On The Brink with Castle Island - Ruud Smets and Marc de Kloe (Theta Capital) on Blockchain Fund of Funds (EP.480)

Episode Date: December 4, 2023

Ruud Smets and Marc de Kloe of Theta Capital join the show. In this episode we discuss: Theta's initial foray into the world of blockchain focused venture funds and hedge funds. The process of educating institutional limited partners on this emerging technology. How the Theta team segments the investable opportunities in the blockchain industry. Views on fund capacity and securing allocations in promising managers. Views on co-investment opportunities and how Theta has approached these opportunities. Promising trends for 2024. The Legends4Legends conference and plans with the event going forward. To learn more about Theta Capital visit thetacapital.com

Today in the podcast, I sat down with Lute Smets and Mark DeKlo of Theta Capital. Theta Capital is a leading investor in both traditional hedge funds and blockchain venture capital and hedge funds. In this conversation, we talked about the origins of Theta Capitals launch into the blockchain industry, their approach to underlying manager selection, and the themes that they're actively tracking in the blockchain space. I think you'll enjoy this one. So without further ado, here's my conversation with Lute and Mark from Theta Capital. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these expressed by them or the guests on this podcast are solely their opinions

and do not reflect the opinions of Castle Island Ventures. Guests and hosts may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only is an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees will be liquidated. The Federal Government Loans American International Group, A.I. $85 billion.

This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more to Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden, people start to worry. So out of this worry, we have something called the Bitcoin. Fluid and Mark, great to see you again.

Thank you for joining. Thanks, Matt. Great for being on the show. met. We're big fans. I appreciate it. And I was a big fan of a conference that you guys put on in Amsterdam a few weeks ago. So excited to talk about that as well. Maybe let's just start with the overview of Theta Capital, the origin story maybe before crypto became a big part of the firm. Yeah, sure. I'll start with that, actually. Essentially, Theta's been around since 2001. And we specialized in finding specialist managers with a focus on alternative investments.

So I've been doing that. And historically, those have been hedge funds in nature. And we've run a range of bespoke accounts for large ultra high net worth clients over the last years. So I'd be really curious, guys, and I should say that first voice you heard there was Mark, but I'd really be curious around how blockchain became a focus area for the firm. Was there an overarching thesis around, hey, this is an attractive category? Or did you get pulled into it by your existing clients looking at the space? Yeah, I think to add to what Mark said, basically what we've been doing for 20 years is finding specialized managers that we believe have a real edge that can be sustained and where they can give us very attractive risk-adjusted performance. So on the hatchman side,

that also doesn't mean it's not three people under Bloomberg to try to out-compete everybody else in the world trading equities. These are very specialized strategies. So I think crypto, there's a couple of angles here, but one where it ties back to our origin is that there's no other area in the world that we've seen where this goes more than in crypto. But to give you the back story, my background by studies is in information technology and investment theory, and I've done some work doing simulations for pension funds and interest rate derivatives trading and sales. And then I joined the Capital 18 years ago in 2005 and been heading the investment side since 2000. 2013, basically. The thing that struck me in 2017, after having dismissed Bitcoin a couple of times,

was really the power of this technology for the first time did the deep dive into it. I've always felt very strongly that we're on a course where the nerds are taking over the world. And with this technology, it felt to me like they really have been given to superpowers to do this. And basically, to me, the core is now you have these programmable internet native business business. models. So that was one part. And then the second thing was really that we had this interesting window into the investment world. And we were speaking to all the smartest investors in the world, all these hedge fund managers. And it was clear that they really didn't look at this space in the sense that they didn't have time to take the deep dive. They, in many cases, dismissed it back

in those days. Or if they did appreciate the technology, it was really difficult for them to invest. in it. How do you invest in an internet protocol? It's so counterintuitive and different from investing in your typical company. So what we observed was that there was this complete new cohort of VCs of investors that really invested in the space and that had a big advantage and that advantage compounded very quickly because there were no existing specialists. So if you were investing in the first defy protocol, then the next founder would certainly come and find you as an investor. So that basically is what we see today. 90% of all the high quality projects are still being funded by this new cohort of CryptovVC. So it's basically those

