Where Web3 Gets Real: Onchain Rails, IPOs, RWAs & Hyper-Competitive Lending | Aly Madhavji

Speaker A: You do end up with the problem of what we call the debt spiral. So if you launch a token and you've got a good company and you launch a token and the token actually goes down significantly, it can actually turn what is a good company into having a lot of early users and supporters who get burned from this token because it goes down in value. They believed in it, they trusted it, they lost money on it. And so now those people come out and say, hey, this is shady. Hey, this is a scam. Hey. They didn't follow through on what they said. But you might actually have a good company. Many might not. Right? But some might have a good company, but it ends up pulling you down because it gets harder to sell your product. If people go online and they see people complaining about people that have been burned, bad reputation, which is, you know, the most important thing. And so actually a good company with a bad token can actually, you can still enter that debt spiral and, uh, not make it through. And I think that's actually very important for founders to understand and investors to understand when they're investing in these companies, because it can actually backfire. Foreign.

Speaker B: Hey guys, uh, welcome to the NTR podcast and today we have Ali joining us. Hey Ali, good to see you again. How was Davos for you?

Speaker A: Fantastic. I'm glad to be here. Yuri. And Davos was phenomenal. I mean it was just such an incredible culmination of minds from around the world, you know, looking to solve the biggest and uh, most challenging problems out there. And so it was a phenomenal time.

Speaker B: Cool, cool. Uh, we meet each other multiple times a year around the world. But, uh, let's start with quick introduction. Maybe you can share some brief intro about yourself.

Speaker A: Absolutely. So, uh, you know, as mentioned, my name is Ali Madhav Ji. I'm the managing partner at Blockchain Founders Fund. We invest in and help venture build top tier startups in the Web3 space. And I've also made many investments outside the Web3 space. I'm an LP in, uh, about half a dozen funds as well. And uh, recently we had a TV show launch on Amazon Prime Time called Crypto Nights with Adrian Grenier, if you remember him, from Entourage, and Kim Lee from Bling Empire. So a lot of, uh, incredible talent and that was, you know, really understanding how to, you know, go pick the best and brightest founders who are building, you know, industry changing technology. And so that was a, uh, phenomenal experience as well.

Speaker B: Cool, cool. Yeah. So you, you started as an entrepreneur and uh, can you share some of your Ventures that you built, uh, and you build these with your brother, right?

Speaker A: Uh, not all of them, but, uh, I think going back and maybe just for some context, right. I mean, both of my parents are refugees from East Africa. And uh, I grew up in Canada in Vancouver. And always given this scenario and wanting to have a little bit of pocket money to go to the corner store and pick up a Slurpee or a hot dog or different snacks, different clothes, I always had to m. Be entrepreneurial. And so by the time I was 18, I probably had about a dozen companies, uh, that I had started everything from, you know, starting very small, very, very early on. Right. So having a paper route was the first thing, but moving that to building and selling computers, doing computer networking for people also, um, you know, helping people get the TV shows and movies they wanted most and sort of the era of, uh, peer to peer content sharing and many other things. And so, you know, kind of always had that entrepreneurial bug, but, you know, not necessarily in a highly scalable, you know, technology way. And then, you know, as I, I thought I was too late, but I had already, you know, been involved in Bitcoin more from an ideological perspective. I, you know, decided to kind of jump both feet in and started a crypto exchange. So that was a called Global DCX. Uh, you know, we raised three rounds of capital, grew our team to 40 people, ended up exiting that at the end of 2017, which turned out to be really good timing. It was a totally different market, you know, from when we started it. Binance didn't exist. You know, I remember the days where Kraken, you know, struggle to get, you know, any sort of transactions, uh, through probably a 60, 70% failure rate on converting, you know, transactions and making trades. Bittrex and Poloniex were probably, you know, market leaders for looking at altcoins and on off ramps in a lot of ways and of course, you know, emerging markets. So, you know, very different world. And then after that, uh, and I did that part with my brother. And then after that we ended up starting, uh, Blockchain Founders Fund. Now we've backed over 200 portfolio companies. And then, uh, most recently I've gone on as CFO of Roundtable, one of our key portfolio companies, which we made that the largest investment in the fund. And uh, we're uh, excited to announce that we are taking it public on NASDAQ soon.

Speaker B: Nice. So you were one of the first crypto exchanges. Was it the right timing to exit? What was the decision to exit rather than continue building?

Speaker A: Yeah, It's a very good question. I mean when you look, there was other crypto exchanges, right? I mean Coinbase has been around for a lot longer. Could go back and you had, you know, you had Mount Gox, you had, you know, other uh, crypto exchanges as well. But you know, one of the things for me is I think this was sort of a real story on, you know, not necessarily taking care of yourself as a founder and having some challenges. And so for me, you know, I probably worked 19, 20 hours a day on average. And uh, you know, I lived probably about a 15 minute walk away from our office and I'd actually just sleep in the office. I wouldn't even go home. And, and you know, at some point you've got to really think about taking care of yourself. And so some people know this story and they don't. I don't always share, but I'll share, I'll uh, share it with, you know, our listeners here because I think it's very relevant to you know, investors thinking about, you know, founders and all of the different challenges that could go along with, you know, making something highly successful, scaling it to the next billion dollar company or you know, maybe falling short somewhere along the way, which, you know, could be, you know, still positive. But actually one day I walked onto my flight, I, so I was doing about three overnight flights, a walked onto my flight, I was crossing the emergency exit and I just fainted. And so I woke up and uh, and this girl was actually screaming, kind uh, of freaking out. I was actually, uh, I landed on her and uh, I thought I wasn't going to make it off that flight. I was just, I had actually. So I'm six foot tall, I was uh, I dropped to about 106 pounds. Uh, so a lot of people know this story and uh, that's not healthy. I didn't know I'd make it off that flight. And so, you know, I basically uh, decided to change everything from that point. And uh, and it was probably the best decision that could have happened because from that, you know, of course I think we were onto something quite early. It was a completely different market. Right? I mean, you know, it was, it was in a world where, you know, before Binance existed as an example. Binance launched June 2017. So they had launched by the time, uh, this happened, but we were ahead in some respects in terms of our timing of when we launched. But, you know, went from that to then, you know, going and backing many of the best and brightest founders in an industry that was just off and so, you know, instead of having, you know, a big chunk of, of one pie, you know, was able to, uh, diversify and you know, own, you know, reasonably large pieces, uh, as well. And many incredible companies that ended up, you know, defining parts of this industry.

