We have scaled it up, so we yeah, depending on what you think crypto's worth, we manage somewhere between zero and two billion dollars. Sort of the joke I always tell if you ask Warren Buffett, they'll say it's probably zero. And you know, if you look at our accounting statements, it's a couple of billion dollars. This content is brought to you by Uphold, which is one of the top crypto platforms out there, which allows you to easily buy and sell trade Bitcoin and the top all coins in the market.
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I'm your host, Tony Edward, and with me today is a vich Ol Garg who's the co founder and general partner on the investment team at Electric Capital. Viachel. Great to have you on, Good to see you, Thanks for having me. Vichel. I followed Electric Capital over the years. I've watched the number of funding raises that you guys have done, and who you've had on your advisory board, what's on your portfolios. I'm really excited to speak with you and get to learn more. But let's start with your
background, where you're from and what's your professional background. Well started the very beginning I was I was born in India. I grew up mostly in the Midwest in the United States, went to Stanford for undergrad and grad school, and then had a career in tech, worked at Google, worked on start Drinking and ads rinking. I started this, sold two companies, the second Facebook and then ransom Teams to Facebook, and learned a bunch. In about
twenty fifteen, started angel investing and was very fortunate. I got involved with a bunch of companies that have done well over the years, a lot of sort of up the middle SaaS and productivity and fintech CUNTS companies, so things like Notion and Figma and Airtable and a deal and a bunch of great event
a bunch of great companies in that sort of traditional world. And then I was doing a lot of frontier tech investing, so things like self driving cars, super sonic airplanes, and crypto and increasingly spending time on the crypto side. My co founder curtis my co founder at Electric and he is my co
founder at startup that we sold to Facebook. We thought we started another company, and so when we're thinking about we're to spend time, we were spending a lot of time in AI and we're spending a lot of time in crypto in twenty sixteen. We have a machine learning background, so that that world is sort of familiar to me, and as we thought about it more and more, kind of the thing that we came to believe was that the AI stuff will be very impactful, like you would have a huge, huge impact.
And obviously, I think at this point the thing that we weren't so sure about was what would the implications be in terms of who really benefited and who really won and so kind of as startup people, the thing that we were thinking about was is there some structural advantage for the startups and can they
really win? And our thinking on the AI stuff was there will be lots of interesting startups, but the people who have lots of data, who have lots of compute, are at such an advantage that it wasn't clear to us that it would be quite disruptive in the same way that say, the Internet was. And what struck us about crypto was it felt like a fundamentally different way to think about software and data and money and capital markets, and so
different that it almost was not being taken seriously. This is in twenty sixteen, and when we looked at it, we said, actually, this is really interesting because we think that technology is real is on a path to getting better and better over time. But most people are not taking it seriously enough. They don't really understand it that deeply. And if this stuff works, it's such a different way to build software that the incumbent will actually be at
a strategic and structural disadvantage. Like you know, re architecting your systems to be privacy first, or to use distributed data storage, or to use you know, a USD stable coin instead of using the legacy payment rails. Like these things are actually pretty fundamental changes to how we're business works, and so our thinking was a lot of the legacy businesses would not be set up to make that transition, and that's actually more fertile ground from a startup perspective.
So the analogy here might be something like, you know, the Internet was so fundamentally disruptive, like very few non Internet native businesses were able to make the transition. So most of the media companies got disrupted. For example, a lot of like traditional retailers got disrupted by e comm and they weren't able to make the transition. If you look at mobile, a lot of the legacy software businesses were actually able to make the transition to mobile, Like Facebook
moved to mobile and did fine. Google moved to mobile and did fine. Apple was able to move to mobile and do fine. That's not to say there weren't new things like Uber or something created Instagram, but many legacy businesses, actually Airbnb, they were able to sort of move over to mobile and it was okay, sort of accelerated their business in a lot of ways. And so that's kind of how we thought about it. Is like, the crypto stuff to us felt a lot more like the Internet, and the AI
stuff felt a lot like mobile. Both obviously huge impact, but the Internet was very fundamentally disruptive in a different way in my opinion, And so we said, that's really interesting. We should spend time there. And as we spent more and more time there, we realized that actually there was an opportunity to build a new type of investment firm that looked kind of like a VC firm but was built differently and worked with founders differently and created value the world
differently, and we could talk about that. So we set to create that. In twenty eighteen, we formalized that do Electric Capital and then these days we we have scaled it up and so we you know, depending on what you think crypto's worth, we manage somewhere between zero and two billion dollars. Sort of the joke I always tell, you know, if you ask Warren Buffett, he'll say it's probably zero. And you know, if you look
at our accounting statements, it's you know a couple of billion dollars. And so, you know, we invest in you know, launch token networks, we invest in in equity businesses. We primarily do seed in series A, so early stage sort of first check in kinds of investors. But given that we've done this for a few years now, we have the portfolio has matured and some of the companies that we work with, you know, like bitnow Meal or bit Wise or you know, they started very very small and now
they're you know, large billion dollars plus kinds of companies. And so the portfolio is the end of of people that we work with is evolved quite a bit. But kind of the core of what we do is find early stage founders and give them money and help them build stuff. For sure, and congrats on this success. A follow up question on the AI blockchain relationship item.
