The biggest opportunity over the next decade is onboarding the next 1BN people into crypto. There are currently around 4m users who interact with DeFi and 80m unique blockchain wallets (0.1% of the global population). We are still in the very early stages of mass adoption of crypto, and chain tribalism distracts from the larger opportunity ahead.
I believe that the following things will happen:
We will live in a multichain world where chains are akin to nations (different philosophies, currencies, people and cultures)
Developer tooling, communities and libraries willbecome 10x better enabling a wider range of builders to develop natively on crypto.
Crypto will be abstracted away for the next 1BN people who are onboarding and most will have no idea that the experience is powered by crypto.
Multiple Chains Will Succeed
Multiple chains will endure and be “dominant”. Application developers will choose to route transactions through different chains depending on what they are trying to achieve. Developers have to think about the following things and it’s not immediately obvious where to build:
I believe we will live in a multi-chain future (e.g. Solana, Ethereum, Terra). Passionate, crypto native folks are often chain maximalists, but we all share one thing in common – we are crypto maximalists.
Developers will need to ask themselves the following questions (not a complete list) before they pick where to develop their applications and many successful applications will work natively across multiple chains:
Speed: What is the max load of the system? How fast can block confirmations happen? This varies a lot – Solana can process 65k transactions a second and has a block time faster than 0.5 seconds whereas Ethereum can process 30 transactions per second with a block time of 15 seconds.
Cost per transaction: What are the costs for different blockchains (L1 vs L2) to confirm transactions? Proof of work chains usualy cost more than proof of stake for example.
Security: How secure is the network? How battle tested is it? Are there good tools available to developers to plug common loopholes?
Decentralization: Can a small number of decision makers control outcomes or is the validator network decentralized?
Developers: Can you find Rust (Solana) or Solidity (Ethereum) for your project? Are there more folks with C (close to Rust) or JS (close to Solidity)background avaialble to be trained?
Community: Where are the users (geo) and what type of activity are they already doing (DeFi, NFT, Gaming)? Different chains have different levels of traction in different communities.
Onramps: Are there available Fiat onramps to the token that you require for the users you care about? Can you attract users or provide liquidity if needed?
Incentives: Are there special incentives on specific chains (grants or investment capital) or for users (liquidity mining) that can supercharge your growth?
My friend, Felix Feng put it nicely in a conversation we had a few months ago – different chains are like different nations with different philosophies, communities, and GDP. This Twitter thread also has some great nuggets:
I also enjoyed this data-driven take (from August) supporting a multichain future.
Developer Tooling Will Get 10x Better
Developer tooling will need to improve and deep communities will need to form to onboard the next batch of developers into crypto. If you talk to most people building and scaling projects engineers are the bottleneck to the pace of growth.
If we are going to live in a multichain future we will need better cross-chain infrastructure (check out projects like Polkadot, THORchain) which will help route different transactions to the right chains. Building on the “chains as countries” analogy, we need better transport and global passports to allow for cross-chain compatibility. I’m excited about Neon EVM which allows developers to write smart contracts in familiar languages like Solidity and deploy them on Solana (a second chain). I also think that aggregation services like Matcha which checks for the best prices and liquidity across DEXs will expand across chains (and potentially allow low gas or gas-less transactions) will help improve transaction efficiency.
In addition, I imagine we will need some standard tools to support regulation like on-chain KYC (this wallet is a real, verified person – e.g. Civic), Fiat<>Crypto onramps as a service (MoonPay, Ponto), and wallet analytics to early detect “bad actors” across applications.
Crypto Will be Abstracted Away
To really drive adoption, the complexity of interacting with crypto will need to get abstracted away for users (definitely) and for application developers (likely). Less than 0.1% (made up statistic) of the people who send money using traditional rails understand how the systems work under the hood. The same will be true for crypto; people just want their transactions to be reliable, fast, cheap, and secure.
Audius is a cool example of a decentralized “SoundCloud” built on top of Solana and IPFS where users don’t need to know that storage is decentralized and activity is recorded on-chain. Users can just have fun discovering and listening to music and not worry about keys or custody.
Even when users are onboarding into crypto they often want to just buy an NFT or a token but are confused by the prerequisite of creating a self custody wallet and setting up their own security (and often don’t have familiar mental models). Developers will need to allow new users to pay in Fiat (e.g. a credit card) and provide “temporary custody” of the user’s keys (account information and password). Users could then “claim” their keys with a second onboarding into self custody at a later date (which could just be a common service for all application developers.
This is not an exhaustive list — just a few perspectives on how product development in crypto is going to evolve and how that might help onboard 100x more developers and users into the technology.
Equity: Either in the form of restricted stock units (non transferrable) or stock options.
Perks: Broad but could include flexible hours, working from home benefits (e.g. home office furnishings), free healthcare for your family, and generous parental leave,
Title: Your internal and external title.
Role and Responsibilities: What you actually do and which teams you work with on a daily basis.
I’ve mostly negotiated on equity and my role/responsibilities, especially if I believe in the company (which hopefully is the case if you’re considering working there!). I think the other stuff usually falls into place naturally.
You may also need more or less cash depending on your personal circumstances – e.g. children in major cities are very expensive 🙂
I pulled together this Google Sheet that I’ve used and shared it with many friends and family members over the years. Feel free to make a copy and use it for your own purpose.
Options and equity are really complicated, and I’ve been through the process of exercising and selling my stock options a few times — here are a few things I wish I had understood better.
Strike (or Exercise) Price is the 409a valuation (fair market value) when you joined the company. This is typically lower than the investors as they often have a different class of share (typically preferred shares) which are worth more they are higher in the capital stack. In general, the company tries to keep the strike price as low as possible.
When you exercise stock options (buy stock from your company) you are effectively making an investment into the company. The advantage of exercising the stock is that you start the clock for Long Term vs. Short Term Capital Gains which can save you ~20% on your taxes when you dispose of the stock. You should understand both the risks and the capital requirements of exercising options before you do exercise options:
You have to pay the company the exercise price x the number of options.