things that came together in appreciation or let's say the technology capturing or imagination and a massive investment opportunity there. And then secondly, the market structure where you had all these new investors coming in. And I think there's definitely an element of being at the right place at the right time. We had the platform to invests to specialized managers. So we had the opportunity to really run with this. And we get to know all the firms at the time that were investing in this space. And we made a first investment in January of 18, so fairly quickly thereafter. And I think with crypto more than anything else, what you see is to most people, it's not directly relevant. It's different from something like AI where you can really make

a big effort to implement the AI and your processes because it boosts your productivity. While crypto is this really disruptive force, it's basically disruption of the business model itself. And for many people, I think it's been very difficult to spend the necessary time or to justify spending a lot of time to really understand it and do something with it. And I do think you need to spend a lot of time because it's very complex. So for us, it all came together that way. It's funny, as you're saying, it comes to mind that I don't know that there's ever been another market where retail really front-run the institutions in a way that happened in this market. So it's no surprise that the hedge funds that you guys

have invested in weren't necessarily early to crypto because they were probably looking around saying, well, our bank and our PB, they don't do anything here. It's hard for us to get access. Meanwhile, the Ethereum ICO is probably one of the largest wealth creation opportunities of all time. And I don't know that there are ever any hedge funds or venture capitalists even in that. So it's a market that started with retail and then trickled into ventures, how I look at it. It's almost exactly that. Maybe just to give my background briefly as well, I've been in the investing world. I get a bit scared now.

It's nearly 30 years ago. So I was nearly first started working and studied law. But I've been in the investment world all that time. And beginning of the 90s, I was there at the beginning of the internet cycle. And I was working for a wealth manager, just could come out of university. And we saw what was happening in that space. Then we're trying to find investment opportunities. and it just wasn't possible.

There's a handful of US-based private equity funds, but that was it. So roll on a few years later, I moved back here to the Netherlands and was head of alternatives and funds at AB&A, and the private banking side, and there everything's becoming streamlined and realized, well, creating the right opportunities for certain investors either within these larger banks, because you just want platforms, which are creating the same thing for everybody. So actually, when I first joined Theta,

I got really excited when I was talking to this with Root, because for me, this is just a repeat of the internet side, or these brand new disruptive technologies, but it is investable for us. We could actually do something with that from day one, which was for me extremely exciting. And how did you guys think about what the ideal rapper was in terms of accessing this? Obviously, in the early days, there were a lot of crypto hedge funds. You obviously had the direct opportunity to just buy the underlying, buy Bitcoin, Eath. How did you think about that? Well, I think maybe one step back when we went to invest with this. So we had this existing platform. We had existing family officers and

wealth managers, individuals that had their bespoke accounts with us. So the first thing we did was to go to them and discuss this vision we had that this was a great opportunity. And basically everybody said, well, speculating in cryptocurrency, no thank you. Investing in the technology, in blockchain technology, yes, sounds interesting. And that's always been our approach. We think, especially in these early days, the VC angle is the right one to have. And it's not always easy to explain why, because you still get into tokens and token networks, but it's clearly a long-term VC approach that we've taken. As to the vehicles, I think there's been an evolution. There's many of the first dedicated crypto funds with a VC approach were open-ended funds. And for us, one big

advantage we have is that we're used to all these structures. I will put it separated too. So the strategies very clearly, VC, the structure, we can deal with all kinds of structures. So to give you an example here of where really has helped us in our investors, the first batch of investments we did were actually in open-ended structures with a VC approach. If we look back at that, if we would have just set with those investments, we would be at about a 3x multiple on those investments today. Maybe with the rally now, it's like 3 in our 4x. But with the flexibility that the open and the structure gave us, what we did is, beyond getting good fee discounts that we negotiated in the bear market, was to realize part of those investments at the end of 2021 and to convert

a lot of the positions that have become liquid into new early stage private investments. So those investments for us are now at a 12 to 13x model. And that is really for a big part making use of the structure. So I think today, most funds have come around to a typical venture structure, and that is also the main vehicle that we use ourselves, the Peta Blockchrane Ventures, are 10-year vehicles. And just put my compliance hat on. I'm just going to say funds, past performance, no indication of future performance, and there's not an offer to solicit any funds either. And maybe just to add one other line to that, so we can move with that. because of our regulatory structure, because we're fully regulated here in the Netherlands,

we couldn't participate into tokens or coins or anything like that way either. So it had to be essentially into a unitized vehicle. That makes sense. The education side of this is something I'd love to dig a little bit deeper on in terms of how you educated the LP base. And maybe a good way to tee that up would just be, how do you guys break down the investable universe of managers in terms of the categories they focus on? And I'm always curious how institutions like yours actually translate that story back to the capital allocators who obviously don't spend their full day looking at the blockchain space. It's just how do you synthesize the strategies that you invest in?

