← The Wolf Of All Streets
The Wolf Of All Streets
$100M Bitcoin Fund Is Hunting 1000x Returns With Just 12 Bets | Nico Lechuga
01:02:01
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- [00:00]
Nico Lechuga
Um, let's start with like, what hasn't happened yet. Why should I do this instead of putting more money in bitcoin, which is a great question, great question.
- [00:08]
Scott Melker
Bitcoin should be $5 million by 2027 or something like that. So it makes me a little less.
- [00:12]
Nico Lechuga
Scared if your CEO gets caught on a kiss cam at a Coldplay concert, like, the stock's going to shake, right? It's a fucking terrible investment for anybody else to invest in bitcoin. Treasury company is not a company that's using bitcoin as its treasury asset. This is a, this is a really good question. I, I think those are the best podcasts.
- [00:28]
Scott Melker
Ego Death Capital was arguably one of the most successful venture funds in the last cycle and they've recently raised another hundred million dollars. You've seen their partners on this podcast constantly. Preston Pysh, Lynn Alden, Jeff Booth, an absolute all star team of investors and minds in bitcoin. Today I spoke with their co founder, Nico Lechuga, who actually pitched me on their fund many, many years ago. I joke that it's the one that got away, but we talked about what it's like to work with that dream team, what they're interested in, how they're deploying capital and why they're deploying specifically into companies that denominate themselves in bitcoin. This is an incredible conversation, one that you couldn't have with any other person. It's going to give you incredible insight as to how to invest around bitcoin.
- [01:16]
Nico Lechuga
That's dope. Foreign.
- [01:30]
Scott Melker
As I mentioned to you off camera, Ego Death is the one that got away from me. You and I met years ago and it was, I think, right during the peak, well, I should say right before the peak of crypto contagion. And I was considering an investment and because of all the other things that were happening surrounding it, I decided at that moment that I was like fully deployed and shouldn't do it. And I think you guys are effectively the best performing fund since then. Is that an accurate assessment?
- [01:56]
Nico Lechuga
Thanks, Scott. Yeah, Andy and I, I believe we had a great meeting with you initially. You had a pretty diversified portfolio at the time period across all things crypto and the market turned. It didn't end up happening, but it's okay.
- [02:11]
Scott Melker
You guys survived and thrived through that. So obviously I don't want to take for granted that people know about Ego Death, even though once you start talking about it, they're going to recognize all of your partners from many, many podcasts on this channel. But maybe you Just give us the TLDR really quick on who it is and what you do.
- [02:28]
Nico Lechuga
Sounds great. So I'm Nicola Lechuga. I'm one of the founding partners at Ego Death Capital. Ego Death Capital is a venture capital fund that invests in projects that are building using some part of Bitcoin's technology stack. We started the fund in 2022, raised our first fund to deploy at a seed stage, and then have recently gone out to market. Just closed our second fund, $100 million vehicle to invest at a series A partners in the fund. So Andy Pitt, Jeff Booth founded the fund with me. During the first fund we had Lyn Alden and Preston Pysh were advisors. They loved it so much, and we convinced them to come on as general partners for the second fund. Then we have Pablo Fernandez and Lisa Nagood as technical advisors, and Pete Brigger, who's the chairman of Fortress, as really our traditional financial advisor.
- [03:15]
Scott Melker
So the focus is obviously on bitcoin companies. And so I think you were founded at a time when most of the development in the crypto space was still on other chains. So you were years ahead of what I would call this Cambrian explosion of building on Bitcoin. Right. There were a few people talking about it. It was happening. I don't think Taproot had even happened yet. So I think it was still conceptual and most of those things were difficult to even deploy the ideas. Is that accurate?
- [03:46]
Nico Lechuga
So this is a key point right here. It's completely accurate. Taproot had just happened. So I had met Jeff a number of years before and Andy, the two other partners in the first fund. And we were looking at, I think right at this time period, about 2021, the billions and billions of dollars that you're acutely aware of that had been raised in alt crypto world. And at that time period, it was maybe tens of millions that had been raised to deploy into, into bitcoin. I don't think even The Lightning Labs $70 million round had happened yet, which was a huge, huge round for the space. But when you look at it as some of the other rounds that were raised in all crypto land, like an alchemy round of $400 million, it kind of pales in comparison to that. What we saw was what was happening was because of Segwit and Taproot, you were going to be able to have programmability on top of Bitcoin. And this was like a key understanding that we felt like most of the market did not understand. I think to your point, One of the things with investing, if you're going to be successful, you kind of want to skate to where the puck is going to be, not where the puck is at right now. And so our core belief was that the other chains, while they had some fascinating projects, incredible developers, you were building on layers that had compromised on either security, decentralization for scalability. And because of these updates on Bitcoin, you now had a more programmatic environment and you could build those things on a more secure and decentralized foundational base. And so we bet big on that. We've kind of bet the house on it.