You have to pay the government (tax in the US as Alternative Minimum Tax) the difference between the current 409a valuation and your strike price x number of options. This can be significant if the company’s value has increased materially since you joined.
Early exercise of stock options can be great if you expect the stock price to go up and you are a very early employee, as the cost to exercise your options is low and any upfront taxes are negated. You will need to file a form called an 83(b) election within 30 days of doing this for it to be properly reported.
If the company is very successful and you don’t exercise options you may get “priced out” where you can’t afford to exercise the options and pay the taxes (because the gains are so significant). This may trap you to stay at the company for longer than you may want. Alternatively you could exercise your options and the company takes a downturn, which means you may take signifncant losses. Startups are risky and choosing when to exercise your options is not a simple decision.
Qualified Small Business Stock (QSBS) is also worth researching as you can save a lot on taxes (although these rules may change). You have to exercise your options at a <$50m valuation and hold it for 5 years before you dispose of the stock. This benefit can make early exercising of options even more attractive.
This article from Wealthfront also has a lot of good tips on taxes and explains some of the concepts above in more detail and make sure to educate yourself on these concepts as it could mean a material difference in financial outcomes.
I hope this is helpful. As a disclaimer, this is not financial advice and I just put this together to share learnings from my own experience and to make it easier to share with the community.
We need a Global M-Pesa / Venmo powered by crypto rails. Both these products are closed ecosystems powered by outdated, expensive rails compatible with their chosen markets. Crypto will ultimately enable even better user experiences but powered by rails that give participants access to global finance, trade, and commerce.
M-Pesa was transformative in Kenya. It allowed people to send money from cities to rural areas instantly and quickly. A network of agents lets people cash in and cash out as well as exchange their mobile money for products like airtime (credits for their cell phones), pay their utility bills etc. M-Pesa, however, is controlled by Safaricom and is a closed-loop product.
Venmo in the USA makes us feel like we are making instant transactions but they are faking it using outdated ACH rails and making money through credit card fees and instant transfers. When you send money to a person or business it feels instant but recipients have to wait a few days to “cash out” typically. Venmo is handling the float and taking some risk in this process and many people have money in their wallets which enables float in the system.
Crypto has the power to disrupt these payment systems and power the next generation of how we send each other money. There are a few things that need to be solved to make all of this possible, and activate a whole new set of crypto users (who may not always know they are interacting with crypto):
Cost: With fast, cheap blockchains like Solana and ETH layer 2 solutions becoming more battle tested and proven, it’s now technically possible for peer-to-peer transfers to happen with very low cost per block/transaction which previously made small transfers infeasible.
Scaleability: In addition to lower cost, these chains are becoming more scaleable. Solana can handle 65k transactions per second on their blockchain which means transfers can happen instantly which was not possible on Ethereum (Layer 1) or Bitcoin.
Regulation: Governments have used money to control their economies and societies for a long time, and crypto threatens a this power lever. It’s clear to me that taxation and regulation is imminent across major jurisdictions but my hope is that leading developed economies (like the USA) and emerging economies (all over Africa) will open their minds to the potential benefit to their society outweighing the loss of control.
Custody: In order to interact with crypto you have to create a wallet and keep your “keys” and pass-phrases to your account secure. For less digitally native and less literate people this is a tall order and the only real alternatives are to trust centralized exchanges with custody of your accounts (they keep your keys secure). I expect we will see a lot of innovation in the custody space (e.g. group custody, biometric gating etc) in the coming years.
UX: One of the biggest issues with crypto is that it’s so f*cking jargony and confusing for normal people. Crypto natives are often un-empathetic to “normies” who are experiencing crypto for the first time and this is reflected in the design of their products. As we develop products in crypto we need to remove the jargon, find familiar mental models in traditional finance and take all the friction out for normal people while preserving the functionality for crypto native power users. Crypto can power the back end and does not always have to be front and center – most people who interact with financial products today have no idea how the technology works.
Liquidity: We need enough liquidity (and systems to scale this up and down) on both sides of transactions so that users can complete tasks without having to understand how their transfers affect the global supply. Right now if you make trades that are a significant part of a pool you can adversely affect markets, which is inefficient when multiple pools exist across exchanges.
On and Off ramps: In many countries the hardest thing is figuring out how to convert local cash to cryptocurrency. In emerging markets these are often “over the counter” WhatsApp groups powered by trust because these communities are small enough. In developed economies centralized exchanges like Coinbase power most of the on and off ranmps. We need better standards and process to get fiat (cash) into digital cryptocurrency and back into cash that people can use their cryptocurrency for “real world” utility.
On-Chain utility: As more functionality moves on chain and/or seamless integration with real world use for money (e.g. paying school fees, rent, utility bills) the need for on and off ramps becomes less important. Users will have less reason to take their money “off chain” and they will be able to power more of their lives through crypto.
One of the companies I’m most excited about in this space is Ponto (where I’m an angel investor and advisor). They are building infrastructure to enable every fintech to offer access to crypto for their customers by bundling technology, compliance, and liquidity (cash in cash out). This allows traditional fintech startups to focus on delightful and consistent customer experiences while Ponto takes care of everything else under the hood. If you’re interested in learning more or potentially joining the company check out their careers page here.
I’m an active angel investor in emerging markets, particularly in Africa, often in businesses that power the flow of money. Individuals and small businesses get money from friends and family (remittance), trade (exchange of goods and services), labor (salary), or credit (loans). All these systems that power the flow of money can all be improved with crypto rails.
Once we give 1BN more unbanked people who have cell phones but limited access to digital finance new access to global finance at their fingertips we are going to see unprecedented improvements in financial mobility and global trade.
The internet was transformative because it democratized access to information and enabled instant, complex communication. I think that cryptocurrency has the potential to have as big an impact on the world by powering digitally native trade and commerce. Cryptocurrency allows people to transact seamlessly and agree on the terms for the transfer of value instantly and trustlessly. As more utility is available on-chain more of our daily activity will be powered by crypto rails. NFTs are an early example of this utility.
