a16z Podcast - a16z Podcast: Building Companies in Crypto, from People to Code

Episode Date: July 17, 2018

with Tina Bhatnagar (@tinab), Preethi Kasireddy (@iam_preethi), Lily Liu (@calilyliu), and Kim Milosevich (@kimbatronic) Whether it’s sharing the decision-making behind joining a crypto company to the perspectives of a passionate early adopter (or relative latecomer), this episode of the a16z Podcast -- based on a panel from the “Intro to Crypto” event that Andreessen Horowitz and #Angels put on in April 2018 -- covers what it takes to build companies in crypto, from people to code. You can find other sessions from the event, covering the building blocks of crypto to decentralization to the regulatory landscape, here. Why crypto? What was the biggest surprise in the space? Do the same skills from other domains apply? This discussion, moderated by Kim Milosevich, explores these questions with Coinbase VP of Operations Tina Bhatnagar; CEO and founder of TruStory Preethi Kasireddy; and Lily Liu, co-founder at Earn.com. photo credit: Erin Brethauer The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Hi, everyone. Welcome to the A6 and Z podcast. Today's episode focuses on what it takes from people to code to build or work in crypto companies. It's moderated by A6 and Z comments. It's moderated by A6 and Z podcast. partner Kim Milosevic and features the following guests. Tina Butnagar, who is a VP of Operations and Technology at Coinbase. She was formerly VP of Global Operations at Twitter and of infrastructure services at Salesforce. Preeti Kussi Reddy, who is the CEO and founder of True Story, a platform for users to discover and validate claims made online, whether in a white paper, blog post, or social media.

She's a blockchain engineer who also spent time at Coinbase and who transitioned into software engineering after spending a couple years as an investing analyst at A6 and Z early in her career. And then last but not least, we have Lily Liu, who is a co-founder at Earn.com. She was previously a CFO at China's first foreign-funded private mass market hospital and spent time at McKinsey early in her career. The conversation is based on a panel recorded at our inaugural intro to crypto event, co-hosted with hashtag Angels in April 2018. You can also find other sessions from this event as podcasts, as well as on our YouTube channel as videos, covering everything from why decentralization matters to the regulatory landscape for crypto.

Well, I'd love to just do a little bit of a lightning round and hear from each of you, what do you think are some of the biggest misconceptions in this space? And how would you like to address them? Preet, do you want to start? Sure. I would say a big misunderstanding is decentralization for the sake of decentralization. I think people sometimes get too obsessed with that. There's some things that I fundamentally believe

just will not be completely decentralized governance being one of them. Humans do need to exist in some parts of these. And I think we're just going to realize the hard way. Just like Elon Musk came out a couple of a month ago saying, like we automated too much. So I think the same thing is going to happen here. Totally for decentralization in some parts, but some parts just need a little bit more.

centralization. I think one of the misconceptions, there have been a couple of articles recently, is that somehow it's an unfriendly place for women. That's ever been my personal experience. In fact, I've always felt that it's been one of the most fun, meritocratic, fast-moving, and actually one of the more supportive places I could ever work. For me, I think it's the idea that it's a consumer product, and it's like a mainstream consumer product,

and the fact that institutions are actually coming into the space at a pretty rapid pace. And so some of the challenges that we have at Coinbase are really around the institutional and scaling up institutions. So I think that that's a big misconception as well. So, you know, you talked about sort of decentralization and crypto overall has, you know, very strong ideological underpinning to it. How much do you – this has also led to a very passionate and vocal community. Tina, I know you know that well. And, you know, this idea of decentralization, some of it's also driven by sort of a backlash to big banks, to some of the big internet companies, especially in light of what's going on right now with

Facebook. Do you think that this motivates or turns off people into the space? And how much do you think it figures into people getting into it? I think it's a big thing. People are very ideological in this space. And sometimes they will hate you if you don't follow their ideology. And that's okay because I think in the early days there were very few of them. And now you're trying to see different communities form because people just have different theses around what's right, what's wrong. And you can find your group where you fit in. I remember in the early days when I started writing about crypto,

you know, I was very focused on Ethereum in the early days. And like I was pro-Etherium and everything. And I wrote a post and I was like shocked to see the amount of like hate I got in the comments for not talking about Iyota, for not talking about all these other blockchains that I wasn't focused on and I realize it's just like that's just the nature of this thing people are so passionate and ideological and you just have to be okay with that and have to have thick skin and go in with your own views and that's what I kind of love about this space because it forces you

