Exploring the evolving landscape of crypto finance, Randall Little of 50T Funds joins John Furrier of theCUBE to discuss transformative shifts and exciting developments in the sector. This discussion is part of the ongoing Crypto Trailblazers series, highlighting the growing impact of blockchain on both traditional and emerging financial landscapes.
In this episode, Randall Little shares insights into the current state of the crypto market, drawing from a comprehensive background in financial technology (FinTech) and investment banking. Hosts from theCUBE Research explore how technology reshapes financial services, while Little elucidates the transition from retail-driven market dynamics to increasing institutional adoption. As regulatory clarity improves, they believe the crypto market is on the brink of significant growth.
Key takeaways from Little's discussion include the importance of understanding market cycles and the continuous need for innovation. They emphasize that, while the crypto space remains highly cyclical and fast-paced, companies should focus on building sustainable business models. Little highlights that the integration of blockchain leads to unprecedented efficiency and disintermediation in the finance sector compared to previous technological shifts such as electronification.
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Randall Little, 50T Funds
Exploring the Future of Cryptocurrency with Offchain Labs
Join us as we delve into an insightful discussion with Steven Goldfeder of Offchain Labs, analyzed by theCUBE Research. This segment, part of the Crypto Trailblazers series in collaboration with NYSE Wired, explores the innovative efforts redefining the Ethereum ecosystem and the broader blockchain landscape.
Steven Goldfeder, co-founder and CEO of Offchain Labs, discusses significant advancements and strategic insights in blockchain technology. In this engaging episode, hosted at theCUBE Studios, Goldfeder shares their expertise on how Offchain Labs contributes to the evolution of Ethereum through groundbreaking projects such as Prysm and Arbitrum, while discussing impacts on scalability and decentralization.
In this discussion, Goldfeder elaborates on key technological initiatives driven by Offchain Labs, focusing particularly on Arbitrum, the pioneering layer two scaling solution for Ethereum. They illustrate how innovative platforms such as Arbitrum significantly enhance Ethereum's capacity, efficiency, and scalability without compromising security or decentralization, closely analyzed by theCUBE Research.
Highlights include Goldfeder's insights on the future trajectory of Ethereum and its ecosystem, emphasizing the sustainable development model and potential for global business transformations. Goldfeder states that engaging with regulators now can ensure crypto's lasting impact, aligning with a US administration open to embracing this technological shift. This discussion offers valuable perspectives for developers, businesses, and policymakers navigating the crypto landscape.
Find more SiliconANGLE news and analysis https://siliconangle.com/. Follow theCUBE's wall-to-wall event coverage https://siliconangle.com/events/ Learn about the latest theCUBE events https://www.thecube.net/
00:00 - Intro 00:06 - Exploring Innovations in Blockchain: A Deep Dive into Offchain Labs and Arbitrum 05:23 - Ethereum's Scalability and the Layered Architecture 08:01 - Smart Contracts and Developer Innovations on Arbitrum 11:46 - The Impact of Arbitrum on Blockchain App Development 16:08 - Navigating the Future: Offchain Labs and Ethereum in a Regulatory Landscape
>> Welcome back, everyone. I'm John Furrier here with theCUBE, your host at our NYSC studio. Of course, we've got Palo Alto and Wall Street here at the NYSC, part of the Wired program. This is our Crypto Trailblazer series, an ongoing series featuring the leaders of... The folks making it happen, building the products, funding the ventures. Our next guest, ran a little partner at 50T Funds. He's been on the builder side, now he's on the money side. Randall, great to have you on theCUBE. Thanks for coming in, appreciate it.
Randall Little
>> Absolutely, excited to be here.>> One of the things I love about this Crypto Trailblazer program is that it's like... I won't say coming out, it's more of the, "Finally, it's happening, the IPO window's open." Dan's been on, you work with, we had successful IPOs go out here at the NYSC, but also, at the same time, there's some real alpha development going on, real tech being built on the blockchain DeFi, TradFi, so you've got backend frontend working. The market's hot, the regulatory regime is positive.
Randall Little
>> Finally.>> Finally, yes, yes. Everyone's migrating back into the US. The global aspect is still phenomenal, scaling. What is your assessment of the market right now? How would you put this in terms of progress? What inning are we in? Are we still two at second inning? First inning's passed us, how would you peg this?
Randall Little
>> I still think it's quite early. It's better than it's ever been. The last six months have been some of the best months in my whole career within crypto, just given... Now I feel like we're playing on a fair playing field, and it's been a long time coming, where people have been saying, "The institutions are coming, the institutions are coming," and now I think that there's enough clarity or the clarity is starting to be put in place to allow that to actually happen. I think there's been demand for it. However, I think it's going to take longer than people think to happen. In crypto, the cycle times are very fast. It's been a retail-driven market to date, and the cycles happen very rapidly, whereas institutions take a while to adopt things, and we're talking about rewiring the plumbing of all the financial services. The analogy that I usually draw to that is thinking back to the electronification of markets that I was a part of. I was more into the FinTech space before crypto, and that has been an ongoing process for two decades. That's also a huge change, but rewiring all the plumbing and the efficiencies and disintermediation that crypto can bring is even a bigger change.>> That's a great throwback and a call-out on the electronic trading aspect. What's different now in today's market? What market forces are changed, if you could point at? Because it seems accelerated. It's not years. Everything's faster, obviously, but we're seeing that, but what are some of the market forces that are moving? Is it entrepreneurial, is it the money? Is it the realization? Is it all the above? What is the key force right now?
