Unchained - Why Future Perfect Ventures Did Not Invest in ICOs - Ep.107

Starting point is 00:00:01 Hi, everyone. Welcome to Unchained, your no-hyped resource for all things crypto. I'm your host, Laura Shin. If you've been enjoying Unchained, pop into iTunes to give us a top reading and review that helps other listeners find the show. And if you haven't heard yet, Unchained is going live with a recording on stage with Vitalik Boutterin in New York City on March 20th. Check out the show notes to find the link to buy your tickets. Get them now. Do you have an idea for a blockchain app but are worried about the time and cost it will take to develop? The folks at Azure have you covered. The new Azure blockchain dev kit is a free download that gives you the tools needed to get your first app running in less than 30 minutes. Learn more at AKA.m.m.S. slash unchained or by following them on Twitter at MSFT blockchain. Within months, cryptocurrency anti-money laundering regulations go global. Are you ready? Avoid stiff penalties or blacklisting by deploying effective anti-money laundering tools for exchanges and crypto businesses, the same tools used by regulators. CipherTrace is securing the crypto economy.

Starting point is 00:01:10 Considering using digital securities as a way to grow in 2019, Tokensoft's trusted platform provides the security and compliance tools to leverage blockchain technology and enter new markets with confidence. Visit us at tokensoft.io or on Twitter at Tokensoft Inc. My guest today is Jalak Jobon Pudra, founder and managing partner of Future Perfect Ventures. Welcome, Jalak. Thanks. It's great to be here. Let's start with your background. What were you doing before you founded Future Perfect Ventures?

Starting point is 00:01:42 I know this is a pretty long history, but it's super, super interesting. Well, I'll try to be brief. I'm going to age myself by saying that I've been a venture capitalist since 1999. Prior to that, I was on Wall Street as an investment banker, focused on media, telecom, and tech mergers and acquisitions, equity and debt offerings. So I was in New York and London doing that. And the Netscape IPO happened while I was on Wall Street. And it was a really defining moment for me.

Starting point is 00:02:19 And I think a lot of people, when we saw. what the potential of the internet was and the excitement around technology and, I mean, the stock obviously kind of popped more than I think any other stock had until that point, but it was also kind of opened up the era of, I'd say, the commercial internet. And I had always been very interested in media and communications and the role of radio and television at the time when I was growing up, we didn't have the commercial internet. But thinking about how all of these communication mechanisms could help in connecting humanity. So I was born in Nairobi. I am Indian by background. So after we moved to the United States in the 70s,

Starting point is 00:03:15 when I went back to a lot of these countries, it was really hard to call back or get a line. out or feel connected to what was happening in other parts of the country, let alone, you know, across borders. So when I saw and started looking more closely at the internet, my mind went back to how this could open up education, development opportunities, cross-border trade. And a lot of the things that we're actually now seeing happen not only with the internet but with blockchain technology. And around 1999, I was given the opportunity to go work at Intel Capital out in Silicon Valley. And it was kind of the best time and place, in my opinion, to learn the venture industry. Because we're in the middle of a massive boom with valuations, with a lot of the

Starting point is 00:04:20 kind of hype and potential around the internet, but a lot of the infrastructure wasn't built out yet. And that's really when we started to see the bubble burst in 2000 and 2001. And then also looking and managing some of the cleanup from that time period really has informed the way I invest today. I moved back to the East Coast in 2003 and was with various venture funds. including the New York City Investment Fund in New York City, a public-private partnership that was very involved post-2008 financial crash to spur the development of the tech sector in New York City.

Starting point is 00:05:06 It's kind of hard to believe these days, but in 2010 even, there were very few seed funds in New York City. So I partnered with New York State to start a small seed fund, New York City's first accelerator program that was before tech stars, several years before tech stars came into New York City and started doing some direct investing in the fintech sector. I also helped launch the FinTech Innovation Lab, which worked with a lot of the bulge bracket firms on Wall Street. It's since been replicated in Hong Kong and London and was a first of its kind model of showing

Starting point is 00:05:47 how large companies can partner and provide resources to startups to help create innovative solutions, technology solutions. So took all of that experience, and about six years ago, I started thinking about what's next in technology. I, because of my global background, believed very strongly that the next wave of technology was going to be truly global, that there wasn't going to be one place, one region that kind of monopolized tech innovation. I also wanted to base the fund in New York City

Starting point is 00:06:29 while investing globally because I felt like New York was emerging as a very strong ecosystem in the United States, but also around the world. We have the most diverse population in the world, if you kind of look at the data, almost most languages in the world represented, most ethnicities represented. And so it's kind of a living laboratory for any new technologies that could emerge.