Speaker B: That's great. Yeah, it's kind of, you know, we, we, we meet so many serial entrepreneurs, exited entrepreneurs. Sometimes, uh, you know, you need to exit at the right time or never, uh, and uh, then reinvest smartly. Right. So, uh, you chose the, to be the investor on the investor side. How did you get started? And uh, you know, did you start as an angel initially or you started the fund right away? Can you share the journey?

Speaker A: Yeah. So I mean, I had already been angel investing in companies probably for about, you know, five or six years by this point, but not, not as much necessarily in Web three. I mean, I'd gone through the whole ICO boom. I don't know how much that counts in terms of, uh, you considering that angel investments are not. But you know, many outside of uh, of Web3 sort of by that point. And you know, when I went and decided, hey, we're going to go work with what we thought were some of the best and brightest founders and help them, you know, build, uh, those companies, own a chunk of it, you know, put in a little bit of capital, you know, that really works. So I mean I would put that in the category of like angel investment, but highly strategic angel investment. Right. And so, you know, knew the industry quite well, could open up doors, help, you know, founders kind of go in the right direction, rethink through some of those strategies, focus on certain things on go to market. And so that actually, uh, worked out really well. And as we did that, we got to about 60 companies, uh, between uh, Mansoor and myself. And then we went out and became one of the first regulated Web three funds out of Singapore. We ended up launching a second fund which then had a lot of incredible, incredible backers, many well known across the entire Web3 space, some of the biggest families in the world as well telcos and financial institutions, many other really incredible and supportive investors that came in and supported us, and the rest is history. We're now up to over 200 companies. So it's been a phenomenal journey thus far.

Speaker B: And how many funds do you have?

Speaker A: This is still the second fund. Uh, we're getting towards the end of the deployment period later this year. Uh, and then we're going to go raise a third fund. Um, and one of the big things that I think has Differentiated us in the space is just, you know, taking bigger bets on companies early and making sure that there were companies not, not necessarily chasing short returns. I think this industry kind of is notorious for that. But you know, going and investing in companies that we thought would be around for 10 years, 20 years, really building something that we thought could help the industry or category defining and really long term go out and make real money, you know, have a proper business strategy. And you know, oftentimes while that might sound uh, quite basic, you just see it forgot a lot of times in this industry and uh, to the detriment in the most part.

Speaker B: Yeah, you mentioned that you are quite hands on and can help a lot for early stage founders. But can you touch on the difference in founders in web 3 versus um, other industries? What are the traits and how do you evaluate uh, and identify the best?

Speaker A: Yeah, it's a really good question. I think this industry, and I've talked about this a little bit, right. I think it's been plagued in reality with oftentimes having second tier founders and it's not always right. And of course there's a lot of incredible founders. But I think what you see is like, you know, for example, you're looking at how to reinvent the gaming industry on chain, if we take that as an example. Right. There are a lot of key benefits to the technology to reinventing the gaming industry. But you oftentimes don't necessarily get the founders that have built games that have been highly successful in Web two come into Web three, uh, oftentimes. Right. You may get certain senior executives that were part of a 50 person team, 100 person team that built something successful. But that's kind of where there's been a struggle. I think that's been changing sort of more recently, which is a very good thing because now you've got founders that have like built, you know, some of the biggest companies in the gaming industry or in the media industry or many other things around technology. One of the really, really important things is making that the founding team is technically strong because this industry does require a much more technically sound team. Right. Because you've not only gotta build the technology side that you typically have built on your industry, whether it's gaming, media technology or otherwise, fintech, et cetera. But now you've gotta build the rails that are on chain, which is actually quite complicated in certain respects. There's gonna be things that are changing. You've gotta worry about security risks associated with that because now you might have value of money moving digital. There's no recourse in the vast majority of cases. So there's going to be some of these other challenges that are very, very important. The other things though, in reality I think is, you know, the same things that you'd probably be looking for on a Web two side other than maybe that technology piece, making sure they're highly strong in that piece because it is so critical to the infrastructure. And then it's probably ideology. Right. It's, it's, it's like what type of world are you building? Why are you building it? Like, like why is that going to help you drive through that? Because resilience is so important. But in this space you got to be careful on and with anywhere but, you know, any hot industry, you've got to be careful on people trying to come in for the wrong reasons because they may not have the longevity to get through when things aren't going well. When things are an issue, you know, are they going to keep working when the industry isn't hot anymore, are they going to keep working? Are they going to live and breathe this and are they kind of going to get through that wall or many walls to, you know, build something successful? And, and I think that's uh, a big part of it as well.

Speaker B: Yeah, you probably met many founders that are there to raise money and then wait for the, you know, for the bear market and, and, and say, oopsie, kind of, uh, let's move on. We failed because of the market rather than keep building. Right. Did you meet many of these?

Speaker A: A lot of these. And in reality, I mean it's a formula that's kind of based on, I think trying to chase short term, the market is very rarely an impact from that perspective. Like it shouldn't be. Right. So like take, take. If you're building something in fintech for the unbanked populations or underbanked populations, there's a billion people that are unbanked or underbanked today. In a year from now, there's probably a similar amount or two years. Like the same amount of people or close to is going to be in that category regardless of market conditions. Right. In the same way if you're building, you know, a gaming, uh, product, I mean the same number of people are going to be gaming whether the market's hot or not. Right. Maybe plus minus 1, 2, 3%. Right. Whatever that number is, the market in reality isn't changing those things. It's changing maybe your ability to raise and the valuation that you're raising at. Maybe if the market's really hot. You're raising at, you know, as a new startup, maybe a $20 million valuation. It's not hot, maybe it's uh, a $8 million valuation. Right. And so you'll have changes like that, of course, but, but we tell our founders you can't pick the market conditions, right. You just keep building, you take what the market gives you in certain respects around that and then you'll get the ups and downs, the market will be hot and you may end up with less dilution at some point later on or early on, depending on what that cycle looks like. And it'll kind of make up for itself in most cases.