Randall Little
>> Well, there's a couple different things going on. I think just the technology itself has changed what's possible. I'll use an overused analogy, but the internet is the digitization of information, crypto is the digitization of value. If you have digitization of information, you can electronify markets and make them more efficient in a way, and that's happened. Digitization of value allows you to remove all of steps, all the intermediation, all the credit that exists for the purposes when there was a pre-internet period when everything was paper-based. I think that just the technology is enabling more to happen, but I think that, since the credit crisis, which I spent a lot of time->> Row C4.
Randall Little
>> I row C four, I was at JPMorgan at the time.>> Yeah.
Randall Little
>> I think that, since then, I think the other big force is just what's been happening with the money supply, and I think that is a profound change in everything that's going on and I think that that's what kind of hooked people on Bitcoin, which I see is... The first step in someone's crypto journey usually is to understand the concept and why it's relevant, and then they see everything else after that. I think that the credit crisis did have a part in kicking off the dominoes that we're starting to see fall now, but I think that a lot of what's happening now is unexpected back then, and I think things happening five years from now will be unexpected from more we sit today.>> I love that example of the information digitization, because accelerated information changes things. We saw that impact time to get information, change behavior, but value, that's money. You're talking about now, a lot of people want that money. You have a lot more action forces, maybe even, hey, disruptive enablement happening around it, too. That's motivating. I can take some territory if I'm a young startup, why not do it?
Randall Little
>> Right. It's a profound change. We're sitting here in NYSE, so I think a profound change for trading, but one of the easiest examples is payments. Circle has been pounding the table on this since 2020. If you can send value, you can send an email in a trustless environment. The implications of that are massive. A lot of the benefit of that has been international to date, but I think, especially given everything going on in the US, a lot more of that will come back to the US as well.>> I want to get into some of those forces, but I want to first get some of the things you've been working on and share your thoughts on how real these companies are that are going public. It's not like Johnny come lately, "Hey, jump on the bandwagon, ride the wave, shine your new toy." With the last regime in the US, the regulatory environment, there was companies doing some serious business, so this is not like, "Hey, it's a startup."
Randall Little
>> Well, this is the part that I think a lot of people miss, and this has been core of the thesis of our 50T Funds, is we've tended to be growth stage, later stage, looking for real proven businesses with real traction. We bias our investments to where we think there will be institutional demand, where the real money flows are. I think that that gets overlooked, because obviously, two reasons. One was, I would say, the regulatory environment in press, I would say, was either neutral to hostile to crypto before. That's changed, obviously, but I think that most of the money and most of the capital going into the spaces VC-oriented. VCs are investing in pre-seed seed, series A, which are definitionally small, riskier endeavors, but they could go 50, 100X. That's where a lot of the attention ended up flowing, and a lot of the guys that you're talking about that are more the pre-IPO stage, they're beyond those guys. They're, quote-unquote, "Uninteresting, too boring, not high enough returns," so they don't get the spotlight, but I think that what's changed is what we've been seeing here on the floor of NYSE, where now the IPO windows open. The equity of these companies is, all of a sudden, really exciting, whereas a year or two ago, people were focused on tokens. Now, people see that there is some value to the equity in these businesses, and you get the S1s and you realize these are real businesses that are growing.>> Yeah, and the numbers on the IPOs popped huge. The bullish was amazing, circle's amazing. It's interesting, your philosophy on the investment thesis, because you guys are smart risk-on, I call it. You are looking at deals, others, maybe their risk profile was medium, maybe off.
Randall Little
>> Right.>> Maybe on in their mind, but not fully looking at where that puck is going. What were some of the things that moved the needle for you guys at the firm? Can you share the thoughts on how you guys looked at the decision to go after certain companies or invest?
Randall Little
>> Well, I think it's the returns we've advertised to our LPs, which we're not swinging for grand slam home runs, we're swinging for five to 10X, which in any normal market, those are amazing returns, but in crypto, that's a little sleepy. But in exchange for that, we're muting the downside that comes with bear markets. It still is a cyclical market, there's no doubt about it, it's extremely disruptive, and that's what we've tried to balance. There's a huge market gap. Like I was saying, almost all the capital, almost all the focus is early stage. Once the company gets to $50 million and above, the capital dries up.>> Yeah.
Randall Little
>> There's a market dislocation there that exists that was being filled by a lot of the generalist funds that were doing their first investments in crypto in '21. They overpaid for things, I would say they didn't do proper diligence, and they got blown out.>> There was a chasm.
