20VC: Should Large Crypto Funds Give Money Back to LPs | What Will the Next Generation of Crypto Funds Look Like | What Should Happen with FTX; Who Should be Held to Account | The Future of NFTs & What Happens to Opensea w/ Nick Tomaino @ 1confirmation

Nick Tomaino is the Founder and General Partner @ 1confirmation, one of the leading seed firms fueling the decentralization of the web and society. The fund started with $26M in backing from individuals including Peter Thiel and Mark Cuban and it has been reported that the firm now has over $1B in assets under management. Nick has led seed investments in OpenSea, dYdX, SuperRare, Polkadot and Cosmos among others. Prior to 1confirmation, Nick was a Principal @ Runa Capital and before that led business development and marketing at Coinbase in the early days of the company. In Today's Episode with Nick Tomaino We Discuss: From Cryptokitties to founding the Leading Seed Crypto Firm: How did Nick first come into contact with crypto and bitcoin specifically? How did getting fired from Coinbase catalyse his move into venture? What does Nick know today that he wishes he had known when he started investing? 2. The Landscape Today: Funds and SBF Are the current generation of crypto funds too large? Should they give money back to their LPs? Will the next generation of crypto funds be smaller? Are any crypto funds able to raise right now? Why does crypto Twitter hate crypto VCs? Who are the worst VCs for pump and dump? 3. SBF & FTX: What Actually Happened, Who is to Blame, What Happens from here? What is the biggest misconception on SBF and FTX today? Who should be held accountable? What else would Nick like to see? How should FTX change the way that LPs invest into venture managers? 4. How to Build the Best Crypto Portfolio in Venture: How large are the funds? How does Nick determine the right size for a fund? How many investments does Nick make per fund? How do loss rates look in crypto? What have been Nick's biggest investment hits and losses? How did that impact his mindset? 5. The Future for NFTs and Opensea: Why does Nick remain bullish on the future of NFTs? How is Nick able to remain optimistic about the future of Opensea given their volumes? Where does Nick believe the fair price for Opensea should be today? Did Nick sell their Opensea at the $13Bn round?

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Way too much money was raised. People raised billion dollar funds that just had no unique insights. They had a brand name and access to institutions and institutions just had FOMO and wanted to deploy. Are they going to give money back? Are they just going to milk management fees and deliver poor returns to LPs? The truth reveals itself in time.

• 0:22Harry Stebbings?

  I mean, what an intro that is. And this show does not hold back the punches. This is 20 VC with me, Harry Stebbings. And joining me in the hot seat today is Nick Tomaino. Found out One Confirmation, one of the best seed stage crypto firms in venture. And this show came about after Nick tweeted his staggering returns. 5.13x cash back to LPs in just six years on his first fund. Before founding One Confirmation, Nick started an venture at Runa Capital. And before that, led business development and marketing at Coinbase in the early days of the company. But before we dive into the show's day, did you know that every 20 VC episode you listen to is recorded with Riverside? Riverside is insanely good. Like, I would pay a thousand dollars per month for Riverside. It's that good.

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• 1:49Harry Stebbings?

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• 2:32Harry Stebbings?

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• 3:16Harry Stebbings?

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• 3:47Speaker 00

  You have now arrived at your destination.

• 3:50Harry Stebbings?

  Nick, I am so excited for this. I saw your tweet and I replied like, man, this would be such a good show. I'm so thrilled that you agreed to do it with me. So thank you so much for joining me. Thanks for having me, Harry. Not at all, but I want to start with a little bit of kind of two origin stories, really. One is obviously how you found crypto for the first time and then obviously is on the firm. Just take me back on the crypto side, how did you first find crypto and come to join Coinbase?

• 4:14Speaker 00

  So I've always been an internet person. In middle school, I was really interested in sneakers. I was buying and selling and collecting Jordans and Nikes and I played a lot of basketball. So I was super into sneakers. I was spending a ton of time on Nike Talk, which is kind of the early sneaker head forum. So I've just always gravitated towards the internet, more so than the physical world around me in some ways. I think I'm kind of unique in that sense where, you know, when I first heard about Bitcoin, it was this Wired article talking about this magic internet money that was being used to buy guns and drugs on Silk Road, right? That was kind of the early media narrative. If I asked the people in the physical world around me, you know, what they thought,

• 4:55Speaker 00

  like everyone else at that time, they would have thought it was stupid and they would have told me not to spend any time on it, right? But I wanted to see who was on the internet talking about this. I stumbled across Bitcoin Talk, which was the first online forum for Bitcoin that was created by Satoshi Nakamoto, the founder of Bitcoin. And I saw on Bitcoin Talk that, you know, the media narrative is one thing, right? Talking about this magic internet money being used for illegal stuff. But the reality was very different. I saw kind of this community of people from around the world. They weren't aligned by physical location, but they were aligned by shared belief system and economic incentives. After spending some time on Bitcoin Talk, that's kind of what led me down the rabbit hole and decided I wanted to make a career out of the space.

• 5:40Harry Stebbings?

  And you did make a career out of the space. You joined Coinbase. And then you take the decision that actually I'm going to switch sides of the table from operating to venture and investing. I'm going to have found one confirmation. Can you just take me to that moment of transition and why you decided to do one confirmation and why then?

• 5:55Speaker 00

  Yeah. Well, frankly, I mean, I got pushed out of Coinbase. Like I wasn't a great employee, I think is the truth. I think I did a lot for Coinbase in the early days, but Coinbase got to a certain point where I wasn't great at kind of office politics and following rules and directions and stuff like that. I technically, you know, left and that was how I was framed to the company and things like that. But I effectively got pushed out. And at the time, that was very painful. Probably one of the lowest points in my career. I would say because I believe so much in the space and the company. It was a great thing ultimately because it just it wasn't the right fit. But at the time I was like, shit, what am I going to do now?

