Crypto Update | The Comeback of Bitcoin Programmability Like 'Renaissance': Portal VC Founder

Summary

Markets Daily Crypto Roundup: The Comeback of Bitcoin Programmability Like 'Renaissance': Portal VC Founder

Release Date: November 21, 2024

In this engaging episode of CoinDesk's "Markets Daily Crypto Roundup," host Jen Senassi sits down with Evan Fisher, founder and general partner of Portal Ventures. The discussion delves into the evolving landscape of cryptocurrency markets, the resurgence of Bitcoin programmability, and the strategic direction of Portal Ventures amidst a dynamic financial environment.

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1. Navigating the Crypto Market Cycle

Jen Senassi opens the conversation by acknowledging the tumultuous end to the year and inquires about Evan Fisher's observations as 2024 draws to a close.

Evan Fisher responds by highlighting the cyclical nature of the crypto markets, noting, “[00:02:04]... we're on the four-year cycle timing and it's interesting that we're here again because the only way that happens is when people think that the four-year cycle is not going to repeat again.” He emphasizes the importance of Bitcoin inflows in creating a wealth effect within the crypto space, which subsequently influences investments in longer-tail assets. Fisher points out that understanding the profile of these new buyers—often those who have significantly profited from Bitcoin's rise—is crucial for predicting future market movements.

He further elaborates on the role of institutional investors, questioning whether their entry will lead to more fundamental, value-driven investments or if the market will remain narrative-driven. Fisher anticipates that Bitcoin’s continued ascent and other blue-chip cryptocurrencies breaking their all-time highs will signal the next phase of the cycle.

2. Portal Ventures’ Investment Thesis

When probed about his investment thesis, Fisher shares, “[00:03:22]... crypto over some period of the next decade will turn more fundamentally driven.” He discusses the dual nature of cryptocurrencies, some behaving like equities and others resembling commodities. Using BNB as an example, he explains that while traditional valuation methods like discounted cash flows (DCF) might apply, the actual price drivers are utility-based, such as access to discounts within the ecosystem.

Fisher underscores the importance of adaptability in investment strategies, stating, “[00:03:19]... we position ourselves by saying we just want to win regardless of what happens. And we can do that with how we invest, where we invest, how we construct a portfolio.” This approach allows Portal Ventures to stay resilient across varying market conditions.

3. Raising a $75 Million Pre-Seed Crypto Fund

Jen Senassi congratulates Fisher on successfully raising an oversubscribed pre-seed crypto fund of $75 million. Fisher provides insights into the fundraising journey, noting, “[00:05:16]... we started raising in Q1 of this year. And so it was a fast raise in the grand scheme of things, but it was a very different time.” Despite Bitcoin being down by 45% from its all-time highs during the fundraising period, Portal Ventures attracted a diverse Limited Partner (LP) base comprising traditional finance stalwarts like Henry Kravis and crypto-native leaders such as Chris Dixon.

He highlights that about half of their LPs seek crypto exposure exclusively through Portal Ventures, while the other half view the fund as the initial entry point into crypto investments. This strategic positioning allows Portal Ventures to balance risk and return effectively while identifying and leveraging emerging trends in the crypto sector.

4. Investment Strategy and Portfolio Construction

Exploring the nuances of their investment strategy, Fisher explains, “[00:07:06]... almost everything we do is first check-in investing with a thesis-driven approach.” Portal Ventures focuses on ideation-stage investments, often before projects even have white papers or formal proposals. This early-stage involvement means they frequently engage with founders who are still shaping their business models and products.

He emphasizes the importance of backing founders who possess both technical expertise and commercial acumen—the ability to transform ideas into scalable businesses. By concentrating on specific categories where Portal Ventures has deep expertise, they act as thought partners for founders, providing not just capital but also strategic guidance to foster growth.

5. Key Narratives and Predictions for 2025

When asked to identify a pivotal narrative that could drive the upcoming bull market, Fisher passionately asserts, “[00:11:18]... bitcoin is actually going to come back.” He recounts early investments in Bitcoin programmability projects like Arch, highlighting the latent demand for programmable Bitcoin solutions. Fisher argues that despite skepticism, there remains substantial unmet demand for Bitcoin-based products that enhance capital efficiency and programmability.

He envisions a “Bitcoin renaissance,” where innovations on the Bitcoin layer-1 (L1) blockchain enable more scalable and meaningful applications, potentially surpassing platforms like Ethereum and Solana in utility and adoption.