You know, I see them being symbiotic. I don't know if you agree where blockchain can be used to help validate some AI things like deep fakes and so forth, and AI can be used on top of blockchains to enhance certain attributes. A first question, do you agree with that? And second, are you looking at any AI themed blockchains, whether it be near render and so forth. Short aster, yes, I agree. I think these
two worlds converge. They are two sides of the same coin as sort of you're getting at, which is, you know, AI in a lot of ways, I think gives us digital abundance, and so the cost of creating content, for example, goes to zero. And what cryptography really gets you is digital scarcity and provenance. And so I can prove to you that I did a thing with a cryptographic proof and that's the other side of it.
And so, for example, if you're Joe Biden or Donald Trump and you're running for president, you may need to issue videos that are provably not deep fakes. And the way you would do that is you would issue cryptographic hash alongside the video that asserts that you, in fact did create that, and all of that cryptography and technologiesist today, So yes, they're definitely complimentary. Now there's this new flavor of sort of blockchain plus AI, and I think
some of that stuff is very real. So we receive investors in Near in twenty eighteen, and Ilia and Alex are good friends of ours, and so I think a lot of the work that the Near ecosystem is doing is very real. Those guys are spending a lot of time thinking about, for example, what does a developer AGI look like, Like can you create an AI that could write code? Because if you could do that then you would unlock a lot of other things. And so that work that they're doing I think
is very real. I mean Ilia, for those of that you don't know, this is not open AI Ilia. This is a different Elia, but this Ilia pull asukin Ilia p was on the attention is all you need transformer paper that kicked off LLLMS, Like it's a fundamental underpinning. So he's he's an author on the paper that created LMS. Ultimately, so very smart. Guy, really knows his stuff, and so, you know, I think the work that they're doing is very real. I think a lot of other
AI crypto projects right now are basically vaporware. Like if you sort of wood through, it's like there's no real usage. Nobody's actually using them. Unclear if anybody would use them. It's unclear with their competitive advantages, So it's a little bit reminiscent. I think of maybe the ICO boom in twenty seventeen,
which is the ideas are probably right. It's early for that stuff to really work, but you know, by twenty twenty two, twenty twenty three, a lot of the ideas from the seventeen ICO boom and that speculative menia,
they were basically the right ideas. There's a lot of DeFi ideas or things like stable coins, there were things like you know, non custodial DEXes or things like you know, ex separate execution, and environments like L two saying some of those ideas were being kicked around in seventeen eighteen and they just didn't come to fruition until twenty three. So I think a lot of the
ideas are right, but they're probably five years too early. And that sort of an environment where there's a lot of speculative energy can be a little bit dangerous, So we generally are wary of things that are sort of sitting at the intersection of cryptonai right now. But I think like twenty percent of that stuff is very real given your web to experience right working at Google, working at Facebook, what are you hearing and seeing As far as those companies looking
to transition to Web three, it seems it's been a bit slow. There's talks of them testing things, investing, you know, on their venture arms and so forth. And do you think there's going to be a tipping point or you know, maybe in five years or so that they Okay, oh man, we need to get on board because we're getting left behind. It's an excellent question. I think there will be a moment that a lot of
Web two companies look around and say, oh, we're way behind. Not that dissimilar from let's say, media companies in the nineties not really understanding the Internet, and then when YouTube and Facebook happened and social media happened, they sort of said, oh, no, we've been left behind. What now? But by then it was too late. But I think there's sort of isn't it. It may be a different way to ask that question, or sort of an angle on that question is who are the companies that sort of
seem to get it, and like what categories do they fall into? And in addition to startups that are sort of native to the space. I think you are seeing companies like Stripe and Visa sort of financial infrastructure companies that seem to get this because they look at it and they say, oh, this actually the ability to move money twenty four seven and write code around money makes
a lot of sense. And so for those folks, like the notion of the stable coin is very natural, they get it, and they're good engineering teams understand it. I think the second category of people that seem to sort of understand this are some of the traditional finance people, so folks like black Rock or Fidelity. So you have the crypto natives like bit Wise, which is a portfolio company, but then you have an largest index fund ETF provider
in crypto. But then you have companies like black Rock, which are legacy TraFi companies, and some of those guys get it. So I think TRADFI, which just had to deal with like the guts of really terrible financial infrastructure for the last thirty forty to fifty years, a lot of those folks get it, and you're like, oh, this is just better infrastructure to do
what we already do. And then when you look outside the US, when you look into developing markets, you see a lot of companies that get it, and it's because they deal with a lot of day to day problems that the technology solves, like the ability to move money around twenty four seven, or to get access to US dollars, or to have you know, non custodial sorts of arrangements where maybe you don't trust your counterparties, like a lot
of the problems that these technologies solve people internationally, like here in Southeast Asia, are Latin America. You deal with these kinds of problems every day, and so those businesses seem to understand it and are sort of crypt native, and in those markets often you actually don't even see necessarily a h a distinction between Web two and Web three, Like you might just be a fintech company that happens to use much crypto and behind the scenes and you don't even mention
it. Or you might be like some healthcare company and you just happen to use distributed systems off the shelf like maybe Peo, pull like the Cosmos SDK off the shelf and use tenderment, and it's just because it solves a problem for you, so you don't even you don't even mention that you're a crypto company. So it's interesting that internationally you see a lot of companies just solving problems just using the infrastructure. But there's a lot of baggage in the United