• 6:36Speaker 00

  I love this space. I know Coinbase is going to be a billion dollar company. Did I just fumble the bag? What the hell am I going to do next? You know, it was at that point that I decided that venture would be, you know, what I could be world class at. And I thought I know the space really well and I see what's going on and I understand products better than anyone. Why not start a fund to invest and help the founders that I'm investing in? And that's kind of, that's how Unconfirmation came to be, I guess. There was obviously a lot of other stuff, but at a high level.

• 7:09Harry Stebbings?

  I've just been thinking about how to phrase this politely in my head.

• 7:13Speaker 00

  You don't have to be polite.

• 7:14Harry Stebbings?

  You don't have to. Okay, well then respectfully, you were kind of, I'm really sorry, by the way, for you being pushed out of Coinbase, but respectfully, it also made you who you are today, which is very, very successful. So congratulations in that. I often think sometimes the hardest elements can shape you. But no offense, kind of pushed out of Coinbase and then raising a $26 million fund? That's quite a big jump, Nick. How does that happen? You either have a lot of rich friends. How did that happen?

• 7:39Speaker 00

  No, I don't. I don't have any, you know, I didn't have any really rich friends. I had built a strong personal brand while I was at Coinbase and I think that helped a lot, right? To me, like working at Coinbase, it was more than working at a company. I was like working for an industry. Crypto was very, you know, early, obviously, when Coinbase started. And Coinbase was kind of leading the industry in a lot of ways. I wasn't like a Silicon Valley person that just wanted to work for like a brand name company or something like that. Like I genuinely believe, still believe that, you know, crypto is the most important social technology of our lifetime. And I was going to do anything that I could to help it grow. That was kind of my mindset.

• 8:20Harry Stebbings?

  Was it easy to raise that first $26 million?

• 8:23Speaker 00

  What helped in between was after Coinbase, I ended up joining Runa Capital. Not a super well-known venture fund, but really good Russian entrepreneurs that founded a few multibillion dollar companies. So I joined Runa. That was kind of my bridge while also doing a lot of stuff personally. You know, like I started a newsletter called The Control at the time where I was writing about the space a lot. I also founded an event called The Token Summit. It was a 400 person event and there was so much demand, the tickets were selling on Craigslist for like four times the price that we were selling them for. A lot of what I've learned in my career is like, you need to be at the right place at the right time.

• 9:06Speaker 00

  It's like timing for both entrepreneurs, for venture, for whatever it is, like timing is really important. It's not luck. You can use your knowledge and learnings to assess what a good time is, right? But timing is important and I think there were a lot of things that kind of came together for me. It was Runa, it was Token Summit, it was me continuing to believe in crypto and kind of build a brand. All that came together to help me raise, as you asked, how did I raise it? A $26 million fund. That was kind of how I was able to do it.

• 9:37Harry Stebbings?

  Okay, play this game. If you were to put luck and skill, which would you say, if you would have put numbers against it, your success is?

• 9:45Speaker 00

  I think it was about 90% skill, 10% luck. It's politically correct to say, oh, it's a lot of luck. I think a lot of really successful people say that. But I feel like I made my own luck in a lot of ways. I feel like I had a lot of bad luck that I persisted through. It was my determination and kind of grit more than anything and that is a big skill. Determination and grit and belief, having self-belief is a skill. And it's not having these unique traits that I think anyone can have, but you need to have belief first and foremost, so.

• 10:23Harry Stebbings?

  It's like being an entrepreneur, it's persistence, it's going through the shittest of shit days and coming back tomorrow and saying today could be different. What was the worst luck that you went through, that you persisted through?

• 10:33Speaker 00

  Good question. Yeah, I'm talking about some things I haven't talked about really publicly, but, okay. So I was working at Coinbase, but still in business school. I had all my money in Bitcoin on Coinbase and that's how much I believe. I basically emptied my bank account, put it all in Bitcoin. This was before Coinbase had two-factor authentication, right? Literally like two weeks before Coinbase added two-factor authentication, there was a fairly sophisticated phishing attack. On a number of Coinbase employees and other people associated with Coinbase, and I was one of them. I remember, you know, the morning it happened, I was like, you know,

• 11:16Speaker 00

  groggy. I was in business school at the time. I was groggy from a night out or something and woke up, got an email from what, you know, appeared to be a Coinbase email, but it wasn't, you know, I wasn't careful. And at the other day, it was my own fault, but I basically got phished. I got an email saying that Coinbase updated terms of service. I clicked the link to try to update the Coinbase service, login to Coinbase to do so, logged into Coinbase with my password, boom, the hacker got into my account and drained all my Bitcoin. It wasn't a ton of in USD at the time, call it $50,000, but it was the only money that I had and lost it all from that phishing attack.

• 11:55Harry Stebbings?

  What did you do then?

• 11:56Speaker 00

  Well, I think I came close to crying, honestly. It's like, it was very painful and my wife remembers. But yeah, it took about 24 hours. You feel like shit, blame other people, or, you know, I certainly thought about like leaving the industry, but at the end of the day, it's like my belief in crypto more than anything else, it's like led me to the thinking, like, you need to use this to level up. At the end of the day, it was my, you know, mistake. They caught me slipping. So it's like, you need to use it to level up and to motivate you to to go bigger. That was kind of the lesson. And this is still an issue in crypto, obviously, hacking. And we all know someone that's gotten phished or clicked a MetaMask LAN or something

• 12:37Speaker 00

  like that. And I still, it's kind of a big unknown secret, unspoken secret, I should say, in crypto, like how many people actually get hacked and no one really talks about it. But yeah, you basically just have to use it to motivate you and to level up to go bigger. So that's what I tried to do.

• 12:52Harry Stebbings?

  I know that you're a sportsman and you're competitive, so we can talk about that later. But that is a shit day, isn't it? You're like, fuck, I don't drink anymore, but that's a day when I would need a mojito at 9 a.m. Okay, I want to get to one confirmation. The scaling and the evolution is incredible. I want to start on how big is the, and I'm going to ask some pretty base questions, but I live in standard venture world. It's different. How big is the fund? And how do you think through the right size of fund to raise?

