevitable. Part of the challenge of investing with cycles is human nature, right? Human nature is to get overly ebullient when everyone else is overly bullion. And usually that's a top signal and, and to get overly depressed. And so one of the things is, I think genetically you're either a value person or a growth person. Neither one's good or bad. But I'm, I'm kind of genetically a value guy. So one of the constants is this discipline to you Know the Buffet quote, be greedy when others are fearful and fearful when others are greedy. But to me, that's driven by this tech cycle and this venture cycle. And what I mean by that is there are four things you need for venture capital. And so this will come to the number one constant, and the reason actually we partner with Outlier Ventures and create these accelerators, is there are four things you need for venture capital. You need ideas. So you need research, and you need good ideas and new ideas in development. You need capital. There's capital everywhere, and the governments are really good at printing it, so plenty of capital. Third is you need venture capitalists, right? You need the people who give the capital to back the ideas. But the fourth thing, and the most important thing is the founders, right? The people who build the businesses. Because a lot of people have good ideas, but very small number of people who act. And so in the first bubble, in 2000, first tech bubble, I was allocating to venture. I went out and I spent a week in Silicon Valley and I talked to 40 different firms, right? From Benchmark and Kleiner and Sequoia all the way down to a whole bunch of other firms and, you know, Mayfield and Accel. And I asked all 40 the same final question. So of those four things, what's the most important? Shocking. Maybe not shocking. Only two gave the right answer. 38 of them said, well, it's us. It's the venture capitalists, of course, only two, Sequoia and Benchmark said, oh, my God, why are you even asking the question? The founders, it's always the founders. So the most important constant is the evergreen presence of great founders. It's the one true evergreen opportunity. Everything else, business cycles have a cycle, capital cycles have a cycle. Geopolitics has a cycle. Founders, they're always around. They're always people with good ideas. Always people. You want them back now? They're hard to find and it's hard to differentiate. Howard Marks, uh, the famous investor one time said, the problem with investing is you have to determine. You have to separate the bad person who sounds good from the good person who sounds good, because they don't let the person who sounds bad make the presentation. So that's part of the challenge, is a lot of things sound really good. But to isolate, uh, great individual founders and get behind them and facilitate, that's what we love about outlier ventures. That's what we love about our partnerships.

Speaker A: And I'd probably just add, Dimitri, that in that side, you know, you're kind of looking for the areas that can give you the edge or the advantage. You know, I always, I always think about that. We're trying to figure out, you know, what is, what is primary, what is secondary, you know, what is alpha, what is omega. But one thing that was kind of really comforting for me when you, when you know in this business, you're going to have a lot of failures and you can't really let that get you down, you have to be cautiously optimistic. And the easiest way to do that is to just have conviction in the industry that you're in, because that really kind of cuts across different things sometimes. To Mark's point, you could have the guy who was amazing at pitching but terrible at running the company, or the person who just had a bad day and didn't sleep because they were all night with clients across the world and, and they're really, really flat when you have your 20 minutes or the person's really not there with them. So if you just know that fundamentally something is going to change, and we really find that change happening every 10 or 15 years, which is the tech adoption cycles really kind of developing. Right? And so we've kind of spoken about this at length and other formats, but really, you know, in the 90s, you're talking about this era where it was very simple type, uh, of connections, right? The Internet was in its infancy primarily in governments, maybe some universities. But really your technology was restricted by, you know, this large device, uh, which was much smaller than it used to be, but it was large enough in your room. You had towers, you had boxes everywhere. And that was it with Encyclopedia Britannica being the number one website in the world. Uh, and then we kind of transitioned into realizing that this was the technology we all needed. Uh, and not just at home, but all the time with, you know, your, your phone constantly, which was more powerful than, you know, all those machines put together practically at that era. And that allowed us to think about how we put information on as well as receive information. The read write era of the Internet. And that really just got us to find some more problems with that model because there was a vast disparity between those that were putting quality information and the compensation they may receive or the attention they might receive, you know, positive or, or negative. And so what, uh, blockchain in this next era really represents is a continued growth on computing power bolstered by AI, which is just really fueled with all the data we've created in all of these eras, but then also uh, really serving as this kind of neutral arbiter of truth. And also of security. And in the world now where we have infinite connections and sort of infinite ways to attract information, you're really going to need and depend upon this neutral layer that's just code which is effectively playing traffic cop as we continue to build out information and create ultimately better AI. So that's kind of how we think about this way of. Well, how can you, how can you not miss, right? How can you, how can you basically be at the goal line with unlimited chances, right? And that's to pick the right industry which, which we feel we're in right now around our these is abcds. And I know you guys have a similar view of the world as well.