6. The Future of Venture Capital in Crypto

Reflecting on the venture capital landscape, Fisher draws parallels between historical capital market behaviors and current crypto investment trends. “[00:13:06]... The markets just always work this way. In times of euphoria, everyone gets excited and in times of despair, everyone gets scared.” He emphasizes the importance of maintaining a level-headed investment approach, resisting the herd mentality during market extremes.

Portal Ventures aims to navigate this volatility by adhering to first principles and making investment decisions based on rational analysis rather than market sentiment. Fisher recounts their strategic investments in 2023 contrasted with the cautious stance in 2022, demonstrating a deliberate approach to capital allocation that prioritizes long-term value over short-term gains.

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Conclusion

Jen Senassi wraps up the episode by congratulating Evan Fisher on raising the new fund and expressing enthusiasm for the future projects Portal Ventures will support. Fisher reciprocates the sentiment, emphasizing the collaborative spirit essential for thriving in the evolving crypto ecosystem.

This episode provides a comprehensive look into the strategic thinking of a leading crypto venture capitalist, offering listeners valuable insights into market cycles, investment strategies, and the future trajectory of Bitcoin and the broader cryptocurrency landscape.

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Notable Quotes:

• Evan Fisher: “[00:12:42] Bitcoin programmability, Bitcoin program like capital efficiency and really just like this bitcoin renaissance will come back in a very meaningful and scalable way this cycle.”

• Jen Senassi: “[00:10:16] Now you're writing checks before a white paper at the ideation phase. It sounds to me like you really are writing these checks based on the founder and their ability to bring this idea to life in collaboration with your team.”

• Evan Fisher: “[00:14:33]... by being just really at home doing the work, not being super public, we've found that we can avoid a lot of that.”

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For those interested in the intricate dynamics of crypto markets and venture capital strategies, this episode offers a wealth of knowledge and foresight from one of the industry's key players.

Transcript

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[Evan Fisher]

People were saying no one wants to be more capital efficient or do anything programmable on Bitcoin. And whenever I hear a black and white approach to things, I'm like oh, my alarm bell goes off obviously if it's not right. So it's like, okay. If 10% of Bitcoin holders want capital efficiency or programmability, you have an asset that's larger than Ethereum and or Solana.

[Jen Senassi]

Hello and welcome to Markets Daily, hosted by me, Jen Senassi. On this show we nab navigate the currents shaping the crypto markets, providing insights against the broader financial landscape. So whether you're actively trading or simply fascinated by the volatility that is the crypto markets, this show is your compass to understanding what's happened, where we are and where we're going. On today's show we are joined by Portal Ventures founder and general partner, Evan Fisher. Evan, welcome to the show.

[Evan Fisher]

Hey Jen, great to be here. Thanks for having me.

[Jen Senassi]

Of course. Thank you for being here. It has been quite an exciting and turbulent end to the year. Talk to me about what you're watching as we head to the end of 2024.

[Evan Fisher]

I think what's interesting here is we're on the four year cycle timing and it's interesting that we're here again because the only way that happens is when people think that the four year cycle is not going to repeat again, which was the talk over the summer or last year. And so for us, we're looking at a few things. The first is we're looking at the inflows to Bitcoin. We're looking at how that creates a wealth effect in crypto, what that does to the buying of longer tail assets. From that we're trying to understand, okay, who are these buyers? If you look at past crypto cycles, buyers were typically people that were making their money in Bitcoin. It doubled, tripled, quadrupled their money and then they went further out in the risk curve and they did that in a way that was more narrative driven. There's been a lot of talk about institutions coming to crypto and so we're, we're staying close and saying, okay, does that mean that you're going to really see institutional investors buying this longer tail of assets? Are you going to see people underwrite things for their cash flow or their commodity value? Or will it continue to be narrative driven? And that we will only really be able to tell once we see Bitcoin really continue climbing and climbing and see other blue chips break their all time highs, as would happen in, in that four year cycle.

[Jen Senassi]

What's your thesis?

