What values and philosophies drive the Pantera Capital strategy?

We believe in the power and value of decentralized technology, and we want to help build and invest in the people that can change how things are done in the future — and that means companies, organizations, products and new technology. We’re really trying to help change the world. For us, we feel that being allocators of capital and putting it into places with good people and innovative technology is the best way for us to make a difference.

How does that manifest in the company’s portfolio?

We have three different strategies, and each strategy has its own fund. This methodology differentiates us from the majority of other funds. We have a pre-sale fund called the ICO Fund that solely invests in token launch pre-sales. We have a VC Fund — about which we made some announcements recently — that invests into more traditional venture capital equity deals. Finally, we have what we call the Digital Asset Fund, which invests into tokens or cryptocurrencies that are already on exchanges. More recently, we’ve had some liquidity on the ICO side, projects like Thunder, Ankr and Celer have gone out to market. In the short-to-near future, I imagine we’ll start taking more scalability projects out to market: Blocksuite, Oasis, Filecoin, Polkadot. I foresee those coming in the next quarter or two.

What’s your take on how the past two years have developed in blockchain investment?

In 2017, there were a significant amount of applications launching, a lot of them around decentralized marketplaces, decentralized exchanges and stablecoins. Then people realized that for a lot of these things to work, we’re going to need help with scalability. Subsequently, we saw projects getting into this smart contract war trying to build better Ethereums, even going after Ethereum 2.0. I think it’s great for the ecosystem. If you’re the only game in town in an ecosystem so early — no one’s pushing you — you may get complacent, you may be slower to innovate. Once you have well-funded competitors going out there and trying to be the platform to enable all these really cool products and technologies, it really makes you hungry and it keeps you on your toes.

Ethereal Summit NY 2019: 104 speakers, 67 talks, 13 panels, 2 stages, 2 days

How do you see this playing out over the next couple of years?

We saw a lot of layer one protocols in 2018, and then in 2019 we started seeing more layer two protocols. We noticed a trend: when people saw problems around scalability, they started going after the different layers separately. There are numerous obstacles for teams building on top of layer one and two such that teams started building their own layer two solutions, or even their own blockchain underneath in addition to the applications on top. As the ecosystem expands, I think we’ll probably see a trend going back towards fragmentation of those layers and specialization on the layer-level to best support different applications built on top of them.

Tell us about Pantera’s recent announcement of Venture Fund III…

Venture Fund III is much more sizable than the previous venture funds. The first Venture Fund was $12 million. The second was about $25 million. With this one, we’re seeing a lot of great opportunities in the seed and Series A level. With the ecosystem scaling, we’ve also scaled ourselves in terms of our personnel, our expertise and our value-add. We’re planning to lead a lot of seed and series A rounds, and that requires more capital, especially if some of these companies are capital intensive and handle money transmission and licenses. We want to have the ability to follow on and operate more as a traditional venture capital firm, not a seed firm — having the ability to continue to invest in the companies throughout their life cycle. That is what you should expect from us.

How do VC’s formulate strategy on investing in projects with token launches vs. more traditional models?

VCs have backed ICO and non-ICO projects. The questions you have to ask are: Do you need a token? Are you open source? Are you building an application or are you a company that’s providing a service for the ecosystem? As an investor, you have to understand what type of financing structure makes the most sense for that company, and see if they are actually aligning themselves by raising and using that structure. If the alignment is off, then you shouldn’t invest.