Randall Little
>> There was a chasm, there still is a chasm. When we're competing for deals, when we're buying secondaries, there's typically zero to one other parties around the table.>> That's good for you.
Randall Little
>> I think that'll persist for some time, maybe another six months or eight months of that, but we'll see.>> You'll see the fast followers, because once you start making money, it's looking good. Talk about some of the deals you've done, share the successes that are out. What's coming? What's on the pipeline? What's on the roster for you?
Randall Little
>> We have a couple things this week. We're investors in Figure and Gemini, which expected to start trading late this week or certainly within days. Also, one of our largest investments is Kraken, that's on the docket for probably Q1 of next year. It's been public there in the middle of a very sizable raise at a decacorn valuation, so we're super excited about that. We are obviously working on a couple new investments for our fund five, which we expect to be closing in the next couple months.>> You guys are doing later stage, that's the key for you guys. What does latest stage mean for you? $50 million and above? Because of your...
Randall Little
>> I would use that as a proxy, $50 million of revenue and above, because it proves product market fit, it proves as a real business. A lot of what happens in crypto is people have an idea for a technology, they guess at what the world needs, but you don't really know until you see the revenue and you see customers and you see customer behavior, so we're taking a much more private equity style approach to that. We also, I think, help a lot of the companies that reach that stage, usually they're mature in certain areas, but immature still in other areas, because the founders tend to be younger, and that's where we roll up our sleeves and help navigate the markets.>> Randall, I was talking to Dan, what I was really impressed by, what you guys are doing is, one, you have institutional background, you have history. You're not new to the world, taking an investment approach and moving it into crypto, but you're building a Karitsu too. You're building a community around this, so that's a huge advantage. You don't usually see a PE approach combined with an ecosystem, which by the way, the crypto market is ecosystem-based to begin with. It's almost counterintuitive. It's hard for a private equity company, the traditional Pes, to build community. They build portfolios, that's it.
Randall Little
>> Dan Tapiero's built the firm around that idea. He's hired a good team, I think, of people with varied skill sets. My background was more in investment banking, M&A, doing IPOs, both public markets and private markets deals. That Karitsu idea is a natural for me in helping companies to think through what could be synergistic and drive that value. But then, also, a lot of our companies want to get to the next stage of either going public, but how do you prepare for that? That preparation needs to start at least two years in advance of when you actually want to do it.>> Let's talk about readiness, because that's come up a lot, and I actually had some hallway conversations with folks, including Dan's small one, but we didn't have time. I won't say there's a rush to go public, but there's a demand. On the demand side, there's certainly value in the equity. You pointed that out. How does a crypto company that's hitting skate velocity on the market side get ready? In the old tech world, clearly, it was a slow roll. You get ready, you hire a firm, you got to do the things. It's a little bit of a long slow burn to get that going. What's the accelerated path? Because I think we're going to see a lot more. What's your advice? What's the readiness plan? How do you go from zero to 60 seconds on that speed up? What's the playbook? What's the best practice? Or is it like, "Fingers crossed, let's go"?
Randall Little
>> The easier things are things you can hire advisors for, so all the accounting pieces, SOX compliance, all of that blocking and tackling. Where there's a will, there's a way. If you're ready, otherwise, that can happen pretty quickly. We've seen that with SPACs, for example, where a SPAC comes in, a company gets excited, they can be ready pretty fast.>> They can grind out fast pretty quickly.
Randall Little
>> But the real thing is, is the business ready to be a public company?The things that we think about are the scale of the business and how many legs to the equity stool are there? In many cases, there are businesses that I would say they have a good feature, they have one good product, but they need a real business where it can survive different market cycles. You're not dependent on one thing, and ideally, you can actually model the business, because investor support is derived by the way analysts will think about it. If you can't model the business and there's no predictability and they can't operate like a machine, it's not going to end up being a good public company.>> I have to use a golf analogy, since the Ryder Cup's in town this month. You got to have more clubs in the bag than one.
Randall Little
>> Right.>> To survive that IPO, which could be a couple quarters of honeymoon, you need to have the muscle on the growth strategy, the finance projections. These are the things that you were saying, right?
Randall Little
>> I think that a good example of this is Coinbase, I think has done a great job of transforming its business from a very retail-oriented trading company only into this multifaceted retail institutional infrastructure company. I think they're still doing more and more of that, but that's a perfect playbook of someone who's taken something that's very hard to model to something you can model now.>> We call that one-trick pony. You don't want a one-trick pony. Let me ask you about that since you brought it up. I want to go there, if you don't mind, real quick, unpacking the whole platformization. That's a common trend we're seeing in the Trailblazer series. Some of the, I would say, attractive platforms targeting finance, because there's a lot of... Some call it replumbing, some say upgrade, depending on how you look at it, but it's pretty much... It's not a full displacement, because institutions will be big in this. What does that platform look like? Is there a pattern you're seeing around successful companies? Because you might have to pivot from your entry-level business model, say, Coinbase, with retail to a more durable. Is platforms the durability angle, is that the moat, or is it the data? What are some of the things in crypto that people should look at, if you had to be a quick advisor?
