On risk, thesis-driven investment, and what Kyle thinks people aren’t thinking about enough.
Kyle Samani is Managing Partner at Multicoin Capital, a thesis-driven crypto investment firm that he co-founded with Tushar Jain. Multicoin was founded in 2017, and manages several billion in assets under hedge funds and venture funds.
Previously, he was co-founder and CEO of Pristine, a company building Google Glass software for surgeons.
Under Kyle’s management, Multicoin has made some notable investments including Solana, Near, Helium, Audius, and Arweave, making Multicoin one of the most successful crypto funds around. Kyle’s writing and successful contrarian bets have made him one of the most respected thought leaders in the crypto space.
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Kyle Samani
[00:00:00] Alex: Kyle Samani is managing partner at Multicoin Capital, a thesis driven crypto investment firm that he co-founded with. Tushar Jain. Multicoin was founded in 2017 and manages several billion in assets under hedge funds and venture funds. Previously, he was co-founder and CEO of Pristine, a company building Google glass software for surgeons. Under Kyle's management coin has made some notable investments, including Selana, Near, Helium, Audius, and Arweave, making Multicoin one of the most successful crypto funds around. Kyle's writing and successful contrarian bets have made him one of the most respected thought leaders in the crypto space. Today, we talked about risk, thesis driven investment, and what he thinks people aren't thinking enough about. Hope you enjoy.
[00:00:44] Alex: You know, Kyle, you've got a really interesting path that I'd love to delve into for a bit. So starting with, I'd say the origin of some of those larger interests, whether it's a, you know, one of your parents being a computer scientist, going back and forth between finance and programming in college starting pristine or anything else in between, like what's the synopsis of some of those key points and decisions that led you to.
You are at multicoin today?
[00:01:06] Kyle: I think there's a couple really important things. One is follow your passions. That's very cliche. That's certainly resonated with me and has impacted how I think about myself and my time. And then the other thing I would say is go to the end of the risk curve.
There's way too much focus in society on not going to the end of the risk curve. And I think it's quite important to go to the end of the risk curve in your twenties, you can afford to be wrong in your forties is a lot harder. Again, also very cliche. But I, I do find those to be, to be quite accurate.
And then, then when I would say that's probably more kind of Kyle, it is specific is I just, I read an absolute ton of information. That's been very helpful to kind of accumulated knowledge helps us make investment decisions, but that's more relevant only if you're going down the investing.
If you're on the builder track, it's probably a lot less relevant.
[00:02:00] Alex: I'd be interested to hear you dig in a little bit. On that second one. Cause that was actually the second question I had for you, you know, and choosing to forego the traditional path and starting a company built around Google glass, which I'd love to hear a little bit more about, I suspect you might have sort of an interesting take on well calculated risk when you're faced with some larger life decisions.
Do you have like a thought process that you go through?
[00:02:22] Kyle: No, it's, it's a very formal. And certainly wasn't with pristine with pristine. It was, I wanted to, I wanted to start a company for the sake of saying that I started the company and I like shiny new objects and Google glass was a very shiny new object and that was really about it.
And that also has the lack of clarity, probably partially impacted the net outcome, which was not super successful. Although variables, that's how I control the second time around with multi coin I was definitely more thoughtful about specifically with what market I went into. I would say my, my experience running pristine was basically fighting gravity the whole time at the fight to raise Andrew money at the fight to raise and you where they had to fight to try to win customers.
I had to fight to try. And once the customers had signed the contract and wireless money fight to make them successful and do what they were supposed to do with it. And it was just full of friction. Every step of the way. And I remember kind of while I was doing that was like the rise of Uber. And I remember just like how, or like Twitter and the other thing, or just like these businesses don't seem to have this much friction and made me think very carefully about markets and like, what market do I really wanna spend my time in that led me to crypto and kind of the theoretical point of crypto is.
Finance frictionless. And that, that kind of struck me and resonated with me. So I think it's super important to pick a market that, you know, you think it has real secular tailwinds. That's a super, super hard thing. But very important.
[00:03:53] Alex: I'd love to take a minute to touch on the process behind starting a multi-core and, you know, you mentioned fighting every step of the way, and obviously the timing was pretty great.