• 13:21Speaker 00

  Yep. So our first fund, which was launched in 2017, is 26 million. At that time, in venture, for like a first time fund manager is big, but in crypto is actually pretty small. And I actually could have raised much more. And a lot of people in crypto is like, oh, why is your fund so small? It's like kind of looking down on me. You know, I have such a small fund. I thought it was important to start small and be disciplined, particularly because like our focus is very early stage, kind of pre-seed, seed. You know, the thinking was 26 million dollar fund, make between 20 and 30 investments between 500K and a million or so in terms of initial investment.

• 14:04Speaker 00

  So that was kind of the first fund and the thinking.

• 14:07Harry Stebbings?

  That's the first fund. What do the second and third look like?

• 14:10Speaker 00

  So Fund Two is 50 million, 2019 vintage. Fund Three is 130 million, and that was 2021 vintage. And the NFT fund is about 80 million.

• 14:22Harry Stebbings?

  We're going to talk about NFTs later. I have to ask, in terms of actually, you mentioned there 30 companies per fund, right level of diversification with that. How do loss rates in crypto investing differ to normal? Or are they very similar? How do you think about that?

• 14:37Speaker 00

  We've seen loss rates have been lower so far. And again, we're still 2017 vintage. We're about six years in, so there's still a long way to go. But like in our Fund One, we have 22 investments in that fund, right? So I said about 20, between 20 and 30. And every fund, even Fund Three, which is 130 million, we're still doing early stage, bleeding edge crypto. We're still doing kind of first money in. Like, we haven't changed our strategy. We do bigger checks now, but it's really the same strategy. And that's something I think. That has gone wrong in crypto is like when you have a lot of money being thrown at you and a lot of hype and things like that, you can go in different directions and raise

• 15:21Speaker 00

  massive funds, start doing growth stage, shit like that, which I think is, you know, I get why people do it for to make more management fees and to feel more important and things like that. But we've stayed very disciplined and focused on like what I just enjoy doing, which is like bleeding edge crypto. So in the first one, 22 investments, we haven't had any zeros. We've had two projects dissolved, but they actually gave back in one case about 50% and another case about 70%. So we actually haven't had any zeros in the portfolio at all. I think that's pretty unique and probably within crypto especially, there's all these blowups and stuff.

• 15:58Harry Stebbings?

  And so these rounds that we're investing in, are these tokens? Are these equity rounds?

• 16:02Speaker 00

  Both. We're not religious about anything, really. We're very practical. In terms of like the private stuff that we did for Fund One, it was very much equity, but we also very much believe in tokens as well. So our token deals were more buying, you know, like we bought a significant amount of Bitcoin and ETH in that fund.

• 16:22Harry Stebbings?

  Can I ask, when we know you, but you obviously posted on Twitter, the 5.13X distributions back, which is amazing. When you look at those distributions, was that equity that converted? And, you know, it was an acquisition or it was an IPO, whatever that was, or was that largely tokens? I'm just intrigued how much of the liquidity came from equity versus tokens?

• 16:41Speaker 00

  Yeah, it was mostly equity, actually. So this is another thing, too. There's a lot of hate, I would say, for crypto VCs. And I understand that because a big part of the crypto VC game is doing these private token deals. And then you kind of build some prestige, media narrative, hype, and then sell the token to retail and then retail gets sucked in and the VCs kind of dump tokens on retail. That's like a big game being played within crypto VC.

• 17:12Harry Stebbings?

  It's not even allowed.

• 17:14Speaker 00

  This is what FTX, a lot of people weren't paying attention. Silicon Valley invested hundreds of millions of dollars into FTX. FTX was doing exactly this. No one was paying attention to it, apparently. And then retail was getting sucked in. So FTX Alameda was their investment arm that was basically investing in these token projects. Then FTX, the exchange, was listing these tokens, hyping up the tokens to their users. I don't know how quickly they were dumping. This is, that's the piece of it. But again, you have private investors that are getting better deals. And then these tokens are being listed on exchanges. The dumping part of it is what, where there's gray area on holding periods and stuff and may or not, may not be allowed.

• 17:56Speaker 00

  But if you're doing this, holding for the appropriate time and then dumping, that is technically legal.

• 18:03Harry Stebbings?

  I don't like name calling, and so I'm not going to name anyone here. But is that across industry or are some players worse than others?

• 18:12Speaker 00

  No, I think some players are worse than others, right? It's certainly not cross industry, right? Like, there's a lot of good players in the space that aren't doing that at all.

• 18:19Harry Stebbings?

  We mentioned that the great returns so far, six years in, 5.13 X. How do you think about when's the right time to sell? It's a very difficult thing to do. How do you think about liquidity planning and management?

• 18:32Speaker 00

  I think it's prudent if you have a big winner at the early stage, call it Series C or beyond, to take money off the table if you can. We, you know, had some big winners that we, you know, sold somewhere between 10, 30% of the position. If you have a big winner, I do think it's prudent to take cash and return it to your LPs.

• 18:54Harry Stebbings?

  Do you think venture investors should publish their returns annually, biannually?

• 18:59Speaker 00

  Yeah, 100%. To me, it's one of like the fakest parts of venture capital. It's like everyone, it feels like everyone's competing for prestige. Everyone talks about fund size, you know, is trying to get press. These kind of vanity, you know, metrics that aren't really related at all to what the job really of a venture investor is. So, yeah, I think. You know, the reason that one size is the metric is because, you know, the incumbents want it to be that way. The incumbents who they they've got great relationships with these institutional LPs that allow them to raise these big funds. If, you know, everyone viewed fund performance as the metric of success, the big, you know, incumbents wouldn't have the prestige that they have.

• 19:44Harry Stebbings?

  Do you think the incumbents in venture, traditional venture, will be the incumbents in crypto venture? Obviously, we've seen your Andreessen's and your Sequoias raise very large funds for crypto dedicated. But I, again, I've had Avi Chal on the show, many others on the show, who say, no, it's a new generation. It's an entirely new setup in terms of the talent that you need. It's a different generation of winners in crypto. Which camp do you sit in?

• 20:08Speaker 00

  It's a combination. You know, A16Z is is a great fund in crypto, and I have a lot of respect for them. I do think they probably got too big, but they still made good investments and, you know, like Chris Dixon, I have a ton of respect for. So, you know, they're obviously-

• 20:25Harry Stebbings?

