Crypto unicorn tokens
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The three waves of crypto startup investing

Protocol Pipeline

Hello and welcome to Pipeline. I'll be on vacation next week so Pipeline will be taking a break as well. See you again on the 23rd. This week: how founders should split equity, investing advice you hopefully didn't follow, and what's behind the wave of crypto unicorns (or cryptocorns for short).


  • You know it's a crazy startup market when… founders are apparently charging VCs to pitch them.
  • Investing advice from two years ago you hopefully didn't follow. Scott Galloway's projections from 2019 were resurfaced by Susa Ventures' Leo Polovets as a "good cautionary tale about betting against tech and listening to overconfident predictions." Galloway had listed Tesla, Robinhood and Lyft all down 80% or completely disappearing, and considered companies like Peloton, Palantir, Uber, DoorDash and Twitter overvalued.
  • The fantasy startup investing fantasy. Visionrare launched as a way for people to buy NFT versions of "startup stock" and build a fantasy portfolio. Twenty-four hours later, it had to put its own fantasy on hold because it "underestimated the legal complexities" and is trying to pivot to a free-to-play model.
  • I'm not buying this billionaire burnout story. In a Twitter thread, Coinbase CEO Brian Armstrong tried to argue Bill Gates, Jeff Bezos and Larry Page all left their companies thanks to "the number of attacks from press, politicians, and trolls on CEOs (and rounds of congressional testimony)" making the job of a CEO not fun. But Armstrong should maybe listen to Bezos' own advice on it: "The best defense against speech that you don't like about yourself as a public figure is to develop a thick skin," Bezos said. "You can't stop it."
  • This is way cooler (and way more pixelated) than your average LP pitch deck.

Biz on Biz

The tidal wave of crypto unicorns

Crypto as a sector isn't new, but if you look at the investor frenzy surrounding the space, it may feel like investors are just catching on. In the last few weeks, several startups have become "cryptocorns." NFT trading platform Sorare raised $680 million at a $4.3 billion valuation and blockchain infrastructure startup Blockdaemon is now worth $1.3 billion after its $155 million series B. This week, a16z put its new crypto fund to use when it led a series B deal for Sky Mavis, the maker of an NFT game, which valued it at $3 billion, and also made its first investment in India in the country's second crypto unicorn, CoinSwitch Kuber.

The explosion of interest is part of the latest wave of interest in crypto startups, but there have been other waves before, CoinFund's David Pakman explained. A 13-year veteran of Venrock, Pakman went all-in on crypto earlier this year when he joined CoinFund.

  • First-wave companies were mostly focused on how people could buy and hold crypto. Publicly-traded Coinbase is the most well-known company from the era, having started in 2012, but others like Kraken and are still unicorns.
  • The next wave was DeFi, or decentralized finance. These startups were trying to recreate traditional financial models (like being able to loan cryptocurrency and receive interest). Crypto lender BlockFi is rumored to be raising funding at a $5 billion valuation, while another crypto lender, Celsius, announced it has $20 billion in digital assets under management.
  • Then a faster wave came: NFTs, or non-fungible tokens, which have roared to prominence in the last 12 months. NBA Top Shot creator Dapper Labs (where Pakman is a board member) grew to a $7.5 billion valuation and has been credited with mainstreaming NFTs. OpenSea also grew to a $1.5 billion valuation, but also ran into insider trading problems. (There are other NFT scams in the news this week.)
  • That doesn't mean the earlier waves are over when it comes to innovation. Another crypto exchange startup, FTX, made its CEO a billionaire already, rivaling Mark Zuckerberg's wealth when they were the same age, according to Forbes. Four years ago, Sam Bankman-Fried had reportedly never even bought a bitcoin. Now he's one of the richest people in the world.

The rising interest in investment means three sectors could also reach a tipping point soon, Pakman predicts.

  • The first combines the second and third waves by finding new ways to use NFTs as collateral to allow people to take out loans: NFT DeFi.
  • The second is DAOs, or decentralized autonomous organizations. A DAO unfortunately named "The DAO" was hacked in 2016 and lost a ton of money, but investors are taking a second look at other DAOs thanks to the rise of DeFi. (The one caveat is that DAOs aren't Delaware corporations, so VCs have to find different ways to help, invest in or otherwise work with them.)
  • Another subsector is stablecoins, an area that has shown increasing interest from investors — but also regulators, with concerns that it's going to face increased regulatory scrutiny.

There's obvious investor interest — but still a lot of smart folks walking away from crypto rather than taking the time to learn it, Pakman says. (If you've been reading this and are confused by the acronyms and terminology, it may prove Pakman's point.)

  • "It's a very hard industry to be a tourist. One of the reasons I came over [to CoinFund] is just that almost every other sector in tech is over-competed. There is so much money in every tech sector," Pakman said.
  • Crypto VC is increasingly well-funded, though, as its ability to mint cryptocorns shows. There's native crypto funds like Pantera and Polychain. Andreessen Horowitz is one of the largest players having raised $2.2 billion for its third crypto fund and hired a staff of around 50 people. Coinbase Ventures has become one of the most active corporate venture capital funds. Meanwhile, Coinbase's co-founder Fred Ehrsam started a fund, Paradigm, to focus on crypto.

"The only way to make any return is to be right about something that most people think you're wrong about," Pakman said. "Even after crypto has gotten to the point where it is today, you have literally the majority of the people on the planet either not caring or dismissive of it." The pace of crypto unicorn creation is clearly picking up, but it's still small compared to the rest of VC-funded tech.


