Hashed Interview: Michael Arrington, Arrington XRP Capital, “The Korean Market Is Important”
“My reason for investing in Terra is the same reason I invested in Uber when Uber made no sense. It’s just obvious to me that Terra’s going to be spectacularly good. I’ve made some bad calls; my first article about Twitter was that Twitter was going to be a stupid failure. So I mess up all the time. But it’s okay if you mess up because sometimes you’re right. And so for me, Terra, and a couple of other deals we invested in last year are just obviously huge winners, and I’m very excited about them.”
Michael Arrington, Partner at Arrington XRP Capital, on why the Korean market is so vital to the blockchain industry and Hashed. Hear more of his insights below.
First of all, Mike, thank you, for agreeing to do this.
You’re welcome. I’m so excited to be here.
We just got off a panel together.
We did. It was great. You were excellent.
I had to stop you a few times.
You did. You cut me off. That was less great.
I’ve seen you a bunch of times. We’re friends now. We are. We’re legit friends. We go shopping together. But I’ve seen you more in Asia than San Francisco. We talk about this all the time, but I just want you to hammer that home.
We talked about this onstage today: why are so few American investors coming to Asia? That’s interesting, but why am I here? I keep coming back to Korea. As I said on stage, part of it is that we’ve seen so many great deals, and all of them introduced by you, and we just keep making money. And you know, that’s important, because we have investors and we have to keep making money for them. And so the continued business success we’ve had means that I will continue to spend a lot of time here. We also go to Singapore quite a bit, and we have a lot of friends there, and there’s a lot of crypto stuff going on there. This is a much shorter flight than Singapore, though. Yeah, Singapore’s brutal. And we actually haven’t done many Singapore deals. But you know there are a lot of conferences and events there. Korea is fantastic. And before you invited me last year, I’d never been.
Never?
No.
All those years in TechCrunch and you never came out here?
Well, TechCrunch was obviously a blog, a new site in Silicon Valley, and before crypto, tech was centered in Silicon Valley, and everybody would come to me. And so the VCs really never change, never really leave either, because everybody comes to Silicon Road or San Francisco. Crypto is a different world, and if you want to get in the best deals, you have to go where the deals are. And that means Asia. And in particular, Korea. And I’m willing to do it. So you’re saying missed opportunities for your peers in the bay. I don’t understand it. I think, and I tell them, and they just don’t want to hear it. So, good for us.
Is this very different from all your years at CrunchFund?
Yeah. So CrunchFund is a traditional venture fund, and early stage, which is exciting, and similar to crypto in the sense that early stage is when pre-product has just come out, so you don’t know yet, there’s no revenue, you’re making a lot of guesses as to whether the product will be successful. In later stage ventures, you’re actually using financial metrics to make your business decisions. So it’s similar in that way, that in a lot of crypto stuff we do you’re investment decisions before you have any idea how it’s going to do. But this has the added dimension in that it goes liquid very early and then you have to choose to sell or not sell, and I find that fun. And also the crypto markets are so volatile that you have these greatly compact business cycles, and everything moves so fast and I love that.
What about — on stage, we were talking about dApps. And services with consumer portions that are missing in the US. Have you had a chance to look at any of those that are in Asia?
Well, some, but nothing that I’ve liked. But I was just talking to your team, and I know that you guys, through your accelerator/incubator, are going to start really focusing on gaming. I know you’ll do other stuff as well. And that, to me, is good. Because Korea is an important market for gaming, and if you’re doing the filtering for us, and we can look at those deals, that’s going to be something we’re really going to look at.
I’ve seen some gaming stuff in the US — have any of them come across your desk that you find interesting? You don’t mean gambling, right? Not gambling. Just gaming stuff. I’ve read the in the news about some stuff, but we haven’t looked at any deals yet.
Cool. This is really timely because just a few days ago, Bitcoin just went bull again. You’re focusing a lot more on handling live assets, right? A lot more, yeah. What’s that been like for the team, and what’s the outlook like for this year?
Well, so we’re a hedge fund, but last year, we were acting like a venture fund and doing deals. And if we liquidated positions, we go back into Ether, Bitcoin, and we were doing next-to-no trading. We have core positions in cryptocurrency, but next-to-no trading. I merged with another hedge fund, another fund, just a month ago, and it was announced just a week ago, and these guys are hardcore, technical traders. So they come on and we have started trading aggressively at exactly the right time. And so that’s now a core focus of ours. It’s trading.