  Can I be blunt? They're the ones, they're the ones who are always labeled as the pump and dumpers.

• 20:29Speaker 00

  Yeah, I hear you on that. And again, I think some of that may be more recently due to fund size. They just have to invest in these token projects. I'm talking more historically. I think, you know, if you look at who's a winner in crypto, like Chris Dixon is undoubtedly a huge winner in crypto. But more recently, fund size caused them to do some of the stuff that people, you know, accuse them for. I don't think they're dumping. They have to be very careful about about that. But I do think they are investing in some of these token projects that are getting hyped up to be dumped later. Some of these narratives that that you hear are over exaggerated in in different ways. That's what I'd say.

• 21:14Harry Stebbings?

  You mentioned there about kind of the size of the fund forcing people to do certain things. You know, when I speak to LPs, everyone says, well, you know, every crypto fund right now is downsizing, giving money back. The next fund sizes won't be the same. This is from like, very traditional US LPs. So I wanted to get your perspective inside. First, should they downsize in terms of the fund sizes that they raise?

• 21:37Speaker 00

  100%, way too much money was raised. You know, you had people raise billion dollar funds that just had no unique insights or, you know, no investing prowess really, or anything like that. But they had a, a brand name and access to institutions, whatever it is. And, and institutions just had FOMO and wanted to deploy. So are they going to give money back? Are they just going to milk management fees and, and deliver poor returns to LPs? I mean, it plays out over time, but maybe some of them will just put it in, in Bitcoin and ETH. And maybe that will just work, but we'll see. Like I think a strategy, you know, a dishonest, but probably

• 22:22Speaker 00

  successful strategy for one of these billion dollar fund managers would be to, you know, pitch to LPs that you're investing in bleeding edge crypto that's going to, going to push the space forward. And then decide to just deploy it all into Bitcoin and ETH. And if someone does that, I think they'll be successful and make a lot of money.

• 22:40Harry Stebbings?

  Can I just ask you then, what does the next few years look like for crypto funds? You must think about this when you think about competitive landscapes. When I speak to LPs, they're like, well, obviously our crypto budget's gone to zero, obviously. And I'm like, oh, so no crypto funds get raised? Is that right? No crypto funds are getting raised? And what will the next, from now to the next three years look like?

• 23:00Speaker 00

  I don't think many crypto funds are getting raised. It's going to take, one thing is hopefully LPs are going to get a little smarter and, and do more diligence. And, and not just deploy, you know, like crazy into, you know, fund managers that don't really have any unique insights or defined strategy. They're going to start looking at results as well closely. And for even, you know, these big funds that maybe do some interesting things. If you don't have really quality returns, I think LPs are going to be. More skeptical. At the end of the day, it's like crypto needs to deliver beyond where it's delivered to date. And that's going to ultimately decide, you know, institutional money coming in or out.

• 23:43Harry Stebbings?

  Things like FTX don't help. You tweeted before, the elites who amplified FTX should be held accountable. What do you want to see happen, Nick? Like, what would make you happy?

• 23:53Speaker 00

  Yeah, that's a good question. Nothing would really make me happy. What will happen, it just won't happen quick enough, is that, you know, the truth reveals itself in time. The people that got sucked into this perception game that the FTX was playing, that, you know, the politicians, the regulators, the investors, they all now are trying to just sweep it under the rug and say, "Oh, I didn't know about this financial fraud." It wasn't just a financial fraud, right? It was a fraud of perception, which they all played a role in. Ultimately, people will realize that. That's what should happen.

• 24:25Harry Stebbings?

  What's a fraud of perception? Sorry, just so I understand that.

• 24:28Speaker 00

  Outwardly signaling prestige and reality being very different, being focused on soulless grief or money or attention. It's like everyone involved in that, it's like a kind of vortex of soulless greed for money and attention. That's what was happening with FTX, right? Like, if you ask investors, "Oh, why are you involved in FTX?" "Sam is so good at execution," right? That's what was said. He's like, he's so good at getting media attention and working with regulators and politicians and all that. And why was that the case? That was the surface level of perception. Why was that the case? Because he was buying off politicians and regulators and media.

• 25:10Speaker 00

  And also, you know, launched a token in a way that wasn't very moral and hyping tokens and things like that. So it was just, the surface level was the fraud of perception. It's like- If you look at the surface level, there are all these good things going on. There really wasn't, and a lot of people within crypto recognize that. But that's kind of the fraud of perception that I'm talking about.

• 25:31Harry Stebbings?

  Will the blast radius expand beyond Sam, though? You know, you mentioned the media, you mentioned journalists, you mentioned, you know, maybe politicians. Does any of that get exposed? Or do they all get swept under the rug and we just nail Sam and beat the shit out of him?

• 25:46Speaker 00

  Well, you asked me what should happen. I think people should realize that it's not just Sam. So I think what ultimately will happen is that people will realize this, but it might take much longer. Right? It's not going to happen quickly, maybe as quickly as I or some people would hope. But I think it will happen eventually. I tweeted before this all played out, it was like, truth reveals itself in time. The internet itself is a very good tool to reveal truth, but it takes a long time. Sam is going to be the one that, you know, goes to jail and takes the brunt of it. And it's the obvious, but over a long period of time, I think people will realize, you know, the character of these people that are involved.

• 26:27Harry Stebbings?

  Before we move on to NFTs, which I'm excited to talk about because I want to be educated by you. But is there anything that you think there's a big misconception of the public in terms of SBF? They don't understand, they don't get, you constantly hear misquoted, misattributed. Is there anything that you think people should know that they don't?

• 26:44Speaker 00

  I would say the strong narrative now is that like SBF is this evil, you know, mastermind behind this. And again, the truth is often far from the strong narrative. And while it is true that SBF is a big part of this, I think maybe what people don't realize is that the broader fraud of perception that we've talked about, right? That's a misconception.

• 27:10Harry Stebbings?