Randall Little
>> Yeah. I think moat is very important and I think it gets overlooked. One mistake that we see in cryptos is people have an idea that they think is important and they run ahead and build that without really knowing whether there's demand. One thing we talk about internally a lot is, "Put the end first," in thinking about making sure that that demand will be there. We're looking for companies that have done that work, they know that there's demand there, and that they have a core business. Then as they develop new products, they're not building... It's not, "Build it and they'll come," they've done enough work, so that they can pivot into something that works.>> That's where, I think, real value add shines as an investor, because a lot of entrepreneurs, we've seen the movie before, their head's down, they're jamming away, they're building, they're recruiting. They got it busy, it's hard.
Randall Little
>> Well, and importantly, most of the people building in crypto tend to be much more technical. That's been their whole background, they're passionate about what they're doing, infinitely more about their business than we do, but they usually have no idea what investors want out of a business, and that's private market investors, which is like where we are today, but then, even more so, public and market investors, they have literally no idea, I think, what they're looking for. That's part of what we try to help illuminate for them well in advance of when they hit that point to make changes.>> Tell me about the public market. I'm not really schooled in your area, so I'll ask, because I'm curious. The IPO track has always been glamorized, "Hey, go public," and there's a playbook. Now, there's an active private market going on in the later stage. Certainly, on tech, we're seeing tons of that going on. In crypto, is that happening too? How should the company think about those later stages? Is there certain things to watch out for if I'm on a board or a CEO, as they get in their growth, as they come into your wheelhouse? What are some of the things that might be tripwire or you don't want to landmine, or something that they could avoid? That you could share.
Randall Little
>> Yeah, I think the most basic thing is to retain as much optionality as possible, which means operating the business, so that you can survive through any period. I think a lot of crypto entrepreneurs have made a mistake in not accounting for the cyclicality of the business, over-hiring, and they back themselves into a corner, and they either have to raise at the worst possible time or the business goes away. I think that it's obviously most easy to raise money when you don't need to, so if they can build the business so that it's sustainable in that way, obviously doing all the other things that I was describing, they're going to be in a much better position.>> A little game theory there.
Randall Little
>> That's the most->> Basic competitive strategy, game theory. Optimize for optionality, keep your eye on the prize, work backwards from the outcome.
Randall Little
>> Don't over-hire.>> Over-hiring is definitely a red flag.
Randall Little
>> In crypto, that's the other big thing, is there's shiny objects literally everywhere.>> Yeah.
Randall Little
>> The new cycle changes every week, so people see the new thing that's up on the... They read on their Twitter->> "I can do that."
Randall Little
>> They see, "I can do that, we should be in that." They jump to that, they jump to the next thing, jump to the next thing. It's extremely distracting.>> Yeah, got to play the long game.
Randall Little
>> Exactly.>> All right, so what are you excited about the most right now as we get ready? We're having a big reception tonight, NYC Wired, theCUBE, and FinTech.TV. 250 trailblazers are going to be in town, you're in the middle of it. What are you excited about?
Randall Little
>> For me, the most exciting part is just actually seeing the vision that everyone has been looking towards come to fruition and the different sorts of people that are coming. There will be more crypto-native people here that have been in the space for a while, more in the trenches building, but then you see people from BlackRock, you see people from Fidelity actually building their businesses and bringing their institutional heft to the space. There's so much going on just in terms of thinking about how it's all going to unfold. We've seen the Stripe announcement this week, how they're going to build their own payment network, Circle's doing the same thing. What is the end game for all that? Those are the things that were avidly watching.>> I'm super pumped, I wish I was 23 again. If I was a young gun... If we were riffing, say we're college roommates, we're sitting there having a beer coding away, let's say we had nothing to do. What would we work on? What would you work on if we had to do a venture? Knowing what you know, you see the landscape, what are the cool areas you see people digging into? What would we go after? Because you're punching up when you're young, you have nothing to lose.
Randall Little
>> Right.>> The scar tissue can go for the brass ring. What would be some of the things that we would target?
Randall Little
>> I think that I would align it with our focus, which is thinking about what will be needed by the institutional flows as they come into crypto. A lot of the shiny objects, I think, are all the retail trading of meme coins, and things like that, but the next wave that's coming that we need to prepare for is, what happens when people really want to use crypto for payments? What happens when they really want to use trade?>> Hundreds of millions of people at scale.
