How do early stage venture firms decide whether to invest in a project? Host Jamie Burke speaks with Maria Shen of Electric Capital on her background and what they look for in their investments.
- Graduated from Harvard, majoring in political science and computer science
- Worked at Microsoft for a few years as a product manager
- Went on to get her Masters in Computer Science. While doing that, she started her own company in the supply chain space helping small businesses with their supply chain backend
- One recurring issue that her customers had was to do cross-border payments with manufacturers — there was no trust between two parties that were separated by geographic boundaries and languages
- Have been following the crypto space loosely. In 2015, Ethereum came on the scene and she realized that it could be used as an escrow and solve everyone’s problems
- However, the infrastructure was not there yet
💡 Electric Capital is an early stage venture firm focused on cryptocurrencies, blockchain, fintech, and marketplaces.
- In 2018, the crypto market has tanked ~80%
- Believed in crypto still
“By the time 2018 rolled around, the crypto market had tanked like 80%. But I was like no, I really believe in it. I think that this is going to be a new industry or kind of like a new way that everyone’s going to do things.”
– Maria Shen
- Wanted to go full time crypto and joined Electric Capital
- Everyone at Electric has a similar background where they have been an operator at places like VMware and Facebook or that they have started and sold companies
- Gravitated towards early stage founders and developers because of their background
Changes In Perception Towards Web3 Among Her Peers Who Work In Tech
- Perception has changed dramatically
- In the beginning, her peers saw her as the crazy one
- During the bull market, she received text messages asking for her thoughts on crypto
“I think if you dig through all of that noise to find really quality contributors and quality builders, you realize, holy shit, there’s this whole universe that’s being created. This is real.”
– Maria Shen
- Many of her peers are still hesitant to jump into crypto full-time
- Thinks that they might just be risk averse
How Does Electric Capital Filter Through The Projects Coming To Them?
- Will sit down with the founder and have a conversation with them
- Will look at external and internal factors:
- Is the market large enough?
- Thoughtfulness of the founder — do they think deeply about things, understand the assumptions they are making, how do they test those assumptions, and if those assumptions fails, can they be flexible enough to come up with another plan of action?
What Does Jamie Look At In The Early Stage?
- He’s biased towards co-founding teams instead of a single founder because it’s really hard to start something alone
- There are common traits across people who apply to accelerators — they have humility and realize that they have gaps which need expert advice to fill
“It’s a combination of humility and the ability to recognize when you’re wrong about something. I think I struggled with that, really, when I was working on my own company as well, because you work so hard on something that you developed tunnel vision, right?”
– Maria Shen
- Have traditionally invested in layer ones
- Before DeFi, their thesis is that blockchains can be used for a number of different use cases
- When DeFi entered the scene, they invested a lot into DeFi as they felt it would be the sector with the most asymmetric returns
- Did not manage to invest into middleware and developer tools early on. Is currently reconsidering that position
- Would be challenging for new layer ones to enter the market now
- Currently at the inflection point where developer tooling is becoming incredibly important
- Would prefer regulators providing clarity so that founders know whether have they made a misstep
- Regulation doesn’t seem very friendly right now
- Founders are starting their businesses elsewhere because there is too much uncertainty
This podcast summary was prepared by The Reading Ape in collaboration with Outlier Ventures. The Reading Ape is a humble servant of the written word.
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