I’ve been playing around with Non-Fungible Tokens (NFTs) for a little over eight months now and they are super fascinating from both a technology, cultural, and utility standpoint. NFTs are on-chain assets where each one is unique as opposed to “fungible” assets like Bitcoin or USD where each one is worth the same. They can be used to verify ownership of digital assets such as images (the most common use case right now).
Yes, we are living in some weird metaverse microcosm where pixelated Twitter profile pictures (PFPs such as CryptoPunks) can cost more than most people’s houses but this is the start of people placing value on their digital identity. PFPs allow people to express themselves while being a member of a bigger tribe. It’s not much different to being a sneakerhead and buying some rare Air Force 1s to collect and share with your other sneakerhead friends.
Beyond digital identity, NFTs have immediately made lives better for both creators and collectors which I’ll summarize in more detail below.
NFTs are better for Creators
I’m particularly excited about what NFTs mean for creators. Creators have historically given very large portions of their income to promoters, curators, and auction houses. NFTs can help creators find, interact and transact more easily with their customers.
Trading behavior: NFTs allow creators of products (digital or physical) or understand the behavior of their buyers. Are people “flipping” when they purchase? Are people long-term holders? What are the transaction and trading behaviors of their holders?
Direct Interaction: Ownership is all verified and on-chain so creators know who owns their products, how long they have held it for, how many they own etc. This allows creators to have direct interaction with their fans and supporters in a way that was almost impossible in the past.
Annuity: Many NFTs allow creators to participate (via revenue share) in all future transactions of their products. This leads to an ongoing “annuity” from people trading their products and a much lower percentage of fees to marketplaces and platforms which I think is healthy.
Digital distribution: NFTs and distribution tools allow creators to run more complex launches without a lot of technical experience. Creators can run raffles, auctions, or even sell NFTs that can be redeemed for physical goods like the Damien Hirst NFT.
NFTs are better for Collectors
NFTs also make the experience better for buyers and collectors. Here are a few ways that NFTs are superior to “offline” tradiitonal models.
Ownership: NFTs allow collectors to actually prove that they own the asset in a way that is verified by the collective community as it’s “on chain” and cannot be forged.
Authenticity: NFTs are “digital papers” that certify that the asset is authentic. For high-craftsmanship products (e.g. fine art, mechanical watches) authenticity is important. Verifying authenticity is a big part of the reason people transact through trusted dealers and they often charge high fees for this service.
Liquidity: NFTs unlock more liquidity for owners. They can find other collectors to transact with faster and more easily which has always been an issue for more niche products.
Legacy: NFTs allow us to track the history of ownership of assets which is often lost for other products. A Rolex that was owned by Jack Nicklaus sold for $1.2M because it was his watch. Steph Curry’s Bored Ape is likely worth more than the average one because he owned it.
Community: Collectors like to engage with other collectors. NFTs make it much easier to find other real collectors and engage and transact with them and feel part of a club gated by ownership. It’s possible that NFTs are the start of early social networks powered entirely by cryptocurrency.
Many folks are being onboarded into crypto through NFTs and can be tricked more easily than purchasing a physical piece of art from an artist or gallery. They can be victims of organized “pump and dump” schemes, “rug pulls”, fake minting links in Discord all completely anonymously and without recourse. We still need clearer user experience , better requirements/standards, better tools, and trusted information so that the communities and projects are safer for everyone.
Profile Pictures and Generative Art
Profile pictures, collectibles, and generative art are driving most of the trading volume for NFTs right now. I think they are culturally important and the start of digital expression in the Metaverse, but I don’t think many new projects will have long term staying power. OpenSea is currently the largest NFT marketplace. Should the company hold on to its 97% market share, that suggests a total annual GMV of $28BN. (Source: The Generalist Article, from public data).
The most common type of project is modeled after CryptoPunks which was the first project of this kind. The formula is a few thousand (usually 10k) randomized images created with some unified theme (lions, monkeys, aliens etc) and traits (body, hat, sunglasses etc) each with non uniform rarity attached to each trait. This results in a distribution of outcomes which are a combination of the traits (and some are much rarer than others). Rarer NFTs typically command much higher prices in popular collections.
Collectors can mint (create them) these NFTS and for the most popular projects this can be a battle for how much “gas” buyers are willing to pay to secure one of the NFTs. It’s not uncommon to see people spend thousands of dollars on gas just to get to the front of the line and have a chance to mint a rare NFT. Once buyers have minted they can keep the NFT, or trade them on a marketplace like OpenSea which is the most popular place to trade (280k+ monthly users in September 2021). The project creators often receive a portion of the value of all future trades acting as an annuity if their project has trading activity over a sustained period of time.
Buyers pick NFTs on the market based on aesthetics and rarity then often showcase their NFTs as their profile pictures in social media and private communities. The most popular projects are CryptoPunks and Bored Ape and the “floor price” for each is 110 ETH ($400k) and 40 ETH ($150k) respectively.
Every credibly project typically has a published roadmap after minting is complete such as access to special events, future NFTs for holders, or even full-blown games. In reality, very few projects will actually have to stay power to build a robust and active community and continue to develop and innovate. Developers often take the minting the profits which can be substantial (e.g. 10,000 mints x 0.05ETH x $4000 per ETH = $2M) and move on to the nest project. This “drop formula” is becoming stale and many new projects don’t have the same demand unless they have some sort of unique innovation so I expect this wave to pass in the next few months.
On-chain generative art is also a popular category (CryptoArte, and Art Blocks were early innovators). They both have programmable on-demand generative content that is stored immutably on the Ethereum Blockchain – a true intersection of art + code. CryptoArte is an NFT art collection that tells the history of Ethereum with each block representing a moment of time. Art Blocks has done a great job of curating new projects and giving creators a launchpad for their work. Chromie Squiggles were the first project on Art Blocks and the cheapest one is 9 ETH ($37k).