Randall Little
>> Hundreds of millions of people, and thinking about, how will they interact with DeFi? I don't think the average person's not going to go to a DeFi site and figure out how it all works. It's going to be abstracted away from them through an app that looks and feels like a Web 2.0 application, but the experience will be transformatively different, so I would look for ways to basically deliver the experience and the cost and the speed of crypto in a very user-friendly format, in terms that people could understand, and sign up just like you can sign up for Revolute, you could sign up for XYZ app and access all the benefits.>> It's interesting. One of the things that jumps out at me, because I've been born in the cloud, like this venture and others, from day one, even when EC2 had no custom domain support going that, way back when. The cloud was a revolution, because you didn't have to buy a computer or a data center. You put your credit card down, you fool around, things would come out of it. There's a lot of similarities we're seeing between that abstraction and scale, right? It starts simple, some building blocks, and crypto's a little bit more complicated, because it's evolved, but it's a similar trajectory. Not exactly, but it's almost like the same pattern.
Randall Little
>> It is, because before cloud, there was discreet data centers and a lot of complexity and a lot of inefficiency. Now everything is exchangeable, super easily, instantly. Again, that's the same thing that we've seen with value, right? It'll become the value... The cloud is the value.>> My dad used to have a wallet that was like a USB drive. Can you imagine that? That's crazy.
Randall Little
>> Or carry around floppy disks. It's the same thing. Yeah.>> Well, congratulations, you guys, on the success you guys have. Got some great deals, so congratulations. Look forward to continuing to chat. Thanks for coming on-
Randall Little
>> 100%. Thank you.>> Right. Well, Crypto Trailblazers, a lot of action. Skating where the puck is one strategy, skating with the puck is the other, and a lot of people are doing that right now. As the world advances, the abstraction, making things simple and easy to use, that's the key part of the commercialization. As crypto and crypto infrastructure goes mainstream, just another utility, the money's values being transferred. Of course, we're doing our part here in theCUBE to bring that to you. I'm John Furrier, thanks for watching.
>> Welcome back, everyone. I'm John Furrier here with theCUBE, your host at our NYSC studio. Of course, we've got Palo Alto and Wall Street here at the NYSC, part of the Wired program. This is our Crypto Trailblazer series, an ongoing series featuring the leaders of... The folks making it happen, building the products, funding the ventures. Our next guest, ran a little partner at 50T Funds. He's been on the builder side, now he's on the money side. Randall, great to have you on theCUBE. Thanks for coming in, appreciate it.
Randall Little
>> Absolutely, excited to be here.>> One of the things I love about this Crypto Trailblazer program is that it's like... I won't say coming out, it's more of the, "Finally, it's happening, the IPO window's open." Dan's been on, you work with, we had successful IPOs go out here at the NYSC, but also, at the same time, there's some real alpha development going on, real tech being built on the blockchain DeFi, TradFi, so you've got backend frontend working. The market's hot, the regulatory regime is positive.
Randall Little
>> Finally.>> Finally, yes, yes. Everyone's migrating back into the US. The global aspect is still phenomenal, scaling. What is your assessment of the market right now? How would you put this in terms of progress? What inning are we in? Are we still two at second inning? First inning's passed us, how would you peg this?
Randall Little
>> I still think it's quite early. It's better than it's ever been. The last six months have been some of the best months in my whole career within crypto, just given... Now I feel like we're playing on a fair playing field, and it's been a long time coming, where people have been saying, "The institutions are coming, the institutions are coming," and now I think that there's enough clarity or the clarity is starting to be put in place to allow that to actually happen. I think there's been demand for it. However, I think it's going to take longer than people think to happen. In crypto, the cycle times are very fast. It's been a retail-driven market to date, and the cycles happen very rapidly, whereas institutions take a while to adopt things, and we're talking about rewiring the plumbing of all the financial services. The analogy that I usually draw to that is thinking back to the electronification of markets that I was a part of. I was more into the FinTech space before crypto, and that has been an ongoing process for two decades. That's also a huge change, but rewiring all the plumbing and the efficiencies and disintermediation that crypto can bring is even a bigger change.>> That's a great throwback and a call-out on the electronic trading aspect. What's different now in today's market? What market forces are changed, if you could point at? Because it seems accelerated. It's not years. Everything's faster, obviously, but we're seeing that, but what are some of the market forces that are moving? Is it entrepreneurial, is it the money? Is it the realization? Is it all the above? What is the key force right now?
Randall Little
>> Well, there's a couple different things going on. I think just the technology itself has changed what's possible. I'll use an overused analogy, but the internet is the digitization of information, crypto is the digitization of value. If you have digitization of information, you can electronify markets and make them more efficient in a way, and that's happened. Digitization of value allows you to remove all of steps, all the intermediation, all the credit that exists for the purposes when there was a pre-internet period when everything was paper-based. I think that just the technology is enabling more to happen, but I think that, since the credit crisis, which I spent a lot of time->> Row C4.
Randall Little
>> I row C four, I was at JPMorgan at the time.>> Yeah.
Randall Little
>> I think that, since then, I think the other big force is just what's been happening with the money supply, and I think that is a profound change in everything that's going on and I think that that's what kind of hooked people on Bitcoin, which I see is... The first step in someone's crypto journey usually is to understand the concept and why it's relevant, and then they see everything else after that. I think that the credit crisis did have a part in kicking off the dominoes that we're starting to see fall now, but I think that a lot of what's happening now is unexpected back then, and I think things happening five years from now will be unexpected from more we sit today.>> I love that example of the information digitization, because accelerated information changes things. We saw that impact time to get information, change behavior, but value, that's money. You're talking about now, a lot of people want that money. You have a lot more action forces, maybe even, hey, disruptive enablement happening around it, too. That's motivating. I can take some territory if I'm a young startup, why not do it?
