Race Capital: Driving Web3 Forward
On this week’s Project Serum Twitter Space, Chris McCann from Race Capital sits down to discuss all things crypto. As a venture capitalist (VC) he offers a unique perspective on what investors look for in a potential crypto project. He also offers some great insights on the future trajectory of the crypto space and the overall digital landscape.
Chris, how did your journey as an investor start?
Yeah. I was going to say that when we first met it was before the Bitcoin Genesis event, so this was pre-crypto. But I guess to answer your question: I started more on the founder’s side.
I started and ran a company called Startup Digest, which was a super early tech newsletter before tech newsletters were a thing. We got up to a million subscribers, covered almost every major metropolitan city around the world, and then the company was acquired by Techsaris.
After that, we had built a bunch of internal tools to manage our community ourselves and we tried to spin that out and turn that into its own independent company. Think of how current crypto projects are using Discord today. We were trying to do a lot of that stuff way back in the day.
Long story short, companies had no idea what we were trying to do. This whole concept of decentralized communities and ecosystems was not really prevalent at the time. And so, we raised some money but the company eventually folded. I helped my team find other things to do and that’s what lead me down more of the traditional “investor” path.
After the company folded, I ended up joining Graylock partners back in 2014. Graylock is one of the larger, traditional, Web2 investment funds. One of the biggest in the world. And, I guess, it’s the oldest by vintage. So, I joined that to initially start all the community ecosystem programs and I ended up focusing on all the emerging market ecosystems we were looking at at the time — VR, eSports, autonomous vehicles, robotics, etc.
Crypto was really just being released, I mean it was really just Bitcoin at that time, so back in the 2013–2014 timeframe Graylock wound up investing in Blockstream, Zappos, and Coinbase kind of all in that same timeframe. And that was really my first foray into what would turn into all of this stuff.
What type of Defi projects are you looking at right now?
Because I was one of the initial seed investors in Solana itself, a lot of our investments have tended to be Solana-centric. Just because I know a lot of people in the space and a lot of people on the Solana team itself. And I think in the longer term, the speed and scalability come into play a lot. If you need to scale these projects to hundreds of millions or billions of users, I just don’t see any other chains being able to scale to that level or degree.
All that being said, I think people assume that I’m some type of Solana maximalist and I’m completely, religiously against any other things. But I’m more than willing to play with new things, try things out, and use other stuff. I still have some ETH, I still do some pool stuff there, and I actually just bridged a bunch of assets over from Solana to the NEAR ecosystem just to play around with it and learn it.
Again, even if you want to be critical or speak out negatively against any projects, you actually need to use it and try it yourself first. You can’t just dismiss anything for the sake of it. I feel pretty strongly that you actually need to use it and go through the full process. Then, and only then, if you have legitimate criticisms against it you can speak from a more intelligent perspective.
One of our most recent investments that we announced recently is a project called Altbridge — which builds this bridging connection layer across various L1 ecosystems including Solana and some of the other major ones. And so, for that investment, I tried a bunch of the bridges like NEAR and tried some of the other ecosystems — basically just played around with a bunch of things. To-date so far, the vast majority of our investments have been within the purview of the Solana ecosystem but I’m naturally curious about most of these other things, so I’ve definitely tried them all even from a personal perspective.
When you analyze Defi apps now, what are some of the factors that you look at?
Giving context from the birth of Solana itself until today and the initial defi ecosystem, a lot of the basics weren’t there. There wasn’t really a liquidity network — aka Saber. There wasn’t really a borrowed lending markets — aka SoLend, there just wasn’t a lot of the basic components.
And so, I think a lot of the basics that you probably saw in the Solana Hackathon V1 and V2, was you just saw people taking other existing projects and building them on Solana. “I want to take Curve and I want to build it on Solana. I want to take Compound and I want to build it on Solana.” And it was a fairly easy thing mostly because Solana wasn’t EBM compatible, you basically had to build these things from the ground up and it kind of built its own little ecosystem.