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Inside Track

  • "... I think VCs need to be really careful over-pushing startups before they are ready on the PR/marketing front and founders need to be wary of VCs who 'win' deals with star power and promotion in early rounds vs. being focused on product refinement," wrote Slow Ventures' Sam Lessin in his "musings" on Clubhouse and "the challenges of dumping too much star power on platforms early."
  • Not all founders split equity equally. Carta's Peter Walker analyzed how co-founders actually split equity and found only 41% of two-founder teams divided it up equally (and it's less equitable for teams larger than that).
  • How should the government regulate digital assets and decentralized technologies? Andreessen Horowitz's Tomicah Tillemann, Miles Jennings and James Rathmell sent four proposals to the Senate Banking Committee on how to regulate a decentralized world.

Need to Know

  • Evil Ape lives up to its name. The NFT project developer disappeared with millions investors had spent buying its "Evolved Ape" NFTs.
  • Ozy may have more trouble looming. The media company reportedly told investors GV was going to lead its next round but there were supposedly no conversations between the firm and company this year, another revelation which raises more questions about whether Ozy defrauded investors.
  • A Tiger was tamed. Sequoia Capital China dethroned Tiger Global as the most active VC in the last quarter as it averaged 1.5 deals a day.
  • Super-sized seeds continue. I was a week early when I wrote about the arms race in seed funding because this week, NFX added its own $450 million fund to the mix.
  • Notion is now worth $10 billion. Who knew productivity apps could go viral on TikTok?
  • Zillow's former CEO is taking Rigetti public. The quantum company is merging with Spencer Rascoff's SPAC to go public at a $1.5 billion valuation. (If that name rings a bell, that's because founder Chad Rigetti is married to Susan Fowler Rigetti, the Uber whistleblower.)
  • Making moves: Khosla Ventures hired its first CMO, Shernaz Daver, who joined after advising GV for 10 years. All Raise CEO Pam Kostka is stepping down, and the VC nonprofit is running a new public search for its next CEO.
  • This week in Theranos: Safeway thought it was getting Theranos tech. Instead it got a mess. Plus if you're looking for a broader view of everything that's happened in the last month in court, I wrote a recap for Protocol's daily newsletter, Source Code.
  • On Protocol: VCs aren't paying attention to nonprofit tech. They should be.
  • Also on Protocol: Invest now, win later. Protocol's fintech team wrote an in-depth manual on what people need to know about the "buy now, pay later" craze.
  • Your weekend reading: Have you taken a side on "Who is the bad art friend" yet? It's a story about art drawing inspiration from life, but the very complicated litigious reality when it's someone you know. It's not exactly tech-related, but there's plenty of startup founders who have also faced similar accusations of "inspiration."

Five Questions for...

Redpoint's Jason Warner

Jason Warner made a name for himself as the engineering leader at Canonical and Heroku before becoming CTO at GitHub. In July, he switched tracks and joined Redpoint to be part of its new $725 million growth fund. Warner has a particular fondness for driving a minivan and is also a fan of sports teams like the Yankees, Penn State and the Cleveland Browns (just don't ask him any sports predictions).

What was your first job, and what's a skill you still use from it?

My very first job was at McDonald's. A practical skill that I took away from it was juggling multiple things at once. Whether working the register or the kitchen, when rush time hit, you had to keep track of a ton of things all at once. There's an energy and a surge of adrenaline that comes with it, and while it's super busy and chaotic, you can develop a rhythm and systems to keep it all in order. I also quickly learned that a kitchen is a team sport and the person that can best organize the team makes an outsize impact on the overall success or failure of everything.

What product or service are you totally, even irrationally, loyal to?

Nike and Lacoste. Nike because I have large and flat feet that require insoles and I found Nike sneakers accommodate this well when I was playing a lot of basketball. I have ventured out to wear Adidas in their new line, but I have a closet full of Nike.

Lacoste is a throwback to IZOD when I was a kid. I have lots of pictures of my siblings and me in IZOD gear that we got from thrift shops or department stores when the brand went mainstream and also had many knockoffs. I know the brand now has a bit of a "Patagonia in VC" vibe to it, but I can't help think of growing up every time I see the green crocodile.

What's one of the worst predictions you've ever made?

Nearly any and all sports predictions I make as a fan vs as an independent spectator or observer. Never let fandom get in the way of rational decision making!

What role do you think software should play in a venture firm?

I have a romanticized notion of VC, I think. Perhaps almost provincial and quaint. Firms should be amazing partners to help think through, build and grow your business as you see it. I love the idea of "trusted advisor" alongside "experienced partner." My own operational experience (41st Parameter, Canonical, Heroku, GitHub) has led me to understand that it takes a village to make a hugely successful business. I also had the distinct opportunity to see when it goes well and poorly. I want to be there for all founders the way I wish I had it going through my own journey. I am a team sport person and I care more about championships than I do my own "contract." This is the game I want to play and the way the game is meant to be played.

What company, outside of your portfolio, have you been most impressed to watch this year?

Figma. It's always Figma.


This fall, as enterprises everywhere decide whether to return to the office, continue working remotely or establish a hybrid working model, collaborative technology platforms will be more important than ever. Asana COO Anne Raimondi shares advice with business leaders as they move into the next productive work phase, whatever shape that may take.

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