The Potential of NFTs
I’m most excited about the next phase of innovation for NFTs. I think there is a lot of space for growth in terms of quality and utility for NFTs and will be following the developments closely. Here are a few of the areas that I’ll be tracking closely.
As I noted above, NFTs are a great medium for collectors. Collectors can have a good understanding of the total supply of collectibles and also the metadata for these collectibles (for rarity) of the entire universe. As metadata standards and analytics tools (e.g. Dune Analytics) improve this will help collectors build and trade with a more data informed perspective.
Collectors can also more easily get benefits from holding NFTs like access to communities or get special roles or rewards for holding the NFTs (although this has some legal/regulatory ramifications). This could be further segmented based on “sets” with different properties or “time based” to incentivize long term holding of NFTs.
As the technology becomes more mainstream and battle tested, more established creators will embrace NFTs increasing the quality of art available to collectors (see Damien Hirst “The Currency” below).
NFT Native Communities
I’m very interested in NFT communities where holding the NFT is an “access token” for the community. I’m a member of the 888 Inner Circle (promise of NFT drops and early access to quality artists), and Metaverse HQ (early information and access to future NFT drops and a community of serious collectors). These NFTs are all identical and purely act as a gate to access the community.
The same is true for communities like Bored Ape Yacht Club or Solana Monkey Business community MonkeDAO on Solana which have similar NFT ownership requirements to join but the different NFTs add more personality and freedom of expression for the participants. However, many of these communities don’t have a clear purpose and it’s hard to figure out at what level to engage in the discourse.
What’s clear to me is that we’re in the early stages of NFTs powering decentralized social networks and we need better tools to filter important and relevant information from these communities that stretches beyond tracking hundreds of Discord channels.
It’s also clear to me that we’ll see meaningful collaboration within these communities — members will collaborate in a digitally native way and be rewarded by their fellow community members or from the “treasury” (or DAO) where many of the high quality NFT communities are very well capitalized.
Merging of Digital and Physical
I also think that many physical craft products, tickets and collectibles will have companion NFTs and we are already seeing these patterns emerge. These NFTs will represent legal ownership and act as “digital papers” for the products.
NFTs are also very likely to power tickets for events (authenticity, tradability) so that event organizers can capture a larger part of trading revenue over the marketplaces. The same thing will likely happen for gift cards, or coupons as the technology provides a more robust infrastructure for this type of product.
Trading and Composability in Gaming
Many games (especially MMOs, RPGs and MOBAs) have used in game items to increase the power of your in game character or as a medium of self expression. These items typically only have value in the games themselves and it’s not uncommon to see people trading high level accounts on eBay(with lots of loot). The issue with these items or in game currency is they only have economic value in the game and not outside the game.
Games powered NFTs can power composable Avatars where each individual object is an NFT that can be tradeable outside the game which makes the in-game items more valuable because they are liquid and have real world value. The same is true for earned in game currency.
There are also interesting projects like Loot which start off with the NFT or set of NFTs and encourage developers to build games or experiences with those items/NFTs. It’s a mental model that starts with the NFT v.s. starting with the experience which has never been done before.
Gaming is very likely to be significantly disrupted by crypto and will drive a lot of creativity especially on fast, cheap blockchains like Solana. Aurory is a RPG project that I hold and and am tracking closely. The hardest thing in gaming is making something super fun, so I hope many of these projects are not taking too much “game mechanic” risk to increase their chance of success.
Intersection of DeFi and NFTs
The intersection between DeFi and NFTs is also particularly compelling. There are a number of projects that allow for fractionalized NFTs which allows multiple people to bid and own an NFT. PartyBid and Fractional.Art and I’ve used both products (see CryptoPunk Zombie below). This also improves liquidity for NFTs because collectors can trade much smaller units of an NFT which increases the size of the addressable market.
High value NFTs will also be used as collateral for borrowing. Wealthy people who own physical art have been doing this for a long time, but this can now all happen in a decentralized environment in the future pending some regulatory hurdles.
It’s also going to be possible to rent NFTs (like folks do with Axies right now in Axie Inifity) when they have utility. This could be extended to club memberships, season tickets, home rentals etc so that owners can get more utility from these products.
I could even see a world where Gaming, DeFi and NFTs all collide and where resource production in game is functionally equivalent to yeild farming (gives users tradeable tokens) and in game assets are tradeable as NFTs but this is likely a while away. The 13 year old in me is thinking about a crypto native Command and Conquer Red Alert and getting pretty excited to play it 🙂
We are still in the early innings of both DeFi and NFTs powered by crypto. It’s easy to dismiss NFTs and the current expression of projects as “fads” but after digging a few layers deeper, it became more obvious to me that it is one of the most important innovations in crypto to drive more utility on chain.
I’ve been helping a few startups with hiring, have hired large teams and have been a candidate on the other side. Labor is getting more and more competitive and the best candidates have lots of options so it’s important to have a good process.
To hire the best people you need to see a lot of good people (top of funnel), select the best and win them over the other options they may have.
Here is how I recommend you run your interview process regardless of the role:
Leverage networks: The best way to get quality candidates is to leverage your network of investors, advisors and existing employees. Good brands (team/investors), good PR and good written content can also attract candidates.
Screen: Arrange a screening call with someone on your team who is directly responsible for running the recruiting process. This could be the hiring manager or a recruiter/HR lead depending on the size of your company. If you’re going to scale quickly, then someone who can lead recruiting and HR is a very good investment and takes pressure off the operators. Skip this step if the candidate comes from a trusted source or you need to move fast.
Clarity: Once candidates pass the initial screen (skills, fit) then provide clarity on the recruiting process. What skills are you testing for? Who will the candidate meet on the team? I suggest doing this via a templated message with a bit of character. It displays organization, transparency and builds trust.
Skills: Decide what skills are important for the role and explicitly agree (in writing) on them as a team . Each interviewer should know what skills they are assessing and multiple interviewers should assess the same skill (to find disagreements). Look for candidates that have at least one “A” skill. “ABC” candidates are better than “BBB” candidates because it’s often easier to build complementary teams than move someone from a B to an A. You should bias towards candidates with a “high ceiling” over relevant experience especially if you’re doing something new – experience becomes outdated faster than you think.