Speaker B: What is the difference between uh, Web two startup and Web three startup in the sense of, uh, you have the token economics. If there are tokens versus equity, what do you prefer and how the deal is structured on your side?

Speaker A: Yeah, it's a good question. This is something that a lot of people even early on laughed us out of the room on because they just didn't understand. Right. So probably if you go back 2017, uh, 2017, 2018, 2019, most of the funds in this space were looking at tokens and we just said we require the same incentives as the founder. If the founders have tokens and equity, we need tokens and equity. That's a non negotiable. Right. Like if our incentives aren't aligned with the founders, there's going to be a big problem at some point and we don't know which side we fall on. You might be invested in the right idea, the right team, and it might be the right wrong, and it might be the wrong financial instrument if you don't actually have the same incentives. And that's a huge problem. And so we were always adamant on that, to be honest. It did make us, uh, lose some deals, um, because certain founders said, hey, we're keeping the equity, we're just selling the token or vice versa. Right. And it just didn't make sense to us. And deals that were hot, we had to sit out on. But in reality, in the long run, when you kind of look back on it, it was the correct decision. And now you might see more funds in the space that want to do equity. But in some ways you're seeing the impact of those five years in the middle, six years in the middle, where it just negatively impacted a lot of funds that, you know, may not be able to raise again because they took tokens on companies that pivoted away from tokens. They, you know, may have been a great team, may have Built great products and they kind of got the, uh, short end of the stick for not doing the proper due diligence or homework early and understanding this. Right. And at the end of the day, I mean, incentives are key to the way the world, you know, operates, um, especially sort of in the Western world. And so you've got to understand these things and you've got to be aligned. And there's not really any exceptions to that rule because I think it's critical.

Speaker B: Yeah, no, like many companies launched their tokens and the token didn't do well. Right. But they had the capital to keep building and build quite successful teams and products. So, uh, I do agree with you that, uh, you know, it's pity not to have equity in something that you funded.

Speaker A: On that point, actually, I want to bring something up because I think it's very relevant. We've been telling a lot of our companies for the past couple of years to not even necessarily launch a token. Right. Because you do end up with the problem of what we call the debt spiral. So if you launch a token and you've got a good company and you launch a token and the token actually goes down significantly, it can actually turn what is a good company into having a lot of early users and supporters who get burned from this token because it goes down in value. They believed in it, they trusted it. It, they lost money on it. And so now those people come out and say, hey, this is shady. Hey, this is a scam. Hey. They didn't follow through on what they said. But you might actually have a good company. Many might not. Right. But some might have a good company, but it ends up pulling you down because it gets harder to sell your product. If people go online and they see people complaining about bad reputation, which is, you know, the most important thing. And so actually a good, uh, company with a bad token can actually, you can still enter that debt spiral and, uh, not make it through. And I think that's actually be very important for founders to understand and investors to understand when they're investing in these companies because it can actually backfire, uh, and you end up with a challenge of, you might think. And some people explain a token as, say you invest in a dollar or $100,000 or whatever. If you invest a dollar into a company and you get both the token and the equity, that doesn't mean it's worth $2. Now some people's accounting say that's worth 2. In reality, they're basically still worth 1. And, uh, you've got to be careful because one side could actually make the other side worth less. And so you got to be, you've definitely got to be, um, wary and understand these mechanics.

Speaker B: Yeah, I met many companies that were launching second token. Right. Uh, because the first token crashed, uh, but they did well in building the company and then at some point they want to still reintroduce the token. Um, how do you see these companies? Like, would you invest in a token of a company that uh, is relaunching a new token?

Speaker A: Yeah, I mean the vast majority of the time this is a really big problem. Right. Um, and you can't build a successful company by just burning everyone along the way. And reputation is everything. So if all of those people from the first one are burned and have a problem with it and then you're going to kind of go do it again, I mean it just, it just doesn't work that way. Right. And so I think, I think you've got to be very careful with these. If they do figure out how to go do right by the initial people and figure out a better model, and maybe they have large user bases where a token starts to make sense and you have synergies. Maybe there's some exceptions. But you know, the vast majority of times I think this is probably a recipe for disaster.

Speaker B: Mhm. And how many of these Web3 companies don't need a token?

Speaker A: It's a good question. I mean, I think that the vast majority probably don't need a token. There are benefits to having a token. But we're in this industry right now where I think people are using the token as a way to probably, I'd even go as far as say, trick investors to invest in poor products with metrics that maybe look good, but people don't understand what they're actually looking at. And that becomes a very, very, very, very, very big problem. Um, and investors continuously don't do the diligence that's required on some of these things. And so let me explain this further. I would say if you go back last year even or a year and a half ago, I would say that probably, and this may not even be an exaggeration, the average company we were seeing had more than 100. Okay. But these users were basically Telegram bot users or Telegram users. And uh, when we looked at the conversion, so everyone would look at Those headlines, oh, 100,000 users, they've got their product out. 100,000 users, let's go invest them. 20 million valuation sounds reasonable. Or 25 or 100 or whatever the number. Right. People would be excited by these numbers. And when we actually looked into it and did diligence around this, we basically determined that we saw a less than 0.01% conversion of users from Telegram to the actual product. Those are, that's an, that's an actual, uh, analysis. And we were surprised by how low it was. We thought maybe. And some people be like, oh, it's going to be 5% or 10%. And that was what a lot of founders kept saying, hey, conversion might be low, it might be 10%. It was 0.01%. Okay. And when you start thinking about that and understanding that that's a big problem because you're giving. What these companies were doing is they were giving away a lot of these tokens as incentives. But if they're giving away all those, uh, tokens to incentives across 100,000 real users, that may be worth it. But when they're giving away all of those tokens across, in reality, what's 100 real users or 10 real users? It's a very big problem. And so this actually created a lot of fundamentally, uh, broken companies that investors piled money into and just didn't understand what they were doing and didn't understand what these metrics were. And that's the problem when proper due diligence isn't completely.