Randall Little
>> Right. It's a profound change. We're sitting here in NYSE, so I think a profound change for trading, but one of the easiest examples is payments. Circle has been pounding the table on this since 2020. If you can send value, you can send an email in a trustless environment. The implications of that are massive. A lot of the benefit of that has been international to date, but I think, especially given everything going on in the US, a lot more of that will come back to the US as well.>> I want to get into some of those forces, but I want to first get some of the things you've been working on and share your thoughts on how real these companies are that are going public. It's not like Johnny come lately, "Hey, jump on the bandwagon, ride the wave, shine your new toy." With the last regime in the US, the regulatory environment, there was companies doing some serious business, so this is not like, "Hey, it's a startup."
Randall Little
>> Well, this is the part that I think a lot of people miss, and this has been core of the thesis of our 50T Funds, is we've tended to be growth stage, later stage, looking for real proven businesses with real traction. We bias our investments to where we think there will be institutional demand, where the real money flows are. I think that that gets overlooked, because obviously, two reasons. One was, I would say, the regulatory environment in press, I would say, was either neutral to hostile to crypto before. That's changed, obviously, but I think that most of the money and most of the capital going into the spaces VC-oriented. VCs are investing in pre-seed seed, series A, which are definitionally small, riskier endeavors, but they could go 50, 100X. That's where a lot of the attention ended up flowing, and a lot of the guys that you're talking about that are more the pre-IPO stage, they're beyond those guys. They're, quote-unquote, "Uninteresting, too boring, not high enough returns," so they don't get the spotlight, but I think that what's changed is what we've been seeing here on the floor of NYSE, where now the IPO windows open. The equity of these companies is, all of a sudden, really exciting, whereas a year or two ago, people were focused on tokens. Now, people see that there is some value to the equity in these businesses, and you get the S1s and you realize these are real businesses that are growing.>> Yeah, and the numbers on the IPOs popped huge. The bullish was amazing, circle's amazing. It's interesting, your philosophy on the investment thesis, because you guys are smart risk-on, I call it. You are looking at deals, others, maybe their risk profile was medium, maybe off.
Randall Little
>> Right.>> Maybe on in their mind, but not fully looking at where that puck is going. What were some of the things that moved the needle for you guys at the firm? Can you share the thoughts on how you guys looked at the decision to go after certain companies or invest?
Randall Little
>> Well, I think it's the returns we've advertised to our LPs, which we're not swinging for grand slam home runs, we're swinging for five to 10X, which in any normal market, those are amazing returns, but in crypto, that's a little sleepy. But in exchange for that, we're muting the downside that comes with bear markets. It still is a cyclical market, there's no doubt about it, it's extremely disruptive, and that's what we've tried to balance. There's a huge market gap. Like I was saying, almost all the capital, almost all the focus is early stage. Once the company gets to $50 million and above, the capital dries up.>> Yeah.
Randall Little
>> There's a market dislocation there that exists that was being filled by a lot of the generalist funds that were doing their first investments in crypto in '21. They overpaid for things, I would say they didn't do proper diligence, and they got blown out.>> There was a chasm.
Randall Little
>> There was a chasm, there still is a chasm. When we're competing for deals, when we're buying secondaries, there's typically zero to one other parties around the table.>> That's good for you.
Randall Little
>> I think that'll persist for some time, maybe another six months or eight months of that, but we'll see.>> You'll see the fast followers, because once you start making money, it's looking good. Talk about some of the deals you've done, share the successes that are out. What's coming? What's on the pipeline? What's on the roster for you?
Randall Little
>> We have a couple things this week. We're investors in Figure and Gemini, which expected to start trading late this week or certainly within days. Also, one of our largest investments is Kraken, that's on the docket for probably Q1 of next year. It's been public there in the middle of a very sizable raise at a decacorn valuation, so we're super excited about that. We are obviously working on a couple new investments for our fund five, which we expect to be closing in the next couple months.>> You guys are doing later stage, that's the key for you guys. What does latest stage mean for you? $50 million and above? Because of your...
Randall Little
>> I would use that as a proxy, $50 million of revenue and above, because it proves product market fit, it proves as a real business. A lot of what happens in crypto is people have an idea for a technology, they guess at what the world needs, but you don't really know until you see the revenue and you see customers and you see customer behavior, so we're taking a much more private equity style approach to that. We also, I think, help a lot of the companies that reach that stage, usually they're mature in certain areas, but immature still in other areas, because the founders tend to be younger, and that's where we roll up our sleeves and help navigate the markets.>> Randall, I was talking to Dan, what I was really impressed by, what you guys are doing is, one, you have institutional background, you have history. You're not new to the world, taking an investment approach and moving it into crypto, but you're building a Karitsu too. You're building a community around this, so that's a huge advantage. You don't usually see a PE approach combined with an ecosystem, which by the way, the crypto market is ecosystem-based to begin with. It's almost counterintuitive. It's hard for a private equity company, the traditional Pes, to build community. They build portfolios, that's it.