  Mentioned kind of fraud of perception, made me think of NFTs, which you can tell me I'm wrong about. My question to you is, why am I wrong to be negative still? And why are you still positive? Like, what am I missing?

• 27:23Speaker 00

  Well, at the end of the day, I think NFTs are an incredible business model for creators on the internet.

• 27:30Harry Stebbings?

  If we just expand that then, what does that look like in terms of tangible use case? Amazing for creators on the internet. What does that look like? And why is that better than the traditional mechanism?

• 27:40Speaker 00

  It aligns incentives between creators and their supporters, right? So incentive alignment is kind of is a underrated aspect of what crypto can do, both within cryptocurrencies, but also NFTs. You know, as a creator, you can, you know, sell NFTs to your supporters and they can have an ownership in your success. The combination of those two, it's not just the business model for creators. It's the new asset, investable asset class for anyone in the world to participate in. To me, that combination is really powerful. And you're looking skeptical. No, I get, I understand the skepticism, right? Because at the end of the day, like.

• 28:21Harry Stebbings?

  I'm a creator, why would that work? I can do premium features, I can do paywalls. For those that are successful, I don't need to sell you a part of my business and a part of my future earnings. You get access to my content and I'm thrilled to have your support, but I don't need to sell you a part of my future. And then for those that do need it, most often you probably won't have a huge amount of people that want it. So I don't understand how it works.

• 28:46Speaker 00

  It may not solve a problem for you right now and that's okay. But it does solve a problem for a lot of creators that that are creating content of any kind.

• 28:56Harry Stebbings?

  If you're Taylor Swift, no, not bad in the existing businesses, I don't think. Maybe tell me if I'm wrong. And if you're a specific writer on knitting in England in the 18th century, I only get sales of specific benefit over a paywall and a higher price for a smaller audience. So I'm just trying to understand where it's better.

• 29:14Speaker 00

  What I would say is new technology often isn't ideal for the incumbents, right? So if you're a massive creator that is already being served well by existing business models, then NFTs might not be for you. They're certainly not for you now, they may never be for you. What what NFTs are really useful for is for these kind of new internet native creators that don't have an existing business model, but maybe have some true fans. Taylor Swift is never going to create music NFTs. The next Taylor Swift, who may be 13 right now and may be having a hard time getting distributed. On existing distribution channels may sell music NFTs to a hundred true fans who then may

• 29:57Speaker 00

  help her, you know, spread the awareness of the music. That's a use case that I think is quite interesting that really hasn't blown up yet, right? Is music NFTs and the idea of like giving a incentive for the music to grow at a very early stage because music itself is very memetic, right? It's like, why do most people love Taylor Swift? Because everyone else loves Taylor Swift and she's kind of cracked this, the memetic code. Is her music good? Some people, yes, some people, no. You know, a lot of why people think she's good is because other people think she's good. That that applies to cryptocurrency too. Why does everyone think Bitcoin is valuable? Because other people think it's valuable. And so you combine kind of the memetic aspect of

• 30:39Harry Stebbings?

  Sorry, I'm going for it. It's the end of the day. It's dark outside. If you could see the time. But I'm like, I don't think they like it because other people like it. I think they find it because other people find it because other people have found it. So it's distributed because it's popular. So discovery is solved because it's popular, but they don't like it because other people like it. I think they just like it and musical taste and preference has evolved in a way where actually it's largely aligned. Humans do tend to like the same thing. It's why people love pizza or ramen or whatever that food source is. They discover it because a lot like it, but the liking is different.

• 31:17Speaker 00

  You haven't read any Renee Girard, have you?

• 31:19Harry Stebbings?

  No.

• 31:20Speaker 00

  Have you heard of Renee Girard?

• 31:21Harry Stebbings?

  I have, and I was warned that he would come up.

• 31:25Speaker 00

  This is exactly what Renee Girard has written a lot about, this idea of memetic desire. And this is, I believe, what is unique about humans is that desire is actually not based internally. It's based externally on the desire of others. And so I think there is Core human needs that everyone has, but outside of that, what we like, what we desire, what we want is fundamentally based on the desire of others. So why do, I think, in the terms of music, this explains why Taylor Swift gets so popular. You know, some people may like Taylor Swift early, but then once she gets popular,

• 32:07Speaker 00

  it kind of, it becomes this memetic switch that other people like her because other people like her. That, that's human nature. Humans are fundamentally memetic.

• 32:15Harry Stebbings?

  Okay. So if we take children and put them in a room and give them a carrot and a chocolate, and they have no idea which one is more popular or which one people like more. They will like the carrot as much as the chocolate? No, there is a chemical composition to the chocolate, which triggers chemicals in your brain that you need and want more of it. Same thing actually with music and tones and notes. There's a huge amount of research that sad music actually can make you feel comforted when you're heartbroken, which is why Lewis Capaldi has such a strong career. It's chemical.

• 32:46Speaker 00

  Yeah, there, there is a chemical component as well. Again, the, the truth is nuanced, right? So it's not to say that there aren't fundamental things humans like more than others. But I think most people are way more influenced by others than they would fundamentally acknowledge. I guess would be my point. So there are some people that fundamentally gravitate to certain things for chemical reasons. But I think there's way more people that gravitate towards those things just because other people gravitate to them, is what I'd say.

• 33:20Harry Stebbings?

  We both operate in the venture world, so I mean, I can't disagree with the memetic nature of human following when it comes to deals. Can I ask, in terms of like people following what other people do? You obviously see that when you look at volumes in terms of purchases on trading platforms. You're a very early investor in OpenSea. How do you think about, how do you bullish on OpenSea or not, given volumes being where they are?

• 33:44Speaker 00

  OpenSea was the authentic NFT marketplace. That's not to say that their success is a given moving forward. But for OpenSea, I think if NFTs become the massive asset class that I think they will, OpenSea as the on-ramp into NFTs is a massive business. So that's my long-term thesis on OpenSea. That really hasn't changed since we started. And again, we're early-stage investors. We're not as much making judgments about was OpenSea a great investment at 13 billion? The last round was? I don't know about that. But do I think it's going to be an important product in the world in five years? Much more important than it is today?