Speaker C: Again I, I started as an allocator and you know I would allocate across the, you know, what people think is the four major asset classes, stocks, bonds, currencies, commodities. And we would allocate capital to the smartest people who would allocate to those things. But I had this again, aha moment that it's really this fifth thing that really is the constant which is innovation as an asset class. Because without innovation those other things don't exist, right? You don't get stocks and bonds and currencies and commodities without innovation. And the most powerful force in the universe arguably is human creativity. And you think about the amount of change because you build on top of the better tech. And so it's not a linear change, it's an exponential change. 110 years ago we didn't have cars, now we have self driving cars. So this exponential movement is really exciting. And backing that innovation as an asset class is really central to everything that we do in coming around our theses.

Speaker B: You're building a really nice bridge actually to my next point which reflects kind of like how to navigate through this current kind of like very noisy market. Because what we are seeing at the moment at outlier is it's never been easier to build in web three through off the shelf tools, um, the LLMs, uh, you can really easily issue your token network. But it's never been harder kind of to invest actually in this space. And what we are seeing is you know like tokens being issued daily, thousands of those, it's outpacing demand, the kind of like attention in this industry liquidity capital is starting to be very fragmented. Um, and what we believe is kind of we're going to see this sort of like next phase being a phase of consolidation and curation and where the real focus at least also for us is going to be really consolidation into sort of like Leaders within like different categories, be it decentralized AI deep in RWA, UM and DeFi and others have other categories that they want to back. And we believe like this sort of next space is going to be really backed by cutting through the noise. Fundamentals will be again the important. It's going to be a route signal, um, and real utility adoption. And like you will start having this sort of like leading projects and founders building this gravity systems. I want to really take uh, kind of like what you think about that.

Speaker A: So the idea that you can have relatively limited amounts of capital chasing a lot of deals is kind of what builds this industry and what kind of creates this opportunity of why now? Right. And I think that's something that Mark and I actually spoke about last week on, on, on our side and digital currency where it's an astounding stat that I'm sure that you know, Dee, but maybe others don't. In this kind of latest cycle you had 12 firms, we call them the 12 apostles, the biggest firms raising half of the money in our industry. And then if you kind of expand that a little bit more than double to 30, it's 75. Right, so 3, 3, 3, 4. And so what that effectively creates is extremely overweight towards existing portfolio companies and sucking up the capital for, you know, everything else. Because then if you zoom in even further, more than half of the dollars go to AI and then further still, most of those are going to like the top, top, you know, X AIs of the world and chat GPTs of the world are open AIs. And so what that creates is scarcity at the lowest level and the real need for folks to think about alternative ways to raise capital like, like ICOs. And I, I remember as well as Mark in 2017, ICOs were all the rage because you know, crypto was, was uninvestable. That was back when you would have the, the cannabis front, Mark, and you would have the crypto fund kind of doing a similar strategy all in one kind of this, you know, lack of institutional grade but potentially high alpha, uh, or could potentially be illegal. You know, that was kind of the, the, the middle ground. There was really no middle ground. So as you kind of think about how you perform your diligence, you kind of start there where others are not looking as deeply and we've had a little bit of a crease, a little opportunity now and that we have the winds of change giving us a little bit more favorability. You know, whether this is the idea that we can now build, uh, in the US Again with stablecoins and really expand upon this, which we spoke about a lot, that cascades to the rest of the world because now you have the largest market kind of giving it a green light or whether it's the idea that AI will continue to be more and more enterprise and free. Right. So the idea is if now these models are free, well, what else does that free up a, uh, startup to do with the resources that they were so limited in?