[Evan Fisher]

We expect that crypto over some period of the next decade will turn more fundamentally driven. What does that mean? That's a story that's still being written. Like in 2021 I wrote an article for Bankless about the MakerDAO DCF for instance, and that pretty much every 6 to 12 months has come back into the meta and there's been talk of, okay, can you underwrite these assets for your cash flow? On the flip side though, a lot of cryptocurrencies actually resemble commodities. And I think what we're going to see is some combination of some assets resemble equity, like businesses, some resemble commodities. And so for us we, we underwrite every asset based off that. Like for every investment we're making, we're asking the question of, you know, if this goes right, what does it look like? But also is this going to be valuable? Because a lot of users just have to own the asset to interact with it. You know, you could look at BNB as an example there. Like you could run a DCF on bnb, but that's not what actually drives the price action. It's more so people need it because it gives them discounts. And so it resembles more so a commodity. So you can underwrite it like that, or you can underwrite something and say actually it is going to look like a maker or in Ethereum with burn. And then we need to understand the profit potential. But that's a story that's going to play out over the next decade. And so I think when we look to this cycle, we position ourselves by saying we just want to win regardless of what happens. And we can do that with how we invest, where we invest, how we construct a portfolio.

[Jen Senassi]

Let's talk about your recent news. You've raised a massive oversubscribed precede crypto fund at $75 million. Talk to me about going out and raising. It seems to me like an interesting time to be putting this fund together. Talk to me a little bit about the interest and the participants in the fund for sure.

[Evan Fisher]

Something that's interesting about raising these funds that I think is hard to grasp from the outside is they can take a long time. And so we started raising in Q1 of this year. And so it was a fast raise in the grand scheme of things, but it was a very different time. When we went out to market, you know, Bitcoin was down 45% from its all time highs. And so there's some irony in doing the press as Bitcoin is breaking its all time highs because that's actually not when we did the hard work of raising it in terms of what it looks like for us. You know, I started Portal after being at Insight Partners for three years. Insight is a global venture capital fund. They manage about 90 billion totally globally in total. And they've been more under the radar than the flashy guys like the Andreessen of the world. But so part of the LP base is managing directors from Insight Partners and founders across the Insight portfolio. So two Decacore and founders there, for instance. We then have some traditional finance folks like Henry Kravis and then we also have very crypto native folks. So that could be the Kyle Simanis of the world, the Chris Dixon's of the world, et cetera. I think when we look at our LP base though, what's interesting is it's probably 50, 50 between investors that want crypto exposure and we're really their only crypto exposure. And then the other half is investors that have crypto exposure and then they want to work with us because we end up being the first check in. And so we end up being upstream of a lot of the really blue chip assets that form here. And that's just a really attractive place to sit from a risk return profile, but also from a discovering new trends perspective.

[Jen Senassi]

Talk to me a little bit about your investment thesis. I mean this is a pre seed fund. What kind of projects are you looking at? What from your research and from your perspective is going to drive the narrative in 2025?

[Evan Fisher]

Yeah, the thing that really over kind of covers our thesis first and foremost is the stage at which we're investing, which is to say almost everything we do is first check in investing with a thesis driven approach to give a sense. We've only done, you know, of the deals that we've done this year, only one or two have had a white paper and a deck. So we're really coming in potentially just the ideation stage. We've, we've been held up on investments in the past because the company was not formed yet. Like we told someone we wanted to invest and the company was not formed. So the first thing is it's very, very early stage. The second thing is we only lead and we do it with high conviction, which is to say we're only backing one player in each category. And that's really important to us because we want to be all in. Like, building a company is an emotional roller coaster. And when we back one per category, we're along for that journey. Like we feel the ups, we feel the downs. After that though, it's theses that drive a lot of what we do. And so for that it means we're coming in and only looking at assets and companies in categories where we've really done the homework and we have a unique perspective. So we don't look at that many different categories at any given time. What it does though, is it means like when we're talking to a founder, we're a thought partner and that's what founders really want. Like they want someone that understands their product deeply, can be trusted, and then can help make some really material impacts on it over the course. And so right now there are, you know, a handful of theses that we're running at. I can speak to two. One is something we call Latent Capital Markets, which is kind of our spin on rwa, but it's really just asset classes that cannot be served in the traditional financial system because the cost to serve it is just way too high. And we led around into a business called Skytrade and recently into a business called Uranium Digital. The former is tokenizing air rights, which is a multi trillion dollar asset class that really doesn't have liquidity or efficient markets because it's just so complicated to actually manage these, upload them, facilitate buyer, seller interactions. And then the second one being uranium. Uranium doesn't have an efficient spot price today. And so there's a uranium Trust, but you can't physically settle. It's like there are all these complexities around how do you manage the audit trail for uranium, how do you physically settle it, how do you make a market? So this is the first big bucket that we've spent a lot of time in. The second, which is a more than crypto native bucket, would be ideas and businesses focused on novel distribution. So there we were, the first check into OpenSocial, which is the largest social fi platform. Today. There are about 500,000 daily active users. They grew past Farcaster in the course of a few months and there the insight for us was really about distribution. So it was about a business model that we spent a lot of time thinking about. And the founders there, they've built Chinese slash apac Internet businesses before. They understand how to get products into the hands of users, how to iterate pretty quickly. And we think that's going to dictate a lot of what makes crypto successful going forward is just distribution.

