Lisa Cuesta is currently a Principal at NextGen Ventures. She lives in New York, one of the hubs for cryptocurrency, and enjoys connecting traditional venture firms with crypto thought leaders.
What or who made you interested in the cryptocurrency space?
“In 2010/2011, I was on an intel project to analyze a cyber threat by non-state actors. This group used Bitcoin to facilitate payments and fund these activities. That was the first time I learned about it.” As most know, Bitcoin was used for suspicious activities at first, but it’s since matured and institutionalized. She said it wasn’t until 2016 that the venture world became truly interested, mainly because they started to see companies raise money through this decentralized system. “When I saw how these projects were getting funded without traditional venture capital, I went down the rabbit hole. I started connecting with experts in the space to understand how to best position myself and the firm.”
What’s the current sentiment towards investing in cryptocurrency in the venture capital space?
She first explained that there were a few forward-looking VCs who invested directly in cryptocurrency. They invested in Bitcoin and the increasing price attracted more talent and resources to the space. “Firms like Union Square Ventures
, Andreessen Horowitz
, and Founders Fund
put millions of dollars in the space
. At the same time, they also invested in opportunities that looked more like typical venture investments, like centralized exchanges and wallets.” Some VCs weren’t able to invest directly in tokens according to their limited partner agreements. Though over the past couple months, Bitcoin has become more institutionalized. “I think as it gets more sophisticated, investors get more comfortable with it. Limited Partners are asking venture firm managers how to approach it.” It’s definitely something you need to constantly monitor, as regulations and rules change month over month.
Actually though, how hard is it to get these funds to invest?
“Tactically, Limited Partners have invested money into you [as a principal or manager] for a specific reason, for a particular part of their portfolio. When you start throwing something into the mix that’s unexpected, there needs to be a bigger conversation with investors.” Maybe soon endowments for specialized crypto fund managers will be trending upwards, or has already.
ICOs are technically a replacement for venture capital, so what’s the future for VC and ICOs, and how do they work together?
First off, you obviously need a financial officer to evaluate startups and companies. This question is very forward thinking, and mostly concerns the idea that smart contracts could replace the need to manage the cap table and automated payouts. *Lisa sounding very excited* And for good reason. “This week, I’m having my first crypto and coffee with traditional VCs and folks that are dedicated full-time to crypto. Venture has been around for several decades, and along the way, the industry has created a lot of structures based on experience. I feel like the people that are just getting into the crypto space, which is a combo of traditional finance and crypto natives, can teach each other a lot.” That’s when she said something that changed how I looked at things:
“How can we make sure we’re learning from one another rather than reinvent everything entirely.”
It truly is an opportunity for traditional VCs to teach the folks in the crypto space the mechanisms they have built. And on the other hand, it’s an opportunity for the crypto experts to show the value in what they’re doing and how it applies.
The conversation at the crypto and coffee breakfast they’re having this week: What do venture firms need to do differently to invest, and what can the crypto space learn from VCs?
“There are tons of opportunities to work together. It’s also how I created a name for myself: I hang where other VCs aren’t. Some VCs may not want to learn something new and rely on what they know, which is fine. Structuring deals can be very different.”
Is there a difference between evaluating a startup and a crypto startup?
“Yes, it’s fundamentally different.” This is something you don’t hear often, many think it’s the same, which is why I’m happy to hear Lisa’s point of view. Her overall point of view was that a startups bar is much higher regarding what you need to have done before fundraising. It’s much easier to build something today with tools that can hack together a solution within a couple days. Looking at traction, user growth and other determining factors are dependent on what you’re building. The more complex, the less traction and user growth you will have because it’s more long-term. In crypto, teams run a token sale based on a white paper, you don’t really need to have all your ducks lined up in a row. “The playbook doesn’t really exist in the crypto world. Investors look for potential and liquidity, and the time horizon is much shorter.” She explained that one investor she knew pulled out in 6 months, which is considered very short-term to VCs. “You have to evaluate the opportunity differently, it’s a different calculation. A typical venture investment may be locked up for 10 years. 6 months is not long-term!”
What industries in crypto are you most interested in?
“Things that make it more accessible and easy to use.” Companies that look for ways to make it more scalable and user-friendly will definitely have everyone throwing money at them. The more accessible, the more valuable. “It needs to get more scalable. It’s still very slow. I mean, Cryptokitties congested the network. We still have a long way to go to make it the new internet, which is how some see it.”
New York is a hub for everything crypto, is NextGen planning to get on the train, or have they already?
“Actually, we’ve made our first investment. The team came out of AngelList and the company is called Republic
. It allows crypto founders to raise from unaccredited investors in a regulatory compliant way in the US. The company is planning its own token sale
.” So in that way they are, but not in a dedicated way...yet. “We have no one full time on it, it’s definitely been a conversation internally. We want to be smart about it.” Lisa then continued with something even more valuable, “I’m not following this ecosystem because I think it will lead to a deal today. The way I see it, the people that are in it for the quick buck will go away, and the real builders will stick around, and so I want to be a part of that. I want to be there before the crash, and I want to be there to see it through all that.”
What resources do you use to stay updated?
“Twitter, podcasts, and Hash Power
, a 3 hour audio documentary that’s amazing. I recommend it to everyone learning about the space.”
Where’s your favorite place in New York?
“Bosie Tea Parlor (BTP)
, it’s a tea shop that has good tea and desserts in West Village.”
What company or cryptocurrency are you watching the most right now?
“One I need to spend more time on is 0x
.” 0x is an open, permissionless protocol allowing for ERC20 tokens to be traded on the Ethereum blockchain.
How do you encourage more women to get into the crypto space?
This is one of Lisa’s favorite exercises, and she wants to encourage others to do the same. “Whenever people are dismissive, you have to think how you can make it relatable to them, because crypto is related to just about everything.” For example: She was at a crypto meetup and saw a man who was very into crypto, yet his wife was not into it at all. “I went up to her and asked what she cared about and what she did, and her life was DIRECTLY related to crypto. So when I talked to her about how it’s related and how her skill set was so valuable to the space, she was like ‘OH, I get it now!’. You have to push people to think that way and show them that their interests are related.” So, I challenge you. Try to explain crypto to someone that doesn’t get it, make it relatable, make it as interesting as it truly is. "