Which, again, in the US, hedge funds don’t touch that stuff. You know, I realized that we’ve gone back and forth about crypto, but I’ve never asked you about what got you into this stuff.
Do you want the true answer or like the marketing answer?
Let’s get the true answer.
All right. So the true answer is that it happened because of a date with a woman. I was in crypto in the sense that I’d bought some Bitcoin and Ether, like everyone else in Silicon Valley.
When was that, 2017?
2013. Not a lot, but enough to understand it because we were doing some crypto investments through my venture fund. So in 2017 in March, I had a date with a woman named Natalia, whom you’ve met, and she was in crypto, and she was getting ready to do an ICO. The company is called Propy. And she was telling me about these ICOs and I hadn’t paid much attention to them, and it sounded like a pyramid scam. But I kept talking to her about it, and I started doing a couple of deals, and in 2017, it would have been hard to lose money on ICOs, right? I mean, you could just about throw money at anything. So I invested in a few things and thought, wow, I’m really good at this because I’m making really good money and I decided, at that point, to raise a fund, because venture funds have trouble making a lot of —
Oh, were you still knee-deep in CrunchFund back then?
Yes. And I tried to push my partner to start another all-crypto fund and he didn’t have the passion for it, so I decided to do it on my own. And then I raised pretty quickly, and I decided to do a hedge fund. I thought that made the most sense, and that’s how I got into it.
Very cool. All right. Any outlooks for the future you can share with our audience?
That’s going to be wrong. Maybe we could record, like, 5 and you could cut them and then add the right one in. Because I don’t pretend to know — I was talking to — So 2018 was a rough year. We closed our fund. We made some investments in 2017 but that was before we closed. We closed our fund January 2nd or 3rd. The high point of the market was like two days later. And so for a few days, I’m like: this is great. We’ve made 10% returns in a week. And then the market fell apart, and it was 51 weeks of hell. Yeah, and so obviously, I’m not good at predicting markets. My general idea is that this is going to be an extremely important part of the world economy at some point in the next few years. And therefore, I need to place some bets, put myself in a good position, and if we do well, we’ll do well for all investors. Beyond that, I have no idea.
I mean, you’ve been doing venture for a while now, so that one panel I was at — maybe it was the IBM event? Right, and we were just talking about being early, and investing in other funds, being a gut investor, and that’s a strategy that worked out really well for you.
Well, Terra’s an example. Alex today, had passed on Terra. He’s super smart. He’s smarter than me.
Different Alex — Alex Paek.
You also are super smart. Thank you. But Alex passed on Terra, and we were talking about why, and he had some very good reasons for passing on it. My reason for investing in it is the same reason I invested in Uber, when Uber made no sense. It’s just obvious to me that Terra’s going to be spectacularly good.
I actually have a question on that. I saw the Uber deck that they raised with. You actually committed on that deck. Yeah. If you go back, when Uber just launched — And TK wasn’t quite involved, the founder was not going to be an operator — Travis? / Yeah Yeah. Well, at first, he was just the founder, although it wasn’t originally his idea. It was Garrett Camp. Exactly.
And you guys still made the investment?
We did. And you could actually see like I wrote about it on TechCrunch: this is spectacular, and this is when Uber was just black cars. I could already see how it’s a black car, but it’s also a phone with an app. You could put a phone with an app on anyone’s car, and it could become a taxi. And I wrote about that, and so you could tell I just got it. Look, I’ve made some bad calls; my first article about Twitter was that Twitter was going to be a stupid failure. So I mess up all the time. But it’s okay if you mess up because sometimes you’re right. And so I got it. And so for me, Terra, and a couple of other deals we invested in last year, are just obviously huge winners, and I’m very excited about them. I think when it’s all said and done, we will have made a lot of money in 2018, when those investments play out. Just like I think you guys will. Even though it was a brutal year. And so yeah, I invested with my gut, quite a lot. But now, my new guys, from Bitesize Capital, they’re very much number crunchers. I actually think that makes a good partnership, where I have my gut, they have the numbers; we fight, and if we come to a decision it’s more likely to be a good one.
Pretty cool.
But I just want to thank you. I’m only here because of Hashed, I only came last time because of Hashed, and if you guys hadn’t pushed me to come out here and become part of the ecosystem here, I would have never come.
We’re going to make you come out again, like end of this year. I will come anytime you want. Very cool. Thank you so much for your time. Let’s go have some dinner / Yeah, let’s do it.
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