Questions: Pick questions that test for the explicit skills you are looking for and ask the same set of questions to each candidate (reduces systematic bias, and helps calibrate). Don’t be afraid to ask challenging questions. The best candidates will enjoy this process and it will help with closing if candidates feel they will learn from and enjoy working with their colleagues.
References: Use references (backchannel or formal) as a confirmatory signal. Ask more open ended questions (gauge depth of relationship, strengths, areas for development) but also understand the candidate’s percentile relative to others in a similar role and if the referencer would work with the candidate again.
Offer: You have 5 levers to use when making an offer: title, salary, equity, responsibility, and one-off payments (e.g. signing bonus or relocation). Ask candidates what they value and why before making a specific offer, as it’s another opportunity to build trust and tailor the offer for the candidate. Title is a cheap lever unless you are recruiting for a “head of” position, as it’s harder to hire above this person. I prefer candidates who pick equity and responsibility over anything else as it aligns long term incentives but also understand that everyone’s circumstance is different.
Winning: When a candidate has multiple offers winning can be challenging. If you have a organized, transparent process with smart, kind interviewers it’s a great way to build a trusting two-way relationship even before the candidate joins your company. You should leverage your network of advisors and investors to close candidates, but this is not a replacement for running a really great recruiting process.
I write a short memo for every angel investment that I make and I’ve practiced this for the last 10 years.
I do this because I believe that writing is refined thinking (to quote Stephen King in his book “On Writing“) and because memory can be warped over time. A memo best captures my thinking on the rationale and the risks of the investment at the time I made it. It’s also helpful to share with co-investors and helps build mutual trust and help refine the thesis.
Memos are typically 1-2 pages and I usually assess the Market, Team, Product and Traction between A-C (letter grades) in addition to the qualitative description. If a company does not have any As, then it does not make sense to invest and most great investments have more than one A but rarely all As.
At the earliest stages, Market and Team and the most important but as the companies mature and entry price becomes higher, Product and Traction become more important. In Africa, I rarely invest in companies without at least one paying customer unless I have very high confidence in the market and team.
Here is the format that I use – I don’t imagine there is anything groundbreaking here.
Background: What problem is the company trying to solve? How did I meet and get to know the founders?
Market: I need to believe that that market is currently big enough, or it could be big enough in the future. In newer investment markets (like SAAS in Africa) it’s important to understand the pain point and willingness to pay deeply when sizing the market. (e.g. can they only sell to other startups?).
Team: Teams that know each other well and have complementary skills are often excellent. The founders’ ability to tell a compelling story and paint a vision that allows them to continue to raise capital is also important. If the problem ios something that is authentic to the team in some way also helps a lot – understanding their “why” is something I over-index on in my calls.
Product & Business model: Summary of the product, stage of development and an assessment of product/market fit risk vs. execution risk. Clear synthesis of their business model in this section as well.
Traction: In newer venture markets like Africa, I look for some traction before investing. Traction, especially recurring revenue, has a 10x derisking effect on the business as there is some evidence of product-market fit.
Key customers/suppliers: Early stage B2B companies typically have only a handful of customers. As they grow I look for customer concentration risk. I try and call their early customers and ask how they would feel if I took the product away.
Competition: Who else is building in the same space? Are they competing against other startups or mostly outdated incumbents?
Investment Rationale: I try and crystalize “the why” for the investment as it’s one of the most important sections of the memo. My bar for investing are things I’d be happy spending my time but may not have the time or the skills.
Risks: This is another important section and one I come back to particularly in cases where it did not work out to see if I identified the reason it did not succeed upfront. For things that ultimately fail, I try and pattern match across them for future deals.
References: I try talk to at least one other investor, customers, or old colleagues of the founding team. Almost all my deal flow is through trusted referrals so this happens fairly naturally as part of the process.
Cap Table: Companies that have been around for a while may have strong fundamentals, but messy cap tables so this is a deal hygiene step to make sure I understand prior funding and equity ownership.
Investment: How much I’m investing, the round size, the terms and the key co-investors.
Hope this is helpful to both other angels and entrepreneurs.
One-Pagers (short product specification documents) are an important part of product development. Crystal clear thinking upfront can often save multiples of that time down the road when you don’t have to throw away expensive high fidelity design or production level code.
One-Pagers also allow teams to get on the same page (particularly in distributed, async orgs) before work actually begins. These documents help clarify the “why” behind the work and the scope of a project before the team starts to build the actual software to solve a problem.
Here is a format that I like, and have used in the past. I think it’s helpful to have a consistent format for your company that is also lightweight. If it’s widely adopted the team will also find these easier to consume in the future.
I like to start all project One-Pagers with a short, consistent table so it’s easy to parse. If you’re using a tool like Notion a number of these buckets can be selections over free text.
One sentence description of the feature
What is the user goal? What is the business goal?
What will we measure to determine if the project is successful or not?
Who is the person or team directly responsible for the project?
Simple T-Shirt Size (XS,S,M,L,XL)
Simple T-Shirt Size (XS,S,M,L,XL)
Is there a hard deadline?
Explicitly list some of the key risks (1-2 things typically)
Before working on the the solution, start by clearly defining the problem so that everyone on the team has a clear understanding of what we are trying to solve and why we are trying to solve it.
What is the user or business problem we are trying to solve?
What is the evidence of this problem (user feedback, data/chart, intuition)?
Why is this problem an important problem to solve now?
How does this problem fit in with our overall company goals?
The most important thing to define in this section is what is in scope and what is not in scope for the first shippable version of the solution (or minimum viable product, MVP).
For more complex experimental features, some design exploration and prototyping may be necessary. In these cases it’s good to put some guardrails around the prototyping so that the design space is constrained.
Be practical about the feature scope based on your knowledge of the technical constraints, team capabilities.
Summarize the user flow for the MVP so that engineers are not designing UX on the fly.