to be an independent thinker and not just kind of joy like be like just do something because it's it's what the what the rules say and I think and if you're going to be an independent thinker and break roles and come up with your own rules you have to deal with what the consequences of the fact that sometimes you're going to get pushed back? There are a number of, it's almost religious, how people kind of feel about their particular protocol or their project, which in a way has been necessary in order to breathe life into the space and to keep it going from 2008 until when there's sort of first wave of adoption in, you know, maybe 2013, 2014, and again, 2017. And so, you know, there's two sides of the same coin. But I think that

maybe we're due for a little bit of a reframing. I think generally it's true that, you know, you can motivate a small and very passionate minority by, you know, being anti-something. But if we take those same principles and reframe it as instead of being censorship resistance, but rather, you know, empowering consumers, right? Ultimately get to the same place, but one is a message that resonates with a much, with a much broader community. And as you mentioned with Facebook and, you know, data privacy, control over your data, this idea, which is now dawning upon a larger number of people that, you know, hey, maybe I should be getting cut of all of the money people are making off of my data, right? A few years ago, that was a little bit more of a novel idea. Now I think

that everyone can really appreciate that. And so same concept just sort of reframed, so something that's a little bit more inclusive and resonates with the broader population. For me, I think about it, there are two, there are definitely two distinct communities. So if you start looking in crypto and you start at the Reddit subthreads, it's probably not the best place. That's a little daunting. but I feel like events like this just showcase how much these spaces evolved and how much information is out there now where I think that that was not the case a year ago, right? So there weren't as many resources.

It wasn't talked about as much. And so I think that the communities are really great because they help understand the technology, they drive a lot of the technology and innovation. So it's a really great place to go and get ideas and understand the underpinnings and like where it started. But there is, there are so many resources now. I think that there's a general, there's more education and people are like hungry to understand it. And so a lot of like the volume that we get are calls or people just trying to understand

the space. So they've made small investments and they're trying to figure out, you know, what's the next step in it. So it's actually really great. It's like to see it getting into the more consumer space. Yeah. And I would say if you're new into the space, I would encourage you to actually be pretty open minded. Like don't go into being like rah-rah Ethereum or like Rara EOS. Like actually take a wide view and look at different communities and what they each preach. And I think it's okay to pick your community and stick with it. But I think it's fascinating. You'll just learn a lot by being kind of open-minded and seeing why different people think different way and why different people have different principles on how they run their communities. I think that that's important,

though, like for people to really dive in and understand sort of the ideology and principles behind some of this. Because I think some people are approaching it as like maybe sort of amateur investors. Some are just approaching this as a new tech area. Do you think it is important for them to really understand some of those, like, religious underpinnings? Or do you think we're starting to kind of move away from that? I think it is. I mean, like, everything is based on, like, we're defining rules. And so if you don't have a thesis for why you're defining rules in a certain way or certain principles that you're basing that on, then, like, I don't know how you define those rules, right? I don't think it's necessary to be, like, super religious about it. But I don't know.

but I think it's important to understand, like, why we're doing it. Like, this is not just a technology. This is a movement. Right. And, like, understanding the why is pretty important. So, uh, Coinbase and Earn are both traditionally venture funded companies in the way that we're, you know, familiar with seeing tech companies kind of grow up in the valley. Early, you know, VC funding, seed, series A, these different rounds.

And that's really changed with the advent of these ICOs and these token launches. Um, in some ways, the VCs aren't as involved. and anybody can join in accredited investors and be part of these projects from very early on and then also have a pretty big stake in them, right? How do you think, do you think that's changed the way companies are being formed and run? What shift are you seeing there? Well, I think that there's a number of different shifts. So to take two examples, Ethereum, for example, has, depending on the day, you know, above a 50, 60, 70 billion market cap, right? So if you think about the corollary of a similarly sized company here in the Bay Area, Uber might be an apt analogy. Uber has

thousands of employees. How many people are employed by the Ethereum Foundation? I don't know. Maybe you can count them on one or two hands, right? And so if you think about just sort of how you scale these two organizations, it's wildly different. And one, it relies much more on the community to sort of build and sustain value, right? So I think that if you're launching a protocol launching a token, you can create a tremendous amount of value by relying on the community, but it's a totally different model for engagement, for go-to-market, and, you know, how you sort of engage with people who are, most people of whom are not fully employed, right? Most people of whom you, you know, don't give them W-2s, you need to motivate them through

other means, oftentimes very indirect means. And so that's one. Another example I'd bring up is Binance, for example. So Binance is, you know, arguably, you know, largest, largest exchange in the world right now. And they launched their own token, pay all of their people in B&B and, and maybe some other cryptocurrencies are. It's unclear where their headquarters are. It's unclear where their servers are. And they're sort of, you know, this, they're like the sovereign company almost, right? And, and they did all of that in less than a year. And so, so, you know, very quickly, you have massive scale and massive value being created in totally non-traditional structures, right? And so I think that, you know, there's potential learnings to be had from both of those.