I think now, maybe we’re not 100% there, but we’re finally getting to a point of, “Ok, there’s already a group of DEXs, there’s a group of aggregators now, there is a borrowing lending market, there are liquidity networks, there’s government staking through Tribeca, etc.” All the base components are here.
Now, the questions become kind of twofold. One, how can you assemble the things that are already there to make newer, better experiences on top, or extract things from the bottom. And, two, the far harder or more interesting question is now that you have these things in place, can you build something that uniquely lives on Solana that you don’t necessarily see a common equivalent from outside.
The second question is a lot harder because the founder would need much more imagination and it would be much harder to bootstrap financially to start with because you don’t really have an easy analogy to point to. But I think in the longer run, these things that are enabled by the order book or the transaction speed, or whatever, these are going to be the things that are probably more important in the longer term. But these things do take time.
What do you think are going to be some of the cool innovations coming to blockchain outside of DeFi?
Outside of DeFi, the more obvious one would be NFTs. NFTs started super small and sort of grew into a whole burgeoning ecosystem on top. They’ve grown dramatically from the start of 2021, where it was basically zero. The velocity has been much higher.
There are also some unique elements to Solana NFTs that you don’t really see from NFTs on Solana. All of the images, videos, files, and data is in decentralized storage from day one. And, that’s not how ETH NFTs are constructed. Things are put through OpenSea and the APIs are effectively centralized. Decentralized storage is not the default option. Some projects do it, but it’s much less common in other ecosystems than on Solana.
That’s on the NFT-side. Which kind of ties into the DAO-related side. So now you have a lot of these NFT projects that have a treasury, that have some funds, and have some sort of DAO governance structure. And, you see more governance on the peer DeFi side with Tribeca and Lock governance and Lock staking. And in these areas things are still kind of “new-ish” so we’re still probably a few generations behind some of the more advanced, crazier stuff you see around chains like Ethereum. But I think Solana will reach Ethereum and start to do its own things in this regard.
The fourth one is an area that we don’t tend to focus on much, but there’s a ton of stuff going on in the gaming ecosystem, gaming items, and gaming infrastructure. We tend to focus more on the lower-level core infrastructure software stuff and not as much on the pure application side. But you can’t deny that there’s a whole movement toward building this sort of stuff on top of that lower level.
And last but not least, the one that we’ve seen a little bit of experimentation in but could be really interesting is the whole peer SPL side. One of the apps recently created on Solana launch, Wumbo, is allowing creator tokens to be made natively as SPL tokens.
I also think Raptor, Serum order books, and all that sort of stuff are newer, weirder, funkier concepts. But, because of the low transaction cost, I think you’ll have a lot more people play around with these social networks, content networks. These are in a super early phase. There are not too many people playing around with these types of applications, but it could be one of the weirder, more unique things we see come out of Solana because it would be far harder for other L1 chains to do.
What do you think about the metaverse?
Oh man. Let me answer this in two parts. First, what people imagine the metaverse would be. And then, two, the more interesting, broader philosophical concept of at least what I think it is.
I think when people think of the metaverse they probably imagine a digital world, VR, like you’d be hanging out on a digital beach. I think it will be cool, but I think that will be more of a niche thing. I don’t know if that will necessarily be the normal perspective on all of this stuff. I mean we are human beings and we do live in physical reality, for instance. But, I do think these experiences can be super cool and I enjoyed playing around with the more realistic VR stuff when it first came out.
The more interesting, and slightly more subversive concept is the metaverse, as this big encapsulating thing, where our digital life ends up being worth more than our physical life. And that could be as simple as your metaverse wallet vs. your bank account — which one is worth more? And when that flips for you, you’re living in like a new, digital reality whether you like it or not, and whether or not you realize it as such.
The percentage of people that will end up living in this weirdly digital reality is small, but probably going to be bigger than most people realize. And it’s also far more disruptive than people realize. Once your life takes on “digital form,” your consumption habits and how you live your everyday life start to take on a much different shape.
Race Capital Taking the Lead
Thank you to Chris McCann for taking his time to hop on this week’s Twitter Space interview. With his innovative thinking and unique insight, it’s no wonder that Race Capital is out on the leading edge of investing in the future of the digital world.
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