Cause you guys started just before the 2018 crash. Well, great. In some ways in terrible and others, I guess I could say. But what was the process of starting a fund from scratch back then? Like, especially in the crypto space, like it was. What poly chain and coin fund around at the time, by
[00:04:15] Kyle: saying, going from the minister stable, really the three around at the time?
Yeah, it was, it was very wild, wild west. Like we were self custody and all the assets you know, we were using like small shop lawyer, law firms, small shop accounting firms. And it was all super ratchet, quite frankly. Like we could have just ran off with. Today, it sounds obviously, but for about where X is, you registered audited by KPMG, we work with a bunch of institutional custodians but it was just really wild, wild west.
And we didn't know what we were doing. And you know, we were slow. It took us five months to launch a fund, which is pretty slow by us standards. But we just saw that he kept trying to call people to raise $60,000 a year. How did that. So I bet I got this thing off the ground. What
[00:04:57] Alex: was the sort of decision process behind starting a fund to begin with?
Because you mentioned you know, you mentioned starting pristine, you guys were doing stuff for Google glass around. I believe surgeons was that. Yep. And obviously Google pulled the plug on glass that's to what you alluded to earlier, some stuff that was out of your control. But in getting out of that situation and turning and deciding to start a fund, what was the decision to start a new fund instead of starting a new company?
Yeah.
[00:05:27] Kyle: So to, to Shar as a fairly good answer to this, I'll try and regurgitate it. You know, try it out. We're talking about. Crypto, we got started getting excited about the opportunities for permissionless finance. And we started thinking about all the things we could do in this space and how we can impact it.
And the thing that we both knew, you know, we had be the boat just on startups. And the thing we didn't like was the building, the business part of our private businesses and hiring and firing and managing the board and doing all those things. And we also knew that we love to, right. Me in particular, I loved kind of longer form writing.
And I'll do I just love to read, like, if you want me to just go read all day for 10 hours a day, I could do that. Then I talked to a single person and kinda recognizing that combination of strengths that came fairly clear that that aligns more with than that. Then with operating. And so that was kind of a natural fit for us.
What we didn't expect was like how effective the writing would be in terms of brand building. That's really worked out much better than we expected. And You know, we certainly cut it on anticipated defy and an FTS and all those other things that are happening. But it was a very, very fun and just exciting kind of way to get into the space.
[00:06:39] Alex: Talk about the writing part for a second in terms of brand building. Cause obviously, I mean, I would assume that a large part of that was the fact that there weren't that many people around back then who were writing quite as consistently as you guys were about the space. What was the intention going into it?
Were you just writing to put ideas out there to sort of clarify thinking? Was it for the purpose of building a brand around multi coin? Like what was that. Ultimate goal.
[00:07:02] Kyle: Yeah. The goal is primarily kind of brand building. One thing that to Sean and I both had a fairly strong, intuitive sense for although I still think we under appreciated it, but we under appreciated less than most other people was the need to just make noise.
But to do so, and like, not just like a Shiley dumb way, but like thoughtful, productive way, but it turns out if you just keep saying pseudo, intelligent things on the internet enough times, it's actually a very effective strategy for, for broadly, like getting people to know who you are. So that was really the goal going in.
And then obviously there was some hope that like an entrepreneur would read it and call us and we'd get to lead their lead the round. And that also ended up working. Quite effectively. But that's kind of a more, the second derivative of point number one, almost
[00:07:46] Alex: when it comes to founding versus investing.
I mean, you've had the opportunity to sit on both sides of the table. And there's. To be like two schools of thought here. One which tells you to found a startup or work at a startup to get some operational experience before you start investing and the other, which tells you to sort of squeeze your way into the investment space.
So you can learn from really great operators before you go off and do it yourself. So, so firstly, do you lean more one way or the other. Obviously experience would say one thing. And secondly, are there any standout lessons you've taken from being a founder into your role as an investor?
[00:08:20] Kyle: Sorry. I think I don't have a strong view of what you should do first.
I think it's it's you should, you need to, if, if your curiosity is too extreme, And intellectual curiosity to extreme, you probably would buy us worth investing over building. So you'd need to be very cognizant of. Your own intellectual curiosity. Some, some builder, especially in crypto, it's very easy as a builder and crypto to like be on Twitter all day and read three or four hours a day and then manage your own book.