• 34:29Speaker 00

  Yes, because I think NFTs are important and because I think an on-ramp to NFTs is very valuable for people.

• 34:35Harry Stebbings?

  Did you sell OpenSea at 13? I mean, it's a high price.

• 34:39Speaker 00

  Yeah. Again, we still own the majority of our position. But yeah, we took some chips off the table.

• 34:45Harry Stebbings?

  Cast timeline, it's such a bad question. I always listen to interviewers and I'm like, God, these questions were... And then I kind of end up asking because I'm just interested. When you think about that resurgence of NFTs, reinflation of trading activities on OpenSea, is that one year, three years, 10 years?

• 35:01Speaker 00

  I would say three to five years. That's kind of the time horizon, which I think it's likely before that. But with a high degree of conviction, I would say three to five years. I mean, NFTs aren't going away, right? Like even the simplest form of an NFT, visual artwork. Traditional artwork is massive and there is a new wave of crypto-rich people that view crypto art just like traditional rich people view traditional art. That's already happening. And even if that is the only thing that happens in NFTs, which I don't think it is, I think NFTs are still going to be very big. But then you have dynamic NFTs that can change on change based on certain variables. You have NFTs within games. You have music NFTs. You have all these other directions that NFTs could go that they haven't yet.

• 35:46Speaker 00

  That's the lens which I view a bull case for NFTs.

• 35:50Harry Stebbings?

  Nate, I spoke to Mark Cuban before the show and he writes lyrical about it. You in many different ways. He gave me pros and cons. Well, one of the pros, he said, was your incredible independence of thought, which kind of goes back to the memeticness or memetic nature of humankind and how you avoid that. Bluntly, that is a contrarian approach to NFTs today. How do you stay independent minded when worlds and narratives are so strong today?

• 36:15Speaker 00

  I think it's just my nature. I've kind of always been a contrarian in some sense. Like, I think about even in high school, I didn't really care what other people were doing or thought. A good example of this is drinking. I never drank in high school or college, really. And I think of drinking as something that's also like super memetic. And I mean, maybe for some people it makes them feel good. And this goes back to what's biological and what's what's memetic. It's like, maybe for some people, drinking makes them feel good. I think for a lot of people, drinking actually makes them feel bad. But they do it anyway because other people do it. To answer your question, I've just always thought about things a little differently

• 36:55Speaker 00

  and wasn't really influenced by what people thought. Maybe my parents are a good explanation for why. I think my parents raised me very well. I never, I've always felt mentally strong and never felt really insecure about anything. I think insecurity can cause people to like fill a hole, to be searching for more money or more attention or things like that. And I've just kind of always stayed grounded. So.

• 37:22Harry Stebbings?

  It's amazing, Tieran. Not to feel insecure is a very difficult thing. I think everyone is insecure in some way. Do you disagree? If you are the person who doesn't feel insecurity, that's amazing. Well done. Like, no, I'm not. We should study.

• 37:39Speaker 00

  There are certainly things I feel insecure about, right? So I'm not saying I'm never, I'm secure about everything in my life absolutely or something like that. But I don't know, I do think a competitive advantage that I have, especially in the crypto space, is a mental strength that I'm not constantly trying to get approval from anyone, really. I'm just kind of living my life. And again, if I think about it, it's like, maybe my parents are a big reason for that. I've never really thanked them for that, by the way, if they're watching. Thank you, Mum and Dad.

• 38:11Harry Stebbings?

  Yeah. Hey, an episode that touches on the heartstrings, Nick. You are just killing this show. And in fact, I would, I would call them and thank them. Yeah. Thanks mum and dad for making me incredibly insecure, for making me drink copiously and fuck me for all those therapy bills. And my parents do watch this. And so I am-

• 38:34Speaker 00

  By the way, by the way, there's stuff I feel insecure about for sure. You know, we all, all do. But I do think that's maybe an explanation for, again, my ability to not chase things, I guess.

• 38:46Harry Stebbings?

  Cuban also told me that you can be a little bit dogmatic, Nick, when you have a position or a mindset. How are you cautious that you're not too dogmatic? Do you agree that you can be? And how do you sense check yourself to ensure that the dogmatism doesn't lead to ineffective decision making?

• 39:04Speaker 00

  Yes, I'm principled and sometimes that can be an issue. Yeah. And so I, I think that is a certainly a flaw of mine. I think it can also be a good thing, but there are situations where it can be a bad thing. And I don't know, one thing I, I think about is like, I think we all live in our own world and we all have a way that we perceive the world. And I think there are people that are kind of too in their own world. Sometimes I can be too in my own world. And then there are people that maybe are too out of their own world and, you know, paying attention to everything else that's going on. And there, there can also be an extreme of that. So I think finding a balance of like, being in

• 39:45Speaker 00

  your own world and, and having principles that you live by, but also seeing, you know, what's going on in the world deeply, and paying attention to that and kind of combining those two. That's the approach that you need to live a however you define in terms of happiness or success. But yeah, I mean, in terms of like, practically, how is being, how can dogmatic be bad for me? A good practical example, right, is Solana in the crypto space. Solana to me- You know, we use this framework of like, there's purists and there's tourists. The best crypto projects are kind of at the intersection of purists and tourists. I have historically viewed Solana as a very tourist thing. It came in right at the beginning of the last bull market. It was aggressively marketing.

• 40:29Speaker 00

  It was also one of these insider VC coins that sold a lot to early insiders, who then marketed the shit out of it and kind of sold it to retail. So there are all these things about it that, from my perspective, are tourists. And maybe I'm wrong on that, right? Maybe I'm looking at it from a too of a purist of a perspective and I'm too dogmatic. I think the jury is still out. Like, I'm not, some people would say I'm a Solana hater because some of my tweets in the past are something. But I'm very open to Solana. I've talked to some interesting founders that are building in Solana right now. I still haven't really seen anything from Solana that's new and pushing the space forward in unique ways. And then I'm kind of waiting for that. And by the way, the people that invested in Solana have done incredibly well. You know, I missed a big investment opportunity as well.

