S1:E2 Archetype's Ash Egan–Lessons And Takeaways From 8+ Years Of Crypto
Welcome to episode two of Cross-Chain Examination. Today we have on our very own Ash Egan, the founder and GP of Archetype. Ash, welcome to the show.
Thank you for having me. Great to be here.
So today's topic, I wanted to have a general discussion about crypto: talk about the trends, lessons from the past, etc. – you've been in the space for so long! For our listeners: Ash has been leading investments in crypto since 2015, which makes it seven/eight years. It would be nice to start a nice walk down memory lane. Rewinding back, what are some of the big moments in the past few years that you consider industry defining moments or just big events in general? It could be good, the bad, and everything in between.
A lot has happened over the last seven years for me. The moment I jumped into the space was reading the Ethereum whitepaper in 2015 and reading about smart contracts and sort of the potential use cases. It's honestly incredible how far we've come from the white paper that Vitalik wrote, , years and years ago.
And now you have just such a proliferation of applications, infrastructure, developers, new talent entering this space. I think, though, if we really drill down to: what are some of the watershed moments within crypto over the last few years?
I think it's the token standardizations we've seen, especially around ERC20, around 721.. that ERC20 originally materialized as ICOs. It took three years after that for Defi to really come to fruition. And so it was similar to 721s: first invented in 2017, but it really wasn't until 2020 or so that we saw Opensea’s massive adoption of these things.
And so I think what's been incredible is just all the experimentation. And we're still use cases and all these things. It's not just the Bitcoin market anymore; the belief here is that crypto/web3 permeates every industry.
Smart contracts underpin all commerce, and then you're also going to have the creation of entirely new markets. It’s not just the Ubers built on the blockchain or Facebook 2.0 is built in a blockchain. I think we're going to see not only some of these traditional and incumbents built on decentralized infrastructure, but also the creation of entirely new markets.
Before you go on too far, I want to dig into why you’re so bullish on crypto/ Ethereum. What's your thesis? What was that aha thing? What was the thing that clicked that made you really believe in it so long ago when , like there's not there were not that many things going on in crypto at the time.
Yeah, I think it was as particular as Vitalik talking about crowdfunding and the different types of applications that could get built on Ethereum. At the time, I thought Indiegogo and Kickstarter were fascinating. But applied to crypto, there were consumer products with a 24/7 open type of infrastructure– for example, not only could you build Kickstarter or Indie go go on decentralized infrastructure and sort of leverage smart contracts and liquidity and the 24/7 permissionless open nature of them.
But you could also build tons of other things. With smart contracts, the most exciting part is these are just really APIs, but they're open to anyone. Anyone with an Internet connection can tap into this liquidity, tap into these assets, the IP, and so on. And so you don't have to rely on the gatekeepers that, when you hit a certain API limit, you could get shut off or if you build a killer application, you could get shut off. So I think just the permissionless innovation possibility that smart contracts enable is what got me so excited about years and years ago.
We do love open-sourced/ unstoppable markets! What were the first couple of investments that you made in the crypto industry and why?
My first investment as a venture capitalist in the ecosystem was the seed round of Chainalysis in 2015. And my thesis was as simple as- well, if this new technology is going to come to fruition and get to scale, you need to have some kind of access portal or some kind of route for the incumbents. , regulators, governments, tradfi to basically understand what's happening on these blockchains. And it is all open, so all of these transactions are anyone can view them. But just Chainalysis having the purview to package up that data and sell it to, , the appropriate constituents to cross the chasm and not be seen as this shadowy super coder kind of market. So that was a sort of the first of many.
We can fast forward now to some of the protocols that I invested during my time at Accomplice, like Near Protocol which was focused on a more scalable blockchain; companies like Balancer that was democratizing liquidity provision and almost building a decentralized version of Nasdaq.
So it's been quite a journey. And this stuff we're doing today is wildly different from when I just started dipping my toes in in 2015.
I agree. I think the industry has grown so big, and you used to just be ‘in crypto’ and that was all there is, and that was enough! Now there are so many subcategories like DAOs, NFTs, Defi, and more. Last episode I had the Crypto Coven team on, and we talked about NFTs as a topic. We talked about building a community around a certain project. And so I think crypto is so much bigger now and the players have just grown to like just so many things that can be built on whatever protocol or, , whatever ecosystem you want to build on. It's possible.
Looking back, it's like rose tinted glasses: everything is great, everything's innovative. But were there any pain points in the last seven years where something happened where it kind of made you take a step back like, whoa, we're still so far away from going mainstream or any other instances?
Yeah, I think there's been a significant amount of bad behavior and this comes along with any new technology, right? So in the ICO era, you had a number of teams that were going out and they had no plan to build something for the long term. It was just entirely a cash grab. I think we've seen that in the NFT ecosystem. , these drops, etc., , the rugs we saw in DeFi. And so whenever you have a change in behavior or usage or a change in technology, , the hope is you have all credible players.