Speaker C: It's so easy to start a company and so easy to, you know, start, begin to execute an idea. And you know, if you execute a bad idea, you can have a really bad outcome. If you execute a good idea, you can have really good, uh, out. But you're absolutely right, it's never been easier. And that's because again, technology builds on itself. You know, Web1 was fundamentally this thing that people didn't believe in because they weren't techies and they didn't understand. Like, so there's this guy in his garage who strung together a bunch of computers and he's going to charge me to access this, this Internet thing. And then of course the first users of any new technology, as X alluded to, are uh, the fringe. Well, everyone's got a pager now and everybody uses the Internet because it moves from the fringe to, to the middle because good ideas get backed. But to your point, those early guys in their garage then became aol, aol, uh, at one point took over one of the largest companies in the world. It a total disaster. But, but people thought Steve Case was, was, you know, Steve Jobs. He didn't turn out to be a smart guy and he's, he's done fine. He's more wealthy than I am. But, but Steve Jobs was the guy who, who decided that, well, wait a second, you know, yes, you can turn a song into an MP3. That was Michael Dell, right? It wasn't Steve Jobs. You know, Michael Dell had the first stick and it looked like a USB stick and it held 10 songs and had no screen. And, and Steve Jobs was like, well that's not a very elegant experience. It's not something you would really want to do. So I'm going to create the ipod and you know, the rest is history. And so there's this, this good idea of innovation around basic core technology, but it's building on the technology before. So web one was read, as X said. Encyclopedia Britannica.com was number one. Well, because all you could do is, is read stuff you couldn't interact. And web one created $2 trillion. Well then web two comes along and now it's read, write, wait. Now I can post a picture on the Internet and other people can see it or I can create a video. And so web two, read, write created $5 trillion of value. But that wasn't even the big one. Now web3 comes along and it's read, write, own. Because if I put content on the Internet, on YouTube, I don't own it. I don't get paid. Who gets paid? So you know, Meta and Google, they get paid and their stocks go up, up, up, up, up, up, up. Because they're monetizing all of that content that humans create for free. Because we, we all like to create content. Well now in a web3world, we, the creators can own our assets, we can own our relationships and so that that ability to understand the incremental building. But the other point that I want to double tap on is this failure thing, our cultures. Oh, failure is bad. No, no, no. Failure is the only way you learn. And look, it's not politically correct to quote Will Smith, but he had a line that I loved. I heard him speak a number of years ago. He said, fail fast, fail, fail forward, right? So make your mistakes fast and, and, and learn from them and then, and just keep going forward. And so that spirit of failing fast and failing forward and coupled with, I said a process or a system, which is what outlier does and what we try to do at ah, Morgan Ah Creek Digital of look, you're gonna have this giant funnel of ideas and you're gonna try to screen and try to back and you're not going to be perfect. And we say all the time we're going to back say 30 companies in a fund and 10 of them are really not going to work at all. I would say I wish I knew which ones those were before we invested. I just wouldn't invest. But that's not how it works. And so then you double up on 20 of them and even of those only a small number are really, really going to excel. But it's that process. One, super fun. Two, it does incrementally change the world because the ones that win, right, the ones that develop new ideas and new technologies, contribute to our overall advancement, that exponential growth curve that we're all living

Speaker B: on, you really touched on um, the right things. And also I think portfolio intelligence matters here. You will learn from these 10 companies that won't make it. And also these founders might actually in the next time be jumping on the right, uh, idea and project to be then backing Again you both came through the same talking about the read, write, own, um, that was unlocked now through the web. 3 and I think which again like aligns are both uh, thesis. I think we are entering also a fourth um, principle which is probably delegate. And this is where we think there's going to be this sort of like breakthrough innovation coming um, under what we call our post web thesis, which is pretty much the next phase of the Internet and more like agentic Internet driven by autonomous systems, not only users. I think this is also where again like your ABCD stack, uh, aligns pretty much with our uh, thesis. So I would like to really take the time um, for you guys to walk us through your ABCD model and the thinking behind it.

Speaker A: I mean the idea with, with that is an evolution of kind of where we've been. So the idea, you know, when we kind of launched early on in 2017 there, there really weren't very many blockchain fonts. I think this is kind of where it all, all began. If you kind of think about it as an S curve, that's really where the technology started kind of building out. So we, we had exits in companies like Coinbase. You know, those were kind of allowing people to access some of the nominal value behind blockchains as represented by token prices and token exchanges. And then as you kind of move up you recognize that, that really what a blockchain is, is, is a kind of computer, right? It's is a set of code, it's a database that kind of has some rules and some logic to it to execute functions. But in and of themselves it can be really dumb, clunky and inefficient. And how many pitches have we seen where you hear the word blockchain at the end with some extraordinary ask for evaluation for a business that really isn't there. Right. And so adding something like an artificial intelligence layer, really what that's trying to get to is the idea of having large amounts of data to be able to think and be the brain inside of this database. Right? Sort of like a thinking database. And so what happens? And we started having a lot of appetite for, for this kind of investment approach, uh, over, over our fund. Three we started recognizing that hey, the computer itself is reaching a limit and that's in the limit in terms of what the actual computation from the hard hardware can perform. And this is sort of this long standing paradox. With the better software you get, the better chip you're going to need, the better chip you need, the better software you can produce. And that really kind of led us to this breakthrough of, uh, the ABCDs in our current fund, which, you know, as a good vc, you need to have your, uh, acronym so that you can be remembered. ABCD really stands for Artificial intelligence, Blockchain chips and big data. So, so kind of all the way around to get to the answer to that question. D is the idea that you have this flywheel effect. We know that more data is getting created in two days in all of human history. And really what that means is that data is the new oil. To kind of quote my old boss, uh, Larry Ellison, who really kind of mastered this approach, uh, in creating a database company. But as a database company, he adds different technologies to it. You know, whether that's AI or whether that's blockchain, this is an idea at a corporate level that they're going to move at a certain pace. And, uh, as VCs, we have to kind of move a little bit faster so that we can identify opportunities for them. So data is kind of abundant. It will continue to grow. But in order to drive that, that's really where the AI comes into place and to create the better model to make use of all of this information. And then the blockchain structures all of this data to make sure that it's executing in the right way. Right. You don't have massive amounts of hacks or bank fraud with your information being all over the place because there's just infinite copies of your person. And then of course, the actual chip themselves can supercharge things like security, where you can create chips specifically for, uh, what we call fhe or others called fhe, fully homomorphic encryption, which is a fancy way of saying keeping things encrypted while you work on them. It's never really been thought of outside of a theoretical approach until now, where you're seeing companies actually have the computational power because of breakthroughs and trips to accelerate hardware and to kind of bring all these forces together. So we really look for the overlap in these circles as a unlock for opportunities to grow the next level of the Internet.