Speaker B: Yeah. So, uh, many of them say, hey, we have a large community that they built on Twitter or Telegram, raising money before there is a product. And then, you know, how do you get attention of these, uh, followers to actual users of your future product? Right. This is the challenge.

Speaker A: Absolutely. And investors got to understand these terms because companies might call them users, companies might call them daily active users or monthly active users, but every single company that we look at will ask, what definition are you using? What does daily active users mean in this context? What does monthly active users mean? Like, what are these users and what are they doing? And how does that fall into your feedback loops? And how does that fall into buying your product or using your product or, you know, and try to understand how long are they spending on these different pieces? How m much are they using your product? You know, what is the total volume? Like, there's all sorts of questions you can be asking to really understand something, and that oftentimes is just skipped.

Speaker B: Yeah. So how do you source quality deal flow for your fund? What do you use?

Speaker A: That's a good question. I mean, we don't think of it as top of the funnel, as necessarily needing to be extremely high quality. Right. So the way we look at it is maybe different from the way other funds look at it, right? But I think we've built systems internally that allow us to scale effectively. But you know, we think of it as, hey, we've got about 500 different deal flow partners. So these are leading VCs in the industry. These are angel investors. These are certain like corporate venture capital or like corporates in the space that all share deals with us. Okay. We just tell them, hey, share any deals that you think could be interesting. If you're not sure, you can still just share with us. Our job as the VC is to filter, right? And so we end up with a lot of stuff. Some is great, some is okay, some is horrible, right? And our job is to filter through that. And so over the last couple years we filtered through about 11,500 deals. And you know, we track every single deal in our system. You know, we, we understand all sorts of things about the companies, details, uh, about it. We actually look up, you know, and uh, you know, their, their linkedins and different things on the founders. We've actually got AI right now that we've recently launched internally. That helps us even rate the companies off the bat on different metrics. So the quality of the team, it looks up any background information, any lawsuits, anything else that we might want to know in advance, you know, and that doesn't mean we wouldn't invest. But we've got to understand, hey, we, what, what's happened? Is there any sort of things we gotta uncover, talk about in meetings?

Speaker B: Is it internal tool or something that you license?

Speaker A: So no, that's fully internal. We built internally, connected uh, a bunch of really cool tools into Nadan, did all of our own training. And then another cool one that we uh, built recently as well is um. And we're gonna actually launch this part out to the public. So stay tuned. But you know we, we're calling it uh, Satoshi and basically it's uh, it analyzes your DAC and your, and your video pitch right in real time and gives you a full report on things that you could be doing better. We trained it with over a thousand different videos and scripts and content of our own. We've been kind of building that out in terms of the way we look at some of these things. Over the last seven, eight years we've trained uh, all of this and actually you get a full report instantaneously. We're going to use this as a deal flow mechanism as well. But anyone out there will be able to share their data back their video and sort of get feedback and it helps Founders become better, faster, stronger. So we think it's a good way to give back to the community, into the industry, but also help us to continue to secure, you know, the best deals, uh, first. And so, you know, this is also really cool. But then, you know, you've got to put in the hard work. You've got to go look at all of these things. You got to look at it, you know, and then you've got to prepare in advance. We typically don't like, uh, you know, general first meetings. Right. Like, we tend to prefer, hey, let's go actually look up the founders. Let's actually understand a little bit about their background, let's look at their deck, let's see anything else we know. And then when we get into that first conversation, we don't have to have this super surface level. We already done the homework. We understand a little bit about the business. We want to know their vision for it. And so that still happens on that first call, but then we can go deeper, right, and we can understand things. We can see, hey, is there any red flags? Have they been running this for a really long time and kind of got stuck, stuck? Why did that happen? Right, and so we want to kind of get past that really surface first call that typically happens and have that first call that has a lot more meat, uh, to it. And so that's been a strategy that we've used as a way to save time as well.

Speaker B: How many meetings do you typically make in web? 3. To invest in someone.

Speaker A: I mean, we probably are doing about 25, uh, meetings with founders, uh, a week across the team. That's so of. That's like first meeting second. It's a combination of all of them. On a typical investment, I mean, we're probably doing something like four to seven meetings, depending on, you know, how, how high quality is all these things. If they have a data room, it's probably saving some meeting time because, you know, we see everything clearly. But then that doesn't include reference calls, which we typically do two reference calls, uh, on a founder. Um, oftentimes we're doing reference calls from our network. So we're not even necessarily asking the founder, hey, who, who can you introduce? We'll know certain people they mentioned. We'll go to those people that they mentioned, uh, so that we can kind of get an unbiased view on things. You know, of course, there's always a little bit of biasness when someone introduces you to some specific, uh, reference which still can be valuable. But, you know, you got to take it with a grain of salt. Um, uh, and then we move pretty fast, though that can happen as quickly as a couple of weeks.

Speaker B: Did you have any deals where other VCs led the deals and you just jump in without too much due diligence? Diligence, or you always follow your process.

Speaker A: So 100. I think any VC out there has probably made some of those mistakes, and sometimes they work out well. But, you know, what we realized is you've just gotta. You've gotta put in the time and, like, you've gotta trust your own diligence. And, you know, that's why our investors, you know, pay. Pay us. Right. And that's the same reason that when I invest in other funds, that's the same reason we pay them. Right. And so I think you've gotta be careful. We've made the mistake. Like, I'll be honest. Like, we have made the mistake. I mean, if you go back to, um, you know, the ICO boom, I would say the vast majority of deals didn't even have paperwork. Right. I mean, it was a crazy time. And, you know, that might get, uh, some people judging me on what I'm saying, but it was just a very different time. You know, people would say, hey, send the money right now, and, you know, we'll send paperwork later. And it was just, if you want in, you had to do it. Right. It was a very, very different world. And there still are hot deals, but, you know, we're. We've got a pretty good reputation. We can move pretty fast, but we've got to follow our process. And. And that's a big part of it. And when you don't do that is usually where things go wrong.