Starting point is 00:07:01 And the third was more of a thesis-driven point around the fact that three billion more people were going to be coming online in the next five years. we were going to see a lot of that on-ramping happening through devices such as smartphones. Billions of devices are getting online as sensors get cheaper and as processing power increases. It's going to create a lot of opportunities for data creation, data transfer. And so I was broadly thinking about these things. when I went to my first Bitcoin conference in 2013 and just became fascinated by not only the concept of a global currency, global transactions without intermediaries, but also what that

Starting point is 00:07:57 meant in the context of all this data proliferation. And thus, Future Perfect Ventures was born in 2014, about a year after going to that conference and kind of digging into how Bitcoin and blockchain technology could fit into the global themes I was seeing around the world. I love it. I've always thought your background is so interesting. And I just want to plumb so many details of what you described here. The good thing is that I've crafted a whole bunch of questions that do just that.

Starting point is 00:08:31 So we will get right to this. But actually, there's one other thing that I wanted to say, which is before we started recording, I mentioned that I had gone back to check out my first interview with you. And I remember that interview pretty distinctly, which is kind of saying something because, you know, I interview a lot of people. But I remember because, you know, I interviewed a lot of people in the space. And, you know, obviously there are a ton of people who are super smart and interesting and, you know, teach me a lot.

Starting point is 00:09:01 But I remember that the one I had with you really stuck out because at that time I was talking with a lot of people who were definitely teaching me a lot about the technology and about crypto. But I remember that my conversation with you was really different because you not only, of course, knew that technology, but you brought it together with all these other cutting edge technologies. So it's like this sort of futuristic conversation where not only were you on the cutting edge of this one, but then you were just thinking about combining it already with some other ones in a way that nobody else was really talking about. This was even a few years ago. So But I just think there is something about your global background and the breadth of your experience in venture capital that it allowed you to have that perspective.

Starting point is 00:09:46 But anyway, so just to continue your story, like you talked about how you went to your first Bitcoin conference in 2013. How did you even hear about Bitcoin in the first place? That's a good question. I'm trying to remember how I had first heard about it. It was just through random blogs that I was reading. I always try to read things that are outside of most reading lists because that's often where I get my strongest ideas. And I think it was just some random blog post that I saw talking about this decentralized distributed currency. And I was particularly intrigued by the fact that it was created in the wake of the financial crisis.

Starting point is 00:10:36 I once wrote a blog post, post 2008 crisis, about the opportunity that disruption creates and downturns create. And I often think it's only, you know, when we're really pushed to be resilient, when we're pushed to be resourceful, when kind of everything that we've believed in starts to fall apart. But that's when the most creative thinking happens. And so whenever there's been a downturn in 2001 was an example out in Silicon Valley, I was in New York during the 2008 crash. And in a lot of ways, had a front row seat to it when I was at the New York City Investment Fund. Our parent company, Lloyd Langfine, was actually the chair at the time. and so was involved in seeing how Wall Street was being impacted and disrupted by what was

Starting point is 00:11:39 happening and then all the failures of the system. And so having lived through that, when I came across the concept of Bitcoin and the timeline of when it was created, I thought that was particularly compelling. And then when I started thinking about it in context of these machines and IoT, Internet of Things, devices, and kind of the need for more trusted data transfers and the fact that our institutions had started failing us or were not keeping on top of the latest technology, it just all came together. And so I was kind of already sold when I went to the conference, but became even more and more fascinated and couldn't stop thinking about it and all the possibilities. And very similar to the first time I logged on to the Internet. And so about a year later, you launched that first fund. What was it like trying to sell LPs on blockchain investments in 2014?

Starting point is 00:12:47 Nearly impossible. Well, the timing of the fund was very deliberate, and the timing of my first investments were very deliberate from an investment point of view, not from an LP point of view. And what I mean by that is that Mount Gocks happened. Silk Road was getting a lot of negative press. So the common narrative around at the time it was primarily Bitcoin was that this was negative. It was being used for nefarious purposes. It wasn't going to amount to anything. And to me, it reminded me a lot of the early Internet days. And I keep drawing analogies there, but the analogies are very strong from my,

Starting point is 00:13:45 personal experiences. And so I was actually more and more convinced as the Bitcoin community kind of still survived Mount Gox. They survived Silk Road. And the creators, the entrepreneurs I was meeting, were more dedicated to their mission and their goals and seeing this technology out there that I thought if it didn't die with that kind of scrutiny that there was really something here. So it was a very contrarian perspective,

Starting point is 00:14:21 but that's when I've always made the best investments and made the most money out of my investments. And so I wasn't kind of afraid of that contrary. If anything, it convinced me more than ever that this was the next wave. And a lot of it was that talent that I was seeing. But the LPs often kind of follow markets, and they're not necessarily ahead of markets the way a VC is supposed to be. And so it took a lot of going back to entrepreneurs I had invested in and helped build their companies who were big believers in my skill set in identifying new companies, new innovations.

Starting point is 00:15:10 I think a lot of them were kind of blown away with the amount of conviction I had. And the fact that I put a fair amount of my own savings into that first fund. And I was kind of putting my money where my mouth was and investing as much as I could in some of these early companies like blockchain, like Abra, like BitPesa. You know, these are all companies that are now leaders in their respective areas. but we were part of the first million into those companies. And so the LPs, I would say, you know, didn't really start coming in until, I would say, almost the second fund in terms of larger LPs. But luckily, I was able to go back to enough people that kind of believed in me, maybe not necessarily in crypto or blockchain tech, but had seen me identify other trends early and kind of want it to put their faith behind me.