States, I think around this stuff. And it's in part because so much of so many of our systems work, you know, and like there's you can get you can get a bank account, you can get an API, we have Stripe, we have plaid. Like the infrastructure is like decent to do a lot of things. And so the companies here often are they think of themselves as Web two or three, and internationally we actually don't see as much of a distinction. Yeah, that definitely makes sense. Now, you
mentioned Electric Capital has about two billion of assets under management. Tell us if you can, how much of it is it? Is it fifty to fifty summer into companies building the infrastructure kind of the picks and shovels, and the other half of the capital is into tokens and things like that. Good question. Well, and and it goes without saying, but maybe it's worth saying. Obviously, none of this is financial advice, and you should not listen
anything I say. In practice, it's a little hard to answer that question. And the reason is because the numbers change every day. So anything like we own a bunch of bitcoin and ethereum, for example, and the price of that moves like a lot on any given day might move five percent,
so that that ratio might move a lot. The other reason it's a little tricky is I think tokens versus equity is not necessarily even that's often not how we think about it, because you know, even with the tokens that we may invest, and often we're locked up for multiple years because we're venture investors, and so the way we think about it is how do we how do we think about this playing out over the next five to ten years, And
in those kinds of situations, often you can create alignment between the investors and the protocol if you're willing to lock up. And so most of our stuff is actually locked up. So it might be a token in terms of an instrument, but for all intents and purposes it be is exactly like our equity investments and insomuch as it's locked up, so we you know, I think usually when people think tokens, they think it's like a thing you're trading or moving in and out of sure, and we just don't do that. So
actually at the portfolio level of that distinction. The other thing that's sort of tricky about that distinction is sometimes you ended up in situations like, you know, we don't hold any B and B. But maybe let's use that as an example. You could imagine that Finance, the equity business issued B and B, and Finance has on its books some B and B, and maybe some of the equity holders of Finance receive some some Finance token as a distribution
for being equity holders. So I think increasingly you're going to see companies that start as a company realize that there's some sort of token network they could be launching that is very beneficial to the ecosystem and allows them to accelerate their business. You as an investor may have had exposure to the equity initially because that's
be invested in, but you also get exposure with the tokens. And so actually it's not even fifty to fifty like in some sense, it's that the the assets allocated will be greater than one hundred percent because some of your investments will have equity that also issue tokens. So anyway, all that states, it's kind of nuanced and influctuates on any given day. But the mindset that we have in any of the investments that we make is we want to hold
this thing for ten years. That's how we think about it. And on that note, you know you were an angel investor, you invested in different companies outside of the crypto industry. Is there any major difference maybe aside from tokens that stands out to you. Is it more challenging you know, anything you can share there? Yeah, I think there's a lot. You know, I think the global nature of this market is really interesting. You know,
you're you're dealing with customers all over the world from day zero. I think the token network aspect of it can create distorting effects because you have you may have to deal with competitors that are willing to launch them token and do sort of short term optimize things that allow them to acquire a bunch of customers,
and then you have to compete against that. There is tremendous market volatility, so there's a cyclicality in the cryptocycle roughly in four year cycle, and a result as a result of that cycle, you have to I think you
have to be a better operator. So if you look at somebody like Brian at Coinbase, Brian Armstrong, it's such a tough business to run, right because your your revenue might might go up five x, and then it might come back sixty percent, and then it might go up another five x. And so the volatility in your business means you have to be really smart about
how you manage your balance sheet. You have to be really smart about how you incidivice your employees, so how to compact it just work, for example, when do you reap people and how much and so so it actually introduces complexity into the business. But I think as a result, the founders who are successful here, I think if you will get Brian Armstrong, if you'll get Jeremy A. Lair at Circle, if you'll get Jesse at Kraken, you know, Joe at Joe Lubin at Consensus, I think you just end
up having to be a better founder. And so if you look at a lot of the things, for example, that Coinbase has done over the last few years, because they're dealing with such a degree of difficulty relative to a lot of the other businesses. You know, after twenty twenty one, when the market's really changed for let's say SaaS businesses or marketplace businesses, a lot of people really struggled. Like there were a lot of companies that were like, I've never done a layoff, how do I do a layoff? I've
never had to manage my balance sheet. I've never had to have investors that are worried about my revenue going down. I've never had to think about how to reprice my options. All of those things were things that crypto companies that had to think about for years because of the market volatility, and so they
were ready for it. So when the market downturn, the broader macro venture downturn happened in twenty one, I think crypto companies were far better equipped to handle what was happening than anybody else because they just have to do that every four years. So I think net actually makes for better founders because you're dealing with a greater degree of difficulty. Yeah. I can't imagine dealing with that volatility and the faster pace I guess of the markets because I don't think I've
seen anything move like crypto. Yeah, yeah, it's wild. Now, tell us about the type of clients that work with you is a high net worth individuals is it institutional investors? Primarily institutional, So our capital based the folks that give us money for our funds are almost entirely US university and dowment's, large nonprofits and so on. So that's the overlong majority of our capital.