Speaker C: I'll just add a couple little things. One is this idea of data is the new oil is really appropriate in the sense that oil subsurface in the ground, it's not really that valuable. I mean, it has value and you can place a value on it. But what you're valuing is the extraction, the refinement and processing and the distribution of the energy that's represented by that trapped energy in the oil. And so similar with data, data, it's everywhere. It's all around us. Everything in our life is being turned into ones and zeros. And not the physical, you know, not, not my coffee cup. But you know, whether it's games or music or ideas or presentations or video content like we're creating, all of that becomes, you know, data. And as do our actions and the things that we do on our phone. And the phones are listening to us right now. And it'll serve me ads based on what I said. And all of that data just sitting there, it's not really that useful. And here's a crazy stat. 85% of the data that gets stored never touched again, because like, if you have metadata that you can't access because it's on the wrong. It's like having an old floppy disk. If you have a floppy disk and you don't have a floppy disk reader, you can't get that data. So having it organized, which is what blockchains do, but then you have to process it, just like you have to process oil after a big refinery to process it. It's what our computers do, they allow processing. AI is so interesting. So AI is like, oh, it's this new thing. What are you talking about? It's the 70th anniversary. Like I'm old enough to remember 1980, right? Uh, before I even graduated from high school was the year of AI. Time magazine cover story, the year of AI 2000. Intel stock over the previous decade had gone up 20 fold because they were going to change the face of AI. Not so much. We got Clippy. That was about it. But, but now suddenly we have these tools and you mentioned agentic, which this, uh, and I love this term delegation because actually I have this conversation all time. We, we'll be recording a podcast on our usual Friday slot and we'll talk about, oh, what are you doing this weekend? Oh, I'm going here. Well, again, an agentic system that we have delegated authority wouldn't just serve me an ad saying, hey, do you, you, you want to go? American Airlines or Delta, if you would actually go out and find the best price, make my recommend or, uh, make my reservation and shoot me the ticket. And it would save me time that I could spend using creativity to, you know, maybe create something good. So this idea of technology advancing to do more of the things that we spend our time on to free up that time to do other things is AI is a decision making tool that allows us to utilize that data much better. And so it all kind of hangs together in this kind of sedimentary Layers like oil. Um, so to torture the analogy a little bit, um, but it's, it's, it really does matter and it really does go in this stepwise progression and this, you know, S curve adoption. And if people don't understand or know what S curves are, read the great boom ahead. It's a book by Harry Dent from 1991 and his other books after that were not that great. But that book is a really great book and it's a great primer. In fact, um, my computer's sitting on that book right now. Um, because it's such a great book that describes that every innovation follows this same adoption cycle of early adopters, early majority mass adoption and then the maturity and then we start all over again. And it's this series of S curves over time that allows us to progress and build and back to founders and back to venture is what you're trying to do is identify out of this group of early adopters and believers the people who will innovate at the beginning of that knee of the curve of adoption and the S curve because that's where the wealth creation opportunity, in fact the greatest wealth comes from investing in innovation which means you have to invest in something you believe in before most people understand and you'll be ridiculed for your non consensus actions. But it's totally worth it. And everything we do day in day out, it's totally worth it. It doesn't always work and that's, that's not the point. But we are engaged in that believing in thumb, in believing in things and believing in founders where there's some controversy.