List all open questions (design or engineering) clearly so that the team is on the same page about things that we need to solve through experimentation.
There are always good ideas that don’t make the MVP and it’s good to record them to show how the feature could evovle but also constrain the first version.
List out feature enhancements in rough order that you will come back to later and prioritize.
Create a task (e.g. in Asana or Notion) for each distinct additional piece of work and tag it with the feature name, so it does not get lost after implementation.
When deciding what to prioritize in the future you can then pick between an enhancement for an existing feature and a new feature more systematically.
Before you launch features there should be some sort of launch plan and checklist to make sure that balls are not dropped like QA (testing, performance), event logging, product marketing plan (customer emails, blog posts, marketing), support documents, AB tests, or a staggered rollout.
Although you can choose to include these in more detailed product specs they are often similar and I reserve these for more detailed execution documents vs. these simple product one pagers.
I don’t recommend you keep these documents up to date after shipping the first version (adds too much overhead). Features evolve during development and the purpose of this document is to act as a central starting point to get everyone on the same page and the source of truth usually moves to whatever product/project management tool you use for your roadmap.
I’ve been spending the last few months getting deeper in the Solana ecosystem because of the explosion of new projects, attractive yields and step function better crypto experience enabled by faster speeds (65,000 transactions per second) and lower cost (fraction of a penny). The goal of this post is to give new users a starting point on Solana.
The recent price movements in $SOL have drawn a lot of attention to Solana although this is a lagging indicator of all the cool stuff that has been built on the platform over the last few years. Solana has added almost $5bn in total value in the last two months to its ecosystem.
I think there is space for multiple chains to co-exist in the future depending on their intended use cases. However, there seem to be more and more high quality projects and great development teams innovating on Solana and this will lead to more users and more money moving to the ecosystem.
The graphic below is a good summary of the different chains and supports the case that Solana may be technically superior to alternatives. I won’t go into details about the blockchain trilema (decentralization, security, and scalability) in this post but plan to write more about this later.
People are drawn into crypto and new L1 blockchains for different reasons: technology, financial returns, cool stuff (collectibles, art) and community. Each of these can bring in new users and developers into the ecosystem and these folks can cross-sell into the other products which creates a halo effect.
I started playing around on Solana because it was so fast and transactions were basically free. It was an order of magnitude faster than Polygon which was in turn an order of magnitude faster than Ethereum. It felt like I was just using the internet today over a dial up connection on my 486 dx2 in the 90s in Mombasa, Kenya (which was pretty slow). I then started yield farming because of the attractive returns and only recently discovered some of the NFT projects. I came because of the technology and then cross sold into DeFi and then NFTs.
Here are three excellent articles on Solana if you want to learn more:
I’ll summarize some of the tools, DeFi and NFT projects that I’ve used as well as share some thoughts for the future.
On Ramps & Tools
One of the first things you’ll need to do is figure out how to buy Solana and figure out how to get money into the ecosystem.
Wallet: If you want to engage on projects in Solana you’ll need a wallet (like you use MetaMask on other chains). You can just send $SOL from whatever place you choose to buy it. My favorite wallet for Solana is Phantom which is a Chrome extension – it’s fast, intuitive and well designed. You can also “stake” your $SOL with validators for 8% yield if you just plan to hold.
On-Ramps: If you want to bring other currencies to Solana like $USDC, you’ll need to use an exchange like FTX.US that lets you send $USDC to a Solana wallet. You can’t do this from an Ethereum wallet or Coinbase (yet).
Portfolio tracker: It’s really useful to pick a tracker to visualize all your positions or it can get super confusing. I use Step Finance and I like it. You can view your investments by investment type and also claim tokens, swap and visualize your NFTs. A decent alternative is Sonar.
Once you’re set up with some $SOL and $USDC in your Phantom wallet you can do a lot and that’s when the fun starts.
The yields on Solana are very high right now, with many pools paying 40%+ APR for credible projects. I only farm on projects that I think have long term potential. Here is the process I usually go through before investing in a project. Make sure you understand the risks of Impermanent Loss (IL) when farming assets that are not correlated as large price deviations can adversely affect your returns over just holding the asset directly.
Raydium: Raydium is one of the oldest DeFi projects on Solana. It’s been more battle tested than the others on this list. They have a cool feature called “AccelRaytor” which is a place for new projects to launch. Users who stake Ray get special access to these projects.
Orca: Orca is a decentralized exchange designed for normal people, not programs. I first heard the team talk on the Solana Podcast and they are an ex Google/Stanford team that is very thoughtful about UX and product design. I’m excited about what they will build. They recently launched their “double dip” pools which pay out multiple tokens as rewards (including STEP-SOL). I stake SOL-USDC and I’m comfortable with the impermanent loss (IL) risk even as the price of SOL goes up, given the high farming yields.
I’m playing around on Sunny,Marinade Finance and others but top three are good starting points with attractive yields and intuitive UX.
NFTs only really started picking up on Solana a few weeks ago, so are still pretty new and there are a lot of new projects launching every week so this section will get out of date quickly.
If you’re going to mint NFTs I’d also recommend setting up a different wallet for minting without any NFTs and a small amount of money in them. Solana transaction confirmations are harder to parse and this will prevent any bad actors from stealing your stuff.
My favourite projects are:
Solana Monkey Business (SMB): One of the original NFT projects on Solana with 25k Twitter followers. I joined the MonkeDao Discord, which is a community owned and operated DAO for SMB holders and found it to be an inclusive and knowledgeable community on Solana.
Degenerate Ape Academy: I think these 3D apes are fun and cool. Mine looks like “The Dude” from the Big Lebowski. They have 48k Twitter followers and a solid discord community. Lots of folks have these Apes as their profile picture (PFP) which is just one signal of their community.
I’m also tracking some of the generative art projects like Rox, Abstratica and Frakt to see which ones have a community form around them and ship innovative work.
