These 2 areas of crypto have real, long-term value, says an investor

Avichal Garg, managing partner at Electric Capital

This article is part of Tech in Asia’s partnership with The Twenty Minute VC where we publish the revised transcripts from the podcast’s 20-minute interviews with today’s most successful and inspiring VCs. This is heavily revised from the show’s original transcript. For the full interview, go here.

Avichal Garg is the managing partner at Electric Capital, a crypto asset management firm investing in both liquid and illiquid tokens. They personally invested in Anchor, Bitwise, Basecoin, and more.

Garg is a part-time partner at Y Combinator and was director of product management at Facebook. Before that, he worked at Google, started and sold a few companies, and invested in startups, including Optimizely, Boom, Color, Cruise, Instawork, and CaseText, among others.

I’m thrilled to be joined by him in this interview, where he shares Electric Capital’s story and some meaningful insights on the crypto space.

How did you get into the crypto space and why did you start Electric Capital?

I’ve spent most of my career as an entrepreneur and angel investor. I’ve invested in over 50 startups at this point. I’m an expert at Y Combinator, so I’m always spending time trying to figure out what people on the fringes of society and technology are doing with their time.

Back in 2013, a friend recommended reading the Bitcoin white paper. So, I sat down and read it, and I was just blown away. I thought the technical insights were brilliant and that the implications of it—if it worked—could be world-changing.

I tracked the space for a few years as a hobbyist, then after I left Facebook, I explored various areas, went to conferences, and read more white papers. As the market was going crazy in the middle of last year, a lot of people in the space asked me to help them with their due diligence, custody, and all those things. They said, “Can I just give you money to do this?”

My co-founder from my previous startup and I were already doing that for a year out of interest. We said, “Hey, if people want to give us money to do this, we should consider turning it into a business.” So, we decided to start a firm around it.

How does angel investing in tech compare to crypto investing?

I think they’re actually very similar. On a high level, there are two categories of crypto companies: liquid (e.g. bitcoins and Ethereum) and a number of early-stage projects that may be liquid or illiquid.

Crypto companies or protocols are going to have the same challenges that any other company has—everything from hiring the first product manager or finding a great designer to understanding the go-to-market. What is my brand positioning? I have 15 people on my team now—how do I actually structure this team?

So, when we think about which crypto projects are interesting, we look at the team, technology, market, and traction, and evaluate them on the same dimensions. But the way you measure them, the way you think about where the value will accrue, and the business model might be different.

How do you think about liquidity from consumer investing and external investors’ perspectives?

It’s a double-edged sword. On the positive side, many of these protocols are companies that can go public in two to four years, instead of seven to 10, and it’s a huge advantage from an investor’s perspective. On the flip side, you have to think about how to manage that liquidity.

Partly why I think there’s an opportunity for new firms is that you both have to do some of the early-stage work and, in two years, think about how to manage that public liquidity. A lot of what the firm has to get good at is both early-stage and later-stage thinking and processes and how to use software to do all of that.

Where are the majority of ICO dollars going today?

What do you think about the impact of government and regulations on the crypto space?