Speaker B: You said we have to be fast in identifying opportunities and I think it's not the first time we're uh, working together and I think last year when we worked together uh and we had a focus on the Latin American market, we were pretty fast in identifying an opportunity and we saw real traction in like DeFi and RWAs and we invested in a couple of really strong founders and projects. That actually was the right timing because now we see these projects gaining traction with a sort of like regulatory regime. The genius act, this like global dollarization through stablecoin Rails. Um these geographic areas like Latam become a real interesting opportunity for institutions as and fintech companies and larger fintech companies as distribution channel. So we have been basically fast and opportunity in identifying this opportunity together and doing these investments. And now um, together we kind of like expanding in the Middle east, the MENA region with a new post web program that we have launched and uh, it's going to be a yearly long engagement together to catalyze kind of like the success of the next generation of the Internet. So I want to hear from you guys why the MENA region and why now?

Speaker A: It's a good point and maybe touching on a little bit about what worked in Latam and some of the lessons learned that we're carrying forward. You know, I think for us what we were really good at ah, at Morgan Creek was developing a ah, thesis uh, and going into our network and finding the best entrepreneurs tackling this and if they weren't there, they knew of the next person, right? Said well we're working on this but this other guy or this other woman is got this project you have to take a look at. And so many times when we come in to look at these projects we were uh, sometimes series A, sometimes seed, but seldomly precede. Uh, and I think that kind of limited a little bit of the opportunity. As you know we have deployed over uh, half a billion. We've now kind of done over 100 deals. Um, you know we, we have been really seeing that this convergence of opportunities um, can better be utilized in some cases at the first check. But how do you kind of sift through thousands upon thousands opportunities, the majority of which are probably not going to be uh, really materializing in the way that you would like them to. So I think what you guys do very well and what helped in LATAM was we took the thesis that we had about LATAM itself being this, you know, really incredible place with 600 million people that are mostly connected digitally, uh, and are looking to use technology to bridge gaps that were driven by mostly infrastructure, um, and in some cases lingering political changes that have now been overturned. But you need technology to kind of catch up and what's known as leapfrog, kind of where you may need to go sequentially, uh, in a 200 year democracy in the US in a 50 year democracy in another place and kind of what that may mean for tech advancement. And so Head Sleep Frog and what it means for us in that program was to your point, finding five companies that really were different from one another but kind of all aligned on this kind of north star of tech enablement for this region. Uh, and so kind of what we're carrying forward in, in the Middle east, uh, is the idea that we just need more time to be able to create better connections across the region. In Latam we had a little bit of a sprint and we were lucky because you know we, we were in a medal round. We found Some good companies and they're starting to raise and we're very supportive of those efforts. And I think within, within the Middle east, the deal flow is beginning to ramp up and we need to have the time to be able to spread that across a year as opposed to, you know, two to three months. What are some ideas and things that kind of stand out there that are really different from, from Latam? I think one of the things is also uh, the regulatory and the sovereign alignment, um, which is really kind of driving this. When you kind of look at that market, you've got uh, the Gulf region, this Gulf sovereign wealth firms. Collectively they're managing over 4 trillion in assets, right? And these global and these allocators are forming the decisions for the important roles of national tech infrastructure. And I think that's really the key thing is you have, as Mark mentioned, what are the four main ingredients for innovations and growth within venture. You have two of the big ones getting checked off in that region alone and it's drawing in other companies to begin their launch there. So when we kind of looked at this, we were able to really uh, pair together the thesis with Outlier Ventures along with Morgan Creek and really ultimately just pick up where we left off. I think we had the demo day not so long ago and now we're back here in region to figure out how we can continue this over the year. And we couldn't be more excited.

Speaker C: I think there are a couple of things here that are, are really important in the digital age. Things change in terms of, of access to some of those core elements. So you think about in the analog age. Let's just think about trading in the analog age. You know, X and I would have to meet physically at the Buttonwood Tree in New York and he would bring his analog pieces of paper money and I would bring my analog piece of paper, a stock certificate and we would physically hand each other the other thing. Now the problem was if you've seen the movie Gangs in New York, on the way to the Buttonwood Tree, those guys with the tall hats would steal your stuff. So it was a bad system. So we figured out we'd leave the physical goods, the analog things at the bank or the brokerage firm and we would trade these electronic things and we wouldn't have to go outside under the tree. We could go inside the stock exchange and, and we could trade electronic Q sips, alphanumeric codes that represent the analog goods. Well that's fine, but we still had to have the piece of paper sitting at DTCC in Dallas, Texas. Well, in the digital age we don't need the paper anymore. That's 400 year old technology. We just can trade the digital ownership represented by blockchain entries, just entries on a ledger. That's all blockchain is just a series of ledgers block in a chain. So uh, same thing's true in inventure. In terms of, in the old days to have the ideas you had to be physically proximate to the great research universities. So not surprisingly Stanford and Palo alto and Route 128 in Boston where Harvard, so and there were a few places around the world that had some good research universities, but you had to be physically proximate in the analog age. Well then as we move into the digital age, I can now search using an LLM for what are the best ideas to back. I don't need to be in Palo Alto anymore. I don't need to be at, you know, the, the great schools in France to understand the best innovations around engineering. So now ideas are more accessible. Money capital. Latam has huge populations and lots of capital because things like natural resources that they sell to places like China. And so there was a natural need to organize around these ideas that now were ubiquitous. And we backed some, some companies around, like I say, stablecoin rails, right? Remittances, huge business, very inefficient, 30% slippage. We can use stablecoin rails and make that better. Really simple. So Mina, uh, totally. Lots of capital because they're selling lots of oil. But they're like, well, if we're going to use less oil because we're more efficient, we use other power sources. What do we do? Infrastructure. Well what kind of infrastructure? Digital infrastructure. Okay, well what, what does that mean? Now I'm going to invest around things like chips and AI systems and. Okay, well what's the thing that's missing? Well, okay, we've got money, we have