We do have some net worths in the funds. Those are usually people that supported us very very early twenty eighteen, and we sort of brought along as a gesture thanks for supporting us early. And then a number of our founders are also involved as infustors and our funds, and so we do that very deliberately and sort of creating ecosystem around the firm by having founders involved as well, but on a dollar weighted basis, it's almost entirely at this point
US university endowments and large nonprofits and healthcare foundations and folks like that. I love if you can take is behind the curtain in pitching those folks, because you know, I would love to be a fly in a wall to tell them about bitcoin, because you know, there is certainly a stigma that has been around for a long time. I mean, go back to twenty eighteen Larry Fink of black Rock was saying bitcoin was an avenue for money laundering. Now he's all in, they have an ETF, so certainly a one to
eighty from him. But I can't imagine folks who are not paying attention to this at endowments in these places. How do you get them to feel confident and to give you money. It's a good question, you know. I think we really benefited by being able to have warm intros. This wasn't by design, but in our very first fund, which was very small, it was a sixteen million dollars fund, a lot of the people that gave us money were people that had worked with us in the past or had had known
about our track record as angel investors or our startup track record. And so it was folks like a let Gil Acoustison and Mark and Dreesen hey Month Tanasa were at General Catalyst, Joe Lonsdale at AHVC, like people that we'd known for a long time or had you know, we'd worked with in some capacity gave us a little bit of money to get going. And as a side effect of that, it turns out if you look at those people's businesses like
Andrews and Horowitz, A sixteen Z or General cattast. These guys areis billions of dollars and so their capital base is very institutional, and so they you know, they're they're trusted advisors to a lot of these institutions. So as we were getting off the ground and with our first fund, if there were ever an endowment that had questions about crypto, we started getting inbounds. We
started, you know, Joe would send us people. A lot of would send us people, Hey, I'm sendence people and they just say, hey, if you're trying to understand this crypto thing. In twenty seventeen, twenty eighteen, as the markets are going crazy, go talk to a Vitel and Curtis. They're really thoughtful about this stuff. And our approach with these conversations always was we're not trying to sell you, We're not trying to convince you of anything. We'll meet you where you are, like, tell us what
questions you have, and we'll tell you how we thought about it. We'll tell you why we are so excited about this, We'll tell you how we think about the technology. And I think one of the lessons here is probably that if you're not trying to sell anybody. You're just sort of stating facts and you're just like, here's how I think about the world. It's very honest, and I think especially for people who are pitched all the time.
Sure, this is a good lesson for founders too. I think if you just sort of say, like, here's what I believe, here's why I believe it, here's my thought process, and you just sort of lay that out in an intellectually honest way. Even if the other person doesn't get to the same conclusion as you, they walk out of that conversation saying, oh,
that's an intellectually honest person and that's a trustworthy person. And then over time if they start to see the data points and you said, hey, look, I think the world's going to work this way and here's why. And let me explain to you why I think the money printing has to happen,
Like politically, there's no talible solution. We got to print more money, We're going to cut rates, or let me tell you why the successive pools of capital inside the bitcoin ecosystem will fall, Like yes, it's starting with altern ahead networks, but like once the endowments get off zero all the endowments will come in. And if the endowments come in, then all of a sudden, the pension funds have to start considering it. And if the
pension funds consider it, the ETF tips one day. And once the ETF tips, then the black arts of the world are so you can lay out sort of what you think is going to happen, and then as those things start to happen, you start to crew credibility where you can walk people through the technology and say, actually, let me walk you through wh this tech
is really interesting, and let me show you the data. We do this annual Developer Report that actually came out of these conversations because we would talk to all these people and we were explaining to them why we had some such conviction in space. And one of the things that gave us a lot of convictions we could see folks like Vitolic or Zuko or you know, so many engineers from kind of like this sixteen seventeen eighteen era gets like Ilaga that were starting
projects and so many of those seed investments that we made back then. If you just want to talk to those engineers, you immediately walked out of the conversations saying, Wow, this is a brilliant person, like technically brilliant person and they're choosing to spend their time on this. And so our thought was in twenty eighteen, well how do we quantify that, Like, yeah, we have a bunch of one off conversations with these technically brilliant people, but
how many such people are there? And we can quantify that? So Curtis built this crawling system to go crawl get hub and get lab and a bunch of websites and started trying to quantify how many developers they are on ecosystem, which turned into the annual Developer report that we do. But again that was sort of from this perspective of like, we think developers are leading signal for where value will accrue over time, because if developers are willing to commit their
time to the thing, they'll create value. And that came out of this conversation. So a lot of our approach with the institutions always has been and continues to be, We're not going to try to convince you of anything, because I think if you convince people, if you try to convince people of stuff and you try to sell them on it, if it turns out they're not there, then six months in they're going to have buyers remorse right,
They're going to feel like you sold them on something. Whereas I think if you just lay out the facts and you're like, I'm not trying to convince you anything, let me just give you the facts, let me show you the data, you decide, and then the decision is theirs. I think the psychology of that is very different because then they had to get there themselves. And in our opinion, like, if you lay out the facts,
then smart people will come to the right conclusion. And so that approach has worked really well for us, and I think it's a very collaborative approach and it continues to be how we think about it today. And so I don't know, I Frank, you know, I always we always talk about this internally. I've never worked at a venture fund. Curtis has never worked at a venture fund, So it is not clear to us that this is actually
how venture funds operate. This just happens to be how we operate, right, and it's sort of our approach to it, and you know, it seems to have worked well for us. I'm curious with the influx of Wall Street and launching ets, Blackrock, Fidelity, all these big names. Has
that given more or has that generated more demand from these folks? Hasn't made your pitch easier because it's like social proof, Yeah, so answers, Yes, I think that especially like kind of what you were saying, right, I mean, if you go back to twenty eighteen, Larry Think was anti this stuff, and then you can see there's like these really amazing CNBC e clips of him evolving his thinking over a few years and getting to where he
is. And I think when the world's largest asset manager, you know, the CEO of that organization, it's making these kind of statements, it's very hard for other people to set up and say it's a total scam, right, and so it is a very very important moment. I think once black Rocks are the once a layer to think tipped. And we kind of saw this with the endowments too. You know, it's like when everybody is at zero allocation on a thing, it's sort of like an interesting chame psychology thing.