To start on this one, it's very core to what we do. So basically, if I would summarize our approach, first of all, we are very much really chosen to be a fund of funds in the space. We're not a fund of funds that has an aspiration to be a direct investor over time. And the reason is because I think this is an area where the fund of fund approach, you can add a lot of help. It's pretty unique, I think, in this time, in this era. I think the fund of fund approach is a great strategy to invest in crypto. So the way we do that is we map the crypto ecosystem, which means that we really identify all the areas, all the ecosystems, the vertical. the different parts of the tech stack, the geographies and the nuances, where we think that crypto offers an interesting opportunity. So that's a separate exercise. And in that regard, we're not too dissimilar from many generalist venture funds or crypto VC funds. But then the second element to it is that we build this map of all the specialized funds in the space. So who is active in which parts of that crypto ecosystem and who can provide us with the top quality.

the early stage deal flow for each little segment within an ecosystem. And those things we pass together providing us and our investors with early stage access to everything that we think is really promising. So empirically, what we've seen is that this actually works very well within crypto. Despite all the noise there is, we do see through our managers with capturing 80 to 90% of all the high quality deals, meaning anything really turns out to have fractured. after a few years from a seed stage type of valuation. So that's where we start from the investment perspective.

We don't want to make too many predictions on where the tech is going or which further goal is going to be most relevant in the next 12 month. One thing you learn in crypto is that even if things take longer or maybe you're wrong on the traction of a certain ecosystem, if you invest very early through highly specialized investors, there's often still a good investment outcome to be had. and there's early liquidity and you have the option to scale out later. There's many examples to that. But that's from the investment side.

Maybe Mark talk a little bit more about how we bridge this to investors. I think there's two angles as well. One being the mapping that we just alluded to. So if you just go back to the hedge fund space, that was the one thing that always alluded to the hedge fund managers in many respects because the managers would never give the full portfolio breakdown. So it made it harder to build up a quality portfolio as well. Well, that's one of the things that we do in building our portfolio.

portfolios with managers, we insist on getting that information, and that allows our team then to map that all out and to map that against the whole universe. That's a fairly, that's taken us the best part of three years to get there now, to really get that working. And how we use that is that allows us to have very in-depth newsletters on the positions and to show that as well. So that's a little bit on the mapping and the space. And on the education side, that's something which COVID has helped with in many respects, but what actually happened, you alluded to coming to legends here in Amsterdam a few weeks ago. So we've been running that conference now since it's on our eighth event now, but we're doing it for a few years, because we got a couple of years off.

We started off in the hedge fund space where we used to get the lead in hedge fund managers to come, Bill Ackman, Michael Hincey, Leda Braga as examples. But each year we also had a blockchain section, And it started off with that. And a lot of the investors we had came along and said, well, we like this hedge fund stuff. Yeah, great to hear about these portfolios. But this blockchain stuff, now that's interesting. That's what we want to hear more about. And that's what started the momentum a little bit.

And then in fact, we actually started doing webinars before COVID started. I wouldn't say a pioneer, but we were certainly early adopters. So that when COVID hit, we already had an audience base, people were willing to listen to us. We used to do regular webinars with the underlying managers, trying to explain the technology, doing sector focuses, just market updates. And I think that Lexus helps a lot. And we just now done this year's Legends for Legends, where we had 20 of the top VCs out there. And everyone, we spent a lot of time just curating the program.