Starting point is 00:16:14 All right. So now let's talk about future perfect ventures. What is your strategy there and what do you invest in? So we're now investing out of our second fund. Our first fund, we had a thesis of decentralization. So blockchain has been a big part of that and was about 70% of the first fund. But the way I've always looked at the blockchain sector, you referred to this before, is that it's part of a stack of new technologies that are emerging, that are enabled by the global connectivity. We already have the broadband and mobile connectivity, cloud computing, better processing powers, faster chip sets, and better analytics. And so better artificial intelligence, machines. learning capabilities. And so blockchain tech enables a lot of these technologies to realize their vision better.

Starting point is 00:17:17 So a machine needs to be able to transact with another machine and exchange data and say maybe it's a solar panel that then wants to be able to transfer not only energy, but then log that energy onto a global database, that energy usage, and then through a smart contract, kind of subtract the payment from someone's bank account. That's a process that would take a lot of intermediaries in our current system to make happen. And so this concept of a global ledger that is immutable that provides audits and then you can build smart contracts, both for currency as well as data transactions, enables devices and machines to communicate better

Starting point is 00:18:15 and in a more useful way in the real world. So that was a pretty ahead of its time vision in 2014. With the second fund, we're now actually seeing the infrastructure built out to enable a lot of this to happen. So the way the first fund was very much about infrastructure, build out, some early applications of say the Bitcoin blockchain, such as BitPesa, looking at emerging markets where we don't have kind of the same institutions in place. So leapfrogging and creating new institutions or new processes on blockchains is a lot

Starting point is 00:19:00 easier in a lot of the emerging markets than it is in places like the United States. So we focused on some of that with the first fund. Second fund, I think, is even more exciting. And I love the first fund and the portfolio and the traction the companies have gotten. But now we're starting to see a lot more business models, a lot more infrastructure build out. And it's at the protocol layer, but it's, also at layer two, what I equate to the middleware of the internet. So how do we create developer tools so that we can start building on these different protocols

Starting point is 00:19:42 that are emerging and start scaling some of them? So then we can actually build applications that will be useful to all of us. And what is the size of each fund? So the first fund was sub-20 million dollars. And the second fund will likely be, north of 50 million. Oh, so you haven't closed it yet. No, and I can't really comment as we are in the final stages of the final close. Okay. Yeah, but I did see Mark Andreessen and Chris Sagar some of your LPs. I wasn't sure if that was for the first. Yes, yes. They have invested.

Starting point is 00:20:19 So we've been investing out of the fund over the last year and we have nine portfolio companies in the second fund, we have seen a huge uptick of interest over the last couple months. As the public crypto markets tanked, I think there was a realization on the part of a lot of limited partners, a lot of family offices that thought that they could go direct and make money through these liquid hedge funds. They realized that we're still in. early, early stages of the tech buildout. And what I have always kind of maintained and stayed out of the ICO boom in the 2017 era was that you can't take early stage technology and IPO it. And that's really what was happening with ICOs.

Starting point is 00:21:15 All of a sudden, these companies that hadn't yet built any technology out or very little had a bunch of public stakeholders. and many of them were speculators that expected the price of the token to go up. Meanwhile, the teams, some of them were exposed through their treasuries to crypto market prices, and they were spending way too much energy trying to manage those public stakeholders. When in a traditional venture capital model, you have investors, but they understand that technology takes time. there's a reason the private markets exist. And I thought we got way too ahead of ourselves. And that theory has been validated over the last few months. And we stuck to the venture capital

Starting point is 00:22:07 model of investing. And that's generated a lot of interest from the LP community. And not only, I'd say, individuals and family offices, which made up our first funds. LP base, but also institutions who want some exposure, but want to do it in a way where, you know, they're not going to lose 90% of their capital in a year. Well, yeah, so this leads me to another question I was going to ask you. So is that why you have invested in traditional equity startups rather than in some of these decentralized token projects? But even like, it sounds like you're shunning the fat protocol.

Starting point is 00:22:53 thesis because there are other VC funds that have changed their structures to invest in things like Bitcoin, Ether, and other tokens. But you don't think you're going to do that? Well, out of our second fund, we do have discretion to invest in digital assets broadly, which would include protocols and liquid cryptocurrencies. We have not yet done that simply because the opportunity on the venture and equity landscape has been phenomenal, better than what I've seen in the last five years of running the fund. And that's because we're starting to see talented serial entrepreneurs, and some of them I actually invested in 15 years ago,

Starting point is 00:23:42 now seeing that this technology can help create business models that they weren't able to make happen in capital-efficient ways 10 or 15 years ago. So I... What's an example there? I'm going to use an example that's not necessarily within the portfolio because some of those have not been announced yet and we can kind of reconvene in a couple months and discuss them at greater lane. But if you start to think about something like an Airbnb and the fact that there's just a lot of friction,

Starting point is 00:24:19 While Airbnb has reduced friction in terms of finding a place to stay and offering more access to people looking for different price points, there's still an onboarding process that can be challenging for some people. They've been increasing their fees over time. So they're taking more and more out of both sides of the transaction. So the people renting out their places have to increase the prices to be able to cover the fees. So that's one institution that is controlling while they've done a lot to reduce frictions in this temporary housing and hospitality market. They're still in charge of what the fees are and have a lot of pressure to go public. And so you can see how their business model is changing. I mean, Uber is another example of that.