- [05:27]
Scott Melker
Yeah. And it's worked out well. So maybe we should start with the things that you got right in that first cycle and maybe some things that you thought would happen that really haven't at all won't or haven't happened yet. It's interesting. I had a conversation with David Marcus not long ago. He's awesome and yeah, who's amazing obviously. But he as an example said, you know, listen, I spent two years convinced we were going to build exactly what we wanted on lightning before saying this isn't going to work and lightning can't do it.
- [05:58]
Nico Lechuga
Right.
- [05:59]
Scott Melker
So like, I think a lot of people have learned a lot of hard lessons trying to build on Bitcoin because it is more difficult.
- [06:05]
Nico Lechuga
Let's start with what hasn't happened yet. I think if we're being realistic, Bitcoin being used for everyday payments has not happened to the degree of which we thought it would. I think that when you look at this from the standpoint of tax implications in certain regions, other regulations, these are impediments to that happening. I think if the current US administration peels back some of those things, we could probably see a more friendly environment and for those projects. And when we think about investing, you think about it twofold of one, you could have a thesis of how the world will look in the future, which is what you're basically betting on. The second part is the timing component. So if we're betting on like bitcoin payments four years ago and you're thinking of venture capital funds, basically invest in a three or four year investment cycle, you're probably wrong. You probably missed on that investment and that it's probably going to be in a later time period. So I think from that standpoint, the part of bitcoin as a payment used in everyday payments now, people are using it to pay for certain things, but I would say the majority of the population is not using it. And the payment volume really isn't there to support a venture backed company at this time period. So that has not happened yet. But I think we're moving in the right way with regulation to make that possible in the future. I think that one of the things that we have gotten right from this is that people want to one build on top of Bitcoin and the projects are generally more secure. So if we think of something like Breeze, that's laying the foundation for infrastructure in the future and you could put LightSpark in the same context, right? These are going to be core infrastructure building blocks for future companies and you're seeing them engage. Both these companies engage from people inside of bitcoin, inside of crypto and externally from that which is a really, really strong market signal. I think from the other standpoint we had had this belief pre FTX blow up, pre Celsius blow up that there was going to be this desire for non custodial infrastructure on ramps in that way shape or form or a limitation of a platform having custody of the user's assets till the last moment. So with that we have like a portfolio company like Relay, which is the biggest non custodial on ramp in all of Europe that people have really like turned to as other platforms have blown up. We have Ellen Markets which allows for derivatives trading on top of bitcoin with like T +1 settlement. So you maintain custody of your funds until that you actually entered the trade. Breeze again you have this non custodial infrastructure. I think one of the other things that's really key on this is a lot of times when we're investing or thinking about investing, I think about my mom and I was just talking to her 30 minutes ago of like the complexity even to understand what we are talking about from broken money to a payments environment is, is it's a jump. And so if we're going to invest in a project, I think about could this be abstracted away from my mom having to understand it and it offer like an order of magnitude better environment, whatever the thing is for her to utilize. I'll give you an example of this. So in Africa there's over 50 different disparate countries and a lot of those companies that work there are multinational and have to deal with this crazy environment across different currencies. And what we're seeing right now is utilizing some of the Bitcoin's infrastructure, those companies are positioning themselves to be able to move, call it Kenyan shillings to Nigeria and Naira in a way that's an order of magnitude better than they were before.
- [10:02]
Scott Melker
Yeah, I mean, bitcoin has an entire economy in Africa that seemingly nobody here talks about. I mean, especially in Nigeria, from what I've heard. Obviously I've never seen it on the ground, I haven't been there. But I know a lot of people who have. And it seems that the youth of Nigeria have really deeply taken to using bitcoin for effectively everything, opting entirely out of their system. And I think in other places we've seen stablecoins kind of play that role, which is taking the shine off of bitcoin as a payment method to some degree.