Speaker B: Yeah. In Web three, they like to brag about the speed of raising money from retail. Right. But, uh, they don't see what's happening in the background on all the private rounds. Right. That it might take them six months or a year to raise until they do the 12 seconds public race, you know. And, um, so let's touch on. On the fund structure, right? Kind of. You chose to do it in Singapore while you're from Canada. Uh, what is the best jurisdiction for a Web3 fund manager? And how did you choose Singapore?

Speaker A: Yeah, so that's, uh, an interesting question. Obviously, uh, Best has, uh, different interpretations, uh, to it, Right. I mean, Singapore is probably the most trusted jurisdiction from a regulatory perspective. Right. It's a country that regulates on the front end versus the back end. Right. If you look at the, the U.S. they don't regulate funds on the front end, they regulate them on the back end. Right. So there's not necessarily a license in advance or diligence in advance by the regulator. So that's where Singapore I think stands out as one of the top jurisdictions. Extremely trusted, very strong rules, regulations, kyc, aml, et cetera. Right. Um, you know, if you look at other places like Abu Dhabi, it's also got a, ah, very, very strong reputation. You're seeing a lot of capital come out of that region. And uh, so I'd say that's also another jurisdiction where they're regulating you kind that front end. Right. You know the US is always great as a, as a jurisdiction, but it's just keep in mind the regulator's not vetting it, looking at it, you know, in advance and not, not for Web3.

Speaker B: Right. Kind of most of the funds, the Web3 funds are not in us uh,

Speaker A: I don't know if I would necessarily say that there is still quite a bit of funds in the U.S. it's just uh, they'll have the master or part of their structure in the US and then the feeder funds or you know, or like they'll have the feeder in the US and then they'll have Cayman bvi. Right. Which uh, both of them have started increasing regulation. I mean they're both great jurisdictions especially if you're talking about like making sure you've got a tax efficient pass through. And so you know Cayman BVI are going to be the most common probably globally in reality for um, to just to make sure you've got like, you know, clear capital going through. But just keep in mind the regulators aren't, don't have that same bar that you're getting in some of those other jurisdictions. Right.

Speaker B: And when you chose Singapore, was it uh, also because of ease of raising LP money from around the world or like what are the limitations?

Speaker A: I think I don't know if I would necessarily say ease of raising, but I think that it has its benefits. Right. So when you do say Cayman or BVI as the sole structure, I think it's not necessarily, it's just signaling like hey, we've got a structure, it works. And if you know all of the investors that would come in, great. Right. They're still used to that um, structure. I think with Singapore, what's interesting is it still signals like quality, it signals like innovation pioneering because we were one of the first regulated Web3 funds. From there, you know, you have to have a very high bar to get through with mas. And so it kind of signals some of that additional credibility. And keep in mind, when we set up this client, and even to some extent today, but not to the same extent. And you know, the crypto industry has been a little bit like the wild, wild west. You don't know who to trust, you don't know what's going on. You've got, you know, poor processes, not necessarily expecting great accounting or internal procedures or processes. And then when you've got uh, a side like Singapore, it's like, hey, they figured out all this stuff, it is super clear. So these things have helped, right? I mean, keep in mind, for example, if you look at like token positions in crypto, right, the vast majority of funds are still putting this on their books. Fair market value. And fair market values just take market price times, number of tokens. That is completely flawed because the vast majority of these tokens don't have the liquidity for you to be, uh, able to liquidate some of these positions. And so we actually, as an example, and this is something we figured out with the Singapore regulator to help understand the impact of a good regulator, we basically determined with the regulator to do a black Scholes model on every single position and we take a 60 to 90% discount on token positions. Now you no longer have those large fluctuations and it's probably a better reflection of what the value is based on a number of factors like liquidity. Uh, and I think that's a better way to do it and it's a better way to make sure that investors, LPs aren't getting confused or screwed or tricked or whatever you want to call it into what would probably be considered poor financials and not even, um, reliable in some respects.

Speaker B: Yeah. And was it hard to raise LP money for your first fund? Um, second fund was maybe easier because you already had some track record. Um, can you walk through kind of the process and why they, you know, chose to invest through you rather than do it themselves?

Speaker A: Yeah, that's uh, it's, uh, I mean, it's interesting, right? I think, I think there's some factors that have changed, right. So keep in mind, early on, hard to find people that you can trust that know what they're doing, that have financial backgrounds that understand Web3 and it's a new industry. And so people are looking for exposure to this industry. I mean there's still some of that today, right? Where people are looking for exposure to this industry, they're probably, uh, you know, under allocated in that industry. And so they're looking for trusted people to go, um, you know, put capital behind. And so, you know, it actually wasn't, I, uh, think as difficult as maybe some people might have thought on raising, um, the space. But I think we were also fortunate enough to have a great reputation, a lot of successful wins that people could look at already before this. Right. On our kind of personal balance sheet, let's call it, or personal investments. And then that stamp of regulatory approval I think also helped to make sure that people saw trust in an industry where there tends to not be a lot of trust and there tends to be a lot of bad actors. And so that's also, I think, a good thing. And so those things are all coming together, actually made it not too difficult to raise. And that's despite some pretty big fails in the industry. While we were raising, FTX had gone under, three Arrows had gone under blockfi, Celsius, all of these things were going under while we were raising. And it was actually interesting because we thought it might have had a bigger impact than it did, but investors still saw a future in the industry, liked what we were doing. And actually the vast majority of capital that we raised in the fund was actually after, after a lot of those big failures in the industry.

Speaker B: Yeah. Um, so one of the perks GPs offer to LPs is the coinvestment rights. How does it work in Web3? Kind of in your case, and especially if there is a token investment.