Starting point is 00:25:23 And so if you start to decentralize that process and allow entrepreneurs or owners of apartments to connect directly with the renters, those fees can come down substantially. And you can create more efficient marketplaces. So, I mean, what I'm looking at a lot is who's created marketplaces over the last 10. 15 years. And how do we create more peer-to-peer activity using decentralized technology to allow the fees to come down and offer a kind of more agency on both sides of the transaction? So eventually getting rid of the need for a company like Airbnb. And so we're moving towards that world. And when you have entrepreneurs who have significant experience building some of those marketplaces, but also saw the drawbacks and the pressures of running those marketplaces, this technology

Starting point is 00:26:28 can open up new business models and new ways of doing business. And so that's just one example, but you can take that to many other kinds of companies that were built during the Internet and social networking eras. and think of new business models almost in any category. I still think we're going to be a good five years off from the realization of a lot of these because the underlying scalability, security, smart contracts, all of that still needs to be built out. And that's, I'd say, what we're primarily focused on with the second fund, but we're also looking at this next generation of marketplace on a global scale.

Starting point is 00:27:14 We're going to keep talking about a future perfect ventures portfolio in a moment, but first a quick word from our fabulous sponsors. Issuing a digital security on the blockchain can be a significant undertaking, particularly to ensure compliance requirements are met. Tokensoft's trusted platform provides security in a world of uncertainty by working with top legal and financial experts so that your digital assets are secure. TokenSoft leads the market in providing technological tools to support tax, banking, and securities regulations for issuers of digital assets. We are honored to have supported leading companies in 2018. To learn more about issuing digital securities successfully, visit tokensoft.io or follow them on Twitter at Tokensoft Inc. Face it, regulations can stall or kill a fast-moving crypto business. New FafT and EU cryptocurrency AML laws are coming soon.

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Starting point is 00:28:36 slash unchained. CipherTrace is securing the crypto economy. Getting your blockchain app off the whiteboard and into production can be a big undertaking. From connecting user interfaces to integrating disparate systems and data, blockchain app development can be time intensive and costly. Well, the folks at Azure have you covered. With a few simple clicks, the Azure Blockchain Workbench can create a blockchain network for you, pre-integrated with the cloud services needed to build your app. And with their new development kit, users can extend their app to ingest messages from bots, edge devices, databases, and more.

Starting point is 00:29:12 It's free to download and gives you the tools you need to get your first app running in less than 30 minutes. To learn more about the dev kit and how to get started, visit aka.m.m.m.S. slash unchained. Or follow them on Twitter at MSFT blockchain. Back to my conversation with Jalach Jobon Prussia of Future Perfect Ventures. So at least so far from your website, I believe it seems like you've probably made other investments, but these are the ones I could find. You've made about 13 blockchain investments, which I'll just list a few. You can add in any others. But for instance, Abre, which you mentioned, the CEO, Bill Barheight was on my podcast Unconfirmed.

Starting point is 00:29:55 Bit Peza, you've mentioned a few times. Whose CEO, by the way, Elizabeth O'Reciel, was my first ever guest on Unchained, and she was amazing. I need to have her back. Blockchain, which everybody knows is a huge wallet, also well known as an information provider. There's Blockstream, also another really well-known company. Civic, Harbor, Tari, BlockCifer. There's a lot. So when you are looking at the blockchain space, what is your strategy or what factors

Starting point is 00:30:25 will prompt you to make an investment out of all the companies that pitch you? Well, first and foremost, it's about the entrepreneur. And what I really look for on that front is resiliency. This is a market that is very nascent, very early stage. And whether or not an entrepreneur has experienced before, I want to see kind of a maturity around the challenges of such a nascent market. It's a maturity on the part of the entrepreneur. And that can be an entrepreneur that's 19 or it could be an entrepreneur that is 60 years old.

Starting point is 00:31:09 It's just understanding that they're going to be challenges and it's not going to be a straight line to success when you're building with such new technology. And there needs to be a collaborative effort with stakeholders, including any investors. And so one of the reasons we also kind of stay away from these $200 million transactions, and a lot of the ICOs ended up being that number, is that we bring a lot to the table in terms of experience and network and connecting our entrepreneurs with business development opportunities, with potential partners with investors down the road. and that is a collaborative effort. And it works best when you're part of the first money in

Starting point is 00:32:00 where there's respect on both sides. I know the entrepreneur is the one building the business. I'm here to enable and help the company grow in a way that will be additive and multiply the effect if they hadn't given up the equity and engage with us. So I always keep that role in mind. And it's important to know that we'll have that kind of relationship. We invest in 25 to 30 companies per fund.