[Jen Senassi]

Now you're writing checks before a white paper at the ideation phase. It sounds to me like you really are writing these checks based on the founder and their ability to bring this idea to life in collaboration with your team. Is that a correct assumption to make that?

[Evan Fisher]

That's right. It's both founder and market driven, but the founder really matters and we really like founders that are not just technical, but also really have a sense for what does it take to turn this into a real business? We sometimes call that being commercial, but it's really just like they can take an idea to a real product at scale with users.

[Jen Senassi]

Yeah, that makes a ton of sense. Now, you just unpacked a few different narratives that have come out of your research. And I know that you've built a little bit of a reputation on being able to predict what's going to happen in the next six to 12 months based on your research. If you were to pick one of those narratives as one of the driving factors in this bull market as we head into 2025, which one would you pick?

[Evan Fisher]

I think that bitcoin is actually going to come back. You know, we saw we were early to bitcoin. We started doing our work and our investing in that summer of 2023. The thesis was simple. People were saying no one wants to be more capital efficient or do anything programmable on Bitcoin. And whenever I hear a black and white approach to things, I'm like, oh, my alarm bell goes off obviously, if it's not right. So it's like, okay, if 10% of Bitcoin holders want capital efficiency or programmability, you have an asset that's larger than Ethereum and or Solana. And so there, you know, something that we're most excited about is Arch, which is smart contracts natively on Bitcoin L1. And we just, we looked at that and we're like, wow, there is pent up demand for using Bitcoin that has really still never been met. And what's so interesting is in crypto people are often saying, okay, we have all these products and these businesses and these protocols, but no one wants to use that. They're like, how do we build demand? This is one of the few spaces we found where there's actually so much demand for these products, but the demand hasn't been met. And so I think that Bitcoin programmability, Bitcoin program like capital efficiency and really just like this bitcoin renaissance will come back in a very meaningful and scalable way this cycle.

[Jen Senassi]

You know, I think about the last bull cycle and there was VC money just kind of flowing everywhere. It feels like the landscape is a little different and maybe that's a result of the industry getting a little bit more mature. But if you look to 2025 and you look at the VC landscape, how do you think it's going to compare to what we saw in the last bull cycle?

[Evan Fisher]

Yeah, I think it's going to look pretty similar. The markets just always work this way. In times of euphoria, everyone gets excited and in times of despair, everyone gets scared. And the job of an investor and what we try to really do is be the inverse of that or not purposefully be the inverse. At least we try to think from first principles and say, okay, if there's greed in the markets, is that greed justified or should we be fearful? And you know, when I look at it, it's just throughout all capital markets in history, like let alone crypto, look at stocks, look at tech assets, it just eventually turns into this game of okay, there's euphoria and people end up making irrational decisions. Um, a quote that I love on this, I don't remember the exact line for line, but it's, you know, it's, it's hard for an individual to go mad, but it's easy for a crowd to go mad. And so then we ask the question of with that knowledge, what do we do? And that's where we've historically just tried to be pretty low key. Um, like by being just really at home doing the work, not being super public, we've found that we can avoid a lot of that. You know, we were very aggressive investing in 2023, we really didn't invest anything in 2022. And so that's our plan going forward to try to just keep a level head with with the madness.

[Jen Senassi]

Evan, thank you very much for joining today. Congratulations on raising this fund. I look forward to seeing the projects that you support with it. And thank you for joining the show. It was a pleasure talking to you.

[Evan Fisher]

Of course. Thanks for having me, Jen.

[Jen Senassi]

And thank you to everyone who watches and listens to markets daily. If you enjoy the show, subscribe to the Coindesk Podcast network that is available on all podcast platforms. We are on YouTube. If you prefer to watch, subscribe to our YouTube channel. Give us a thumbs up. It was a pleasure bringing the show to you today and we'll see you tomorrow.