The Inquisitive VC: Haseeb Qureshi — Dragonfly Capital Partners
Haseeb Qureshi is a Managing Partner at Dragonfly Capital Partners, a leading crypto-focused VC. Haseeb's previous experience includes being a Partner at Metastable, working at Earn.com and Airbnb. He is an effective altruist and was previously a professional poker player.
We talk about adversarial thinking, decentralized teams, the best advice he has been given, effective altruism, Paradigm and more!
Thanks to Patrick Chang for the introduction!
NA: Thank you for joining me. I’ve been keeping up to date with your stuff over the past year and a bit. Definitely excited to have a chat with you.
HQ: Thanks for having me. I was looking forward to this.
NA: Fantastic. I just wanted to start with your journey. Could you talk a little bit about your background and how you actually got into crypto and then VC?
HQ: Sure, so, before I ever got into the tech industry, I actually used to be a professional poker player. I did that for about five years from when I was 16 until I was 21. Sort of made a lot of money at a young enough age that I kind of figured out a lot of things that people in crypto took a long time to figure out, which is that the relationship between money and happiness is pretty tenuous when you actually look closely at people who make a lot of money very quickly.
So, I left poker when I was 21 and although I studied English and philosophy in school, I decided I really wanted to go into the tech industry. So, I moved out to San Francisco and learned how to code and basically in the span of about a year, I was able to get a job at Airbnb.
Getting into Crypto
I was working on payments fraud and it was there that I really caught the crypto bug. I had known about crypto for a while. You know, some of my friends had been early investors in crypto. I remember buying some Bitcoin, but I saw it as sort of like an internet curiosity, kind of this weird subculture and maybe a better way to buy drugs.
It wasn’t until during my time at Airbnb that it really clicked for me what crypto was. I never worked on payment systems before working on payments at Airbnb. Airbnb, which is a digital-first global company, doing payments around the world you sort of assume that things just kind of happen automatically.
But in reality, working on the payments code, I realized that the international payment system, it’s just a fucking mess. It’s just a complete ball of spaghetti, right? There’s like, automated CSVs getting emailed around at midnight that people are manually reconciling and there are some places in the world that we literally can’t even route payments.
So if somebody created this automated system, they’re like, we’ll mail a cheque based on an API call. Because Airbnb is global, it’s a travel company, right? People want to travel everywhere, but payments don’t work everywhere like money doesn’t work everywhere.
It was very clear, the mismatch between the global digital-first world that we have today and the way that all these systems were built, they were built for constraints from 50 years ago. As an engineer, your first instinct, when you see a system like this, it’s so poorly designed is, “Oh, we should throw this out or we should start over”. I realized, “Oh, that’s what crypto is”.
Crypto is a bunch of engineers and economists and political scientists and game theorists and cryptographers who got together and said, if you had to do money again, knowing everything that we know now, how would you do it differently?
Maybe you would make it digital-first and you would make it secured by cryptography. You’d make it decentralized and you’d make a monetary policy algorithm, and all these different ideas all coming together. There’s no way that the way we did money 50 years ago is the way that we’ll do money 50 years from now. In the year 2070, there’s no way it’s going to look like this.
I don’t think that in the future we’re all going to be paying each other with Bitcoin, but I do believe that what happens here in the crypto industry is going to change the way that money works forever. And that’s what made me decide that I wanted to leave Airbnb and jump into the crypto world.
First Experiences in Crypto
At first, I didn’t really know what I was doing. I started by doing some security research and covered a front running attack against Bancor, which has now re-entered the limelight as one of the first, really big ICOs.
Then I worked for a little while at 21, which became Earn.com, which got acquired by Coinbase. After that, I started working on a stablecoin startup with a buddy of mine, Ivan Bogatyy.
I dragged him from Google Research, where he was working on deep learning at Google to come work on crypto with me. He was very early in crypto, relative to myself. That was when I ended up getting the introduction to Naval and he pitched me on joining Metastable.
Joining Metastable and VC
Metastable, at the time, was one of the largest crypto funds and one of the oldest. It was first founded in 2014 and had a very well-respected pedigree as being a lead crypto fund. He basically asked me if we’d be interested in coming on board as partners to help run the fund.
It was honestly a very unexpected opportunity for me because I had not been thinking at all about going into investing. I kind of didn’t really know that well what it even meant to be a crypto hedge fund. That whole idea was very opaque to me.