I think to understand when everybody was at zero in crypto, like no endowments had gone in. Every chief investment officer, every CIO could look around, and they didn't have to justify their zero, Like you didn't have to justify to your board why you are at zero percent crypto allocation because everybody else was at zero. Now, as soon as one or two of really high quality people tip in you as an organization, your board is going to say, wait a second, why is Harvard in? Why is he Yale in?
Why ist in? And we're not. Now you have to justify your zero, and once you start looking at the facts, it becomes very hard to justify the zero. So this act of like one or two or three really credible people like a black Rocker Fidelity moving off of zero and bringing much
people along the question for everybody else. So it's not just that like the money that they bring in, it's actually creates this downstream second order effect where now Vanguard has to justify being on zero, and all of a sudden, once you start looking at it on the basis of the data in the facts, it becomes very hard to justify a zero, like, well, maybe we should have ten BIPs, maybe we should have twenty five BIPs, you know, like half a percent of the portfolio should be in this stuff that
doesn't seem crazy like if you lose half a percent of the portfolio, but if it really works and you add five percent or ten percent to your net worth because this stuff really out performed, that's a pretty good risk word, right, So it sort of forces the question. And so I think the black rock movement was actually really important, not in so much for like how much money they'll bring into pick on ETFs, Like, I think that's not
really the point in my opinion. The really interesting thing is it forces a conversation for all of the asset managers in the world now for like, wait a second, why are we on zero? Why do we not have a cryptive strategy? Is that the right thing for our clients? And now you have to start trying to justify your zero and it turns out justifying being on zero it's very hard, yeah, because they have a food uciary duty and in addition is a bit of game theory, right, and no one wants
to get left behind exactly. Yeah, So it's fascinating. And in your pitch, are you talking to them about macro factors as well, given that bitcoin has been the best performing asset, bonds are not doing well, and just looking at the trajectory of the outlook of the markets and different assets. It's like you're almost forced to, like, if you want to have a reasonable return, you have to go on to crypto. Yeah, so it
depends a lot on who we're speaking with. So some firms are, you know, some asset managers, some LPs are very top down macro oriented, and so they do think about things like track record and you look at the last ten or fifteen years of performance history. They think about things like well fixed supply assets and interest rates in supplying demand and liquidity. They think about
things like inflation. So there's absolutely set of capital allocators in the world that are very sort of top down macro where the money flows and currency exchange rates and interest rates and inflation that's what ultimately drives the world. There's a different set of people who are a little bit more bottom up rather than top down, and their world view is much more technical and technology breakthroughs create new use cases, and those use cases create new markets, and that's really where you
have outsize returns. And of course those are impacted by capital flows because you risk capital needs to drive this innovation. But they care much more about what can you do with this stuff? So for example, in the first category, you may get a lot of people that are open to doing investments in commodities or gold because they look at these sort of as driven by liquidity and macro effects, and those people think about perhaps some bitcoin in a particular way.
And the second category is there's a lot of people in the world that actually don't own gold in their portfolio. They think it's a non productive asset
and it's speculative and like what does it really worth? Yeada YadA. But they're very right now into like AI and so a part of part of the job for us is understanding how where people are and what their mental models of the world are and how they think about it, and trying to explain to them what's happening sort of given that context, so that they can understand it.
It's almost like you're a translator and there's a bunch of technology and there's a social movement, and there's capital flows and liquidity flows, and they're absolutely impacted by interest rates and all this stuff is all true. How you sort of translate that into the language of the person that you're speaking with is sort of the challenge that that you have, and when you're trying to fund raise. Tell us about your twenty twenty four row map. Are you planning to
do in any additional raises? We are not. And you know we normally just per SEC rules, even if we are raising, we can't we can't tell anybody that we're raising. It's because we it's a bunch of downstream restrictions on the SEC side. But we're rais certain investment advisors, and so we're constrained in a lot of voice as we should be, and so even if we were, we really couldn't say, but yeah, we're actually you know, we we announced the last fundraise that we did and we're still sitting on
a lot of cash and deploying it into great companies. And so yeah, no, no plans to raise it anytime soon. Now. I saw former SEC chair Ja Clayton is an advisor. How did you guys get Jay Clayton? And I want to talk a bit about his views? Have they changed given you know, under his administration, I would say it was much better than in would Ginster right now. It was by no means perfect, But look, I think all these folks were trying to frigere it his technology and
his acid class at Yeah, Yeah, Jay has been fantastic. Jay. How are we originally Jay? I believe we met Jay, I don't remember. Maybe through Ja, maybe through Kevin Worsh. Kevin is a former FED
governor. He was actually the youngest governor of the FED. He was he was basically Ben Bernanke's right hand guy during the two thousand and eight crash, and he was like the architect of a lot of the bailout, of the V one bailouts in two thousand and eight to try to like the Tark bailouts and stuff to try to save the financial system, which they executed on phenomenally.