And I don't think we've seen, you know, really anything at that scale with such new models until now. Right. Yeah. How did that, how have you been thinking about that as you're starting a company? Yeah, I think I agree with you on the openness and the community being a huge part of it. The other thing is when I'm thinking about hiring, I think there's a certain type of culture you have to build with a crypto company. Like you have to work with people who are okay with like rapid change every day and like

thinking of things from ground up, thinking from first principles. Like some people are not like that, just to be frank. And like they prefer the more structured approach. And sometimes that's just not the right fit for early crypto companies. because like you need to be able to move with the market like a lot of these rules are not defined and like working with regulatory stuff like that's kind of scary you have to be okay with like the fact that things can go totally wrong so all that are things that you have to build into the culture this like this ability to be risk taking versus risk of risk so I know you know a lot

of the headlines are really focused on price right and that's a lot of the conversation and I would love to just kind of hear your thoughts on like how you feel about, I'm sure you all have strong opinions about that. It's very relevant. I think that, so speculation is really the first use case of cryptocurrency. And I think that's okay. It creates a lot of the energy and brings a lot of people in because it just creates a lot of headlines, creates a lot of attention when you're up 1,000 and then down 500% and

you know, whatever else, right? but I think eventually, you know, people are building out use cases. That's what we've been trying to do at Earn now within Coinbase to build ways that people can actually use cryptocurrency on a day of the basis and integrate it into something which is inherently useful outside of sort of the speculative nature of it. So I think really that's just a matter of time. So one thing you're going to hear a little bit more about in depth later is the regulatory environment. I would love to hear, you know, and Tina, maybe you can start off. like how much does that play into how you approach your company, your product, consumer communications, there's still some murkiness around how this is all going to be regulated. Yeah,

absolutely. So for us, we think very deeply about regulation. So we want to be friendly to the regulators. Everything we do, it's like top of mind, right? So as we think about,

you know, everything from our business processes to the leadership team and the investments that we make in our products, like the underpinnings of that are very real. I think Chris Dixon said this in one of our board meetings that like the regulation is like an existential thing for us for the industry. So it's something that we should always keep top of mind. So for us again, it's just like staying on top of it, talking about like the work that we're doing to be trusted, to be safe to make sure that, you know, all of the things in early crypto that you heard about never manifest on our platform. But I think regulation is like, you know, like Breithy was saying it's a really big deal and you have to be okay.

with a little bit of the discomfort of knowing that that doesn't exist, but it will come. And so you should just do your best to be prepared for it. And a good percentage of your employee base is in the compliance area. Yes, correct. It's incredibly relevant. It's always in the background of, and it's constantly evolving. It's usually catching up to industry, quite frankly. But, you know, one of the interesting things about cryptocurrency is because cryptocurrency

is inherently global and becomes global sort of much faster than, you know, other, you know, maybe financially oriented products, it's something that I think has already and will continue to encourage a more global approach to, or sort of more holistic approach to regulation. And so, you know, as we've seen throughout the world, there's a number of different approaches. Given, you know, personally, given the choice, I still think that the U.S. is a relatively good place to be doing business and be in crypto. Because in the U.S., you know, if you disagree, you can go to court. In other jurisdictions, if you disagree, you go to jail or maybe even go to the grave.

And so, relatively speaking, it's not a bad deal. Yeah, I mean, the regulatory thing is like an unknown, unknown. I can't say I or anyone knows the answers. For me personally, like, for example, my project does have a token and, like, I can't say, I know all the answers for how we're going to tread the regulatory waters, but that's something I'm hoping that I can work with my investment. and the regulators on together. I think it was eye-opening to me

when I went to the Satoshi Roundtable meeting like last year or like earlier this year and there was a lot of traditional regulatory people from people from the CMC like all the regulatory bodies that came and like I realized that even like they're not like

they're actually very friendly they don't want to like harm this system they like don't want to like kill blockchains like they actually want to figure it out together. And so as long as we're not like, we're just like work together and not like hostile towards them. I think we will get to a good place. It's just going to take time.