The pitch that Naval gave me, which was really what resonated, it was like, if you build a startup, you get acquired by some company (we had some acquisition offers for the startup we were working on) and then you’ll be sitting around trying to ram things through legal and you’ll get blocked and you’ll have these company all hands and it’ll be super boring.
What you really want and what’s really interesting is if you’re an investor, you get to look at everything, you get front row seats to the whole industry and you get to decide what’s the most exciting and innovative thing happening in crypto. You get to zero in on that thing and help support that and make it a reality.
Like that is the best seat in the house, to an industry like this. I bought it and so me and my partner, we both joined Metastable Capital and that’s how we started our career as VCs.
Although Metastable was a hedge fund, it was really a name, the way that they invested was basically like a VC firm. Then from there, I ended up leaving Metastable a little bit later and joining Dragonfly, which is where I currently am. I’m now a Managing Partner at Dragonfly Capital, which is a $100 million dollar crypto venture fund. Here what we do is very, very pure venture and haven’t looked back since then.
NA: That is quite a different journey compared to the other people I usually speak to. I actually met Naval once last year when he came down to New Zealand. Super interesting guy.
HQ: Yeah, Naval’s an amazing dude. I’ve learned a lot from him.
NA: Related to your journey with Airbnb. What would be one valuable thing you learned at Airbnb that transferred with you to the crypto space?
HQ: That’s a good question. So, at Airbnb, I was working on payments fraud, and Airbnb and every big internet company have very sophisticated industries of fraudsters that exist around the world.
People very literally were professionally making money in organized structures from defrauding internet companies. So, of course, Google, Facebook has lots of ad fraud. Airbnb, PayPal, you know, all these companies that deal with payments, especially large ticket items.
If you’re like an Amazon, right? Let’s say that I managed to fraud you. I can steal your credit card. I can use it to buy some groceries. How do I turn that into cash? How do I turn your Amazon purchases into money for myself as a fraudster? It’s really hard to do, I’d have to deliver goods to myself and then fence them.
Whereas with Airbnb, it’s actually really natural, it’s perfect. You have these high ticket items where nothing is really weird. You just create a listing that’s fake, you steal someone’s account, and then you buy the fake listing. No one ever stays anywhere, but nobody ever knows because Airbnb has no way of knowing.
You were basically just able to monetize, stolen credit cards and stolen accounts, it’s very attractive to fraudsters for that reason. So, our job was to protect the entirety of Airbnb surface area from sophisticated attackers, trying to take advantage of it.
What you get from that experience is that you get very, very, good at adversarial thinking. Any system that you see, how could I exploit this? What would somebody who’s just trying to wreak havoc and take as much money as they can out of the system, what would they do to exploit it?
It’s a never-ending game, a cat and mouse continual process. That style of thinking is incredibly useful in crypto. Security is the bedrock of every cryptosystem and in order to think clearly about how the systems will behave under adversarial pressure, you have to be able to think adversarially.
You have to be able to think if I’m an attacker, what am I going to do to break the system? As a crypto investor, I can tell you, it’s surprising the number of times that I’ve been pitched on a protocol. I’m an investor, I shouldn’t be able to do this, but I can have a look at your protocol and tell you if I was an attacker here’s what I would do. And they’re like, oh crap, it did think about that, I guess that isn’t going to work.
Being able to think very, very critically about how I would break your system is a very important part of being a good crypto investor.
NA: For sure, I can see exactly how that would be so important. In my readings online, I’ve come across investors like Avichal from Electric Capital and Elad Gill. They believe that decentralized teams don’t work and this will lead to re-centralization of talent back to Silicon Valley. I wanted to know what your thoughts on that were.
HQ: Unsurprisingly, because I have a global firm that is not exclusively in Silicon Valley, I do not believe that. For some people, you can follow the incentives here and it’ll predict what you’re going to say, so that’s a bad sign that what I would say has any content.
What I would say is that one we’ve already seen a lot of decentralized teams be quite successful, if the claim is that it has not happened or is not going to happen. So far, the track record of centralized teams has been relatively dismal. I mean arguably the most successful company in crypto is Binance and that is completely decentralized. If you look at protocols, Bitcoin and Ethereum are decentralized.