Marketplaces and Tools
All the marketplace are fairly new and have their fair share of teething issues. I imagine there will be a lot of improvement on all these platforms over the next few months (addition of bidding, UX improvements etc)
Solanart: Probably best marketplace on Solana for NFTs right now. They curate and verify the projects so it’s a “safer” place to get started and buy some NFTs. You can buy Degenerate Apes and Aurorys here.
Digital Eyes: Digital eyes has a wider variety of projects than Solanart and worth browsing to see the breadth of projects in the ecosytem.
Solanalysis: This is a great tool to visualize price and volume movements for NFTs across the ecosystem. They even have a section for upcoming drops which is handy if you want to mint anything.
Metaplex: Metaplex is building the “Shopify for NFTs” on Solana and allows creators to host their own storefront and mint NFTs etc on their site.
I’m going to continue to track the new projects on Solana and am particularly excited about projects that unlock new use cases that were previously impossible or prohibitive without the speed and cost effectiveness of Solana. A few areas in no particular order:
Global payment rails: There is a lot of whitespace for simplifying the UX and accessibility for global payments. On and off ramps into crypto as well as regulatory landscape are still the biggest barriers to entry this, but Solana seems like a viable place for more innovation here.
New financial products: Many financial products require real time execution (or low cost) or multiple dependencies to be viable like call/put options, derivatives or auctions e.g. Zeta Markets and Soleon.
New mental models in gaming: I think gaming will bring in an entirely new audience into crypto (and much larger than the collectibles wave). NFTs which are composable, tradeable and have utility are going to change the way we think of gaming completely. Star Atlas is an exciting project with a credible team and nice concept art, but we still have to wait and see if the game is fun. Axie Infinity is a great case study of innovation in “play to earn” on Ethereum and Ronin as well (podcast episode on Colossus).
Empowering creators: We’re moving to a world where creators are becoming more empowered and will have a more direct relationship with their audience and can capture more of the value that they create vs. giving a large portion to platforms, agencies and investors. I expect a lot of innovation in this area.
Overall, we’re still at the start of everything and it’s going to be a lot of fun to have a front row seat on this ride. 🍿
Note: As usual, nothing in this post is financial advice. Please do your own research.
Open source technology and infrastructure development is a very powerful way to make scalable software. Open source can also allow a more diverse community to build products that are flexible enough to solve for a broader set of use and edge cases.
Contrary to popular belief, many of these open source projects are developed in house at large technology companies (e.g. Google – Tensorflow, Angular, Android, Chromium; Facebook – React, PyTorch) and not all small independent groups collaborating on projects in the open (e.g. WordPress, Telegram).
In this post we talk about some of the advantages and issues of open source as well as some of the specific business models are built on open source projects.
Advantages & Issues
I spent a few years working on WordPress (at Automattic) and here were a few of the advantages and issues that I observed during my time there.
The biggest advantages of open source exist in leveraging the community for product development, hiring and product distribution.
Product Development: The community can act as a decentralized product management function and help with QA, Localization (language, local integrations), and support.
Long Tail: Open source allows users with very specific requirements or use cases to build these themselves which frees up the core development community to focus on the core use cases and platform. Anyone can add customizability and depth to the product.
Diversity: Open source allows for more geo, cultural and variety of use cases for the same product which ultimately makes the product better for a more diverse and global audience.
Hiring: For businesses that are built on top of open source technology, they can access a pool of talent already engaged in the project from the community — richer data on potential candidates and better hiring funnels.
Distribution: Open source projects are typically free to try which leads to more bottoms up adoption. A single developer can make a decision to use open source technology which then ultimately propagates across an organization vs. relying on top down decision making.
The advantages that come with having a strong community can also lead to drawbacks as well.
Community building: A core part of building open source products is building the community of users, developers and supporters of the project. Building community takes time and many open source projects take longer to get off the ground (when not incubated in larger companies with specific use cases) but are often more resilient at scale.
Bar for completeness: New features in open source projects often have a higher bar for shipping, and it’s harder to run fast experiments and iterate (with data/feedback etc) – localization and accessibility increase the amount of product an development work to ship even for experimental features.
Decision making: With a more decentralized product management function it’s harder for smaller groups to hold a vision of the product and make significant product evolutions without alienating members of the community. This often leads to slower iteration, but better adoption once the community embraces the changes.
Bigger pie, smaller share: When building an open source product you’re often expanding the size of the addressable market but only capturing a portion of that for yourself. Closed loop companies that own all their technology, data, and users can monetize those users more aggressively but also may lead to divergent interests to their community of users over time.
There are also a number of examples of both widely adopted open source software and successful business models and here are just a few companies who’ve built successful businesses with open source products.
There are a few high level categories of business models built on top of open source projects:
Hosting is one of the primary sources of revenue for many open source companies. Often, the creators of the technology have a brand halo effect around them can attract more users to their hosting service over others in the market.
Cloud hosting can make open source products easier to access over self hosting which requires more technical skill and investment. Hosting can include the following features (not a full list), which users are often willing to pay for:
Authentication to allow for secure signon
Permissions/Roles for access control
Encryption (especially important in specific industries)
Backups and changelogs (to recover previous versions)
Support and Consulting
Many successful open source projects have a rich community of freelancers, agencies and consulting services providers who are specialists in the technology and platform to help users most effectively leverage these tools. Open source projects are often more flexible but flexibility can come with complexity in set up and ongoing management, as the products are less streamlined for specific use cases. In the WordPress world there are many agencies that will help you set up and manage your site and provide ongoing site maintenance and support.
Even for do-it-yourself cloud hosted products like WordPress.com, support is an important part of the service that they provide and people are willing to pay a subscription fee for ongoing support for their site. WordPress.com has hundreds of support folks called “Happiness Engineers” to help users troubleshoot and perform light customization to their site.
Paid Extensions and Marketplace
Open source products often have an “open core” which has a base level of functionality that is immediately useful but for more complex use cases or advanced features users may have to pay for these as paid extensions. These extensions are often offered as in-house proprietary features to further differentiate the product (and the cloud hosted version paid tiers).