Speaker B: ideas.

Speaker C: Uh, there aren't that many venture capitalists in the region. So now again, virtually we can bring firms from other places to the region through this great outlier venture system which allows for lots of people to participate. And then the last thing is the entrepreneurs themselves, they're always smart people. There are always great founders around the world. Maybe they didn't have the right infrastructure to be found and backed. And that's what these types of programs do. And so the success that we had with OV in Latam, I'm pretty confident will be, you know, repeated in the Middle east because it's also in a digital world where nations, states and borders become a little bit less important. Right? You can work from anywhere. You can be anywhere. You can say, well, where do I want to live? I want to live where there's good weather and low taxation and an entrepreneurial culture. Hmm. M guess what's happening in places like Dubai and Abu Dhabi. Yeah. So let's see a migration of talent. And at the end of the day, and the speech I gave that X talked about is, uh, at this thing, Digital Asset Summit. And you know, it's a bunch of young people and, and one of the things I said is everyone in this room is a clear example of the greatest migration of talent in human history. Like the one in 2000. It was big. A lot of people were leaving banking and consulting and coming into tech. But the one that started around, you know, 2017, 18 was bigger. the end of the day, I have the greatest job in the world. I get paid to allocate capital to the smartest people in the world. It's awesome because, I mean, I don't have to be the smartest person in the world. I just have to be able to identify talent. And that's just pattern recognition. The more people you meet, the more mistakes you make, the more you learn, the more you can recognize some, um, patterns. And then the partnership with OV is so important and so spectacular for us because it, as X said, it expands our reach because you guys are so good and have such a great reputation of getting the best founders to come in because there's a lot of noise, right? There's Y Combinator and there's Draper University and there's lots of accelerators and, and so to get great founders to come, you have to have a brand and you have to have an easy process and you have to have pattern of success. You have to have analogs that you can point to and say, hey, you can be like this person. And that's what's so great. So, um, I'm super excited about what

Speaker B: we're doing and we've benefited also a lot in the due diligence process, um, working hands on with more and creed together to really learn. Also the way you look into this sort of like pattern recognition and the project that are building in the space and the founders especially, um, one thing that we keep hearing from founders is that it's not only capital that matters, uh, because there are a lot of VCs in this world and uh, that they, they want to have this sort of like partner that, that adds value, um, on their cap table and for the founders that in our audience also, it would be great to know also um, basically what you guys bring to the table. Not uh, only you know, like during the program, but also like post program, uh, being part of this cap table of founders basically on their journey.

Speaker A: I think, you know, just kind of to set the table. Uh, we're pretty active when it comes to uh, just walking the halls as they say. For the companies that we're invested in, both Mark and I and our other partner Sachin, uh, sit on a number of boards and you know we, we cycle through these. Right. So kind of you have a two to three year term, uh, and then you know we'll go off to the, to the next large Czech investor. And so we're kind of constantly um, getting really good ideas about, you know, what it means to be a good board member and ultimately a friend of the company. Sometimes a, uh, friend will give tough advice and sometimes it's just to get out of the way as they're looking to kind of get to that next level. You know, for this program. I think since the companies are a little bit on the earlier side, they're going to really stand to benefit from some of the experience experience that we've seen in the exits. Right. So Morgan Creek has had, you know, a number of exits in kind of that early web3 idea of what's. Where are we on that spectrum of the S curve that, that Mark mentioned. And so we have a little bit of some clues now with some of the changes uh, in, in the U.S. how that might impact the rest of the world. And so I think if we compare those experiences together, what we'll do is how to make sure that the fundamentals are in place. You know, is the company primed for their Series A. And I think as somebody who is going into an accelerator program, you should be thinking about how do I get to the Series A or the larger check writers so I can begin to, you know, scale my team from, let's say 10 people to 30 people or from the next, you know, one type of product to the 1.5 or the 2.0 type of product. And as we think about what this means for us, you know, outside of the program, what we've been able to do is really kind of showcase uh, our companies as, as leaders. Um, I think Morgan Creek has, has a good brand and one that kind of aligns itself with innovation and backing and scaling that talent, but then also showcasing these companies where they are. You know, whether it's on shows like this or digital currency or bringing them to rooms of investors, or what we love doing is bringing portfolio companies together because that's a nice opportunity for them to be synergistic and do something even greater than they may have otherwise been able to do on their own.