The centralized Silicon Valley VC coins, so far, have a pretty terrible track record. So, I think if you’re, just doing the accounting of what’s been most successful and what does it look like? I don’t think you get a lot of points in favour of the Silicon Valley ones.
One other thing I want to add, of course, is that you might look and say Coinbase, isn’t Coinbase great. Of course, Coinbase is a great company, they’ve been very successful. But Coinbase is not the largest exchange in the world by volume or by revenue.
Almost all the largest exchanges in the world are in Asia. They’re not in Silicon Valley. Even just on pure numbers, really the number of unicorns, three-fourths of the unicorns in crypto are in Asia, and I think only two of them are in Silicon Valley. Which are Kraken and Coinbase. So, not an amazing record of this narrative. Right now, 14 of the 16 crypto unicorns are not in Silicon Valley.
NA: Yeah, that’s a fair point. A question about the DeFi space. A lot of the major protocols or projects that seem to be doing really well, and are a lot more in terms of proportion to other projects in the space are lending, derivatives and stable coin type of projects. Is that also the majority of the types that you’ve been seeing and do you happen to see any other more nuanced and interesting applications in the decentralized finance space?
HQ: Yeah, I think you’ve hit the big ones. I think there are other interesting categories. Of course, Oracles, insurance. So I think we are seeing Nexus Mutual as one example, but I suspect there’s going to be a lot more iteration in the space beyond just Nexus Mutual.
Synthetic assets, which I guess are derivatives or kind of the same boat. I think you’ve got most with them.
NA: Yeah. But do you see other kinds of applications coming out of the growth in the ecosystem? Especially to do with capital formation and the whole previous ICO kind of buzz, but a different way to raise money in a decentralized way?
HQ: I do think that. That’s a compelling area that I’d like to see people iterating on. But the honest answer right now is it’s very difficult for regulatory reasons and of course, because of the associations with ICO, which are at this point, you know, very, not invoked. I think it’ll take some time and honestly, I think you need to wait for the stank to wear off before people can really start touching and innovating in capital formation again.
We’re very interested in it. So, DAOs are starting to come together. We’re starting to see some capital formation happening that way, but it’s still a bit gingerly. You can tell that people have been burned and they’re a little bit afraid to get too creative in the ways that they think about capital formation right now.
The big issue, I think with ICOs was the lack of incentive alignment between founders who were able to raise tons of money pre-product and the lack of investor protections in ICOs. Almost everybody, myself included was, was saying, Hey, this is going to end badly and surprise, surprise, it ended very badly with lots of scamming and not delivering anything.
Of course, nobody was returning the money unless they were forced to by the regulator. There were a few cases actually, but the vast majority almost never returned the money. I think if we, at some point see some kind of structure, perhaps similar to DI ICOs that Vitalik suggested a couple of years ago, as being a way to better align incentives between investors and projects.
We also see things like Gitcoin and other ways of sort of funding public goods, but they can certainly be extended to companies in general. I think there will be more innovation here, but it will take some time before people are comfortable with it.
NA: A bit more general, what is the most useful piece of advice that you’ve been given?
HQ: That’s a tough one. I was given two pieces of advice that I think actually kind of work together.
First one was from my best friend, I think I was 17 at the time, he gave me the advice, “Say yes to everything.” I think that was very, very useful advice for the vast majority of my young adult life.
Then it was really about a year and a half ago that I got this really good advice from Naval, which was, “It’s probably time to say no to almost everything.”
That I think is probably the right way to think about the way to structure your life. So if you’re a young person tackling your career or you’re trying to build up your own identity. I think earlier on in your life you want to take on as many things as you can, try as many new things as you can, meet as many new people as you can, and sort of explore as much of the world as you can.
I think as you get older and you get into your local maximum, you figure out like, okay, great, I’m in the seed of opportunity now and I have the ability to basically have my pick of what I want to do next. It takes a while to get there before you get there, you have to say yes to a lot and to do a lot of bullshit to build up your skills and figure out what your niche is going to be.
Once you have that, the most important thing is to be patient and to learn to say no to things, because once you have opportunities, then many people are going to pitch you on things. Like, Hey, why don’t you come work with me on this? Why don’t you join this thing? Why don’t you do that? The hardest thing to do in that situation is to be patient and to wait, because the difference between the best opportunity and the first opportunity is really, really, big. And it’s very non-obvious how big that difference can be.