So we had a red line run throughout the day. People could just follow the journey as well. We're going to publish the recordings as well so that they'll be available online soon. Because you hear it once, and it's a full day in this. fairly intense and then hopefully over the Christmas holidays, people will spend some time listening to it as well and absorbing it a bit more. So that's how we basically try and communicate on what we do. Just to quickly jump in, I think what's very clear about crypto and traditional investors is they do need to hear the story many times from a little bit different angles.

And that's basically what we do with these webinars. So we know exactly which VCs in the space take what angle in explaining the big picture here. And we do get that feedback from people where they really say, listen, my understanding is going from 5% to now, let's say 20%. Thanks to your webinar, those are people really high up in bigger banks, et cetera. So we do get a lot of appreciation for that as well, which makes it more funny. That makes sense. I really like the way you guys have a taxonomy view of the types of strategies and the types of categories.

And from where I sit, it's the sign of a healthy ecosystem that you start to see more specialization, where you have gaming-only funds or D-PIN-only. funds. How do you guys think about these niche pockets within the industry that are starting to pop up? It's a good point. When we started investing, you've basically had just generalist funds because there wasn't yet too much going on. Let's say there weren't specializations. The first specialization we saw was decentralized finance. So the first wave of specialized funds were D5 funds. Now you have gaming funds. You have funds focusing on the creator economy, NFT funds. You have ecosystem funds within Solan, Cosmos, etc. You have funds that focus on the

modular blockchain thesis or even on shared security. So there's more and more specialization. And for us, it's great because what we optimize for is getting the best early stage exposure across that whole ecosystem map. And the more specialized that investors are, the more we can with granularity in that effort. So it also goes both ways, right? Investors find out over time that they need to specialize in certain areas to make sure that they will be the go-to-party from the next most promising founder that builds something and less than a certain segment. But for us, it really helps. And as Mark alluded to, what we've been doing is over the years, is really build this database of which investors are leading.

which rounds. We have weekly team meetings where we discuss all the early stage rounds that take place in the space, who is involved there, who is fulfilling what role, so we don't miss any funds. And that combined with specialization, I think, just further helps us to add value for investors and really mapping out the whole ecosystem. Absolutely. A lot of these funds, I'd put most of these funds actually in this category. They're running strategies that are by nature capacity constrained. So even if they could go out and raise $2 billion, it wouldn't make sense with their investing strategies. And obviously, that's just good discipline at some level, but it also has a follow-through effect

to the LP base where a lot of these funds that you guys are in will not really be open to outside capital, I would imagine, at some point in the future. So I guess, first of all, do you agree with that? And then just second of all, how do you think about access in terms of what you want this to look like 10 years from now? Absolutely. I think we fully agree with that. That's what we observe.

I think we got into this industry at the time that the VC industry was taking shape. In 2017, you had only a handful of funds. So it feels like we grew up with the industry. And that means that we got to know all the main players from the beginning, got to know everybody who joined it later on. What has held a lot is that we've invested through to bear markets in the space. So that goes a long way in building. the relationships. And I think what helps us in obtaining that capacity with these capacity

constraints managers is that we do have this real deep understanding of the space. A lot of investors for most funds want to have some allocation, but they don't really understand what it is that they're investing in. And that helps. We can help funds to serve as references for other investors. But I think it's just more of an appreciation where we really have an investment pieces to work with a manager. So I think it's nice for a manager to hear, listen, we want to invest with you or continue to invest with you because you're showing that you have the best early stage deal access in this area. And I think that's what we also try to give across us a message to our investor base. We just came back from this conference in Zurich last week, where

I noticed some family offices, they invested to some managers. I'm not going to opine on the quality of the manager, but they do it because they've met them or they think they've got a good investor base. but actually all they've got is an investment in a certain sector with a certain manager. They're not really though diversified, and they're probably not big enough to get capacity in the future iterations of the fund, whereas we're set up before that. We've got the capacity arranges in place so that we can ensure that continuity. And even just talking to some leasing investors, they're like, yeah, but I rock up with my big tickets. I'll get into any Premier League fund.

I'm saying, well, actually you won't. And that's good, unless the manager starts changing what they're doing, how they run their business. but it is just purely capacity constrained. So that's something that investors really need to be aware of, I think. And it's also about being proactive. So we often negotiate capacity six to 12 months before manager raises their new vehicle because we already know that we want to have a certain manager covering a certain part of our map for our next vintage.