Does that figure into your thinking when you were starting a company? Did it make you hesitate or just? It's interesting. It was definitely a scary part. But I mean, like I'm not going to not do it because of that. And, you know, like it's interesting because I see different approaches for how to go about it. Like I want to stay in the U.S. So I have to deal with the regulatory bodies here.

But like some of my friends, like, went abroad and they're like, F the U.S., we're just going to go abroad and do it. And, like, that's another way to think about it. Like, if you don't want to deal with the U.S., go somewhere else. So, yeah, there's options. Which is something the U.S. regulators really don't want to see happen. I think they're making that clear that they want to see the innovation stay here. So lastly, and then I want to open it up to some questions from the audience.

There's, you know, crypto can be associated or has been. traditionally assessing, and I think this image is getting cleaned up now very quickly, but with scams, some illegal activity, it's also, you know, so it's scared some folks off, I think. What advice do you have generally for people looking to get into the space? I can start just, I mean, I've, these guys have been in it for a while, I'm really new to it. There's so much material out there. There's podcasts. There's like great mentors. There's like, just read on it. I think understanding the underpinnings of it is really interesting because it started with like such you know it's it's just an interesting community there's

so much out there it's really inclusive going back to what lily was saying um there's so many use cases and like i've traveled a ton in my career and i've like worked on scaling teams i've been in like seen under like privileged communities and there's so much power in what like this could become um so it's you know if you're if you want to like do something that's like mission driven and you know have an impact in the work that you're doing i feel like this is a great place to start. And there's a ton of material out there. So it's a little bit daunting, but just like jump right in. Yeah. So, you know, looking at the backgrounds of some of the attendees, it seems like, you know, everyone here has a pretty great career in technology and various

functions. And I think there's really great need for people who, with those types of backgrounds coming into crypto, because I think that as it, as industry scales and really becomes a little more mainstream. There's a need for, you know, those same skill sets with, you know, go to market, building great products, building products that really resonate with whether it's more enterprise customers or consumer customers. And so crypto sort of started in a little bit of a corner of a very sort of unique and special world. But now it's really sort of going to mainstream tech and then maybe even mainstream consumer. So, I mean, this is kind of a problem that I'm solving with true story, which is my company, because it's essentially a truth layer for the claims that

crypto projects and crypto people are making. And so we're using the expertise of the crowd to basically bring truth to the world about what these people are claiming. So until that exists, I would say, I mean, how I go about it. I mean, like, first of all, like, you can probably, you can smell a scam. Like, you just like look on the website and like, like, poke around. You're like, all right, this is a scam. Like, it's not easy. If you can't figure it, I'll ask a developer, like, they'll look at it and be like, yeah, this is a scam website to, like, read the white paper and like try to like get an understanding, join these like telegram groups and Slack groups. Like a lot of really smart people are talking about this stuff. I'm just like, just do your

research on everything. Don't just dumb for something because you saw something on Reddit or like Twitter. Just actually do your research. Great. With that, I'm going to open it up to any questions from the audience. Hi, everyone. My name is Bianca. First, thank you all y'all. You could be doing a lot of different things this morning. So thank you for joining us. So I think from a company standpoint, my question is like, what does responsibility look like for, you know, for you guys as practitioners in crypto? The reason why I ask where kind of the vein is tech tends to have this very like hands off approach, but kind of being aloof to like the power that they inherently hold. So I think how are you guys balancing the capitalistic with also like the ethical and human side in that like you have all this attention. So I think about Coinbase. You have all this attention. You have a lot of people like you're going to be the people's first line of information gathering. So yeah, how do you guys think about your roles as educators, curators, but also like this is not investment advice. So that's a question I had around the company side. I mean at Coinbase, you know, we talk about this a lot. Like people will use Coinbase and Bitcoin or.

the blockchain, like interchangeably in conversations. So I feel like we carry a large responsibility in just education. And so we don't have like 50 assets on our platform. We don't, you know, we try to be really mindful and thoughtful of like how we introduce new assets. We again, like I said, we're really regulator friendly. So we're trying to make sure that we partner with them. There's education happening both ways. So for us, we do think we take it deeply responsibly. We take a deep responsibility for it just to make sure that, you know, every customer that joins our platform feels like they're coming into a safe space where they can learn. And it's a good introductory point. So for me, I think that that is top of mind. And everybody you talk to

with the company, it's an ongoing conversation. So I don't think that that responsibility is lost on us. And we take it with with a lot of respect. Yeah. Yeah. I mean, as an individual contributor, I take that pretty seriously too, because I'm starting to realize that like the things that people like me, Linda, or others say, like, people actually really listen and, like, people take that to heart. And, like, if I, like, chill a coin, like, that's not really, that's not the responsible thing to do. So, like, it's just about being thoughtful about how you, how you communicate with the community and, like, making sure that you're, like, you're, you're not just pushing your own interests and actually, like, doing the right thing.