So for example, you know, after I left Metastable if I had joined the first opportunity that somebody had pitched me on, that seemed remotely interesting, as opposed to me now joining Dragonfly. I would guess that there’s like a five to 10 times difference in how valuable the role that I took now was from the first role that I was offered.
Of course, I can see it cause I can see what happened to that company. What happened to those people? It’s really, really striking, you know, but it’s not surprising because opportunities like most things in the world are power-law distributed, once you get to a certain point. So the difference between the best opportunity and the worst opportunity is exponentially different.
So if that is, in fact, true, which at a certain point, once you get to power-law distributed opportunities, which are not there in the early days when you’re very young, I think opportunity’s very normally distributed where it’s like, I can get a job here or I can get a job there, and this place is a little bit better than that one, but they’re both kind of good.
When you’re getting your first job out of school, there’s no parallel distribution, right? Like you’re basically going to get like, yeah, I can work at Google, I could work at Uber or Workday or whatever. And Workday is not as good as Google, but it’s not like 10 times worse than Google. But at some point in your career that does actually happen and at that point, your career, patience is the most important thing and then saying no to things is important.
NA: That’s an incredible pair. They actually work really well together. I’ve seen that you described yourself as an effective altruist. I was wondering if you could talk a little bit about what exactly that means for you.
HQ: Yeah. So effective altruism, essentially what it means is that you’re somebody who’s committed to very carefully thinking through what is actually the best way to help the world as much as possible, and to an extent also what it means to be a good person.
And in my mind, what it means to be a good person is not just to be a good human being to the people around you, the people you interact with, but also to leave as much positive impact on the world as possible. I think when most people think about what it means to have a positive impact when they think about things like maximizing their portfolio, or they think about things like, you know, you know, AB test clicks on their landing page, they try to be extremely empirical and they try to use the best tools from statistics and science and rigour in order to make those decisions.
When it comes to improving the world, people, for whatever reason, they just kind of turn their brains off and they sort of think very hazily of like, I’m going to try to help out if my local, this or that, or I’m just going to make a good show of being a nice person. Which is very strange because I think helping the world is probably one of the most important things that we do as human beings.
So if anything, we should be more rigorous about that, than in the other activities of our lives. So, I think what effective altruism means for me is to bring that rigour and seriousness to how I try to help the world as much as possible. So I can have as much of an impact as possible.
For me, what that means is that I believe the way that I can have the most impact, because I am privileged to have the ability to earn a significant income, working in a lucrative industry like in the tech industry and like in venture capital, instead of going directly into rolling up my sleeves and doing some kind of direct work in a charity or doing something directly to improve the world, is to instead use my competitive advantage, devote resources that could pay two or three or multiple people to go and do the work that I would otherwise be able to do directly.
Since I came upon that strategy, which in effective altruism the strategy is known as earning to give, which is the idea of going out and getting a high income earning career so that you can devote those resources to high-impact charities that can do more work than you could otherwise do yourself.
So, I committed to donating a third of my pretax income to high impact charities and I’ve been doing that for five years now.
NA: Oh, that’s amazing. My final question is what’s the latest, publicly announced investment you’ve made. and why did you make it?
HQ: Our last, publicly announced investment was in Paradigm. Paradigm is a block crypto trading platform. Basically it’s a place where high volume traders, generally institutional traders or market makers or folks like that. They basically come together on a common platform and are able to engage in practice discovery so they can sort of negotiate prices and decide like how they want to price and trade, and then be able to clear it on another exchange of their choice.
With Paradigm, you come on Paradigm and all the market makers are there and you just talk to the market maker directly when you negotiate a deal and say, hey, I’m willing to do it for this, you can send out your order to multiple market makers simultaneously and they’ll send you quotes.
The funds can be on any exchange and the trades gets minted on Paradigm, but then the actual exchange of capital happens on whatever exchange you want. So that allows you to move the price discovery to Paradigm, and then use the exchange purely as a settlement layer, which is very new.
Seeing their attraction and seeing the great team, seeing all the innovation that they’re bringing to the space, and for us, it was just a no brainer investment.
NA: For sure. I can see how that would add a lot of value to those large traders. I had a great time talking to you Haseeb. Thanks for taking out the time.
HQ: This was great chatting. Thanks for going through those questions. It was fun.