Speaker C: A partner, as the name implies, is somebody who, who is there to provide, uh, a lot of different things, uh, at different stages and in different needs that people have. And so sometimes it's just to be a cheerleader, like, like X said, to get out of the way and, and to, and to really, you know, boost, uh, people up, particularly when things get hard. So you're being that cheerleader. Um, again, I'm old, so I've, I've seen a lot. I've, I've talked to a lot. And, and I have a lot of experience in things that worked and, and more importantly, things that didn't work. So I can say, well, you, you could try that, but the last nine firms that did, maybe that's, you know, less, but, but we could try. And so there's some, some experience. I, uh, think the, the relationship part of a partner is the network, right? The most valuable thing in the world is community, right? Like, except bring people together, exchanging ideas, you know, toiling by yourself all the time, you can build stuff, but toiling with others and, and learning from other people's experiences and getting their unique expertise, you know, and it's like, like Adam Smith comparative advantage, like global trade is better than every country trying to build everything themselves. Like, if you're good at, you know, growing sheep and someone else is good at growing wheat, then you should trade. So, same thing. Some people are good at building the tech, some people are good at sales, which is maybe the biggest aha moment for me was, you know, I was this young investment guy, and I was very arrogant about investing as the most important thing. And then you get out in the real world and you realize sales is the most important thing. And I always had this negative view of what sales was until someone said to me, well, Mark, sales is simply transferring your enthusiasm to another. I said, oh, geez, I, I can do that. I can get people excited. And so once you have that moment and once you can help a tech founder understand that, yeah, the tech is really important. You got to build the company, but ultimately getting customers to buy it. And I was listening to a podcast the other day, and it's this great thing. It's about this entrepreneur. And they said, what made him so great? He said, well, just this unbelievable optimism. We, uh, were talking about this earlier says he would make 400 calls to customers and get 399 nos. But that one yes, immediately erased the 399 nos. And the ability to just keep going and to keep. That is important. And so there's, there's two types of entrepreneurship. Uh, also there's, there's big E entrepreneurs and little E entrepreneurs. Big E entrepreneurs are actually pretty rare. And that means you're inventing something completely new. Like Marc Andreessen. But he is a big E entrepreneur. I mean he built something revolutionary and new that's hard to do, but literally entrepreneurs, where you're taking new technology or new ideas and making old things better. Yeah, I like that. And I'm pretty good at helping people think about that. And so whether you're marshaling that, that creative talent, uh, to be biggie entrepreneurs, or whether it's, hey, I got some experience and I got some people who've done this, so maybe you should talk to this person and that person and bringing that community in, those relationships, uh, I think that's really like part of what a VC can really do.

Speaker B: And which at least for now, won't be replaced by agents. Again, I'm saying for now, for now, for now.

Speaker C: But if you could capture all the data, which I'm not very good at recording the data, but if you could capture all the data of all of those actions and then build an AI based on that, that actually could work. But we're still a ways from that.

Speaker B: Mark Xavier, I really enjoyed the session. I have one more question. If we go fast forward 2026, maybe let's say 12 to 18 months from now, what is like this one kind of signal, milestone trend that you would say, um, tells us we're on the right path also as an industry and the whole space building this breakthrough innovation, converging the technologies.