He ended up leaving, I believe in twenty ten after being there for a few years because in his opinion, like he's like a pretty moderate economist, so he's like very anti modern monetary theory MMT. And his belief was that I think he was right in retrospect. His belief was that if we kept doing these stimulus packages, we were on a road to disaster because you would create massive downstream inflation and asked a price appreciation, and that would be
really bad for the average person. But also it would really distort the markets, and we didn't really need it, and what we should do is let the markets be the markets. And so it was supposed to be like a one time thing and we're supposed to be done. We kept sort of kept it going for like a decade, and he was very very opposed to that. So he ended up leaving in twenty ten, I believe, and went into the private sector, and he's an advisor to Electric and he's been phenomenally
helpful just helping us us understand. His perspective is so valuable. It's just really really smart these days. He's he works very closely with Stan drucken Miller, if you know, Stan sort of a legendary investor, and so they've always just given this fantastic advice. So I believe Kevin introduced us to Jay. To your question around Jay. I think Jay's thinking has evolved on this a lot, as as it should. And I think he's a really smart
guy. I think he understands, you know, even if he looks back at his positions during his tenure, you know, he was very open to the idea that these things would be transformative and that the technology underlying technology was going to be transformative to Wall Street and so on. But he was actually quite moderate, especially compared to currency see in terms of how he thought about managing these because I think he does have this perspective that you want to have
responsible innovation. So I think there's sort of one worldview that's sort of on the spectrum, and there's like one end of it, which is innovation drives everything, like let it go, don't touch it all the way. On the other end of the extreme is this stuff is really bad. We need to protect people against it, so like, be extremely, extremely extremely cautious
about what you led through and why. And it's basically you want you want the system to be permissioned almost as kind of how to think about it, and we and we control the keys, and we're going to tell you if you have permission. And I think Jason the middle, which is like innovation is really important. You just want to be responsible with it. You don't want the retail user to get blown up because you were irresponsible with letting bad
things happen. And so I think he's always at his core been pro innovation and pro trying to figure this stuff out, which is why I mean, like the Hindman stuff happened with him, right, and he's he's sort of, like I think, understood that this stuff could have huge, huge implications and was always open to it, and I think is as the space has evolved, as Bitcoin has become more established, as ethereum kind of established as
a decentralized thing, he's always been sort of pushing for the applications of these technologies in all sorts of ways, and very open to the downstream consequences of things like ethereum being fully decentralized and not a security and so on. So I actually give him a lot of credit. I don't think that's it's easy to be inside the government and to try to do this balancing act of like
more pro innovation. We want these things to exist and flourish, but do it in a responsible way, and over time, as the ecosystem evolves, to evolve your own thinking and say like, actually things are different today than they were seven years ago, and we should update our models because the world is different today. And so I give him a lot of credit for updating
his models. And he pushes a lot. He's the chairman of the board at the Apollo Group, like the big, big asset manager, and I give him a lot of credit for for pushing this in the Apollo ecosystem as well. He does a lot of stuff behind the scenes too to push push this sort of thinking of like this stuff is really valuable and interesting and we should be thinking about incorporating it. I don't know if you can answer this, but has he spoken to Gaens or is he trying to talk to the
current administration about their approach to crypto? I don't know, you know, and I'm not. I wish I were more versed on politics to understand how these things work in terms of like who talks to who and how these dynamics
work. So yeah, I don't know. I mean I think if if I were in the administration today, I think I would be thinking about who has experienced with these kinds of issues and trying to get their own foot in, no matter where they are on the political spectrum, because I think the reality is, you know, crypto AI, so the chip manufacturing stuff, you know, drone technologies, like there's there are these handful of technologies that
actually have like real geopolitical consequences, and so setting aside where you go are on the political spectrum, you know, I think trying to get all input so you can make a really good decision, either in the executive branch or in the legislative branch. I think the best people tend to do that, and so I hope they are. I think Jay has a lot of good
thoughts on this stuff. So before the recording, you mentioned you're heading to the White House, I think next week, and you're doing some advocacy and education with members of Congress and so forth. Obviously it's a shit show with the SEC right now. They're losing in the courts. The industry is countersuing them, they're suing the industry. We had a bill come out the House, the Fit twenty one. We're waiting for it to go to the Senate.
We'll see what happens with the election. Donald Trump says he's the bro crypto candidate Biden. We haven't heard anything. We don't even know by it's going to be around. But tell us about the work you're going to be doing next week. Yeah. So I do a lot of work on the DC side. So I'm on term of the board at Crypto councilor Innovation CCI,
the leading advocacy group in the in the space. It's US and in Dryson coinbase paradigm fidelity block relatively small, like high powered group of people, and so we do a lot of advocacy work behind the scenes, and especially with the twenty twenty four elections, there's been a lot of sort of senators in Congress, people and people in the executive you know, staffers kind of coming through San Francisco, and I'm going to DC to do a bunch of
conversations next week as well, and so you know, a lot of it is actually similar to how we approach the LP conversation, which is why I think we have been effective, and we have the good fortune of having the access that we do to you know, we're probably like you know, on an email or text basis with probably a dozen senators and probably twenty five members of Congress and some folks inside you staffers inside agencies and stuff that we can
speak with. And because our approach is all always been we're not going to try to convince you of anything, but let me just show you the facts. Like I can show you the data about what's happening with software development, and I can show you that the US used to have sixty sixty five percent market share of the open source development that was happening in crypto back in twenty sixteen, twenty seventeen, and today we're down to like twenty seven percent.
Wow, And that's, in my opinion, not good. If you're if you're you know, in an elected official in the United States and your job is to create jobs in the country and to think about where software development is happening and things like cryptography and distributed systems. Cryptography is really important. You know, do you want that to be happening in East Asia, do you want that to be happening in Eastern Europe? Or would you rather have that
happen in the United States. Now I can't, like, I'm not going to tell you what to do, but like I can show you the data, and the data is very clear on what's happening. And you know, I can show you the data on stable coins, I can show you why they work, I can show you who's using them. I can show you the downstream consequences of how much of that might end up in treasury demand.