I think that Coinbase is doing a lot in terms of helping sort of being a steward. for people who are having their first experience with cryptocurrency. And so I think that's really great. And I think that, I mean, there's certainly going to be a lot more sort of education that needs to be done. You know, we've got, there's four assets on Coinbase. There's probably a thousand assets out there that could be on Coinbase. And so there's going to be a little bit of a bridging that's going to have to happen in terms of education, sort of making that, it's making sure it's a safe, safe experience for people.

You talked about the first, Lily, you talked about the first use case. being speculation, and we've obviously seen massive valuations and all of these things around these coins or cryptocurrency. Could you bring it down to, like, kind of a more base level? That is, where do you see or where have you seen some of the first use cases of converting cryptocurrencies to actual products and services sold? I don't know where to like. I might talk about earned.com. if I may for a second

because that was honestly that was one of our major motivations, which is that how do you make it useful in people's everyday lives? And so we really thought about it as how do you, instead of trading capital for

cryptocurrency, which is the way most people have gotten into cryptocurrency, that requires still a little bit of friction because you've got to go sign up for a website, link your bank account, you know, do a scan of your face, right, and do all this KIC identity. And, you know, some people might get lost along the way.

And so while that's onboarded a lot of people, what if you could trade labor just a few minutes of your time in order to get a little bit of cryptocurrency, right? So we, that was one of the ways we thought about or not com originally. And it was inherently useful because it was sort of based around the fact that we all get too much email anyways. What if you can monetize that, something everyone can get behind? But at the same time, it was sort of like a,

it was sort of like a Trojan horse for crypto to get into the mainstream. And so that was one of our early efforts. I think it's still early days and there's a lot of potential left in through the way that can go. And now what I think you're seeing is you're seeing cryptocurrency

sort of get into a number of existing kind of business models to, so like affiliate networks, for example, right? Affiliate networks, loyalty programs, gaming, all of these things, which already have massive audiences, you know, paid advertising even validating sort of CPA instead of CPC type of advertising, which are things that

can actually be potentially dramatically improved for the use of the integration of a token economy. And so I think over the next year, we're going to see a number of those things to be proven out. And what we've already at least heard is that what was, I think, Starbucks talked about maybe integrating blockchain to the loyalty program, rock. which is, you know, nine, ten billion dollar business, owns ebates, earns a whole number of properties that are related to sort of loyalty and, uh, and consumer affiliate programs is also thinking about rolling out a coin, um, Air Asia as well for loyalty programs. So I think you're going to see a number of the things sort of get integrated into, uh, into, you know,

platforms you already know and love. Hi, thanks again for being here. I'm Teresa, a product manager in payments at Airbnb. So I'm working a lot on privacy and data protection, specifically GDPR. So how does a decentralized network deal with these types of regulatory things that do impact everyone like GDPR? And so for those who don't know GDPR, is the European regulatory protocol that requires data deletion, right to access, right to portability of your data. So how do you deal with that from a decentralized perspective?

I can speak to that. So we have been spending a lot of time actually on GDPR. So I can talk about it in two frames of reference. So at Twitter, we spent a ton of time working on GDPR. Obviously, as a social network, there's broad implications. It's slightly different at Coinbase, right? So we do do upfront KYC. So for us, it's a lot of there as a financial institution, we know and track very specific

things. And there's very specific ways that we do data deletion. So for us, it's something that is top of mind and something we've always kind of been working on. And so GDPR is just a different lens by which we're looking at at the data deletion and maintenance. So for us, it's been work, but it's not been something that hasn't been top of mind already. So it's just a slight tweak to the work that we've already been doing. Thanks. Good morning. First of all, thank you for sharing your insights and advice to the community. This is terrific. Following on the question of regulatory, can you guys recommend a public or good public Slack channel or telegram channel that we could be part of listening and so we can track what's going on? It's also a great question

for our two regulatory experts that are going to be on stage in just a little bit too. I don't know if you guys have. I can't think of any. I think the The problem with right now is it's kind of dispersed. There's information everywhere, and there's really no central resource. And that's kind of the hard work you have to do, I think, right now, unfortunately. But I don't know if you know of any central sources. I mean, Coin Center, and we have somebody, Robin from Coin Center on, they're a great resource for all things regulatory.

Thank you.