Randall Little
>> Dan Tapiero's built the firm around that idea. He's hired a good team, I think, of people with varied skill sets. My background was more in investment banking, M&A, doing IPOs, both public markets and private markets deals. That Karitsu idea is a natural for me in helping companies to think through what could be synergistic and drive that value. But then, also, a lot of our companies want to get to the next stage of either going public, but how do you prepare for that? That preparation needs to start at least two years in advance of when you actually want to do it.>> Let's talk about readiness, because that's come up a lot, and I actually had some hallway conversations with folks, including Dan's small one, but we didn't have time. I won't say there's a rush to go public, but there's a demand. On the demand side, there's certainly value in the equity. You pointed that out. How does a crypto company that's hitting skate velocity on the market side get ready? In the old tech world, clearly, it was a slow roll. You get ready, you hire a firm, you got to do the things. It's a little bit of a long slow burn to get that going. What's the accelerated path? Because I think we're going to see a lot more. What's your advice? What's the readiness plan? How do you go from zero to 60 seconds on that speed up? What's the playbook? What's the best practice? Or is it like, "Fingers crossed, let's go"?
Randall Little
>> The easier things are things you can hire advisors for, so all the accounting pieces, SOX compliance, all of that blocking and tackling. Where there's a will, there's a way. If you're ready, otherwise, that can happen pretty quickly. We've seen that with SPACs, for example, where a SPAC comes in, a company gets excited, they can be ready pretty fast.>> They can grind out fast pretty quickly.
Randall Little
>> But the real thing is, is the business ready to be a public company?The things that we think about are the scale of the business and how many legs to the equity stool are there? In many cases, there are businesses that I would say they have a good feature, they have one good product, but they need a real business where it can survive different market cycles. You're not dependent on one thing, and ideally, you can actually model the business, because investor support is derived by the way analysts will think about it. If you can't model the business and there's no predictability and they can't operate like a machine, it's not going to end up being a good public company.>> I have to use a golf analogy, since the Ryder Cup's in town this month. You got to have more clubs in the bag than one.
Randall Little
>> Right.>> To survive that IPO, which could be a couple quarters of honeymoon, you need to have the muscle on the growth strategy, the finance projections. These are the things that you were saying, right?
Randall Little
>> I think that a good example of this is Coinbase, I think has done a great job of transforming its business from a very retail-oriented trading company only into this multifaceted retail institutional infrastructure company. I think they're still doing more and more of that, but that's a perfect playbook of someone who's taken something that's very hard to model to something you can model now.>> We call that one-trick pony. You don't want a one-trick pony. Let me ask you about that since you brought it up. I want to go there, if you don't mind, real quick, unpacking the whole platformization. That's a common trend we're seeing in the Trailblazer series. Some of the, I would say, attractive platforms targeting finance, because there's a lot of... Some call it replumbing, some say upgrade, depending on how you look at it, but it's pretty much... It's not a full displacement, because institutions will be big in this. What does that platform look like? Is there a pattern you're seeing around successful companies? Because you might have to pivot from your entry-level business model, say, Coinbase, with retail to a more durable. Is platforms the durability angle, is that the moat, or is it the data? What are some of the things in crypto that people should look at, if you had to be a quick advisor?
Randall Little
>> Yeah. I think moat is very important and I think it gets overlooked. One mistake that we see in cryptos is people have an idea that they think is important and they run ahead and build that without really knowing whether there's demand. One thing we talk about internally a lot is, "Put the end first," in thinking about making sure that that demand will be there. We're looking for companies that have done that work, they know that there's demand there, and that they have a core business. Then as they develop new products, they're not building... It's not, "Build it and they'll come," they've done enough work, so that they can pivot into something that works.>> That's where, I think, real value add shines as an investor, because a lot of entrepreneurs, we've seen the movie before, their head's down, they're jamming away, they're building, they're recruiting. They got it busy, it's hard.
Randall Little
>> Well, and importantly, most of the people building in crypto tend to be much more technical. That's been their whole background, they're passionate about what they're doing, infinitely more about their business than we do, but they usually have no idea what investors want out of a business, and that's private market investors, which is like where we are today, but then, even more so, public and market investors, they have literally no idea, I think, what they're looking for. That's part of what we try to help illuminate for them well in advance of when they hit that point to make changes.>> Tell me about the public market. I'm not really schooled in your area, so I'll ask, because I'm curious. The IPO track has always been glamorized, "Hey, go public," and there's a playbook. Now, there's an active private market going on in the later stage. Certainly, on tech, we're seeing tons of that going on. In crypto, is that happening too? How should the company think about those later stages? Is there certain things to watch out for if I'm on a board or a CEO, as they get in their growth, as they come into your wheelhouse? What are some of the things that might be tripwire or you don't want to landmine, or something that they could avoid? That you could share.