- [10:30]
Nico Lechuga
Yeah, I think you're, I think you're 100% right. I think people are very, very comfortable thinking in dollars. One of the things that we recently just invested in and Borja Martell is the founder of the company Roxum. So Borja actually built Lemon. Lemon, the co founder of Lemon. So one of the biggest Latin American cryptocurrency exchanges, hardcore bitcoiner, he started mining bitcoins at 28 years old, started mining bitcoin when he was 14 years old. By time he was I think 17, he had eclipsed. And he's from Argentina. So being in Argentina, he had eclipsed his parents wealth and then goes on to found this Latin American cryptocurrency exchange. But what he comes into is none of these other things matter. And bitcoin is this foundational layer. And if we think about currencies that have had hyperinflation. So look at Venezuela right now, someone in Venezuela might think, okay, great, I need to get out and I need to put my money in dollars. But what would be even more profound than moving into dollars is building a business that's denominated in dollars and that cash flow is dollars when it's cash flow positive. And so that's the underlying thesis of the entire fund in that these businesses, when they become cash flow positive, they are cash flowing bitcoin. And I think that this is what you're hitting on of some of these other countries around the world. The entrepreneurs have started to understand this because they're in more fragmented and broken payment environments than we're in today.
- [12:02]
Scott Melker
So we're seeing a lot of different use cases building on bitcoin, of course, but we're also seeing a lot of different structures around bitcoin and different investment vehicles than we saw in the past. Obviously you guys are venture capitalists. You're investing into companies that are going to, as you said, sort of use bitcoin, bitcoin as their benchmark. Or building on Bitcoin as a network. I want to talk about Bitcoin treasury companies though, because that's obviously the new wave here. I'm a huge skeptic, to state it plainly. And so from your perspective, seeing so much bitcoin go into these and seeing so much money go into these, how do you frame them?
- [12:42]
Nico Lechuga
I mean, you've been through a couple. I feel like crypto cycles in general.
- [12:45]
Scott Melker
Right.
- [12:46]
Nico Lechuga
And there's like a similar feeling, right, like of.
- [12:49]
Scott Melker
I see froth.
- [12:50]
Nico Lechuga
Yeah, it feels like a froth. I think that anytime that happens, whether it's one of these cycles or a technology cycle, there are going to be some winners, there are going to be a lot of losers. And I think that one of the interesting things that we have to look at with the treasury companies is how are they ensuring that they can continue to operate in all type of market environments and based on what they're doing to accumulate Bitcoin and the financial instruments that they're utilizing, what kind of environments would threaten basically their existence? So I think that from my standpoint, I think it's driving adoption of Bitcoin. I think if you get over your skis in any type of debt situation and don't have an underlying business, so this is very different from like microstrategy, like using financial instruments. In my opinion, there is a cash flowing business and they're using Bitcoin as a Treasury asset and they're also utilizing leverage, but they can pay for that leverage.
- [13:58]
Scott Melker
I also think a lot of people view accurately his longer plan, which is to actually add financial services on top of what he's doing. So he's accumulating first add financial services, which I think to a lot of people justifies the premium because there's something coming. Whether it is or not. That's the perception.
- [14:17]
Nico Lechuga
I think with a lot of these treasury companies too. I think that you have to peel back the veil and understand who is initially funding them and that there's a trading environment to it and the initial funders are going to get a pop on that and a lot of times with that pop, they're going to leave and then we'll see what happens. I think it will drive short term price action probably higher. I think longer term, if you have a threat to any of these companies, you could have a downward spiral as they're forced to sell to cover their leverage.
- [14:52]
Scott Melker
So I think it's important, and I keep kind of harping on this, but to differentiate between Bitcoin treasury companies and what I call Bitcoin balance sheet companies. Because I think everybody is excited about a company taking 5 or 10% of their cash and buying bitcoin.
- [15:08]
Nico Lechuga
Yes.
- [15:09]
Scott Melker
Existing cash from a cash flowing business that is successful.