And if you're thinking about the dollar as a national security asset, because now you can do sanctions on people, and you know, you want to monetize the debt and so on, I'll just show you the data. You decide if you think it's a good thing or not. But it's very clear if you look at the data the role that this thing can play. So that's the approach we've taken, and I think, as a result, very similar to the LP side, where we're not trying to convince anybody of anything.
We're just like, I'm I don't like literally, I have no idea how the government works, right, Like I don't know how it build becomes a law, like you know, I study software engineering, but I can show you the data and so you guys need to figure out what to do with this. And I think because we take that approach of being non partisan, like I don't really care if you're a Republican or a Democrat, or if
you're in the White House or you know what agency you're in. I just want I just want people to make the right decision that seems to land, that seems to work quite well well, and it is I mean, that's genuine. It's not we're not trying to like run a playbook or something.
We just want people to make good decisions. And it would be such a missed opportunity in our opinion for politics to get in the way of creating better products for consumers, for creating companies that are more accountable to their customers because there's transparency and audibility. I think it would be a huge strategic missed opportunity to have things like cryptographic research move outside the US, and so I think
those would just be really big misses. So that's how we talk about it, and we've had the good fortune of a lot of people say, you know what, that's actually a very reasonable way approach it, Like you're not trying to convince me of anything, You're trying to give me the fact, so I make a good decision. I think that resonates. Yeah, absolutely,
And look, it shouldn't be a part of an issue. Obviously, certain people like Elizabeth Warren haven't made it that and that yeah, unfortunately, And that kind of is why I think it's become so political, because the other side is like, you know, what do you guys doing, Why
are you so anti crypto blockchain and so forth? It's just nonsense. And then now I think we're seeing some Democrats waking up because they're working with their colleagues on the Republican side to get some bills through to repeal certain things from the SEC. But we'll see what happens is election. It's it's fascinating if you told me you know crypto will be an election issue. Yeah, that's
pretty wild. And I give a lot of credit. I mean, I do think there's been a lot of work behind the scenes by folks like Cci fair Shake Pack. Fair Shape Pack is now the largest super pack in the United States and of all packs, and it's a crypto pack. And you know, huge, huge credit to Ripple and Coinbase and andrews Norwitz for putting in one hundred and fifty million between the three of them fifty million each.
We're very small contributors compared to those guys to that thing. But you know, I think there's sort of been a lot behind the scenes work and advocacy work that's been happening for two years. And then there's this sort of spark moment where Donald Trump leaned in hard and said I'm pro And I think that sort of forced a lot of people who are in tough reelection districts to sort of wake up and say, wait a second, like is this actually a
wedge issue? Like do I want my opponent to be able to take this issue from me, And I think a lot of Dems realize that they don't want to give that up. Given the demographics of who's here. It's disproportionately young and over indexes on black and brown people, you know, over indexes on people who actually have been left out of the existing financial system. So when you look at it on the merits, you're like, why are this
is like this is the democratic base, Like what are you doing? And so the smart people sort of sat up and said, Okay, we can't lose this issue. And now it's sort of similar right like before you could kind of ignore it, kind of like we're talking about with the with the foundations. Before you could ignore it. Now a lot of people and tough races can't ignore it and they have to take a position on it. And
now that's forcing the downstream hand of a lot of other people. But I said, I think this is really at its core as a non part is the initiation. I think it's really a question of do you want jobs in the United States? Do you want companies that you have to you know, don't own all your data. Do you want financial products that don't take fees from poor people, right, Like you think about the way the banks work disproportionately, how do the banks make money? They make money off of fees.
I'm not paying any fees, So who's paying ATM fees if people who don't have enough money in their bank account. So it's basically money coming from poor people. And so when you start looking at the issues, you're like, actually, these aren't totally non partisan issues like this? Should not people
with this ask? This is like, we can make better products for American consumers, and we can lower fees on people, and we can keep jobs in the United States and make new jobs like this, these are totally non partisan issues in my opinion. Absolutely. I'd love to give your thoughts on the Bitcoin ETF performance of what we've seen so far with the inflows we've got the Etherorem ETF potentially being approved this week according to Bloomberg analysts, what are
your thoughts on how things have gone so far? I think the bigcoin ETF has really outperformed. It exceeded my expectations like I had. You know, I did not expect it to do as well as it did. You know, how's the ETF gond I do I have? I have no idea on the east side. I also think that, like we have to think about
these things on very long term time horizons. You know, the guys at bit wise have published some data a few times referencing the GOLDIETF, and so if you look at the GOLDITF, actually i'll see, I'll see I find the tweet. Actually I just saw it well by today, but from Matt Hougan. Matt is there. Yeah, I've had Matt on the podcast a few times. Yeah, he's really great. But here's yeah, here's the Tweet's like, in two thousand and four there was one point five billion dollars
in the GOLDIETF. In two thousand and five it is three point three billion, two hund and six. It was four point eight, two thousand and seven is five point six, in two thousand and eight it was eleven point two, and two thousand and nine is nineteen point three. So actually, for like the six years after the launch of the ETF, every single year had more inflows than the prior year. That's how like the machinery of the true financial markets works. And so I would not be surprised if this is
actually, like now a very very long term trend. And so really to evaluate the success of these things, you need to be looking on like a five to ten year time horizon, not a like six month time rising and ECTF sort of like the begudy T is like six lessons six old, so it's dramatically autperformed. I thought it would be able to do. But also if you look at historically, it would not be surprised that actually the vast