And then also try and run your shot up on the side. And it's very easy to fall in that trap. And obviously folks like me do that all day. And so that, that, that's the biggest thing I think probably is recognizing that and then going from there. But I don't have a strong view in one direction or the other the second part of the question?
If you fail to get up and try again. One of the things I generally look for, I now consider this a plus is if a founder has failed and then they get up and try again to me, that's like that makes me much more bullish the founder.
[00:09:21] Alex: With that in mind to speak to your process behind, you know, being contrary and right. A question in two parts again here, firstly, what's your general approach to thesis driven investment? Because the one thing that stuck with me that a couple of people I think, seem to hold pretty strongly as an opinion, is, is this idea of a thesis representing everything you won't do versus what you will do.
How was that? I think what three part thesis evolved for, for multi-core into today?
[00:09:47] Kyle: Yeah, we I'd say are 90% thesis driven and 10% not. There are some things that you learn about that you couldn't possibly have forecasted helium is a very good example of that. And so we, we generally like to swim in the lanes that like we have defined. And I think that that focus is good. The longer I've been doing this, the more I appreciate it important to focus.
So, yeah, it's good. But I was thinking it's important to like dots from outside your lane from time to time w when you do so you need to have a very, very good reason for doing so. I think you have to hold yourself to an extra high bar when you do so, but I think it's important to do so both for like diversification of portfolio and for just like trying to always make sure you're at the frontier of like, what's going on as a VC.
Like, you need to kind of be at the frontier of what's going on. And so whatever you think your defined swim lanes are, like, can't include a hundred percent of everything. Cause inevitably things are.
[00:10:46] Alex: As, I guess a bit of an add on here only what, like a year ago, it would have been pretty unpopular to say that anything would give Ethereum a run for its money, but now it's become pretty consensus to say that Solano will probably coexist with it.
So the larger question I'd have here is, is do you think there's a problem of taking sort of a set in stone attitude to chains or networks or protocols and deciding they're more, I guess, entrenched than they might actually be.
[00:11:09] Kyle: Yeah, so there's a lot of obviously tribalism in crypto that, that makes it challenging to read and learn about it.
I I've come to the conclusion that tribalism is net good and not bad because you like to make these things work. You need adamant supporters. And a good way to be adamant even in the face of everyone else telling you your thing is useless as to hold a bunch of a whole bunch of tokens and be economically incentivized by it.
So I've got to come to the conclusion that, that tribalism impartiality or our net. Good. Although I realized they create a lot of noise and inflammatory comments. So I don't have a problem with it. And certainly I am very much guilty of, of it to myself. So, you know, like there'll be a hypocrite. second part of the question?
I think this is the there, this is a few kind of component problems.
You're identifying. People net describe it as it's so entrenched. Nothing else could ever beat it. So probably number one is a degree of scale. People thought AOL in the nineties was like insurmountable and then people thought. in The late 22, the 2008 9, 10 timeframe that Blackberry was insurmountable and people thought MySpace in like, 04 05 06 was insurmountable There's been reoccurring examples of this throughout history and in various markets. The common, the common thread across the examples I just gave is actually just a function of. scale It's like, yes, they were the biggest thing at the time, but they were still very small on a percentage of like total Tam.
And so I think that's like super important to recognize is understanding what is my theoretical maximum scale. And in almost all cases, theoretical maximum scale is several orders of magnitude larger than you think. Cause turns out the world's a big place and a lot of businesses and companies and people and stuff.
So it's kind of a, and I think comment B is really reasoning with precision about the nature of network effects. The network effects are tricky concepts. And there's, they're there in kinds of their facts and different ways in which they manifest. My most, the framing that I've come to the conclusion, that's the most important as it pertains to the artifacts is what I call inclusionary or.
Uh, The network effects exclusionary or are they not exclusionary? And what does that mean? So let's take bridges as an example in crypto, if you bridge eith over the solid bridge or ether, the wormhole bridge slot the existence of those two. Is bad for everyone. It's confusing. It means there's slippage between them.
It creates increased developer, complexity, UI complexity, it just like battle around. And so we have an operating theory which may or may be false, but, but our general operating theory is that specifically for asset pegging there is a exclusionary network effects, meaning that as the amount of width over the wormhole bridge grows.