- [15:13]
Nico Lechuga
Yeah. So I think this is a huge point that you hit on right now. So we have think about the companies that we're investing in. These entrepreneurs are so excited about bitcoin. They're so excited about building bitcoin. They get a funding round that's somewhere between 3 and call it $15 million. And they're like, should I put that in bitcoin as a Treasury thing? And I think let's hit on your point right here, which I think is one of the things that we talk to the entrepreneurs all the time is do you have a cash flow positive business? If the business is cash flow positive to your point, no problem. You want to sweep that all into bitcoin or even better, something like ln markets that's cash flow positive and the business cash flow is Bitcoin. You want to just keep that bitcoin because opex is covered.
- [15:55]
Scott Melker
It's like a miner just. It's like a miner not selling or selling. Right.
- [15:58]
Nico Lechuga
Yeah, don't sell it. Exactly. And then you have this high growth tech company that cash flows bitcoin, it's kind of like the craziest thing. But these other businesses, and we saw this, there were a number of them in 2021 that did this and I'm sure we're going to have this, there's going to be some type of pullback in 2021. What's high was 67,000. There were a number of businesses that had raised, call it three to five million dollars and they loaded it all into bitcoin and they were seed stage companies. And then when you saw that pullback to 17, suddenly the Runway was gone and they no longer had the space to figure out how the hell they were going to find product, market fit, get to the next funding round. They had just created this attack vector that they probably weren't cognizant was even there because they were so excited about business Bitcoin, to your point, with the treasury companies, it's potentially even worse in that there is no underlying operating business for most of these treasury companies. Right now bitcoin, treasury company is not a company that's using Bitcoin as its treasury asset. And again, if the market environment continues to go up, then this delta between the cost of their capital and the compounded annual growth rate, it'll be a good trade. But if there is a weird market environment and they get a threat from there, you could see a cascade of downward pressure.
- [17:18]
Scott Melker
Yeah. I was worried for a while that they were a significant threat to Bitcoin. I think I overstated that in my sort of early analysis. I think they're a massive threat to their shareholders. So kind of what you described before, there's an underlying trade going on. The insiders send their Bitcoin in, they get stock at a multiple of an already public company liquid. They either sell it and get their Bitcoin out, or they just buy, borrow, die. Right. But they're not really interested in the long term. But there's going to be some retail person that buys this stock at a9, accessible to NAV and that will inevitably collapse. Right. Even if just because there's so many treasury companies and it's arbed away. Like, why would you buy. Yeah, why would you buy one at 9 if you can buy one at 2 or whatever it is? And so I guess my bigger concern now is it's going to be the retail who buy the stock that get hurt. And then also I think maybe if we were going to get a 25% correction in Bitcoin, we end up with a 40 or 50% correction in Bitcoin because they're forced to liquidate at the lows and cause that cascade.
- [18:16]
Nico Lechuga
Yeah. So I think you have to evaluate all of these businesses one at a time. If you're not part of the initial trade, if there is an underlying business to them, and Bitcoin is really this treasury asset, it could be interesting if this is simply a financial manipulation vehicle and they're using public instruments to accumulate additional Bitcoin by raising more and more capital. I think you just have to evaluate what kind of market conditions could break that. I think what will be interesting to your point is when it does break, I think what's going to happen is that the. The better capitalized companies or the more sound businesses will just.
- [18:55]
Scott Melker
They're going to consume everybody.
- [18:57]
Nico Lechuga
Yes. Yeah. They're going to eat them. Yeah. You're going to start sailors.
- [19:01]
Scott Melker
Going to own everybody. You know, sailor, Maybe Nakamoto, maybe 21, some of the early ones who are really well capitalized. And yeah, I asked Jack Mullers about this actually in Vegas. So it was five weeks ago, and this trend was really just starting. And they had just made the announcement and he said that, he said, more cheap bitcoin. For me, it's good. I said, I said, I asked him, these treasury companies, isn't this like Contagion risk. Is this going to be the bubble? The next thing he says, he kind of was like, I hope so because we're well capitalized and we're ready.
- [19:27]
Nico Lechuga
So you know, and that's, that's the point. It's like if you have the weapons ready in order to say like, okay, this thing trades at an M nav sub of one and the capital is already ready to go and you're saying, okay, well I'm going to go out and I'm going to buy. I'm just going to eat that whole company than buying bitcoin at a discount.