But I think the reality is you're going to have some bad behavior and folks who want to take advantage of new behavior and the less educated users. But that, I do believe, is the sort of tiny minority of investors and builders. But I think I would be lying if I said that didn't exist in some capacity over the last few years.
Yeah, it's actually extra unfortunate. I feel like there's such a small, selective minority of bad behavior that unfortunately gets sensationalized in the media. And so when I talk to my friends around me, I think people are a little bit wary. They're a little bit scared.
Obviously, in the last two years, with the explosion of NFTs, crypto has definitely piqued people's interest. I think NFTs are a lot easier to understand than some layer one protocol or some ZKP. I think people's eyes glaze over. So certainly it's brought mainstream attention. But I think it's also brought a lot of retail investors and your normal everyday Internet users who I think still lack the right tools and information to really just, full on do your own research. So I definitely think that's like a gap that we should all address and solve.
Yeah, totally. And I do think users have gotten smarter and comfortable around having a non-custodial wallet, the seed recovery, etc. Like you never expose that. So you have these hard learnings and you're going to have some bad actors there. But the hope is through these mishaps, you have a more educated user base. And we are certainly seeing that. Just look at Metamask downloads, look at on-chain activity…it's honestly remarkable just the education and acceleration in usage from a decentralized commerce underpinned by smart contracts. So, look, it's going to be ongoing, but the hope is users will continue to get more educated and the less credible money grab kind of folks are around.
I got my first email address in 2004 and back then there was a really popular phishing email about you winning the lottery or it's like someone pretending to be royalty in another country convincing you to send them $200 in exchange for 20 million dollars. And I think these days, people don't really fall for that anymore because it's become like a joke at this point. My hope is that as crypto grows up and as good behavior proliferates, people learn what really clear scams are and what are really clear red flags to watch out for.
Yeah. Well, and I do think web3 and crypto have crossed the chasm into the mainstream over the last 12 to 18 months. And so the incumbents now look at crypto as a large enough market with enough users where it's sort of like, okay, we have to figure out what our strategy is here.
You’ve been a career venture capitalist, and have spent time both at crypto-native funds like Consensys but also at web2 generalist funds in your early career. And now you're obviously running your own crypto-focused VC fund.
What would you say are some of the key differences between investing into the crypto industry versus traditional industries?
Well, I think the crypto founders have asks that are so much more specific and so niche compared to your generalist web2 VCs. Of course, you need to still help out on the traditional stuff like recruiting strategy, or being a sounding board, being support, and obviously being a financing partner to these to these teams and these founders. But it also goes way beyond that in the crypto company building: like building out a community, figuring out token strategy- if you will do it, or how are you going to do that?
And even the talent in crypto looks so different from your typical Silicon Valley talent. It could be a 17 year old kid and you can be one of the best smart contract developers. So I think sort of like the lens has evolved a ton and the ask of the crypto founder both for supporting infrastructure, pure equity companies and the teams that are trying to launch protocols. It just becomes nuanced to the point where if you're not sort of consuming and using crypto 24/7, it's just really difficult to deliver on those assets. And so, we're constantly evolving and thinking through how can we better, better service the founders that we back and thinking: how can we get them to where they want to be faster? How can we help them and guide them to particular markets or a different strategy or whatever it may be or even co-building with them. And so, I think it's partially a maturing of crypto as an asset class. But I think the best analogy is just how biotech venture investing just ended up splitting off from general venture investing back in the nineties– crypto requires its own speciazlied set of knowledge and expertise.
At such an early stage where Archetype invests in, sometimes it’s just an idea, right? Inception capital, as you call it. How do you personally gain conviction at the pre-seed/seed stage?
So I think what we love, my fellow colleague, are founders who have a unique vision of the future and they're not building just because someone else is. It's not reactive, but they've organically come across a problem set or opportunity and they have their own vision of the future. II do think in every industry, you're just going to have some aspect of teams trying to outcompete other teams and you have an existing market and it's really about execution.
But I think what we get excited about are the founders who can create entirely new markets, who can create new user behavior. And so I think these are really tricky to get right, but I think that's what we get really excited about, is founders who have the ability to create entirely new markets or just change the status quo. And so they're not going to have everything figured out at the early stages. And there are times that we'll invest in just people and it's pre-idea and we'll go through the list of, say 3 to 30 different ideas or concepts or market opportunities that we see. But ultimately it's about the founders self actualizing and getting excited about a particular opportunity. And so it's going to be different depending on what they're doing. But I think it's just seeing that unique vision and then doing everything we possibly can to get them from 0 to 1.