We haven't even started our 2004 vintage in terms of asset raising, but we already have a lot of capacity agreements in place. and have a strong view on what portfolio we look like. And for example, with Castle Island, we know that you would give us early stage equity exposure to top quality and financial services like prime brokers or stablecoin issues. And this way, our managers all have their certain areas where we can really count on them contributing to the overall picture. I think that access game is going to be really critical.

And I guess there will be some mistakes, too, on your underlying managers will hold Hopefully not yours, but underlying managers that just get too big, too fast probably as a result. And I guess that's what you guys always have to be careful of is you don't want to have a fund go from a $100 million fund to a $2 billion fund on its next vintage just because they have the ability to raise the money. Absolutely. It's probably the number one reason why we are passing on the next vintage of a manager is when they turn into an asset gatherer and have automotives driving it.

Well, speaking about asset gatherers, I'd be curious how you guys think about non-crypto generalist funds. Obviously, these guys tend to ebb and flow, it seems. A lot of them came into the market and invested in large companies like FTX. So be curious just how you think about generalists as competition and collaborators potentially for some of the managers that you guys are investing in. To us, the generalist funds are basically a fact of life. They are sometimes there and sometimes they're no longer. And at some point, then they probably will get back. And where they directly impact us is more in how quickly underlying companies and protocols are raising new capital. So what you've seen in the previous cycle is that the seed and then the Series A typically

got poorly funded by crypto-native VCs. And then very soon thereafter, one of these large generalist VCs would come in and do a series B at a high multiple of the previous round. So it helps short term in your marks, but over time I don't think it contributes a lot. And today, basically, all the generalis VCs are gone. I don't think it makes any difference in terms of how the tech proceeds and the ultimate outcomes. For us, it's extremely obvious that we want to invest with the crypto native VCs. It's really, if you count it, it's 90% plus all the top quality projects, get their funding from that new cohort of investment managers.

What I always say is just look at who is leading the crypto initiatives at some of these generalists. And if it's an associate or a principal, I'll take the bet that they won't be there in a couple of years. They'll either started their own dedicated crypto fund or they'll be an existing crypto fund. We keep an active list of people. We do speak to the generalist VCs and we keep an active list of people that we think may start a firm themselves in the years to come so that we can be proactive there as well. That's kind of the scouting department. I'd be curious, how do you guys think about direct investments into companies that your managers are investing in? Is that something where you're active as well? I'd say, as I said, we are really seed yet the value we have on the fund of funds approach.

So it's covering that whole map. We can earn back our own fees by making good arrangements with underlying managers. We create our own share classes. We've been very busy and active in sourcing secondary LP stakes of some of the best portfolios out there. So there's many ways where we can directly add value. So we do have the option to invest directly up to 30% of our portfolios, but we're not doing it driven by pure fee motive, like if there's a lower of no fee share class, it's really to complement the map of investments that were construed. So an example is that we co-invested in around in Celestia a year ago because in two of our fourth integers, we felt we were a bit under exposed to the modular investment thesis. Right, there was an

opportunity to go invest with one of our managers in that round, and we took that opportunity to build that. So that's typically the way we go about that. That makes sense. Celeste is a good one. We like that one too. I'd be curious, we were just in person together a few weeks ago at Legends for Legends. There were a ton of new trends that were being discussed at the event. And just curious, what you guys are seeing is the most exciting trends in your underlying portfolio that's driving direct investments from your managers? Well, again, I think for us, it's what we try not to do is to predict too much, but we do observe, obviously. I think we are still in the early stages of this technology, meaning that there's still a lot of infrastructure to be built. Clearly, every cycle

plans to see for the next cycle. So I think if you look at this bear market, hopefully now potentially past bear market. We've made great strides around scalability with all the layer two's launching. There's a lot more to follow there, especially on the zero knowledge proof side of things. With account abstraction, we're making great strides in the usability of the tech. So one trend I think that we're witnessing is that people are a bit more anticipating applications. So it's not just about infrastructure anymore.

it's also about, okay, what are going to be the first applications that really see some form of broader adoption. For us, infrastructure is a great segment broadly to invest in. It's often the most complex. So working with specialized groups gives you the biggest edge there. The outcomes are often the largest because these infrastructure projects are at the base of everything built on top. And I think infrastructure still has a long way to go. And there's also a definition question because, let's say some of these core defy primitives, uniswap or a compound, to us, our infrastructure much more than that they are applications. But that's definitely a trend that we see.