- [19:43]
Scott Melker
So it makes me a little less scared. I think the bitcoin gets vacuumed up somewhere and like I said, it's just kind of the shareholders that get hurt. Okay, so that's my favorite topic. I just wanted to knock it out as we go. So I think what's more interesting probably to people listening is that you've now raised the second fund. You have $100 million to deploy specifically into the bitcoin ecosystem. What's exciting to you? What do you view as the next trends? What do you think is coming? Because you're always trying to be, as you said, you want to go where the, where the puck is headed, not where it is right now.
- [20:15]
Nico Lechuga
What we saw, started to see the semblance and gave us confidence to be able to go out and raise the second fund was that there was still this misunderstanding in bitcoin and what the businesses in bitcoin should look like. So a crypto business, at the time period of when we started to have conversations about the second fund, they still were very focused on this token component to these businesses which, these bitcoin businesses, they don't have, they do not have a token warrant. So just for all the listeners, when you invest most of the time in a crypto business, what happens is the venture capitalist is focused on one thing and it's not the equity that he's going to get out of the underlying business. He is focused on he or she, the token warrant and a one to one or two to one match of the amount of equity that he has bought with tokens. And then the, the token like lockup schedule and when he can dump those.
- [21:10]
Scott Melker
I would take, just really quickly, I would take that one step further and say the majority of the ones I've seen or that go around don't even have an equity component. They're straight to token. So it's not even a one for one, it's just a token deal.
- [21:20]
Nico Lechuga
But yeah, so the token deal, right. And so like let's just take a step back even farther. Right. So venture capital was built to do moonshot projects. Like you want to put someone on the moon, it's going to take years to do that. It's going to cost a lot of capital to do that. But if it works, the return on that should be 100, a thousand X of the money that put in. And typically those projects from like inception to what we call like a liquidity event. So think acquisition, public offering, whether that comes from an IPO or reverse merger, a spac, like you're seeing a lot of stuff right now, those would be considered liquidity events. And there's a real reason why you don't have early liquidity in early stage companies is because if you think about like just look at public markets, right, right now if your CEO gets caught on a kiss cam at a Coldplay concert, the stock's going to shake. Right.
- [22:12]
Scott Melker
Got a nice watch on though. Apparently.
- [22:14]
Nico Lechuga
Yeah, yeah. And my wife pointed out his hand was in a precarious position for being on camera. But your stock's going to shake. It's a stable company. If you have raised $3 billion at something like an 8 to $12 million valuation and you have this token that's in this, in a liquidly traded token, that stock is going to shake or that public equity token, whatever you want to call it, and it becomes an intact vector for the company. So us, from day one we have blocked companies ability to issue tokens. We actually have like token blockers in all of our deals as we do not believe early stage companies should have tokens attached to them now. So venture capitalists traditionally would invest in a project and expect six to nine years out that they're going to get liquidity. And this is important until the entire token craze in crypto, six to nine days, it broke, it broke the venture capital model, right? You had sold LPs on this 10 year fund vehicle and suddenly the VCs were indifferent to what happened to these projects as long as the token pumped. And six months after they had bought the token, they could sell it onto retail and they might be able to sell all of it in six months. Some of them have like 24 month vesting periods and like six month blocks from here. But generally what you've seen is even if the token drops, call it 90%, the VC is fine because it's still like a 10x return on their entrance price to buy that, that token. And there's Certain retail that will just never sell it. Now from day one in bitcoin, what we've been investing in, those companies don't have that. They look like traditional financial companies which, if you're one of these alt crypto companies and start investing in bitcoin or evaluating Bitcoin, it looks different than the mental model that you have conceived of what the space should look like because of the background of the partners within the fund spending time in traditional finance being entrepreneurs. This was right in line with what we were looking at. And what we started to see was the companies in bitcoin started to achieve revenue quicker. So we started to get revenue bands of 1 to 3 to 5 to $7 million for companies that were raising what they would call a Series A. Now if we step back like a series A in like a traditional FinTech company, doing one to one and a half million dollars would be great. That's like a great early indicator the company's doing well, there's some semblance of product market fit that we should probably inject more capital in order to hypercharge growth. And we were seeing that these companies doing those numbers like 2, 3, 4, 5, 6, 7 and raising Series A's and we weren't seeing a fund step up and take them. We saw this void, right? You had growth equity that was willing to come in later on and you had a decent amount of seed stage funds that are now in the space. There's probably seven to nine of us, but there wasn't a leading series A fund that could step up and say, hey, I'm going to lead the deal. Which is very different. Like I think for all the listeners from there, if I were evaluating if I wanted to invest in venture capital, whether it's an AI or Bitcoin or defense tech, one of the things I'd want to understand was is the fund that I'm investing in, are they capable of leading transactions? Because if you're not capable of leading transactions, you're always waiting for what's called a lead investor, someone that's taking down 30 to 50 or potentially all the round to set the terms, price it, lead the diligence of that. And because we had done that in every single one of our transactions at the seed stage and the institutional brain power that we have with an ego death, we're well equipped to do it at a series A and people trust us within the space, whether it was the co investors or the growth equity that you bring along. So we saw these strong financial metrics and then we saw valuation compression anytime where there's not a lot of people looking at these deals or they misunderstand it.