Starting point is 00:32:32 So we're not kind of spraying and praying. We do diligence up front. We spend time with the entrepreneur. Make sure there's a fit in what they're looking for and what we think we can bring to the table. And those are the best success story. And if you look at our portfolio, these are all entrepreneurs, even if they've raised, you know, hundreds of millions of dollars since our first million into the company, we still talk all the time. I'm still making introductions for them.

Starting point is 00:33:07 They're still calling me for advice. And it's like seeing children grow up, but you're kind of always there. And, you know, I feel like we've all kind of grown up in the industry together and we'll continue to. We're kind of in, you know, maybe adolescence in terms of where the industry is. Maybe not even. Maybe we're just starting to walk. So it's been a really fulfilling process to see these great entrepreneurs that you mentioned, build these companies, and also maintain that flexibility and contribute so much back to the sector

Starting point is 00:33:44 because I think that's so key is making sure that the podcast. continues to get bigger because the opportunity is limitless right now. And I think I said this when I was at Ethereum. And I know you wrote an article on this during the first Ethereum conference, but that was before the whole kind of ICU boom or right at the start of it where I equated, you know, where we wore to to the internet days. And, you know, we're still in 1995 phases. We're still at where Amazon was a bookseller on the internet. And if you think about all the businesses they've created since, I mean, that's the potential of all the companies you mentioned.

Starting point is 00:34:28 And then all these new companies still to be formed and funded. And so the equity model is alive and well. And I would say that I'm excited about tokenization. I have always kind of believed in the access that tokenization can provide to people who don't have opportunities to invest in, say, real estate or even private equity, if we can start to tokenize, create less friction around buying and trading of some of these asset classes, we'll have more people who have the capability to invest, but just currently don't have access. So that's exciting to me. I think, you know, the concept of having,

Starting point is 00:35:17 a decentralized token that allows peer-to-peer transfer of value and almost back to a barter system where, you know, I can barter my services for, you know, maybe a token, or I can barter them for some internet access. And that is an exciting future world. However, we try to get there way too quickly back in 2017. And that's why we didn't. participate in the tokens. It's not for a lack of kind of belief in that they will be an important force and business model in the future. Oh, interesting. So you could, it sounds like, invest in them later when you think the time is right. Yes. And a number of companies we've invested in, many of who, which have not yet been announced, are working on

Starting point is 00:36:13 different token models. And however, they're, what's, different this time around is that entrepreneurs are raising small amounts of equity, getting the right people around the table, and then looking at the underlying technology, how these different protocols are scaling, what they should be building on, or whether they should be building their own. So is it layer one or is it layer two? And then thinking about the crypto economics. So a lot of that happened in reverse, where, you know, people just were throwing out white papers without kind of testing anything. Now we're going back to an environment, which is really kind of building testing, but before that public token event, making sure that more is buttoned up. And I think

Starting point is 00:37:03 that's the right way to do it. So we will see some of our portfolio companies out of the second fund eventually tokenize and issue tokens, but it's not going to happen, you know, with than months. It will happen in the course of the next couple of years. And there's this new trend amongst crypto funds to engage in generalized mining, and we've even seen some announcements to that effect, like from Coin Fund and Placeholder vC. Do you see Future Perfect Ventures going down that path? As of now, I don't. I am so glad those funds exist. I have tremendous respect for Coin Fund as well as Placeholder and others experimenting around generalized mining. I think it's a business

Starting point is 00:37:44 model that could make sense. We stick to what we know and have been really successful at, which is that early stage venture. Now, if at a point we think it makes sense to add the mining as kind of another offering or another return mechanism, we'll certainly do it. I mean, we've proven ourselves to be kind of ahead of the curve in many ways just by establishing ourselves when we did. But I also see lots of opportunity in our sweet spot. And what I hear again and again from entrepreneurs is that there's not enough experienced early stage VC that has enough knowledge about the blockchain sector.

Starting point is 00:38:30 So we're in a really good place to fill that hole and are filling that hole. And I think all of these other funds that have these different strategies are fantastic and are going to continue to show all of us, you know, what's going to be possible as a fund manager. And, you know, I certainly talk to them all the time and we trade notes. And so it is amongst funds and funds with different strategies, a very kind of collaborative approach to the sector. And earlier when you talked about your background, you mentioned how global it was. And I, of course, noticed some of your portfolio companies are in the developing world. What do you think are the most likely ways we will see blockchain and crypto being used in the developing world?