• 41:14Speaker 00

  That's an example of the way where maybe I'm too dogmatic, too purist. And I'm constantly trying to reassess my frame and make sure that I'm not missing things because of that.

• 41:26Harry Stebbings?

  Okay, final two, but they're kind of tied together, which is like you learn a lot from wins and losses. What's your biggest win? And how did that impact your mindset? And what's your biggest loss? And how did that impact your mindset?

• 41:38Speaker 00

  Biggest win, I mean, we've talked about it, I think it would have to be OpenSea. That was a product that I just believed in from a user perspective more than anything. It's like I was buying and selling CryptoKitties back in, I believe it was late 2016. Initially, on the CryptoKitties website was the only place that you could trade CryptoKitties and they charged 5%. And then OpenSea was just a product that allowed you to trade CryptoKitties for 2% rather than 5%. A marketplace to allow people to buy and sell these kind of off the main creator's website just made a lot of sense for me. And that was why we invested. And at the time, you know, they came out of Y Combinator, but it wasn't a hot deal at all. Like actually, we led the round and we were trying to convince our LPs to invest.

• 42:23Speaker 00

  It wasn't like, and some of them did and did incredibly well, but it was like, there were crypto funds at that time. Everyone kind of looked at NFTs as kind of this stupid thing that didn't make sense for the most part. That was the, that was a Silicon Valley perspective and narrative. And we let kind of our user perspective kind of guide us. That is, I think, what allowed for that big win. But the loss, I would say, or can I just say to say on OpenSea, where do you, where do you mark OpenSea to date?

• 42:50Harry Stebbings?

  If we talk about LPs and how they think about book value, but like.

• 42:53Speaker 00

  Yeah, it's down, it's, I would say down significantly, clearly, but yeah.

• 42:58Harry Stebbings?

  Is that like one billion? Is that like five billion?

• 43:01Speaker 00

  You're in the right ballpark, I'd say.

• 43:02Harry Stebbings?

  Good. Okay. Yep. No, won't push. I'm a Brit, so I can kind of sense when you're entering sense to enough zone. Okay. In terms of the, the biggest loss or miss, they kind of can be either or. What was the biggest loss or miss? And how did that impact your mindset?

• 43:17Speaker 00

  Interestingly, I would say it's also OpenSea because when we invested, we only invested 500K initially. And that was again, like at that time, we had a $26 million fund. Our mandate was, you know, checks between 500K and a million. It was within our mandate, but yeah, we invested 500K and then we brought a bunch of our LPs in to invest another between 500K and a million, call it. That was one where I learned if you have conviction, be more aggressive.

• 43:46Harry Stebbings?

  If you have the conviction then.

• 43:48Speaker 00

  It's harder to have conviction when you're just starting off. It takes the lessons like this. So yeah, I think you did have some conviction, but part of the reason we were doing that at the time was because we didn't really fully believe as much as we should in kind of, you know, our investment thesis. And we thought it would be a good thing for relationships to bring deals to our LPs. That, that was the thinking and, you know, in some ways that, that I think a lot of first time fund managers do that. And that could be a good decision, by the way. It's like, it's good to build strong relationships and to help other people get any deals and stuff like that. But at the end of the day, when it comes to generating returns for LPs, which again is what we're trying to do in venture, it's like, that was not the optimal decision for that.

• 44:33Harry Stebbings?

  Did you sell across rounds on the way up? Because I think this is another one that just a lot of managers don't know. It's like, should I sell in one chunk or cross rounds? Did you sell kind of continuously on the way up?

• 44:43Speaker 00

  No, no, no, we just, yeah, I mean, on the way up happened quickly. And I mean, it was more just a feel thing than anything else. It's like, we actually invested on the way up a little bit and then sold on the big way up.

• 44:56Harry Stebbings?

  Listen, I want to do a quick fire with you. So I say a short statement, you give me your immediate thoughts. You can be an LP in a seed firm, a series A firm and a growth firm. Which ones?

• 45:06Speaker 00

  Well, I'm just going to use funds that I am LPs in. The funds I want to be in is kind of like newish ones that aren't super well known. And basically the newest ones, I'm at a point where I can be. So the seed fund I'd say is a fund called Pronimos. Patrick Friedman, very interesting guy, one of the founders of the Sea Setting Institute. I would call him principled in some ways libertarian. His grandfather is Milton Friedman, the famous economist. And he's been very deep in kind of sea setting as an idea for many years. So sea setting is kind of one of these out there ideas. They got some media attention just because it sounds so crazy, which is the idea of building

• 45:47Speaker 00

  kind of new jurisdictions on the sea that are outside existing jurisdictions, which could lead to more innovation in finance or in, you know, biotech or healthcare or whatever. So Pronimos is the idea that you can create the new territories within countries. The government of the country could carve out new laws for. And that's the idea of Pronimos is kind of investing in these new cities, basically. What I learned from one confirmation is if you can be kind of this early stage fund is investing in this kind of new category and be kind of first of its kind, then I think there's really high upside there. Very outside of like the traditional kind of Silicon Valley, but I think it's, it's very interesting.

• 46:28Harry Stebbings?

  I love that. Series A and growth.

• 46:31Speaker 00

  I'm an LP in a fund called 1789 Capital, Omid Malik and Chris Busker.

• 46:37Speaker 00

  They are creating a America First Venture Fund. This aligns with my sentiment in a lot of Silicon Valley is there's a lot of soulless greed and just this desire to create these massive funds, massive attention. And I think, again, Sequoia is the best example of this. And 1789, I view as kind of this anti-Sequoia that's very much focused on kind of America first, mostly growth stage, but some kind of Series A type funds. And one of their first investments was Public Square, a Amazon of a kind, but focused on values that are very different than Amazon.

• 47:15Harry Stebbings?

  Let's move towards your favorite consumer brand and why them?