Randall Little
>> Yeah, I think the most basic thing is to retain as much optionality as possible, which means operating the business, so that you can survive through any period. I think a lot of crypto entrepreneurs have made a mistake in not accounting for the cyclicality of the business, over-hiring, and they back themselves into a corner, and they either have to raise at the worst possible time or the business goes away. I think that it's obviously most easy to raise money when you don't need to, so if they can build the business so that it's sustainable in that way, obviously doing all the other things that I was describing, they're going to be in a much better position.>> A little game theory there.
Randall Little
>> That's the most->> Basic competitive strategy, game theory. Optimize for optionality, keep your eye on the prize, work backwards from the outcome.
Randall Little
>> Don't over-hire.>> Over-hiring is definitely a red flag.
Randall Little
>> In crypto, that's the other big thing, is there's shiny objects literally everywhere.>> Yeah.
Randall Little
>> The new cycle changes every week, so people see the new thing that's up on the... They read on their Twitter->> "I can do that."
Randall Little
>> They see, "I can do that, we should be in that." They jump to that, they jump to the next thing, jump to the next thing. It's extremely distracting.>> Yeah, got to play the long game.
Randall Little
>> Exactly.>> All right, so what are you excited about the most right now as we get ready? We're having a big reception tonight, NYC Wired, theCUBE, and FinTech.TV. 250 trailblazers are going to be in town, you're in the middle of it. What are you excited about?
Randall Little
>> For me, the most exciting part is just actually seeing the vision that everyone has been looking towards come to fruition and the different sorts of people that are coming. There will be more crypto-native people here that have been in the space for a while, more in the trenches building, but then you see people from BlackRock, you see people from Fidelity actually building their businesses and bringing their institutional heft to the space. There's so much going on just in terms of thinking about how it's all going to unfold. We've seen the Stripe announcement this week, how they're going to build their own payment network, Circle's doing the same thing. What is the end game for all that? Those are the things that were avidly watching.>> I'm super pumped, I wish I was 23 again. If I was a young gun... If we were riffing, say we're college roommates, we're sitting there having a beer coding away, let's say we had nothing to do. What would we work on? What would you work on if we had to do a venture? Knowing what you know, you see the landscape, what are the cool areas you see people digging into? What would we go after? Because you're punching up when you're young, you have nothing to lose.
Randall Little
>> Right.>> The scar tissue can go for the brass ring. What would be some of the things that we would target?
Randall Little
>> I think that I would align it with our focus, which is thinking about what will be needed by the institutional flows as they come into crypto. A lot of the shiny objects, I think, are all the retail trading of meme coins, and things like that, but the next wave that's coming that we need to prepare for is, what happens when people really want to use crypto for payments? What happens when they really want to use trade?>> Hundreds of millions of people at scale.
Randall Little
>> Hundreds of millions of people, and thinking about, how will they interact with DeFi? I don't think the average person's not going to go to a DeFi site and figure out how it all works. It's going to be abstracted away from them through an app that looks and feels like a Web 2.0 application, but the experience will be transformatively different, so I would look for ways to basically deliver the experience and the cost and the speed of crypto in a very user-friendly format, in terms that people could understand, and sign up just like you can sign up for Revolute, you could sign up for XYZ app and access all the benefits.>> It's interesting. One of the things that jumps out at me, because I've been born in the cloud, like this venture and others, from day one, even when EC2 had no custom domain support going that, way back when. The cloud was a revolution, because you didn't have to buy a computer or a data center. You put your credit card down, you fool around, things would come out of it. There's a lot of similarities we're seeing between that abstraction and scale, right? It starts simple, some building blocks, and crypto's a little bit more complicated, because it's evolved, but it's a similar trajectory. Not exactly, but it's almost like the same pattern.
Randall Little
>> It is, because before cloud, there was discreet data centers and a lot of complexity and a lot of inefficiency. Now everything is exchangeable, super easily, instantly. Again, that's the same thing that we've seen with value, right? It'll become the value... The cloud is the value.>> My dad used to have a wallet that was like a USB drive. Can you imagine that? That's crazy.
Randall Little
>> Or carry around floppy disks. It's the same thing. Yeah.>> Well, congratulations, you guys, on the success you guys have. Got some great deals, so congratulations. Look forward to continuing to chat. Thanks for coming on-
Randall Little
>> 100%. Thank you.>> Right. Well, Crypto Trailblazers, a lot of action. Skating where the puck is one strategy, skating with the puck is the other, and a lot of people are doing that right now. As the world advances, the abstraction, making things simple and easy to use, that's the key part of the commercialization. As crypto and crypto infrastructure goes mainstream, just another utility, the money's values being transferred. Of course, we're doing our part here in theCUBE to bring that to you. I'm John Furrier, thanks for watching.