- [26:13]
Scott Melker
Good deal.
- [26:15]
Nico Lechuga
They're fucking great deals. They're great deals. And so this was, I would say we had a couple instances of it that gave us the confidence to go out. And again on the analogy of like you're going to go to where the puck is going to be, not where the puck is at right now, two of the biggest questions that we get from or got from investors as we were raising the fund. One was why should I do this instead of putting more money in bitcoin? Which is a great question, great question, unbelievable question. We can hit on that if you want a little bit. The other question was what gives you the confidence that you can deploy $100 million vehicle into Bitcoin Series A companies? We would go over the metrics of where some of the seed stage companies were at and how they would come out. So you think about deploying a VC fund over a three to four year investment horizon for your initial investments and then you follow on into those companies. What I can say to you now that's no longer theoretical is like those companies exist and right now we're in diligence for five additional companies and they have these metrics where they are generating three to four to five million dollars in top line revenue. They're cash flow positive and their growth rates are incredible and we can deploy and evaluate into those companies and I think we've carved out a really nice space.
- [27:35]
Scott Melker
When you're at that point, it's like running a Facebook ad, right? If you run a Facebook ad and you know, if you spend a dollar and you make $1.15 every single time, you just scale endlessly and make that 15% on top of whatever you spend. But you're doing that at the level of millions of dollars into cash flow positive companies and you need to make sure obviously that the scale would be there with your injection, I would imagine, because there are a lot of cute companies out there that make three or four million dollars, but really don't have a path to that becoming 30 or 40 or 340, 400. Right?
- [28:04]
Nico Lechuga
There's a huge point. So I think like two things that you want to evaluate so you, you get an initial, I would say like it catches your eye, the money catches your eye initially of like the revenue. But I think your point is huge here. One is, was that a flash in the pan? This is a one off event that, that you're not ever going to Be able to replicate two. What does the ceiling look like for this? To your point right now, like in a different other space. Like I have a friend that's a very, very sharp CPG investor. So consumer package, good investor. And he's like, there's a host of companies that can get to 5 million and they will never get beyond that. And that's just like they're seeing.
- [28:39]
Scott Melker
That's a great business by the way, if you're a small business.
- [28:40]
Nico Lechuga
Phenomenal business. Yeah.
- [28:42]
Scott Melker
But not investable.
- [28:43]
Nico Lechuga
No, no. I mean like I own a hot sauce business. We have never taken money for it. And everybody I talk to about it is, I'm like, it's a phenomenal family asset. It's a fucking terrible investment for anybody else to invest in. Yeah, yeah.
- [28:56]
Scott Melker
So what I want to get back to the bitcoin versus investing in a fundamental point in a minute. But traditionally, what would you say, I guess at pre seed versus series A is the amount of companies you need to invest in to see a winner. So for example, we kind of always have joked about the spray and pray model of pre seed. Like you throw money into 100 things, 99 go to 0 but 1 of them does 1000x and it doesn't matter. Right. That's always been kind of the joke about precede. But at series A you have a lot more information.
- [29:27]
Nico Lechuga
Yes, this is a really, really good point. I would say like I'm not a good pre seed investor. Your thing right there of how many companies you have to kind of spray across, it's not something I'm comfortable with. Like even when we were deploying at a seed, we were probably deploying a little bit later than a seed for an A, we're going to probably have 12 core portfolio companies in the portfolio. And I think that you're going to expect that probably 30 to 40% of them are going to fail. They might not depending on the revenue metrics that we have. But 30 to 40% of them at least will not perform to the degree that you probably outlined in the initial memo as you went through of the pre parade with the company. I think that you're probably looking more at two to three of them pulling the portfolio. Really taking this and to be determined, I think they just early stage, I would still say venture capital is Series A is still like early stage. Investing is unclear like what future market environment is going to happen, how these entrepreneurs are going to react of scaling their business.