The other trend we just discussed, which is more specialization. So we'll see a continuation of that. But for us, again, it's not about making two-bolt a prediction of, what's going to be the next big thing, but really capturing the broader ecosystem. And maybe just to throw another thing in, although it's less of a investment theme, but the thing that became far more obvious to me was how the institutions are here. You guys have been saying this on the podcast many a time now. But you interviewed Simon, one of the largest interiors, what they're doing in the space.

We had JP Morgan at the event as well, explaining what they've been doing. We've seen what's going on the payment side. So there's no longer some sort of speculative, retaily, pumpy dump thing. It's really there now. And that's what I think makes this very different to going into the last bear market where you're like, well, how are we going to get out of this?

It's clear that the technology is here to stay and the big guys are in the space now. I think that was one thing that became very clear, let alone the actual developments on the technology side, but who are the players in space? That really has changed. I agree on both points on technical and then the institution's coming. Past bare cycles, the technical advances just haven't been as significant. I remember the post-Mount-Gox era right into the block size wars and you had people rage quitting Bitcoin and just it felt like less was being built. And the post-ICO era, even, you just didn't have as many primitives being built. You had plasma on top of Ethereum, which didn't really pan out. But it seems like this cycle, just the technical underpinning. plus the fact that BlackRock is now in the game and it's getting harder and harder for

institutions to not have a point of view. Although it was a bear market, I should correct, I don't think we're in a bare market, but I think it's over, but it just feels a lot different. The thing that we expect to see is that also on the institutional investors side, when we speak to investors, they do know that this is technology that's here to state. And things like, we didn't even mention the Bitcoin and Ethereum ETF that we're expecting. But it all grows, to that same point, the tag is here to stay and the institutions know that. I think what they're missing at the moment is an urgency to invest. There's this shiny new thing that keeps surprising us every day, artificial intelligence. But I think as soon as we see a bit more sustained price

action in the digital asset space, the urgency for investors will come back and we'll see a lot of interest, sending from that. I think that's exactly right. Obviously, the regulatory angle here is a big piece of the puzzle. There was a great chart in the last Coinbase 8K that I think said 83% of G20 nations have put a framework in place around digital assets. Obviously, the US is the laggard there. But when you think about investing, how do you guys contemplate the regulatory setup? And how does that go into your investment decision-making process? Well, we've always realized that this technology is on the one hand extremely powerful. On the other hand, it's very counterintuitive or disruptive. and makes it very difficult to regulate.

The permissionless global nature of it combined with how powerful it is. So it can be used for good and for bad with every powerful technology. So we have always realized that it's going to take a long time for regulators to really grasp with it and come with clear regulations because it also is a very difficult task.

And what we need to do is to be long-term oriented and to have the right structural setup to deal with that intermittent uncertainty. And I think we are in this period now where it's come to ahead and regulators have to start providing clarity. I think in the US, we have turned a little bit the corner after max negativity just before the summer. But it's going to be a bit of a model through process. I don't think it will really impact the ultimate outcomes, but it will definitely impact the path of adoption. And we are set up with this very little we can do to change the trajectory to it, but we'll get through that. And we'll see in some jurisdictions now that there

is this clarity and that will help to get the clarity in the US as well. And we'll take it from there. And I think I just draw parallels as well. I learned to earlier on how when I first started investing, it was the age of the internet era. And what came out that was Amazon. And one of the reasons why they managed to grow so much was on the taxation side in particular, which was a form of regulation. There were no rules in the beginning. It was all taxed at zero. And that included being here in Europe, you could all of a sudden buy this fancy American stuff, which you just couldn't get over here and get it shipped over and you'd access to it. And then eventually, as the technology started proliferate and extend and cutting into other people's margins,