Starting point is 00:39:15 And what problems do you think it could solve there? Well, with Elizabeth and Bitpessa, we've seen that within the banking sector, you can create a huge amount of efficiencies, just bypassing the correspondent banking system right now or before BitPesa existed. It would often take weeks to clear a transaction that originated in Asia and was trying to transfer money over to, say, Nigeria, or we'll use DRC as an example. And through using the Bitcoin blockchain, BitPesa has been able to bring that time down to, you know, within hours, often instantaneous. And at a much lower fee. I mean, every time you start to involve different correspondent banks, they start to into the value of the transaction and the fees start to go up. So that's an example of we just don't have the infrastructure in place in a lot of these

Starting point is 00:40:26 regions around the world to allow kind of efficient movement of money. You can start looking at identity. And some of the most interesting projects in the space have involved NGOs. And often you think about NGOs as laggards or not very tech savvy. And I'd say that's true for the most part. But they have a lot of people they're trying to serve in war-torn regions around the world. There's been a lot of inefficiencies in distributing aid. I know parity has worked with the.

Starting point is 00:41:06 a world food program to distribute aid to refugees in Syria. Because often what they did was, or previously, they would distribute vouchers for food. And sometimes those vouchers were intercepted or people would lose them or they get robbed. And it's kind of like with fiat money, right, with paper money, you can't, you can lose it. people can take it from you, steal it from you. And so the vouchers started getting distributed directly into wallets. And I have another portfolio company working on biometric authentication around wallets. And so you can actually prove that you're the person who's supposed to get this aid and then you own it and then you can transfer that over.

Starting point is 00:42:00 It's that token that you're talking about with their token ring? Yes, yes. They have the biometric authentication on the token ring, which can be applied to any device around the world. Right. Actually, before we, because I did want to ask another question about identity, but before we do that, just to go back to when you were talking about BitPesa, JPM just announced it was launching this stable coin called JPM coin. Do you feel, I mean, this is really basically the first time we're seeing a big bank actually create its own cryptocurrency. How do you expect this would affect the development of pure crypto startups and, you know, companies like Bit Peza, frankly? Well, I think it was just a matter of time before banks started issuing these digital tokens. And given the fact that J.P. Morgan has been working on blockchain tech for many years, they've probably employed more people than any other bank on Wall Street in this sector. It's really not a surprise that they launched this token to basically just offer more efficient accounting. and ability to do instantaneous transfers for their clients.

Starting point is 00:43:14 And so I think a lot of the crypto community is up in arms around it and the fact that some of the technology is being hijacked by centralized institutions. But the reality is you can't create a technology and then mandate how it gets used. You can certainly put resources behind the use cases you want to see. But at the end of the day, I think it's a positive that the technology is being used, that we're moving away from, you know, all the counterparties and all the processes that were set up in a time when the technology didn't exist to do, to have alternatives. But technology has replaced a lot of the way we do business, the way we interact with each other. And so it's good that we're seeing businesses embrace it and use it in ways that can create more efficiencies for their own business. I mean, I don't think, you know, J.P. Morgan is going to go away overnight.

Starting point is 00:44:19 Now, I do think Wall Street and banks are under a lot of pressure. And that's why they're looking for efficiencies. If you look at their revenues, you know, around trading, around M&A, everything is done. down. So their business models are under tremendous pressure to find new asset classes, to find more efficient ways of doing business and finding new customers. So company like BIP HESA to me is kind of proved out that you can use some of this technology for banking processes. I think J.P. Morgan's announcement is they're working with institutions, large institutions, and their clients. I can see them partnering with some of the startups in the space to broaden their reach or reach new customers

Starting point is 00:45:13 because they will have to do that at some point. So to me, it's not a zero-sum game. It is about opportunity and new business processes. I do think, you know, just like we saw in the 2008 crash and we've seen kind of in every downturn, we see companies go out of business. We see large institutions fall over time that we never thought would. Blockbuster is an example of one that during the early internet days, they issued a press release that, you know, they didn't think the internet was a threat that nobody was, they didn't believe anyone was going to watch, you know, movies on their computers. And, and so I think it remains to be. seen who of the large institutions are going to survive this next wave of technology disruption.

Starting point is 00:46:06 I don't think the fact that there's a JP Morgan coin is going to impact whether tokenization or decentralization can happen in other ways. It just is a company that's looking at new technology and embracing it for their internal usage and trying to stay relevant. So earlier we did talk about identity. And you were, we're talking about how that's definitely a bigger issue in the developing world. But I think the two investments that you've made in this area is civic and token ring, and correct me if I'm wrong, I think they're mainly targeting the developed world at least to start. So how do you think this area will be developed and eventually come to solve the problem where it really exists?

Starting point is 00:46:52 Yeah, I think about this question a lot. And you're correct, those two companies are right primarily focused on the developed world. Although I would say both entrepreneurs, both Vinnie and Melanie, have significant experience with the emerging markets. I mean, Vinny was born in South Africa, and I know a lot of what drives him is this concept of self-sovereign identity. One of my first conversations with Melanie was around giving more people around the world access to their own identities. So that topic does drive them as well as a lot of other entrepreneurs

Starting point is 00:47:36 I've met in the space. The challenge with identity is often that we need to involve governments. We have to involve the public sector in those conversations. And they're notorious for being slow. And so I think there are a number of projects that will start to see, you know, that are in pilot in some of these regions that will start to see whether, you know, they've figured out the public, private model around creating more self-sovereign identities. I mean, the challenge is, you know, governments want to track citizens and who's coming in and out. Now, can we use shielded transactions, and zero knowledge proves. Can we use some of the new technology that's being created