majority of the influencer are yet to come. Yeah, for sure. Uh. And I know many of these issuers are going out educating rias and wealth managers, so you know, it's a process, and you know, I think you could probably judge it next year, you know, based on okay, the past year, how did it perform. Yeah, yeah, yeah, I think that's right. One more item herefore, I let you go, Uh, tokenization. We'll love to get your thoughts on that. And
are you guys looking to do any investments on the tokenization side. Yeah, I think tokenization is very interesting. I mean I think I think of this as generally under the umbrella of this is just better infrastructure to move money and assets and do financial transactions. And eventually this is going to do to all of the capital markets of the world. What the Internet did to all of
the information markets of the world. And so, you know, it would have been crazy town in nineteen ninety five to say, you know what, like you're gonna get all of your news on the internet, You're going to only watch videos on the internet. You're not even going to turn on your TV anymore. All of the communication you do is going to go through your Internet devices, on your computer, on a little mini computer in your pocket. It would it would been crazy town, right like that all that has
happen. But it's actually that's what happened. And I think if Peo look at it today, I think it's not It sounds a little bit crazy town to say, you know what, You're gonna have a wallet, likely multiple wallets on your phone. Most apps will actually have some sort of wallet built
in. All of the money movement of the world will shift towards these twenty four to seven global decentralized crypto networks, primarily on stable coins, and all of the assets of the world, all the funial markets of the world will move to this infrastructure. So bonds and securities and derivatives, it's just better infrastructure to create these capital markets. It's cheaper, faster, more transparent, more auditable, everything is better. And so that's just this infrastructure eats up
all of it and tokenization is one of those. And so we think it's just basically at this point, is any fintech company. So the way we think about is actually it doesn't even like it's the litmus tests. Basically is what problem are you solving and if you can solve that problem using this infrastructure, you should probably do it. So I'll give you an example. We
invest in a company called re which is a reinsurance company. On the front end, it's just it's a Cayman Island registered reinsurance company, has the same collateralization ratios, it's licensed in the Cayman Islands. Yeah yeah. On the back end, they've built it on top of smart contracts. And now this
has two really really important properties. One, compliance gets really easy. You can just tell the Cayman Island regulators exactly how much collaterally you have and what your leverage ratios are, and like all the auditing that they need to do is instant, super easy. So they love it. Actually, the Cayman Island guys do love it. I mean the company loves it. Which actually
just makes their jobs easier on the compliance front. Two, you potentially open up new capital markets because all of these people that have US dollars on chain are looking for yield, and this is a productive use of those US dollars. If you could make twenty five percent a year underwriting insurance companies for non
catastrophic risk, then that's a great place to put capital. And so if you're in Vietnam, if you're in Nigeria, if you're in Brazil, not only can you now get access to US dollars, but you can actually make twenty percent of your money in US dollars. You're crushing like you're thrilled, and now you have access to new financial products that you didn't have access to before, and that's just good good for people's productive financial products. Is that
a crypto company? That kind of right, It's actually just a reinsurance business. So that's how we think about it, is like these sort of you know, the real measure of success here in the same way, you know, like the analogy here is there was a time in the nineties, let's say, where you would call yourself an internet company, and today if you launched a company a software business and you weren't on the internet. People would
be like, what are you doing? Like, of course you're an Internet company, like what else would you be, right, Or a mobile company if you're building like a consumer app. There's a time in two thousand and eight, two thousand nine you'd say, oh, I'm a mobile company and I'm an iOS app and I do this, And today you just say no, no, no, just I just do food delivery. Of course you're on mobile device, right, and so I think that's where we're headed.
It's like, of course you're going to build it on crypto rails, like there's no other way to do it. It's just a better way to do it. You just happen to be a fintech, or you happen to be a social company, or you happen sell digital assets. You're an NFT marketplace company or your creator economy business because you help creators move on some money around and work with their fans directly. Like of course you do it on crypto rails because there's no other way to do it. Yeah, great point wrap
up questions here for you. First, if you could create your own metaverse, what would the theme be? Oh, the thing be uh I don't know what if people said before, what's like a space deep deep sea ocean exploration? Oh? Interesting? Oh, I think I would probably I don't know. Actually I kind of like real life as it is, so I don't even know if I would do. I think what I would do is do an overlay of the metaverse into the real world more so than like a
separate universe that makes sense. Rapid fire questions, favorite food, pizza, Favorite musician or band. Oh, I don't if I have a favorite musician or band, so nobody. Favorite movie. I don't actually really watch movies, so no favorite movie. Well, okay, what was the last movie you watched? What was the last movie I watched? I think I watched Idiocracy. It was probably the last one I watch, which is actually pretty
good. Favorite book, favorite book. I would say it's a tie between the Geetha and the Bible, because I think they're like the fundamental like substrate that basically the Eastern and Western societies sort of like understand themselves. And when you're not working at Electric Capital, what are you doing for fun? Oh? This is what I do for fun? This is literally what I did. Was I turned my I turned my hobby into a job, so this
is literally what I do for fun. Awesome man Avico, a pleasure chatting with you and congrats on all the success and looking forward to their future updates around Electric Capital. Well, thank you so much for joining me, Thank you for having me. It was good. Yeah,