Speaker A: Yeah. So actually this is one of those things that, um, even as myself, as an LP in other funds actually frustrates me quite a bit because I maybe have a very different mentality on the way that I think about these things. Right. We're also obviously investors in our own fund in a pretty large capacity. And so the way I look at it is when we invest from a fund perspective into something, we've taken the position that we want. Right. And uh, we already have taken the amount that we want to invest. We need to help those companies get more capital, ideally so that, that it in reality decreases risk for us. Right. If the companies have more capital, it's going to decrease risk for us. And then we want them to ideally have other strategic investors, people that can help them, people that can open up doors because that's again going to decrease risk for us. And so we actually set up what we call our LP deal route and they can actually see our LPs can actually see every deal we do as we do it. They can see the deal, they can see the documents, and if they want to put capital in, they click one button, they get an automated intro to the founder and they can discuss it directly. We don't take any additional fees on it because again we've taken the position we want, we want to decrease risk for ourselves and uh, so to us that makes sense. We do get frustrated and as an LP and other funds, I do get frustrated that some of these GPS aren't thinking about how to maximize return and make sure their companies are doing well. They're thinking about it as almost like a fee collection business. And so they're thinking about how do I still collect an additional 20% of the upside on other, you know, other capital investment. And I think this is actually a big problem for the industry because it actually probably decreases returns if you're going to gatekeep and then hurt the companies from getting the capital that they need and you uh, know, creating these barriers. We don't, we don't like these types of barriers in our companies and you know, we just want to help them go be better, faster, stronger. I mean startups are hard enough, right? I mean you've got to just be as fast as possible. You got to get the best investors as quickly as possible and you just got to keep building and growing and get more users and fix problems and you've got, you've got many different things to worry about that I think adding more walls doesn't help.

Speaker B: Yeah, 100%. Cool. So you, can you elaborate on why did you choose to be LP in other funds?

Speaker A: Yeah, I mean there's a few factors. I mean one, oftentimes you meet other GPS that I think you, you have a lot of respect for. You believe they're highly intelligent, you believe that they've got some sort of edge or some sort of angle where I think it could be that they could win. And so we've gone in um, and written small checks to some of those uh, gps. I think the other part is it's been part of the strategy on just securing really strong partners that ideally are investing at the same stage as us to open up access to share deals more effectively. That now in reality our best deal flow sharing partners haven't been the ones that we've necessarily invested in. I think there was um, maybe a little bit of strategy, uh, or hope there that it would become a deeper and more fundamentally deep relationship which it has in certain deals. But I would say on a day to day that necessarily hasn't been our number one sort of place uh, from a deal flow perspective. But you know, I think it's worked out, out uh, in reality quite well as a way to just, you know, open up some doors. It's also people that you could trust then, and you could talk about deals that are in your pipeline. And, you know, there's, there's a lot of ties there because, I mean, as a, as a vc, you've got to talk to other funds and say, hey, I'm looking at this. What do you guys think? Have you guys looked at other stuff in this space? Have you looked at this company? What have you seen? Because you oftentimes find things that you can't find online or you can't find from, um, you know, other ways other than talking to investors in the space case.

Speaker B: And did you invest personally as LP or as a fund?

Speaker A: I've got both. I've got positions that are personally as, as lps and also, um, you know, from the fund as well.

Speaker B: Yeah, it's kind of the good thing when you invest in other funds as L.P. in a way, you become part of their L.P. club. Right. And do you really utilize that network of other LPs of, you know, the GPS you invested in for your, your benefit or not?

Speaker A: I think that's probably something that necessarily, like, we haven't tapped, uh, maybe to the, to the full extent, but, you know, it's, it's, it's always nice, I think, when, you know, you, you kind of help each other out to some extent, right? Like, you go to maybe some of these events, you'll get invited as an lp, you can talk about different things without, uh, some of the other LPs. I think it's, it's, you know, it's helpful. A lot of these positions that we did were kind of after we were fundraising, so it wouldn't necessarily help us from that perspective. But, you know, a lot of LPs invest as well, and so some of those LPs might join us on a deal or, you know, maybe share interesting deals with us and that, that's all very helpful. So, you know, overall, I definitely think it's been valuable. But, you know, there's more we could probably do as well, like, for example, if we were fundraising.

Speaker B: Cool. M. Let's touch on what is thought in web three these days, because I meet a lot of VCs that transition to liquid strategists, like they, they became hedge fund managers rather than VCs. Um, do you, do you see enough good, uh, opportunities in kind of being a VC or, you know, there might be good opportunities in liquid strategies as well. Do you guys do that?

Speaker A: Yeah, I mean, you, you brought up a good point. I mean I, I'd say a lot of um, funds have moved into liquid strategies and in reality a lot of those have backfired even in the timeframe that they did it. Right. Um, and that's been a problem I think for many of them, at least from conversation that I've been in. I think it's important to, I think stick to what you believe in. We're early in an industry. I mean we're talking about the blockchainization of major industries that are still happening. Right. There's almost no industry that you could say blockchainized. Um, Maybe you'd say stablecoins where you got 45 trillion in volume in the past year, but there's still still huge, huge potential. If you're talking about like unbanked and underbanked populations, you've got a billion people that, you know, this could help them leapfrog the existing banking system. I mean if you're talking about even on the stablecoin side, you've got everything downstream from stablecoins like payments, remittances, um, on off ramps. I mean there's huge, huge opportunities still on these domains. Right. Um, but I think the big thing and what's been super hot, I think there's incredible opportunities still in Web3. But I think where um, people have been getting it wrong is you've got to be investing in things that are building transformational technology that are actually going to have a huge benefit. Right? So for example, uh, one of the things that I always see in this, in this space is people are almost making it sound like, I don't know, like an exciting action movie, like their startup and you know, even though they don't necessarily have that much traction, I think like oftentimes this real impact, it's boring, right? It's more like back end infrastructure that cuts 30 to 50% of cost. You know, using Web3 rails, like payment stack, reporting stack, finance stack. Like that doesn't need to be a very exciting story that you know, everyone like. Right? Like it's boring but it's impactful. Right. And I think people oftentimes miss that and they're looking for something that you know, sounds a lot more exciting and those companies generally may not have, you know, the actual chops to back up what they're saying. Whereas like there is exciting companies that maybe just are incredible infrastructure. And so right now there's a huge movement on companies that are going public that um, are on Web three Rails and then you're going to have many multi, multibillion dollar companies. I mean Kraken's going to probably go public pretty shortly. You're going to see the same thing, most likely from some of the other uh, exchanges. I mean OKX is one of them. Tether is one that people have been talking about. Circle recently went public. You've got, got, you know, many others, I mean figure markets went public. They're basically taking an existing industry, right, the mortgage industry and moving it on chain. That's a very big thing. And this is going to happen across many other industries where you take a big existing industry, you take the benefits from blockchain, you apply it to that and you've got a major competitive advantage and you move it on chain. We're doing the same thing with Roundtable. We're taking, you know, it's infrastructure for the media industry. We're taking existing industry, the media, uh, industry industry, $200 billion industry for premium media. We're moving it on chain and we're going public on NASDAQ right now. And so you've got these types of things that you've got to look at and understand and get away from all the noise and just figuring out where is the real impact coming from. How is this actually changing the world or doing something that nobody else can do effectively. And it makes a big difference, right? I mean we've got a company called Credit, for example, people in uh, in the US and Sub Saharan Africa and you know, they're basically helping to issue you know, millions of loans that are helping people save tons of money like remittances, loans, um, you know, in Sub Saharan Africa. And they're doing in a way where they're dropping non performing loan ratios, you know, for banks and microfinance banks, which is incredible. They've helped uh, in America people increase their credit rating by you know, up to 58 points, um, which is, you know, pretty cool. And that allows you to you know, talent that's moving to America that is, you know, very qualified. They're working at some of the biggest companies like Google, Apple and they're just invisible to the system because they don't, they weren't born in America, right? And so these are, you know, incredible opportunities. People that are making a lot of money that maybe want to, you know, borrow, get a credit card, things like this that now can. And so that you've got a lot of really incredible solutions to problems and you just got to make sure that you know, it's uh, it's going to have impact and then you see, see, you know it helps to change the industry and it makes a lot of money and it means the valuations keep going out.