Yeah, I mean, both building and also investing in a company requires a little bit– actually– a large, leap of faith. On the investor side: you share the vision, you believe in the team, and can see the full potential based on just an idea. And for the founders themselves, obviously, that's just like the biggest change you can take to your career.
I think another thing you mentioned that I want to emphasis is just being a power user of all the products. If you're a power user, you understand the pain points deeply, whether you're a potential user or you learn these lessons just through navigating the blockchain. But you wouldn't know about a lot of the problems and innovation unless you were using it all the time. And so I think as an investor, it certainly helps to be a power user. I think that's a little bit under-discussed, like how much you actually need to like use everything and sometimes make mistakes to really learn.
Yeah, I totally agree. And we live this on a day to day basis being power users across everything: Being part of DAOs, playing in Defi, sort of playing around – with the new 721 instances, playing around with NFTs, being a collector, talking to these different creators, jumping on Zoom calls like, hey, what are you playing around with?
And so I think if you look across the portfolio, the vast majority of our investments are things that we are users of and it's and it pre-dates Archetype as well. For example, at Accomplice we didn't want to set up the staking infrastructure ourselves in-house and so and we were I was actually in the process of setting that up at the time I met the Bison Trails team and I saw what they were doing and knew I had to make the investment.
And so I think it's super, super similar and we take a very similar kind of framework at Archetype. It's like we want to be power users of the things that we're investing in, and it's not always going to be the case. But I do think that gives us an insane amount of insight into what what's next, sort of what the integration and collaboration partners might be. And it also helps us work more closely with these founders.
Yeah, probably makes you feel more like a peer too. Like you and the founder both complain about the same pain points. And I think people like that sometimes I get a pitch and they're solving like a headache that I've had for years and I just like, I get so excited and I think that shows! Plus, it's just good learning in general. Like if people want to learn more about crypto, just start using the products, especially if they're kind of lower barrier to entry types. I certainly think that, , downloading Metamask is easy – just extension on your browser, right?
So maybe switching topics a little bit, moving towards the upcoming stuff. Currently right now, what peaks your interest in crypto? And then I'm going to follow up with what frustrates you. But let's start with what peaks your interest.
Yeah. I think we're in the dawn of the application era for crypto and I think that's a big reason why web3 as a name resonated over the past 12-18 months. Who kicked that off? You could point to OpenSea and through the NFT activities, you could point to Defi.
It's hard to say exactly when the application era started, but my belief is that over the next five years we will have interfaces and applications that can get to tens, if not hundreds of millions of active users. And so I think the big open question is will the complexities or the existing user experience of sending transaction and/ or interacting with Ethereum. For these applications, will that UX be abstracted or will we see an increase in comfort around how to interact with these applications and and gas fees, ensuring that your recovery is tucked away and not exposed to the Internet? There's a bunch of things, but.
And so then the sort of the next framing is, okay, what are those applications going to be? And so I think we're excited about are marketplaces. In web2, which you bootstrap the demand side by Facebook ad dollars, you get to scale and then you ratchet up. And the company and a small group of investors accrue all of the value there. You leave the demand side in the supply side sort of at the wayside for clearly profit based reasons for that for the cap table. And so in a token denominated world, you can pull the levers and actually reward your your most valuable users and your future. Most valuable users. It's just more equitable. So I think marketplaces are just a segment that we're really excited about. I think music NFT just having different vehicles of distributing value, allowing creators to access their collectors, their fans.
The other new social mediums we're really excited about is web3 social. Is that a year away? Is that three years away? Five years away? We'll see. I think that's a category that we're also very excited about. And there's going to be a bunch of others that could be right around the corner that have just haven't popped up yet. So we continue to be very excited about experimentation and just pushing the limits on what you can build with sort of smart contracts under the hood.
So yeah, I get questions all the time from people who are not as deep in crypto just being like, “As soon as you say the word token, you lose me. Like, why is that important?”
And I always like to use the same example, which is that: any company that eventually goes public or end up becoming a unicorn all started from their first 100 customers or users. And as a user and customer, your dollars are what makes up the companies revenue and profit. Essentially is what makes them so successful.
And so theoretically, is there a way in which you can reward users who spent so much time and money and attention on your platform in the beginning, and ended up leading to your sucess when you go public ? There is not a baked-in way to do that currently, but with tokens you can. So I think that's actually like super powerful.
Another example: my sister loves her Robin Hood app and I asked her once: You spend so much time on your you have so much money on it. When Robinhood went public, it's partially due to success stories like having customers such as yourself. Wouldn't it make sense for you to like get a little bit of stock when they IPOed as a thank you to a power user such as yourself? And she was like, “Oh my God, yeah. Wait, why don't I?” And I was like, well, that's why tokens matter. I always like to use that example.
So you can imagine how much you could do with tokens too. Whether it's fundraising, bootstrapping, but also just like having your users really like corral around you, I think that's like that's really pretty magical and I kind of wish like that was always the way things were working.
