Today’s episode is from a 2018 conversation with Eric Meltzer, partner at INBlockchain, a Chinese cryptoasset fund. We discuss his preference for relationships and business opportunities over a rigid investment thesis. For the full conversation, check out Flippening episode 17.
Links Relevant To This Episode
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- Eric Meltzer
- Bitcoin (BTC)
- Ethereum (ETH)
- Scalar Capital
Clay: Welcome to Daily Wisdom from the Flippening Podcast. These episodes feature short, to the point clips from our full-length interviews. We talk to the men and women behind the trades, crypto exchanges, and regulations with the goal of helping you become a better, more informed investor.
Michael: Hi I’m Michael Kaplan, editor of the Flippening Podcast. Today’s episode is taken from a 2018 conversation with Eric Meltzer, partner at INBlockchain, China’s largest cryptoasset fund. We discuss his preference for relationships and business opportunities over a rigid investment thesis. For the full conversation, check out Flippening episode 17. [00:00:30] Without further ado, our conversation with Eric Meltzer, partner at INBlockchain. Enjoy.
Clay: It sounds like InBlockchain is really focused on teams and gets involved really early in token-only projects, or do you also do equity deals as well?
Eric: We do absolutely everything. We would do equity, we do tokens, we’ve invested in training programs. We pretty aggressively have no thesis in the space. We’re just very opportunistic and we go after what we think are promising [00:01:00] teams. I think that filter has historically worked very well for us, and I think it will continue to work very well, just because there are so few teams that can actually ship meaningful stuff in the space. If you just restrict yourself to teams that you’re super excited about, you’ll do well.
It’s funny, I’ve had friends be like, “Man, you really seem to like love the founders of the stuff that you invest in.” That is our bar. If I don’t fall in love with the team when I meet them, then we’re probably not going to invest.
Clay: Let’s dial-in on the statement you made about a thesis. [00:01:30] I’ve heard a lot of funds recently talk about the strength of their thesis, but it feels like after further questioning, there really aren’t any intellectually-rigorous theses in this space. What is your take on a thesis? Is it a limiting filter? Is it helpful? Is it not helpful? Where do you come down on that?
Eric: I think it’s not helpful. For the most part, it’s like marketing. For a lot of these new funds, I respect that they have to go kind of do [00:02:00] what I think of as like content marketing where they go and write a bunch of fancy thought pieces about how they think about the space. The problem with those is that they age extremely poorly. If you read people’s hot takes about the space from six months ago, they already appear almost nonsensical.
With a space that moves this fast, that’s just going to keep happening. It’s much more important to just embrace the uncertainty and just try to find the best projects at any given time, rather than have some fancy overarching conceptual thesis.
Clay: [00:02:30] I believe you said this last time, that there’s probably just not enough deal flow in this space to have a thesis. You’re going to miss a lot of opportunities.
I do think, though, that there is a need for differentiation and there’s a number of dimensions along which a fund can differentiate itself. It seemed like at first it was all just about exposure to the space, that someone was a trusted party or a trusted partnership, they had the custody thing under control, they had reputable backers. [00:03:00] It was all about institutional investors that wanted some exposure to Bitcoin or to Ethereum. Now there’s a whole bunch of funds, how do you think a fund does go about differentiating now that so many people are offering versions of basic exposure?
Eric: I can talk a bit about some of the funds that I co-invest with a lot, because I’ve chosen those, basically because I really like what they’re doing, and I think that they bring a lot of value to the projects that we invest in. Also, just a lot of these are just people [00:03:30] I like. It’s always fun to hang out with friends and invest in cool stuff.
One of the people that we started co-investing with is Binance, a large exchange, has their own fund now called Binance Labs. We co-invested in this project called MobileCoin with them which was actually their first big investment. I’ve been super impressed with the team there. They’re extremely smart and they have a deep view of the space.
What’s cool about a fund like that, is that they’re coming from a place that’s totally different from your average fund. [00:04:00] These guys are running this enormous multi-billion dollar business that’s at the core of a lot of these token economies. Besides the obvious benefit of they can help you get onto Binance, which is certainly not guaranteed, by the way, it’s probably easier for projects that they invest in. Beyond that, I think, perhaps more importantly than that, they’ve just seen so many projects. They’ve seen what works. They’ve seen what doesn’t work. They’re able to provide really useful guidance, much more than like just some guy that’s into Bitcoin and found a couple million dollars to go invest. I really like those guys.
[00:04:30] I think, in general, funds that are coming out of other large crypto businesses. Coinbase got a lot of flack for starting a fund. I think Coinbase starting a fund is totally awesome. It’s a no-brainer and that they should do it. It seems like it’s going very well for them so far. I’m really into funds that are spun out of existing big crypto businesses.
Another fund I really like is Linda Xie and her partner, Jordan, have this fund called Scalar Capital. They actually do have something that kind of approaches a thesis, which is just that like privacy coins are super undervalued. [00:04:59] I think that’s simple enough that I’m okay with it. It’s nothing too over-intellectual or whatever. What’s cool about that is it’s allowed them, because they mostly focus on privacy, although they invest in a lot of other stuff too, they’ve been able to become complete experts in the privacy space and so they’re able to make really nuanced decisions about what to invest in and how to allocate capital within that space.
Funds like that, that maybe you don’t have a complicated thesis, but do limit themselves to some specific niche in order to have really a lot of time to do a deep dive into it is, potentially, good. Especially if you’re a really small fund. I believe [00:05:30] Scalar, right now, is four people. Might be five by now, but it’s very small. If you have limited manpower, it makes sense to limit the kind of stuff that you invest in and so that you can have a really deep understanding of the companies you are involved with.
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All opinions expressed by podcast hosts or guests are solely their own opinion and do not reflect the opinion of Nomics or any other company. This podcast is for informational and entertainment purposes only and should not be relied upon as the basis for investment decisions. [00:06:30]
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