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Protocol | Fintech

Alfred Chuang was the ‘CEO’s CEO’ of Silicon Valley. Now he wants to make his name as a VC.

The BEA founder leads a fund focused on tech for the post-COVID world, including crypto and blockchain.

Alfred Chuang was the ‘CEO’s CEO’ of Silicon Valley. Now he wants to make his name as a VC.

Race Capital's Alfred Chuang.

Photo: Race Capital

Alfred Chuang became a Silicon Valley star in the '90s as co-founder and CEO of BEA Systems, one of the most successful infrastructure-software companies of the dot-com era.

That ended in 2008 when Oracle launched an unsolicited takeover bid. Oracle prevailed in that fight, eventually acquiring BEA for $8.5 billion.

Chuang stayed in tech afterwards, starting Magnet Systems, an ecommerce chat startup backed by Andreessen Horowitz. Ben Horowitz invested, describing Chuang as "the CEO's CEO."

Now Chuang is trying to be the VC's VC. He co-founded Race Capital last year in the face of the pandemic with an eye to invest in new technologies expected to emerge or grow more rapidly in the post-COVID world. One area Race Capital is focused on is fintech, including blockchain and crypto.

In an interview with Protocol, Chuang shared the firm's views on fintech and blockchain, including his reaction to the Coinbase direct listing and the confirmation of Gary Gensler as the new head of the Securities and Exchange Commission.

Chuang also reflected on the offbeat strategy he embraced to become a more effective tech executive. To develop his communications skills as a young Silicon Valley manager, Chuang took stand-up comedy classes in Sunnyvale. That taught him a fearlessness that helped him rise through the ranks at Sun Microsystems and launch BEA. And now, he says, it's helping him seal deals with entrepreneurs.

This interview has been edited for brevity and clarity.

Why turn to venture capital now?

My DNA is to build companies. That's really what I was trained for. I really like early-stage stuff because there's nothing like when you open the door for the first time and you see either one single founder or a small group of founders, and you can actually make that kind of contribution to that. It is a very daunting journey. I didn't have anybody to help me when I did it at BEA.

The best time to invest literally is right after a crisis. Now, our crisis is not over yet. But generally, that brief 18- to 20-month period is the best time to reinvent many aspects of tech.

Why did you decide to include fintech as one of the areas to focus on?

A big part of our focus is data infrastructure. My background is transaction processing. So, that applies to obviously everything about fintech, everything about crypto.

BEA became a major infrastructure software company when the web was just getting started. How do you reflect on that experience as an investor, given that infrastructure is a critical area for fintech?

The exciting deals are infrastructure deals in fintech. It is very interesting. When I first started going deeply into this, I said, "Oh my God, this insurance thing is so boring. I can't imagine I'll get really excited about somebody doing some kind of insurance company." But as we peel the onion, I said, it's the same old stuff that's what I do for a living. We now have really great, incredible technology now from a hardware and a systems level to accelerate each transaction to a point where I never imagined it could be done that fast. I'm really excited about where this stuff is going.

The new SEC chief is an expert in cryptocurrency and blockchain, and he's expected to push more regulation of fintech. What's your reaction to the confirmation of Gary Gensler?

In the past few years [I went] from believing cryptocurrency to be just kind of a fluke to thinking that that's an inevitable trend that we must move into. Our large IT organizations are kind of like a classic American garage. We keep packing stuff in. We can't throw anything away. So we still are using old mainframes. We're going to need a major reboot. This major fintech trend moving into crypto will give us the opportunity for that reset. I think the really smart regulators, they all know that. There's a race going on. It's a tech race among countries on which one will get there first.

You took stand-up comedy classes to become a more effective tech executive when you were just starting out in the '80s and '90s. Is that still helping you today?

I made a comment yesterday to my other partner [when] we were [working on] a very significant deal that we want to invest in. She asked me: "Alfred, were you nervous when you presented because we really wanted to buy this company, or was the entrepreneur actually more nervous?" [I said,] "I'm nervous about nothing." It's just tactics. I think the stand-up comedy part allowed me, as a very introverted person, to separate the strategy part, which is you have to come up with the term sheet, and the tactical part, which is how do you sell the term sheet to a founder. The selling never ends.

After an entrepreneur [presents to us], the partners [would] say, "Wow that was impressive." What is impressive? Because they were able to clearly articulate and project the level of competence that we should back them. Communication is where the other [people] enjoy talking to you, the kind of communication where you sit there, they just talk for an hour, and you walk out [and say] "My god, that was so much fun." It's a stand-up comedian gig. I would recommend it to everybody, especially the people who think, "I'm an engineer. I'm never going to break out." Look at [Coinbase CEO] Brian Armstrong. He is king for the day. Or king for the week. He's a very introverted guy. But now he got put on the bandstand. If he had asked me [for advice, I'd say], "Sunnyvale Comedy Club. Go take a class."

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