Speaker B: Yeah. What about AI in Web3? Right, because there were lots of these ventures, uh, moving to AI because Web3 wasn't doing well, but now, uh, it converge. Right. Kind of the infrastructure of, uh, Web3 is being utilized for AI as well. So where do you see opportunities there?

Speaker A: There's tremendous opportunity. And what you see with, you know, the convergence of, you know, transformational technologies is you'll kind of see these, these, you know, technologies come together and then they can accelerate significantly. Right? And that's where you kind of get this real, real, real transformational change is when you pair these technologies. So take AI and blockchain, or take like machine learning and IoT, um, uh, uh, with blockchain, right? And you start to get some really interesting impacts when you start combining these three together. And so I think right now you had a hype cycle on it, but you've got AI which is going to go impact every industry, and you've got blockchain, that's going to go impact every industry. And so together you're going to be able to do it more effectively. You're going to be able to build faster, use AI tools to build faster, more efficiently, you're going to be able to have leaner teams. And then you're going to be able to look at all of these different processes internally. Right? Talked about like reporting stack, payment stack, you, uh, know, you know, and roundtable work on the ad stack. Like there's all of these different things like finance being able to pay, you know, immediately now without anyone in a trusted manner. I mean, the currency of the future has to be on chain because AI, for it to do transactions without human intervention, is going to have to be a digital currency. Right? And so that's going to all happen on blockchain rails. You know, the auditability of AI is going to be a huge thing. I mean, Europe's already, you know, ahead on this. But, you know, just keep in mind, in the US or anywhere else in the world, you're not going to have. I don't think we're going to live in a world where you're going to have autonomous vehicles on the, on the road, and then they're getting into accidents and there's going to be issues and Congress or whoever is not calling them in and asking, how did your AI make this decision? Like, this is, this is like, very natural if you think about the way that, um, you know, some of these Regulators are working, they're going to call them in and the CEOs are going to be responsible. And if they're CEOs are responsible, they're going to make sure that it's auditable. Right. And the auditability of AI is going to happen on chain. You can't do that on servers where it can be manipulated. Right. And so we're going to see that, I think you be more mandated in the future and become a bigger and bigger thing. And in reality, it is critical. Right. If we don't understand how the AI is making decisions in the long run, we're going to have big problems with AI. Right. And so these things are going to become, I think, coded into law. I think you're already seeing Europe kind of ahead on some of these things, um, from that perspective in, uh, terms of the regulatory side. And, you know, these technologies in reality go together like take humanoid robotics. I mean, Iot. It's going to be better if we're talking about leveraging AI into it. So you're seeing that have a huge benefit. And then if you're adding blockchain into it now you've got the currency layer, the value layer, being able to be transferable. You've also got the auditability layer. You've got probably other aspects that you can start to tack on from all these areas that just make them all better, faster, stronger technologies together rather than apart.

Speaker B: Very cool. Thanks for sharing. Um, and what do you guys do in rwa? Right? There's a lot of work being done so far, but the adoption is still coming. Uh, where do you see, you know, what's happening in the rwa?

Speaker A: I mean, there's, there's huge opportunities in rwa and it's, you know, it's taken time. Right. I mean, keep in mind, you go back seven years, eight years. I mean, I was one of the original advisors to a company called Polymath, which, um, you know, is of. Part, part of inventing this whole space right around security tokens and RWAs and tokenized real estate. And these were topics we've been talking about now for eight years. And I think now it's starting to get into the mainstream. Now it's starting to. The technology having matured and be able to do this effectively. But I mean, everything has to basically move on chain. When you think about commodities trading, um, equities, debt, uh, and the reason is because we live in a world in, in which these are all assets. And so you need to be able to tokenize these assets to then borrow against them and effectively use them as collateral. And so I think you're going to see all of these commodities go on chain. You're going to see all of these equities go on chain. You're already seeing it pretty recently with, um, one of the recent BlackRock funds that are being used as collateral. It's a money market fund that's being used as collateral on any exchange or any major exchange, um, where you can then borrow against it and use that capital still elsewhere. And so I think you're going to start seeing more and more of these things, uh, very quickly. And it makes sense because then you can use these positions as collateral in the same way that you can use your defi positions as collateral. You can use in a very short order. You're going to be able to use your poly market bets, uh, as collateral. And any of these things in reality are assets. You're not borrowing 100%, uh, to value, but maybe you're borrowing 20% to value or 50% of value. And so you have these things that I think are starting to change the game. And then one step further, I think the world is going to have a multi trillion dollar innovation around the lending side of the industry because once you have all these tokenized assets, you have people that are going to be able to borrow against them. But what I think is going to happen because capital in reality has gotten cheaper and cheaper over the last decade or more. I think what you're going to have happen is ultra competitive lending markets, right? So when you think about going and getting a mortgage today, right, you probably go to three banks, four banks, maybe two banks. You ask them, um, you get quotes and you choose the best one out of three or four. Where I think the future of the world is going to be is you'll go get, you'll choose whichever option you still do. You'll look at two or three, you'll choose the best option, right? But other people will be able to see your loan and they'll be able to basically pay back your lender and offer a better rate. So say right now you're borrowing at 7%. Someone else might be able to come in and say, hey, I would lend for 4% against that collateral. The lender gets their money back. Maybe they get an additional fee because they got pushed back early, but now it's actually better for the borrower, better for the lender because there's another lender that come in which didn't have, uh, something to lend against and they found something they liked I think this creates a huge win win. I think you've got multi trillion dollar markets that are going to get created around hyper competitive lending markets which are exciting to see in the the future