I think the other incredible piece about tokens, web3, sort of this next chapter and what we've seen is if there are shifts or a change in strategy where it's not beneficial to the user or it's extractive or off market, everything's open source, right? You can fork these protocols, you can build your own. And so that's something that you can't do with the web2 incumbents. Everything is a closed garden. And so if these networks and applications are not building for the best interests of the current user and the future user, there is the risk of you just forking it and build a different version. And so I think that's another really powerful mechanism that is just not inherent in web2 and what we've seen historically.
Yeah. It's very much power to the hands of the users type of ethos. And I think all the companies building in the crypto industry understand that at any given time someone could just copy, paste their open source code and just launch a competitor. I know you were saying this to me this week: “If I hear community one more time I’ll go crazy” but it's true! Your users are your lifeline, and it’s so important to put power into the hands of users, make them feel like they are part of it. And that's why also so many crypto companies think so much about their token holders, aka their community and want to carve out governance in the earaly days. And I think that's a that's a net good. That's a net positive. But I don't want to just like use this time to sing praises. Let's talk about the things that frustrate us in crypto.
Where do we start? Look, I think it was sort of mentioned earlier, but when you have these changes of behavior of new technologies, new ways of of building enterprise value, you're going to have bad behavior. You're also going to have tourists that come in. Look, we love to see experimentation and curiousiyu. What is frustrating, though, is the tourist folks on the investor side who are investing because it's the hot thing and just completely retreat when things get hard. Theyfill up the inboxes like, hey, what should we be investing in? Like guys, figure out your thesis and take a long term commitment if you're serious about this!
So the hope is that folks that have increased their interest in the space and are here for the long term. We are obviously so bought into this industry, continuing to grow, etc. But I think the just the tourist nature and copycatting things is just frustrating. Like we want to see the net new, we want to see unique visions.
I think you use the word tourist to kind of mean like cash grab behavior. But I feel like that's like a little bit more human nature than it is like crypto specific– like this happens whenever something gets attention and becomes hot.. But but I hear you. I think maybe one of my frustrations was crypto (And I will say it has gotten a lot better) is that there's so much there's so many things that can be done to make crypto like easier and friendlier. And again, I think we've come a long way, but there are still so many things that are like so many products and so many companies in crypto that are predicated on the fact that their users are super comfortable with crypto and onboarding to crypto and even knowing how to like interact with smart contracts. And I think that's probably a limited market in terms of audience. So I get really excited when I see really smart and innovative ways of making crypto easier and more digestible, and it could be like user experience. It could just be like, tools that make it easier for me to know what I'm clicking or the information is really easy to understand.
It has gotten better. Today you have real products: you have these non-custodial wallets and now you can do things with your crypto whereas in the past you could just hold, because there wasn't any products built around that. But today you have Defi, the emerging web3 social stuff like NFT marketplaces, and it will continue to expand.
Yeah, I mean, it's also a matter of time. Like, the first time I got an Apple laptop or Apple iphone, I did not read the instructions. Just open it and tht was it, it was so intuitive. And I think we'll probably get there one day, but not today.
I think that's right. And just you look at the talent coming into the space today and it's so multifaceted. You have founders, you have folks from all over the world. Years ago it’s almost self-selected: either you’re highly technical or know Solidity. Today, you can be a product manager at a tech company and play around with crypto nights and weekends. And you can be a very effective founder or operator in the space. And so I do think it's already improved drastically and it's going to continue to be that way as crypto web3 just sucks talent out of these incumbent boring industries.
Yeah. No, I'm fully behind that. Like total call for any talent: anyone who wants to make using crypto as easy as using your iPhone but not make it as closed as Apple. I think that would be great.
This is the talent board shout out.
Last question: crypto is so known for its volatility. What are some of the things you remind yourself when things get hard to get you through? How would you caution people who are new to crypto?
I think you go crazy if you're constantly checking prices, both crypto and any other asset, you will just go insane. And so I think you have to be very purposeful on not checking prices on a day to day basis.
You should really take your own advice.
Okay. I need to stop checking prices. But look, I think what's more important is you just don't want to let markets impact your day to day, in your ability to execute, in your ability to be happy. And so I just think at some point you take a long term perspective, make sure you zoom out.
We fast forward five, ten years. The crypto market today versus what it will be is peanuts. And so I think you just have to take a long term perspective. Sure, things will be volatile, but it's out of your control. And so, it's nice when things go up. But at the same time, I think just having a long term view and not letting the swings of a day or a week impact your ability to be a happy person and someone who can execute at a high level.
So go offline, take a walk, take a bath. Take a long-term perspective.
Okay. Well, thank you so much for coming on the show. We'll definitely have you back.
Thank you, Katherine. Thank you for having me.