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Kyle: How does Multicoin invest?

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Podcast audio notes by Kyle Samani, co-founder of Multicoin Capital.

The Secret of Multicoin Capital's Success

原文编译：深潮TechFlow

Note:

Review this round of bull market, one of the biggest winners in the encryption world is all kinds of encryption VC, if you have to give them a classification, my sorting is like this: fame and fortune, favorable unknown, favorable bad name, no profit unknown......

Some crypto VC more love money, some crypto VC more cherish their feathers, standing at the top of the VC is to make money and get the respect of entrepreneurs and investors in the industry, such as A16z \Paradigm\Multicoin Capital...

A16z is the master steerer of WEB3.0, Paradigm incubates and innovates in the application layer, and Multicoin Capital driven by paper is one of the biggest VC winners in the new public chain era. Investments include Solana, Dfinity, Algorand, Hedera Hashgraph, NEAR Protocol... Among them, the core investment is Solana...

In March 2018, Multicoin Capital led the Solana seed round with a unit price of $0.04 /SOL. By November 3, Solana's unit price exceeded $230 and its total market value exceeded $69.8 billion, ranking the fifth. There is no point in calculating return on investment. Multicoin Capital's investment methodology and portfolio are still worth studying.

Deep Tide TechFlow has compiled the audio notes of Blockcrunch's podcast interview with Multicoin Capital co-founder Kyle Samani to help you.

1. How has the investment theory of Multicoin Capital changed and developed?

Kyle Samani:Our firm's three core investment philosophies -- open finance, Web3, and non-sovereign currency opportunities -- give us direction. If there's one more investment theory to be added it might be something around monetization of creators or the meta-universe, and I think the three core theories are going to be themes that will be followed for the next decade.

2. Do you look for projects that fit into three core themes or is it more of a top-down approach where you see founders with a great team to invest in?

Kyle Samani:A little bit of both. Companies tend to focus on theory for the most part because we're analytical, and we spend 80 to 90 percent of our time on investment committees talking about market structure, Some of the more important issues, such as whether the existing problems in today's world are solved, what are the weaknesses of the current model or whether the team can come up with innovative ideas, and whether there are network effects of the project, will be less focused on the product and team.

3. Solana was one of your most successful investments. You invested against the trend and you wrote on your blog at the time why you started investing.

Kyle Samani:What gives me a firm conviction is the lack of progress on ethereum scaling. Ethereum launched in July 2015, and in its six-year history, expansion issues have not been effectively addressed. But we also see some smart people working on projects like Starkware and Dydx and a few others. For 6 years, Ethereum has not had a good expansion strategy, and we are not 100% confident about it, which makes me more confident about Solana. Although Solana has many technical risks, ethereum does solve some problems, which is why we double down on Solana.

4. What is your process when you make a new investment? For example, what do you know is the main thing that must be done?

Kyle Samani:This is the same as most VCS, but we spend more time analyzing the market structure, understanding how the market works and what levers the team can use to move forward.

5. Would you never invest in something because it might contradict your thesis?

Kyle Samani:I would be very skeptical of long term value capture in some products, such as yield/liquidity aggregators, where we get niche projects all the time but we don't invest in them. There is a delicate balance between being completely paper oriented and being opportunistic and really open, for example with a project like Helium, which we couldn't predict when we started, we analyzed the economics of it based on history, and from studying Helium as a product, we got some courage to get involved in this kind of project.

6. Hearing you say that the initial predictions for Solana and Helium were conservative compared to reality, how important is it to be able to predict actual results for investing in cryptocurrencies?

Kyle Samani:I believed Solana would be a top five cryptocurrency and have said it several times in private that it is now very close to sixth. Helium is very difficult to predict, they have different networks, they are developing iot, 5G, and other networks, and there is no one standard for success. One thing I realized is that it is very difficult to predict when you first go in, you just need to establish a minimum threshold for yourself.

7. What do you need to check to make this conclusion before your theory becomes invalid?

Kyle Samani:It's hard to generalize about this because proving theories to be invalid is a gradual process, and some teams like Starkware are working on technical and mathematical problems that are extremely difficult and require patience, they just need to have enough focus and dedication, which is the most important, especially when the product is formed before.

8. In an interview three years ago, you thought ethereum had a 20% chance of success. Have you changed your mind now?

Kyle Samani:I don't think ethereum will go to zero, but there's a 50% chance that its correlation will decline over the next three years.

9. What do you think is the best investment thinking frame and how to determine the probability of an event?

Kyle Samani:I think it's very difficult to determine the probability of an event, but the most scientific way is to try to list the main types of risks that are being taken. There are generally the following:

- Technical risk (unresolved/near unresolved)

- Execution risk (what is the market)

- Leverage (how the agreement gains traction)

10. What do you think of opportunity cost?

Kyle Samani :It is widely believed that 90% of all decisions made by all people are value-destroying. We typically don't try to reforecast our entire portfolio every quarter. Instead, what they do is review the decisions they make every quarter to analyze whether it's due to skill or luck.

11. How do you balance criticism and praise when a team member makes a mistake?

Kyle Samani:This is a basic management problem. Different people respond to criticism and praise in different ways. For example, I actually prefer criticism to praise. Back to this question, as a team, we have known each other for more than ten years and are very good friends. We know each other well and have developed our emotional and collaborative abilities. We are sincere to each other. As the final decision maker on the investment, I usually give feedback to other team members that they don't get too emotional. I'll let them know how we made the mistake and give them encouragement to do better next time.

12. How do you limit your portfolio to a certain number of positions, how can you invest a certain amount at any one time, or how do you make sure that you are focused and not spread out in your highest conviction papers?

Kyle Samani:Multicoin prefers concentration over diversification, there is no particular approach to this, it is just a function of risk tolerance.

13. Do you think most of your returns over the past three years have been driven by personal strength? Do you foresee this becoming an advantage or diminishing over time?

Kyle Samani:Solana is clearly in a cycle of investment, do the best in the core extensions, key governance issues, data storage and any similar problems most solved, still unresolved problem about Bridges and some zero knowledge proof, but investment opportunities are from technical solutions to consumer products. Investing in "the next Snapchat" is completely different from investing in something like Solana, and that's probably not our style.

14. If you could only focus on one vertical in the crypto industry to dedicate your research to over the next one to three years, is there one vertical that immediately comes to mind?

Kyle Samani:I think the most interesting area is the protocol that looks like Helium, a protocol that incentivizes people to do things in the real world by generating real world value.