Speaker B: how the retail can find these opportunities where to deploy or like lend. Are there any aggregators you see?

Speaker A: Yeah, I mean there's a lot of lending markets in Web3. I mean if you're like compound AAVE, you know there's going to be some, I mean Netiworth is one of them in our portfolio that's actually working on building this hyper competitive lending market where you know you can basically boot an existing lender and offer at a lower rate. And you know I think it's a very interesting concept that I think think has multi trillion dollar potential and I think it actually makes sense because it actually makes it better for everyone. Right. Like there's no one really losing in that scenario other than maybe people trying to price gouge and charge too much interest. But in reality that's going to make the world a better place. Right. If Instead of paying 10% interest you're paying 5, you've got more money, you know, for your kids to go to school or you know, put food on the table, whatever it is. Right. And so it actually becomes a very, very, very big impact. And so I'm very excited about this. Uh, I think this is going to happen a lot quicker than people think because you can already put up your collateral from defi positions on many of these platforms. Now very shortly you're going to be able to put up poly market positions, you'll be able to put up your RWAs, your debt positions, your equity positions and I think you're going to be able to leverage all this very effectively.

Speaker B: Cool. Yeah, thanks for sharing all these insights uh, around Web three. Um, lastly let's uh, talk about your lifestyle. Right, right. It's kind of you, you, you mentioned that you, you had that almost uh, you know, tough times as an entrepreneur but uh, as an investor I think you, you're not resting enough either. You know I see you all over the world and you travel and work hard. So how do you balance uh, your life and, and family time now? So um, can you share something?

Speaker A: Absolutely. I mean I definitely think I've done like a full 180 shift from uh, the mentality I had when I was much younger and kind of how I approach things which maybe wasn't sustainable. Right. And I think a big part of this is to be effective you have to stay healthy, you have to have very Sound mind. And so I've been very into biohacking. Everything from sauna, red light, uh, therapy, you know, cold plunges. I'm sure many of you guys love, uh, cold plunges. So, you know, these types of things. I think eating very healthy, you know, you know, I have a set of supplements that I really like, and they've been effective to make sure that I have the type of energy that I need. Um, and then, you know, doing things like hikes, you know, we play pickleball a little bit. I tried to come to one of your tournaments. I think you were running a tournament, but I wasn't able to make.

Speaker B: There we go.

Speaker A: Right. So, you know, I love this kind of stuff. Um, and I think it's important. Right. And in reality, I think sometimes even maybe when I was younger, I probably thought about it as, hey, it's taking away one hour. But in reality, it's probably creating five hours or 10 hours because you have more energy, you are more effective, and you have more longevity. Right? And so, yeah, um, you know, it is, it is an important investment to, uh, be effective and to have that mental clarity.

Speaker B: Yeah, we, we launched as, you know, we launched our clubhouse in Portugal. And right now, now we are designing the different types of programming and added value we can give investors and our members. And one of the things we are kind of. We want to add the longevity aspect, right. As all the different, uh, methodologies and tools that you just mentioned, we want to add as part of our spaces so that you as a member can have at least like, a way to get exposed and start practicing, uh, uh, with us. Um, and it would be great to get more insights from you, what works for you and what doesn't. Um, and, uh, yeah. What do you do kind of when you travel? Uh, how do you find all these different, uh, centers or kind of where you can get access to this, uh, different tools like ice buff and, you know, all the different activities.

Speaker A: Absolutely. So. So it depends where, where I'm traveling to. You know, I think with some of the key cities, like five or six cities, I'm very, you know, used to finding. I've already found a place. It's very easy. Um, and then I, you know, if I'm there for a week, two weeks, it becomes easier to make sure that, hey, I can keep the routine and keep, keep going. I think the challenge is when you take those short trips, like two days to a city, you don't typically go. Like, to be honest, it is challenging in those cities. Like, oftentimes I don't have the, you know, ability to go do some of those things. Um, and you know, that's part of the challenge, I think, when you are on the road. Right. And so, you know, in the key cities like Singapore, you know, New York, Vancouver, Dubai, you do have places that you go to typically, or at least that I go to typically. But, you know, when you start going outside of some of those, it does add, uh, definitely a little bit of choice challenge.

Speaker B: Yeah. We should create a directory of all these recommendations for our members. Yeah, yeah, definitely. Great. Thanks, uh, for joining and sharing all these insights. Ali and M. Hope to see you soon, uh, in one of the locations. Um, are you going to Hong Kong or other places?

Speaker A: Yeah, so we're likely going to skip Hong Kong because next week I'll be in uh, Dubai for Satoshi Roundtable and then going to. We're, we've got eth Denver coming up in February. And then there's the main consensus conference token 2049 in the UAE and Bitcoin conference in Vegas, kind of all happening April, May. And so I'm going to some of those. My team is going to some of them. But, um, we're pretty excited about uh, some of the big conference, some of the big moves that are happening in the space, many companies going public, which I think is the thing to watch. Um, and uh, hopefully we'll have an incredible 2026 also together.

Speaker B: Yeah, definitely. Yeah. And we'll have uh, side events in most of the locations. So join us and uh, grow with us. Thank you Ali and uh, looking forward to collaborate with you further.

Speaker A: Would love to. My pleasure.