Starting point is 00:48:25 to allow people to transport their identity, but still be able to reveal what is important to the government so that they're not as much threatened by a completely anonymous system? So I think we're going to see more movement on that side as we start to see the underlying technology refine itself in a way that can, address the concerns of different constituents. And again, you know, it would be great to live in a world where we could move freely

Starting point is 00:49:00 without having anybody track us. But I think we've gone past that point. If you look at many countries around the world, including India, which, you know, has this biometric database of their citizens. If you look at China and the face recognition that's happening, there. What's happening in the United States, what I want to see is protection of our data to the extent we can, but realize that we may never have like fully anonymized identities or fully self-sovereign identities. And I know that your fund invests not only, of course,

Starting point is 00:49:44 in blockchain, as you mentioned earlier, but also in machine learning. And so how do you see blockchain technology and machine learning or AI coming together in the future? Well, there are a number of ways. Probably the most exciting to me around AI, machine learning, and blockchain is kind of alluding to what I just discussed around shielded transactions and zero knowledge proofs and figuring out a way to offer data sets that are more public so that individuals, small companies, large companies can all utilize those data sets right now. We have Facebook and Google and Alibaba, these large companies around the world that maintain large data sets.

Starting point is 00:50:36 And they kind of have this monopolistic advantage of playing with that data and creating new machine learning models. But it's all kind of feeding back pretty much just back into their ecosystem. and their companies. And wouldn't it be great? And I think about public health. And I think about all the different diseases around the world that don't get kind of the research attention or people can't get the right data sets or contribute the right data sets.

Starting point is 00:51:07 And my mom right now is suffering from cerebellar ataxia, which there are only a few hundred thousand people with that. And it's very hard to find research or see what treatments have worked or connect with others. And I think about, you know, being able to do that. But if somebody wants to anonymize parts of their history or, or again, contribute some of it, but get something back or or get some research back, that there's a way of keeping track of that. And so I think it can like unleash a whole kind of renaissance of like machine learning and more innovation around the modeling of it, but as well as the outcomes and the applications. And I say that's what I'm most excited about. I mean, you could also kind of argue that, you know, the more data that is being

Starting point is 00:52:08 collected, the more kind of velocity there's going to be around, you know, creating not only positive outcomes like healthcare that I mentioned, but making sure that these data sets are built with diversity in mind. And a lot of these machine learning models, whether it's around e-commerce or other things, there's just a one demographic that's represented. That doesn't necessarily represent what can be built in the future. The New York City Economic Development Center partnered with Future Perfect and the Global Blockchain Business Council to open the New York Blockchain Center. What is the New York Blockchain Center and what will it be doing?

Starting point is 00:52:55 Well, I look forward to hosting you there soon, so we have to get you there. Yeah, yeah, I'd love to come. That would be fun. It's a really exciting initiative that has been underway for the past year. And I started talking to the city about New York's relevancy and this kind of more a decentralized world. This concept of innovation can happen anywhere, but what are the unique assets that New York brings to the table? And part of it is human talent, the diversity, the domain expertise from having financial institutions, from having media companies, a lot of health care, hospitals.

Starting point is 00:53:38 And how do we participate in this next wave of technology in a way that can be beneficial to companies all around the world and then also make it easier for companies in the sector to do business in New York. And so there are a number of goals of the center. It's a convening spot for the community. So people can just drop by. It's an open door. We have three conference rooms. We have a membership model and the website where you can go and find out more about it or sign up for membership is blockchain.n.com, blockchain center. And we have student membership all the way through corporate membership and a session's running all day long around different topics in the sector. So we'll have one on regulation. We have a number

Starting point is 00:54:37 of kind of developer forums. We have a blockchain 101. So an important piece of this, is not only addressing the needs of the blockchain community, but making sure that we're bringing more people into the fold and can often be intimidating for people if they're not from this sector. So how do we create a more kind of a welcoming environment for those that want to learn more that may have experience that they can bring to the table? So we have sessions around that.

Starting point is 00:55:10 we have weekly breakfast that are again drop-in breakfasts. And so we just launched in January. And we've already had great success in terms of the walk-ins and the feedback from the events. We didn't want to recreate anything that existed. We wanted to be more of a gathering spot for people who, who may be running things in other places around the city, but wanted a central place to gather. And then the other is that we'll certainly be interacting

Starting point is 00:55:52 with legislators and regulators and making sure that they're kind of up to speed on the latest developments and the technologies and making sure that there's communication between the public and private sectors. and so that we can foster the right type of regulatory environment. We'll be bringing in people from around the world to talk about, you know, what's working in their jurisdictions and what hasn't. And so it's kind of this local global model. And we'll be doing quite a bit around that during a New York City blockchain week.

