About this Video

• Video Title: How Venture Is Navigating Crypto IPOs
• Channel: Empire
• Speakers: Rob, Diego, Santi
• Duration: 01:16:38

Introduction

This Empire podcast episode discusses the current state of venture capital in the crypto market, focusing on the implications of crypto company IPOs and the evolving strategies of venture firms. The speakers analyze the fundraising environment, the challenges of outperforming Bitcoin, and the impact of recent IPOs like Circle's. They also explore different approaches to navigating the crypto market, including the use of corporate treasuries and the potential for on-chain IPOs.

Key Takeaways

• The Crypto Venture Landscape: The crypto venture capital market is experiencing a "haves and have-nots" scenario, with larger funds continuing to raise capital while smaller funds struggle. Many funds are not outperforming Bitcoin, creating challenges for attracting LPs.
• The Impact of Circle's IPO: Circle's IPO has significantly impacted the perception of crypto company IPOs, potentially increasing the appetite of LPs and opening doors for other crypto firms to go public. This also highlighted investor interest in stablecoins.
• Evolving Venture Strategies: Venture firms are adapting their strategies, including increased focus on equity investments, alongside tokens and token warrants. There is a growing interest in companies offering clear paths to liquidity.
• The Future of Crypto IPOs: The speakers discuss which crypto companies are likely to go public next (e.g., Kraken, Fireblocks, Anchorage), emphasizing the importance of revenue scale and analyst coverage for successful IPOs. Smaller companies might resort to SPACs or direct listings.
• On-Chain IPOs and Tokenization: The potential of on-chain IPOs as an alternative to traditional IPOs is explored, offering a path to liquidity for smaller companies and potentially channeling speculative energy towards more productive ventures. The broader tokenization of real-world assets (RWAs) is also discussed as a significant opportunity.
• Corporate Treasuries: Public crypto treasury strategies are viewed critically, considered short-term solutions prone to risks, especially during market downturns.

Here are the answers to questions 1-4, based solely on the provided transcript:

1. What are the main reasons why many crypto venture funds are struggling to outperform Bitcoin, and what challenges do these funds face in attracting Limited Partners (LPs)? Many crypto venture funds are struggling to outperform Bitcoin because the vast majority of investments aren't doing so. This is a core problem that leads to questions from LPs about the value proposition of investing in these funds versus simply holding Bitcoin. The availability of more liquid alternatives like ETFs and liquid funds also presents a challenge. LPs are now more sophisticated and demand answers about why a fund should outperform Bitcoin and other liquid crypto options.

2. How has Circle's IPO changed the perception of crypto company IPOs among Limited Partners (LPs), and what are the potential implications for other crypto firms considering going public? Circle's IPO has created a significant shift. It demonstrates that there's strong demand for crypto-enabled businesses in the public markets, potentially leading to more LPs feeling comfortable investing in crypto companies that go public. This could open the door for other crypto firms to pursue IPOs, even if they previously felt too small or lacked the ideal profile. The success of Circle, however, seems to be highly correlated to the success of stablecoins specifically.

3. What are the key differences in the strategies employed by large and small crypto venture funds in the current market environment? Large funds are continuing to raise large funds (though smaller than in 2021) and are outperforming. Smaller funds, or those who raised excessively in 2021, are finding it harder to raise capital and are raising much smaller funds this time around. This reflects a broader market trend beyond just crypto.

4. What are the arguments for and against the use of public crypto treasury strategies, and what are the potential risks associated with these strategies? The argument for public crypto treasury strategies is that they can be profitable short-term trading vehicles, allowing for quick returns. The argument against them is that they are ultimately short-term solutions with no long-term viability. They are prone to trading below NAV (Net Asset Value) in distressed markets, potentially leading to a death spiral involving debt and equity dilution. MicroStrategy's success is presented as a unique and potentially non-repeatable exception.

Other Topics Discussed:

Besides the main points above, the discussion also covered these significant topics:

• The evolution of crypto venture capital: The shift from ICO investments to traditional businesses built in crypto, then to on-chain token investments, and now potentially back to a stronger emphasis on equity investments due to increased exit opportunities.
• The role of analysts and analyst coverage in driving liquidity for crypto companies post-IPO: Analyst coverage is crucial for attracting institutional investors and driving up the price of a newly public crypto company.
• The potential of on-chain IPOs as a mechanism for smaller crypto companies to access liquidity: This innovative concept could lower the revenue bar for going public and potentially reshape the crypto investment landscape.
• The future of stablecoins: The discussion touches on the potential for more stablecoin-related innovation in various applications, with a focus on the shift in value capture from issuers to apps that utilize stablecoins for consumer-facing finance.
• The strategic acquisition of companies by major players in the crypto space: Several billion-dollar acquisitions are highlighted, demonstrating the continued activity and value in the private crypto markets.
• The partnership between X (formerly Twitter) and Polymarket: This collaboration brings together a major social media platform and a prediction market platform, potentially leading to new developments in how information is shared and opinions are expressed.
• Ripple's strategy and its potential to become a major stablecoin issuer: Ripple's use of its treasury and acquisitions to build a larger stablecoin presence is analyzed.

These additional points offer a richer understanding of the current trends and challenges shaping the crypto investment landscape.