Some open source projects also have marketplaces where developers can build their own extensions for users. This marketplace can be free, but could also be monetized by the platform using revenue share or installation fees (much like Google/Apple do with their app stores).
Onboarding and Bundling
Finally, there are now more companies that are building streamlined products for more specific use cases powered by open source technology.
This could look like a full “bundle of products” tightly stitched together to solve a very specific use case (e.g. a site template for dental practices with all the right images, plugins, scheduling and payment systems with all the workflow and integrations totally templatized). This could also include very thoughtful onboarding flows, starter content and tutorials built on top of the open source technology.
Users are willing to pay for speed, ease of use and convenience of accessing their intended use cases right out of the box even if there is some sacrifice of flexibility to start faster.
Here are a couple of articles that I thought were thoughtfully put together on open source business models as well, in case you’d like to dig in further:
I’ve been an angel investor for over 10 years. I try to invest in areas where I have have some sort of asymmetric advantage; usually in specific areas where I have knowledge and experience or people who I know well.
Here are some areas that I’m super excited about and actively investing.
Crypto / Web3
I think crypto/Web3 is going to change the way we build and consume products in many different industries across the digital and physical world. It’s going to be a multi-decade long shift and I’m excited about engaging with and supporting the community at all levels (more here).
I’ve been investing in chains and tokens since 2013 (starting with BTC) and played a more active role in DeFi towards the the end of DeFi summer in 2020. I now spend time every day learning about new projects, buying tokens, yield farming and providing liquidity for projects that I plan to support over the long term.
I’ve also started started making equity investments in Web3 companies and I’m particularly excited about companies that are innovating in:
Future of finance (DeFi, Emerging markets)
Content creation and ownership (NFTs, marketplaces)
Gaming (collecting, competing, play-to-earn)
Community (DAOs, creators, contributors)
There is still much to learn and much to follow as more innovation happens — this is just a starting point and I’m sure this list will continue to evolve. I’m mostly chain agnostic, but particularly excited by some of the possibilities that are unlocked with faster, cheaper protocols like Solana.
Example companies include Ponto (backed by Polychain and General Catalyst), Mirror (backed by USV and a16z), Topos and Paysail.
As more knowledge work becomes distributed, more work will happen in the cloud. I believe we’ll look back in 5 years and be shocked at how inadequate our tools were in 202I. There are three areas of innovation that I think are especially exciting:
Communication & Collaboration: I think the best tools will seamlessly work in person, hybrid & remote as well as synchronously and asynchronously (Slack is a great example). If we reduce the mental load as to “which tool is right for which situation” work will be more fun and productive for us all.
Orchestration Layer: As we use more and more tools to build products together, each of these tools will need to communicate with each other better (using APIs) and we’ll need some common standards to make this happen effectively.
Community: We will need better tools to build genuine deep relationships for organizations (internally and externally) – people desire to find community and their tribes and invest deeply in these communities.
At Automattic, a fully distributed company for 15 years with over 1400 people across 85 countries I helped make P2 which is the internal tool we used to power distributed work at scale and so understand this space as both a user and a builder. I’m also a productivity nerd, tools enthusiast and product manager so love meeting startups innovating to make work better — although incredibly competitive, some new products will be built that we’ll use every day for work.
Creators of all kinds, from all over the world are now able to make a living through (side) hustles/projects over traditional employment. There have been great improvements in creator tools (and reduction in cost) and access to large audiences through distribution channels (albeit through mostly closed networks – Twitter, Instagram, YouTube). I worked at Automattic on WordPress for the last few years and 43% of all websites in the world are now made using WordPress, an open source project to help folks create their online presence.
The tools that creators need to power their workflow, improve production quality and engage their audience are going through rapid innovation and improvement. The best creators will also want a more direct relationship with their community and want to capture more of the value they create over paying a large share of this value to these discovery and engagement platforms.
I believe that making games is going to be as easy in the future as making a website today. There is a ton of innovation in both the tools both for gamers and game developers and I’m excited to support building this future. I tend not to invest in game studios but look for products that support the growth of the overall gaming industry instead. I spent five years making games at Pocket Gems, where our games reached hundreds of millions of users and it was one of the most fulfilling professional experiences I’ve had to date.
I believe that there will be significant value created in global, and particularly emerging markets over the next decade. The data point to more and more entrepreneurs building businesses in their home countries (even after a tier 1 US education #novisas) versus trying to build their companies in entrepreneurial hubs like Silicon Valley e.g. over 40% of Y Combinator founders are now international, and the vast majority want to build their businesses in their home markets.
There is great potential for technology to power the growth of Africa – many young people ready to work (median age of 19), increased urban mobilization (45% living in cities by 2025), high smartphone penetration (50% and growing fast) with digital finance access, and increasing capital and talent flows into African technology hubs. I grew up in Kenya, worked in mobile money across Africa and have been an active investor on the continent for 7 years; it is now more than half of my seed investing activity.
I’m also investing more foundational startups all over the world (mostly in Asia) and my general approach is to partner with a local seed fund or angel investor and build a strong relationship with them as both an LP in their fund and co-investor. I have started implementing this approach in Indonesia (Intudo), India (iSeed), and Asia (Iterative) and am learning more about the Pakistani venture ecosystem as well.
I believe that the best SAAS companies in the world can come from anywhere as long as product quality and sales (team with experience in western companies helps) is world class. If these companies are based in countries with cheaper technical talent they can offer products at lower cost and win sales against similar companies who are building in markets like the US. I’m also excited about foundational fintech rails in each market (where local norms and regulation are distinct).
As much as I enjoy investing in areas where I have specific understanding or theses that I’m exploring, incredible people are a trump card.
If I know the founders well or someone in my inner circle can vouch for the founders I’ll often invest as long as I believe that the market is big enough. Ultimately, and especially at the earliest stages, people are most important and amazing people are difficult to find.
Examples of companies founder by people I know well because I collaborated with them closely in the past include Heron Data, Rinse, ID.me and many others.