• 47:19Speaker 00

  Well, I know you don't like the NFT series, right? So this might be surprising to you as well, but one of the things I love about NFTs, they're effectively user-owned brands. My favorite consumer brand, which again, this is a PFP project that you might not think of as a brand, but CryptoPunks, right? CryptoPunks is effectively a user-owned brand. There's not a ton that's been done with the brand yet, other than just there's 10,000 of these, you know, eight bit pixelated characters that all have different traits. But there's a really strong community. I love the artwork. I love the community. Over a long period of time, there's going to be increasingly interesting things that come out of this consumer brand. So CryptoPunks is my favorite consumer brand.

• 48:00Harry Stebbings?

  You can have dinner with anyone, dead or alive. Who do you choose?

• 48:04Speaker 00

  René Girard.

• 48:05Harry Stebbings?

  What would you ask him?

• 48:06Speaker 00

  I'd ask him what he thinks of what's going on right now in the world in a lot of ways, whether it's in US politics, whether it's in the Middle East conflict, and how his framework applies to US politics, Middle East conflict. I truly believe that deeper understanding of his framework could be a huge catalyst for more peace in the world. He's the father of a lot of these frameworks. So thinking about, one, how you kind of applied the framework to those. And then, two, how do we grow awareness on a lot of these frameworks?

• 48:42Harry Stebbings?

  That was going to be my question. If we wanted to start our journey with René Girard, what should we start with? Is there a specific piece book?

• 48:50Speaker 00

  The scapegoat would be the first book that I would read by Rene Gerard.

• 48:54Harry Stebbings?

  Okay.

• 48:55Speaker 00

  And then there's a few really good interviews that he gave. That would be kind of how I would start.

• 48:59Harry Stebbings?

  Tell me, what was the single strongest belief you had which turned out to be wrong?

• 49:03Speaker 00

  Well, okay, here's one. One of my really strong convictions within crypto is that prediction markets are going to be massive. So, you know, a prediction market is very simply a financial market for any outcome of any event in the world. So you could have a prediction market for, you know, who's going to win the 2024 presidential election? Or is Israel going to do a ground invasion in Gaza? Any piece of information in the world you can create a market for. And I think that is really powerful. It could be the most powerful thing that you could do with crypto. Right now, everyone speculates on, you know, whether it's cryptocurrencies themselves or NFTs or a lot of that is nonsense.

• 49:47Speaker 00

  There is a small portion, which I obviously believe is very important. But, you know, a lot of the speculation, I think, isn't very, very valuable at all. But if you could create like global liquidity around information, I think that could be very valuable for the world. Because how do we consume information today? Media, whether it's, you know, the New York Times or whether it's on X. And everyone that creates media has their own biases. And I think if you can incorporate massive amounts of information, many different perspectives into a market, and it reveals a price which reflects kind of a probability for an outcome, that's very valuable information for the world. And this could be done on crypto because of the global payment rails. And prediction markets haven't happened yet.

• 50:31Speaker 00

  Hayek, who's a famous Austrian economist, he wrote about prediction markets back in 1945. And he's written a lot of great stuff, saying exactly what I'm saying right now, that how useful that prediction markets could be for the world. It hasn't happened yet. You know, it was one of my early bets in crypto. You know, we invested in an early crypto project called Augur that didn't work out. It hasn't worked out yet in a big way. So that's, I guess, what I've been wrong about to date. But, you know, I'm dogmatic, I'm principled, I still think they're going to work. So I haven't given up on them yet by any means.

• 51:05Harry Stebbings?

  And market timing is the hardest thing in venture.

• 51:07Speaker 00

  Yep.

• 51:08Harry Stebbings?

  Always. A final one for you, Nick. 10 years' time, it's 2033. Where do you and One Confirmation want to be then? What type of firm do you want to build? You could build the next multi-billion dollar crypto firm. You can stay small, you can expand team. What do you want One Confirmation to be and who do you want to be?

• 51:25Speaker 00

  I really kind of want to be doing much of the same that I'm doing now, but I just want crypto to be much more important in the world. And that's kind of the lens. If we've invested in a lot more products that broaden crypto to many more users, you know, billions of people are using crypto. There's still a lot of innovation and stuff, you know, that's happening. We want to continue to be kind of bleeding edge crypto investors that are investing in the new stuff. There's a lot of people that come and go. I am in crypto for my lifetime and I want to be kind of doing what I'm doing now, but crypto being much more important.

• 52:01Harry Stebbings?

  Nick, I love this. This has been so much fun. You've been amazing, so thank you for joining me.

• 52:06Speaker 00

  No, I appreciate it and for real, I told you this before. I really appreciate how much effort that you put into your podcast. It's clear that, again, your success too is not luck. It's a lot of hard work and determination and that comes through in the prep and everything else that you do. So, thank you.

• 52:22Harry Stebbings?

  I'm going to read the scapegoat now.

• 52:25Speaker 00

  Appreciate it.

• 52:27Harry Stebbings?

  Honestly, I left that interview feeling, what a great guy. I mean, not that many people are willing to open up as Nick did. What an incredible track record and firm he's built with One Confirmation so far. If you'd like to see more from us behind the scenes, of course you can on YouTube by searching for 20VC and I'd love to see you there. But before we leave you today, did you know that every 20VC episode you listen to is recorded with Riverside? Riverside is insanely good. Like, I would pay a thousand dollars per month for Riverside. It's that good. Why? Well, first off, ease. Your guests do not need an account. One click and they're in the recording room with you. It is fantastic, especially for high-profile guests. Second, they record your video and audio track separately and in the background.

• 53:10Harry Stebbings?

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• 53:51Harry Stebbings?

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• 54:32Harry Stebbings?

  Arising Ventures quickly got UpCounsel back on track and profitable and they could do the same for your startup. Visit arisingventures.com/20vc today to learn more and connect with the team. That's arisingventures/20vc. And finally, SecureFrame is the leading all-in-one platform for automated security and privacy compliance. SecureFrame simplifies and streamlines the process of getting and staying compliant to the most rigorous global privacy and security standards. SecureFrame's industry-leading compliance automation platform, paired with their in-house compliance experts and former auditors, helps you get audit-ready in weeks, not months, so you can close more deals faster.

• 55:16Harry Stebbings?

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