that's where the lobby efforts come in and regulation, in this case taxes came in so their arbitrage was no longer there. And that's just the evolution of an industry evolving. And we're going to see exactly the same here in this space. And with the regulation, you get clarity and clarity, you get larger adoption. And those things will never really happen. And it was interesting because even in Europe, maybe 24 months ago, you would not even have thought there'd be regulation. It still has mentioned to some little villager industry and look at where we are now. It's the headlines of most publications on a digital regulation. daily basis now and almost in a positive way. And I never thought that we would be allies with the

bank lobby in the U.S. But more and more European banks come into this market. I think you'll actually start to see the U.S. bank lobby start to push for this regulatory clarity. Exactly. So Mark, you mentioned the Legends for Legends Conference. That was a great event. That was one of the best events I've ever been to in crypto in terms of the cultivation of the people there and really the sidebar conversations that were happening. So how do you see that event unfolding? And you mentioned the origin story, but I'd love to just hear what you guys are trying to do with the event. So the background to it was when I was at ABN Emro, we decided to launch this charity called Alternatives for Children. And the idea was similar models in the alternative

investment industry. And we realized, here in the Netherlands, there was nothing. So over the years, we did various events, like various fundraisers, gala dinners, and so on. But I also learned that trying to get money out of a Dutchman is near and impossible. So you've got to adapt, you've got to evolve. So when I joined Theta, I was actually riding through the It was an August afternoon. I was absolutely bucketing it down. I came into the office, absolutely so. I said, Root, we've got to do something. When I was at AB and Emma, we did a similar sort of event. I think we should do our own event. So the name Legends for Legends for Legends was just born out of that rainy afternoon. And I said it started off with just trying

to bring along some of the best hedge fund managers, but I think the flavor is very much now on the blockchain space. The idea is we raise money for the charity, just to give a little segue way into the charity. As I was taking the Dutch Calvinistic approach, the American approach with charity is have a big charity, spend loads of money to raise loads of money. We do it the other way. We don't spend any money. I should do everything ourselves a little bit, but at least we try and raise as much money from both the visitors to the event and the managers. And then we've now got six projects we cover. And again, I'm lucky enough to have gone through some great education in my life and you guys as well. And you realize, hey, education can and does change the world.

So we focus on children's education projects around the world. We've got two projects in India, one in Tanzania, one in Ghana, one in Kenya, all focus on education one way or the other and accelerating that for children. And hopefully the guys and leaders of the world for tomorrow. And we do that on a very pragmatic way. These are all smaller-scale projects. We treat it a little bit like a VC startup. We know exactly what's going on the project.

We know exactly where the money's go. We don't pay for overheads. We don't allow for much spillage of costs either. And you can read more about that if you go to the website. So it's www.W.Otertives, number four, children.com to read more about the project and the charity. And basically, we're going to use it as a platform going forward to issue we're going to carry on holding the event. And we really want to be seen as the pre-eminent event bringing together the leading managers in the space with investors who want to learn. That's how we see ourselves.

And we've been doing this now for the last years. Who knows, we might do it somewhere else. but I always recommend that people come to Amsterdam because we hold it to the end of September, early October each year. It's a great time of year to be here. It's a great city, lots of history as well. And in the similar way, how the Dutch invented the stock markets, you can come to appreciate the thoughts behind how we're involved in the blockchain space as well. It was an awesome event and obviously a great cause. I wonder with interest rates coming off a little bit and a Bitcoin ETF, if maybe there'll be some Lamborghinis in front of the event next year.

It'll be interesting, the fair market versus bull market conference. Well, the good thing is you have to take a little ferry across there. It's completely impractical to drive from the city center. So maybe I'll be turned up in a souped up bike instead next year, like a push bike. But I don't think there'll be too many Ferrari's pulling out there no matter what the market's like. That's good. Just avoid the excesses of the New York Consensus Conference, which ebbs and flows over here. But guys, it was great to have you on the podcast today.

Where can we send people to learn more about what you're doing at Theta Capital? Reach out to either Root myself or John with the third partner who's not on the call today. Our website, thetacapital.com or an email to IR at ThetaCaptal.com. Best way to reach out to us. Follow us on LinkedIn or Twitter as well. Well, appreciate you coming on the podcast today. Thanks for doing it. Thanks, Matt. Thanks, love. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.V.C.

To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website. Thanks for listening.