That in that decreases the probability that an alternative version of can, can exist on the same, at least at a minimum on the same pairwise bridge. So like most of the artifacts are not exclusionary. In fact, very few are. But there are some examples that are a good example, actually.
Back of those like Microsoft and apple where it was like developers that to commit to writing code for one it's this like, especially back in the eighties and the early nineties. Like people didn't have the sophistication and the resources and the engineering processes. And there wasn't enough talent that like one firm could literally manage concurrent processes to right.
Apple and windows and Mac and windows. So you had to pick one today with iOS and Android. That's like far less of the crew. It's just like the frameworks are a lot more mature. There's a lot more engineers in the world, et cetera. So again, you need to understand that like nature. How exclusionary is, is a thing in the context of going back to your original question, like a theory of it being a trenched people seem to imply that the market cap and the liquidity and the, the contracts that were written for Ethereum were exclusionary to other chains growing, and that never made any, any sense to me at all.
Specifically because of gas fees and because the gas fees are like, obviously excluding. Rather they're exclusionary to talk to current users which like naturally pushes users elsewhere. And so that, that likes struck us as like the market was very much with pricing, the kind of fundamental nature of these things in a pretty real way.
So yeah, kind of coming back to original question, you know, that analysis really allowed us to not thinking of hearing was.
[00:15:44] Alex: To sort of stay on the same topic of these broader concepts, you know, maybe piggybacking off of network effects here. One thing you speak about a lot, like, especially as of late, is this concept of composability, which has become quite popular.
Which in my mind is sort of maybe a mix between interoperability and open source. How do you, how do you break that down for people? Why does that matter?
[00:16:04] Kyle: So I think the point of blockchains is two large degree misunderstood. The point of blockchains is to keep track of who has how many coins that that's actually really all they do.
And some of those coins have nothing to do with each other. Some of those coins have very tight mathematical relationships or mathematical relationships with. Let's say a derivative asset versus a spot asset. And then others have like loose affiliations with one another. So for examples, they 10,000 board apes the most interesting design space broadly is the design space of figuring out more mathematical ways to tie pieces of state together.
And the more you do that the more that, that, that, that kind of is composability. But also that is what's going to unlock new features and functions in, in these systems. Creating another collection of 10,000 PFPs is like not interesting, creating a set of PFPs that evolve and mutate and are somehow tied to a broader story.
And there are some sort of shared ownership of that. And people are wagering cash on whatever, how the story unfolds. The universe is going. That is like a net new emergent phenomenon, which is pretty cool, but all, but like doing that versus just like, Hey, there's 10,000 JPEGs is what you're really doing is you're increasing the connectivity of the state or maybe phrased another way increasing.
The total tight, total amount of mathematical relationships between the various pieces of state. Am I basically connecting things via math? I think you unlock kind of net new emergent development. So I think that that's why composability is so important. That's why we really focused on it. We want to be pushing the frontiers in these systems and we want to do that.
We think composability is the most interesting way to.
[00:17:53] Alex: Gotcha. So to start to wrap us up here, and this can be inside or outside the crypto space, what's something you're very optimistic about that you don't think people are paying enough attention to,
[00:18:02] Kyle: uh, Helium. Helium is like, I, I, the people in the telecom industry it's day have like, started to call us and like, they're very scared.
Cause like they, they see the writing on the. And usually when those phone calls happen is like the exact time to be outrageously bullish when the executives started defecting and saying things like that. So yeah, outrageous, they bullish Gilliam. They, they they've really proven that you can get hundreds of thousands of people all over the world to coordinate, to achieve some broader objective.
And I think that will be. Yeah, I think he'll even easily grow to a thousand X its current size. And, and, and its network reflect network effects are extremely exclusionary because the first a hundred thousand people who are ever going to buy a hotspot already bought a helium hotspot. And those people are now all bag holders and they've literally built a physical infrastructure network, right.
The ad like I think the probability that you're going to create, get people to build a new unit. Because of the self-selection because the fact that the people who have solves like that are bag holders is extremely, extremely difficult. So yeah, I think there's very few things with that much upside.
[00:19:16] Alex: Awesome. I appreciate it.
[00:19:19] Kyle: No problem, Alex. Hey, I'm glad glad you reached out and good luck and stuff. Right?
[00:19:23] Alex: Thanks so
much. You too. All
[00:19:25] Kyle: right. Bye-bye this.