Venmo is valuated at something like 40 billion dollars, and a huge amount of its use is people making $10 payments to each other.
I'd hate to live in a world where I conducted all my business on FTX, but you can see why it might be appealing to investors.
the line between "crazy, brilliant founders who will build world changing companies" and "crazy, lunatic founders who will lie and cheat and be awful" is very hard to distinguish, especially at the series seed/series A level.
It can lead to false positives and false negatives all the time.
No VC in their right mind should ever pour billions into a finance company that doesn't have a CFO or risk management team, doesn't have properly audited financial statements, doesn't have board oversight, etc. Especially so in a risky industry like crypto where scams and fraud are well known to be rampant.
This is the main criticism I have of the people who invested in FTX. Even if you thought SBF was a world-changing entrepreneur 2 years ago, the structure of his company should have disqualified it from investment.
I mean, I'm not imagining that they have groceries listings on the app, but that the app allows you to transfer money directly to someone from your crypto wallet. Like a venmo payment but with crypto.
The thing is that's not a novel concept, just about every crypto wallet app can already do this. And the achilles heel of all of these apps is the gas fees that are out of their control. The only way to conceptually get around gas fees is to keep everyones money centralized and sidestep the trading of crypto all together, but in the process you defeat the entire purpose of crypto.
SBF was just a thief and a gambler, and an incompetent one, at that. I still think Sequoia does have some responsibility here, but I suppose my point is only that hindsight is always 20/20.
No, they weren't successful. When you leverage up and make (paper) money and later those same investments are wiped out and destroy the comany, you don't get to say you were "successful".
Yes, it made money. Yes, he claimed it was legit, but it wasn't--it was money laundering illegal gains. It just sounds so much better when you call it "arbitrage".
This was all covered in the case.
In 2020, FTX was known to offer collateral on huge loans vis FTT, their stabelcoin. Parties backed off bc of this.
The interplay b/t Alameda and FTX was known and parties wouldn’t trade or do broker agreements bc of it.
within crypto, the growth of FTX, although concerning, was frequently discussed as likely inorganic.
The VC and SEC buy-in to FTX was uniquely inept.
-Dresses like a slob
-Went to MIT
-Is from the Valley
-Has ties to Stanford
-Upper class background
Their VC brains didn’t stand a chance of sniffing this out.
The anti-Adam Neumann. Brilliant strategy.
They had the largest crypto exchange right? That's a competitive market. Seems like something was going right.
They will spend $200m+ on a clown like this but ignore countless people with real innovations.
As a humble poor, if I were running the show over at Sequoia I would have these people out on their asses, but again, I also don't have buckets of money clouding my judgement.
Regardless, what I'm describing is exactly what an investment bank does for a legit public company. They purchase shares from the issuing company to guarantee a certain amount of capital for the company, and then sell it on the secondary market, which in most cases would be to other invstment groups or directly on the NYSE. The difference is that those companies issue S-1s disclosing their performance and numbers, allowing secondary market investors to make an informed buying decision.
https://corporatefinanceinstitute.com/resources/career-map/s...
Everyone and their dog was looking for an actually credible, mass-market compatible usage scenario for Bitcoin beyond buying drugs on Silk Road.
Access to money, and intelligence, are not positively correlated. Jury is out on whether there is no correlation, or if there is negative correlation. Given the braindead antics of the wealthy over the past 10 years, I'm leaning towards the latter.
How about Musk who bought a successful if mid-tier social media site for 44 billion dollars and has cratered it to being worth barely 4?
How about Zuck who renamed his entire damn company in a bid to pivot to the metaverse just in time for that entire house of cards to come crashing down?
You know, the people whose mental model of "the rich" comes from scrooge mcduck - wealth being mostly stored in gold coins that are easy to dive into and/or tax on annual basis.
I loved that piece, and the fact that it was removed soon after.
Not if you're so silly as to think you can replace the currency people use, plus control completely its medium of exchange, plus be able to trade against those same exchange's participants. It boils down to people trying to rebrand casinos as markets.
It's pretty wild how unhinged they became about pretty much rambling...
I'm no VC, but I feel like if I am and you're telling me that _all_ consumer transactions of any kind are going to flow through a portal _you_ own, it doesn't get much bigger than that. The odds of success don't have to be that high, and in principle you just factor the possibility that the founder's full of crap into those odds; you don't have the time to understand every possible market and every person pitching you in the depth necessary to make that determination, right?
>The odds of success don’t have to be that high
The odds of success are as good as nonexistent and I also don’t have to be a VC to understand that.
Holders of serious money often put them into decidedly unserious things. Somebody once put together $44bn cash financing for Twitter dot com.
I've gotten in a number arguments with people who don't understand white collar crime, think these guys are "smart", and are so surprised by how basic their scheme is, and how they thought they'd get away with it.
These people aren't smart, any more than your local gang banger, or small time fraudster... the stories are remarkably similar.
There's lots of white collar criminals that have cloaked their schemes as part of "altruism". This isn't even new.
> That’s when SBF told Sequoia about the so-called super-app: “I want FTX to be a place where you can do anything you want with your next dollar. You can buy bitcoin. You can send money in whatever currency to any friend anywhere in the world. You can buy a banana. You can do anything you want with your money from inside FTX.”
> Suddenly, the chat window on Sequoia’s side of the Zoom lights up with partners freaking out.
> “I LOVE THIS FOUNDER,” typed one partner.
> “I am a 10 out of 10,” pinged another.
> “YES!!!” exclaimed a third
Like, he’s rambling about how you should buy bananas with Bitcoin. How was this compelling to people who control serious money?
It always struck me as the opposite. If someone running a crypto futures exchange said they wanted people to buy bananas and groceries on their platform that’s be a signal to pass, right?