Starting point is 00:56:34 I bet a lot of people in the community will have pretty strong opinions. about regulation of the crypto space in New York. So you might be hearing from them on that score. Yeah, and I look forward to it. It's so important to have this communication open because, you know, one of the things I've learned from being in the space and even, you know, companies like BitPesa that, you know, have had challenges early days on the regulatory front, not so much anymore is that it's often breakdown. of communication that that lead to regulations that are oppressive. And it's, it's, you know, it's like any relationship, it's misunderstandings or, or a will, and not a willingness to engage or listen. And so my approach has been different from a lot of others, which has been let's engage as early as we

Starting point is 00:57:31 can. Let's educate. Let's meet the mindful of why regulations exist. And if they're no longer relevant, point out why they are, and then understand there's a process in place to change them or address them. And we're seeing this year, and we saw in 2018, that that's how most of the world is thinking. Now, I think we can learn in the U.S. and in New York from other places like Switzerland, you know, that are really looking at innovative solutions to regulation. And I think it's important to have some of those folks come in and talk about what they're doing. Last year, you launched the collective future in organization whose mission is to foster diversity

Starting point is 00:58:16 in the crypto and blockchain space. A year in the crypto space is kind of a long time because it is such a new industry. So do you feel that diversity in crypto has changed over the last year, especially as, at least to my perspective, I feel like the people that are still in the space have changed. And if so, how has it changed and what more can be done to foster diversity? I think it's changed quite a bit over the last year. I mean, if I think back to end of 2017 and all the Lambo conversations and look, I like nice cars. There are a lot of things I'd buy before I'd buy a Lambo and park it out front. I think as we got back to fundamentals, the people who've been in it for the right reasons

Starting point is 00:59:14 are still in it. And the people who are excited about the potential of the technology are entering, entering the ecosystem. So I find there's a lot less hype all around. And there's just a lot more building and a lot more. real substantive conversations. And diversity has been, diversity and inclusion has been part of that conversation.

Starting point is 00:59:40 I've seen a lot more women enter the space. I, for my fund, I've had a number, I have a lot more female limited partners in the second fund than I did in the first fund. I have a lot of groups addressing gender as, as well as other underreprey. presented minorities in the sector reach out after we launched a collective future, saying that they were inspired to start local organizations and places like Bangalore in Cleveland. It's been really fascinating to see the energy around this topic and the fact that it takes

Starting point is 01:00:24 role models and a group to show what can be done. And then you kind of unleash the imagination of other people. And that's really what all of this technology is about at the end of the day. It's open source. It's it's grassroots. It's let people build what they want to build on it. And I think that appeals to a lot of people who are underrepresented. They just need to have that initial push or learn about it.

Starting point is 01:00:51 And I think that's happening. Yeah. I still think it's happening pretty slowly, though, because even just as I'm watching. But I compare to the days when Catherine Nicholson from Block Sefer and I were the only women at a conference in 2013. But in that way, I see. She is so no nonsense. I love talking with her. I should get her on my show.

Starting point is 01:01:17 But see, this is the thing. Like, you know, I'm watching the ticket sales for my live podcast recording with Vitolic. And I literally, I still, I, I don't. have to look again, but I'm pretty sure the number of women who have purchased tickets is still in the single digits. And yeah, I haven't checked, but I think already we've sold like roughly 100, 100 tickets. So it's kind of, it's a little bit depressing from my perspective. Yeah, that's a good point. And I mean, because I will be there as soon as you told me about it. I, you know, definitely want to be there. Maybe it's just letting more, more groups know that he is,

Starting point is 01:01:58 getting the word out more, I think we'll definitely be mentioning at the events that are upcoming at the blockchain center. And it could be, you know, I come across a lot of women who are not necessarily, you know, on crypto Twitter, who aren't kind of following kind of the same accounts, you know, most of us do. And so it could just be about getting the word out. And so it could just be about getting the word out in a broader way and so beyond the core community. But now I've made it part of my mission to make sure we have, you know, as close to, you know, I don't think we'll get to 50-50, but we can work towards that goal in terms of the audience. All right. Well, good goals to have. Where can people learn more about you and Future Perfect?

Starting point is 01:02:53 The website is FuturePerfectventures.com. I also have. a blog that publishes a weekly newsletter that I send out. And the blog is the barefootvc.com. And I'm on Twitter at Jallach, J-A-L-A-K. So I'm usually pretty easy to find. Great. Well, thanks for coming on Unchained. Thank you for having me. It was great to talk to you. Thanks so much for joining us today. To learn more about Jalak and Future Perfect Ventures, check out the show notes inside your podcast player. New episodes of Unchained come every Tuesday. If you haven't until ready, rate review and subscribe on Apple Podcasts. If you liked

Starting point is 01:03:33 this episode, share it with your friends on Facebook, Twitter, or LinkedIn. And if you're not yet subscribed to my other podcast, Unconfirmed, I highly recommend you check it out and subscribe now. Unchained is produced by me, Laura Shin, with help from Rangling Gallipoli, Fractal Recording, Jenny Josephson, Daniel Ness, and Richard Struffolino. Thanks for listening.

Unchained - Why Future Perfect Ventures Did Not Invest in ICOs - Ep.107

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