Speaker A: One of the things that, that Mark and I talk a lot about is, is 2025 the new 2021. And the idea, meaning that in 2021 you had a lot of, uh, breakthroughs by way of IPO activity and also kind of new financial structures like SPACs, which, you know, died, but at that time were really, uh, monumental towards breaking us out of what had been somewhat of a normalish year in, or actually a kind of weird year in 2020, started off normal and then got really weird. Um, and then we kind of had to readjust our expectations. So in 2025, now we are on a higher trajectory than we were last year from exits. And I think we are sitting now and Maybe our listeners don't have to wait that long to figure out, you know, what we're looking at. I think, you know, this is the quarter. You know, if I was just, uh, I do a lot of running, so I listen to a lot of, uh, different kinds of music, but one that always gets me going is, is Eminem's 8 mile, right? So you think about, it's like you've got one shot, right? Do not miss your chance. And so we are in Q4, coming up to a point where companies recognize what the price of Bitcoin is. They recognize what's happening in Washington and Capitol Hill, and they recognize that if their peers go ahead of where they are, they might be playing second fiddle. And of course, they see what happens with Circle and some of their successful stories. So if you are a Series C company, you have in place your IPO plan for 20, 26, you know, full stop. If you're a Series D company, you already have your banking relationship in place, full stop. And if now you are an IPO company now, you are hopefully, hopefully having some sort of a relationship to the consumer. And I think this is the shift also as VCs that we try to imprint. You know, you always have a different customer. Whether that customer is a CTO that you're trying to acquire, you know, and put into your business, that's your customer until you're part of your team. Now they're your team. Whether that's your first actual client that's going to be giving you revenue that's your customer, or whether it's the, the actual public at large is trying to buy your stock and understand what you're doing. You know, there's a reason why Jensen, Mark always wears the, uh, the get up that he's got with the leather, um, because it's the Steve Jobs iconoclasm, where you have to develop a brand for yourself. So people are not just buying Blackwells, they're buying Jensen. And I think when we look at the success for the Next, you know, 1812 months, it's really going to be, are companies going to rally around this moment and is the market going to respond? And I'll kick the hard question over to Mark, which is, you know, what happens with the cycle, uh, on our, on our crypto industry, Because I think that's one thing that we'll look at to see. Are we kind of different from, you know, 2012, 2016, 2020, or are we going to have some sort of a newish correction, which we're going to have to live through, figure out what that means for our industry.

Speaker C: You know, incremental growth. It's really hard to see. It's like watching your kids. You know, you look at them, they don't look different day to day, week to week, month to month. And then all of a sudden you're like, when did you grow? It's like. And I think that's the same way with innovation and companies. It's like just day in, day out, and then suddenly it looks different. You can judge the quality of your idea or your innovation by the quality of its detractors, right? If really, really smart people think what you're doing is horrible and awful and they say it's a scam, you're onto something. If people that you don't really know and don't really, you know, have a really high opinion of don't like your idea, maybe it's not worth spending that much time on. So as. As good ideas engage, those detractors have to change their tune, right? Because why are they detractors in the first place? Well, it's because you're infringing upon them. Um, you know, when the Internet came along, who hated it? Media, they hated it because now, you know, I didn't need to read the newspaper. I could just go to Twitter and watch a periscope. And who hated it? E Commerce. You know, the mom and pop shops, they didn't want E commerce. And now E commerce is a big deal. What blockchains do and what web3 does is it changes the largest business in the world, financial services, the exchange of value. And so every bank, broker, insurance company, title agency, they all hate it because you're taking the $7 trillion of fees, that's their revenue, and you're liberating it. And that's pretty powerful. So what you're going to see to me over the next 12 to 18 months is this incremental shifting of the most powerful groups in the world, the largest industry in the world, saying, yep, I can't fight it anymore. I got to buy them. And there's the four stages, right, that, you know, the famous, okay, first they ignore, uh, you, right? Then they laugh at you. Ah, uh, 2015-21. Oh, nerds and geeks, play with your magic, Internet money, whatever. Then they fight you, and we're in the then they fight you phase, right? And that's a tough phase, but then you win. And I think we're probably 24 to 36 months away from the full winning, and we will have the cycle that X talks about and I don't think it'll be as bad bad as the previous because the reason the, the previous cycles were so boom bust is because humans are going to human. They didn't just buy the asset, they bought it with leverage. And that happens in every market. Right right now in the stock market we have the highest margin debt in the history of margin debt. It's not really necessarily a good thing. It works in the short run and then it doesn't work. And I'm not predicting when we're going to have a crash, but we will. So ultimately we'll, we'll have a peak in prices but then we'll have a uh, consolidation. But I don't think the cycle will be as, as deep this time and there'll be M and can we have M more people being drawn? We have more innovation and so we'll just keep powering through it. And what you're going to see I, I believe is the big detractors become buyers like JP Morgan will buy Circle maybe or somebody like that. And you know, Coinbase is never going to sell because they are maybe m the new JP Morgan. So I think you'll see that type of mainstream adoption and that means if you're a founder today, start small, build something small, incremental, incremental, and then you'll get caught up in this, in this wave of global integration and adoption.

Speaker B: I love this interesting and very bullish closing perspective. Awesome A thank you both for joining us. Um, we're really thrilled and excited uh, for this partnership and even more for the founders. This is going to be supporting. So for anyone interested in applying to the uh, post, uh, web program with Morgan Creek and Outlier ventures, visit Outliers IO to learn more and get started. So this is the Outlier Ventures podcast. Uh, I'm Dimi. Thanks for listening in.