- [30:34]
Scott Melker
Bitcoin goes to 50 grand in three months. Everything looks a lot different than if bitcoin goes to 150 grand in three months.
- [30:39]
Nico Lechuga
So for some of the businesses, for some of them, like, it doesn't, they're, they're price indifferent, like a price insensitive. Right. It's like the businesses kind of work. And think of the example in Africa. Like the business doesn't matter if Bitcoin's $5 or if it's 500,000.
- [30:55]
Scott Melker
Transacting.
- [30:55]
Nico Lechuga
Yeah, exactly. Yeah. But so we have those, I think like 12 core portfolio companies. You're looking at this revenue band that we're talking about. Like we want these companies that are series A to be generating 1 to 3 million in top line revenue. We want some semblance of product market fit. So your point right there of the ad, I put in a dollar, I get $1.15 back. You want to see something of like, okay, I have something that I can replicate with more capital. Now let's test it. Let's figure out what the upward band is and let's inject some more capital here. And I think that the other part of this is historically with venture capital, you would need the next funding round and the next funding round. What was really good within the market downturn in 2021 is you really had bitcoin entrepreneurs become much harder in that that capital dried up and they had to raise much, much smaller rounds. What they ended up doing was that they made a choice of whether the business could become profitable or not. So we have portfolio companies, right, that will teeter on profitability, they'll drive growth because you want to drive early stage growth. But they could, if they needed to make the business profitable and not fail almost overnight. And I think that that's like, to the other part of this, of, okay, you've raised an A. If the B isn't there, can the business still exist today is really, really key.
- [32:20]
Scott Melker
Yeah. So let's talk about bitcoiners wanting to invest in anything other than bitcoin because I know that that is to some degree a challenge. Although I think we're finding that at certain prices, bitcoiners become capitalists who also like yachts and second houses.
- [32:37]
Nico Lechuga
100%. I think that Ross Stevens in his one of the shareholder letters with Stone Ridge was like, the point of bitcoin and money is not to just accumulate, it is actually to transact and buy things at a certain point. I just had this conversation with a friend that's in the space. He has two young kids and they were thinking about a purchase for their kids and their family. And he was like, well, how do you conceptualize this versus me just buying more bitcoin? I was like, dude, the memories that you're going to make with your 5.
- [33:06]
Scott Melker
And 7 year old said this so many times, man. In a second I would sell bitcoin to buy a house to like raise my kids in. That was amazing and would give me bad memories. Not everything is a financial transaction.
- [33:18]
Nico Lechuga
I mean, Joe Rogan hit this on the head and it wasn't with bitcoin. He didn't even realize it, but he was talking about billionaires and he was like, great, you've won like spreadsheet math. You won the spreadsheet math game. Like what did you, what was the value that you created with your life? So I think a lot, like if with your kids, like to the example of this or your family in general, like if you have the ability to do that. I think it's an amazing thing. On bitcoiners evaluating whether to buy more bitcoin or invest in our fund. I would say right now, bitcoiners, a lot of bitcoiners that I talk to that are evaluating these things. So I might be skewed because they're already reaching out and I'm talking to them. They're looking for ways to make money on their bitcoin or to outperform bitcoin. I think there are loans applications right now where they could receive some type of yield on their bitcoin. There's ones that use DLCs, there's ones that are custodial, There's a whole host of that. I think that the lending environment against bitcoin right now is just starting to take off. I talked to this individual that manages all the money for the credit unions in the United States and he was talking very defensively about stablecoins. And I was saying to him, you should think offensively of if you can grow your depositor base by offering a new financial product that you already offer. In another context, this would be interesting. I said bitcoiners today, like, if I own an equity portfolio, my equity portfolio is $5 million and I want to buy a million dollar house. You're going to just say to you, like, transfer me custody of 300,000 of your equity portfolio. You won't have to put anything down and like, you're going to give me the loan on the house. I said, why should that be any different than if you were managing someone that had a bunch of bitcoin? If you truly understood it, all the bitcoin lending right now is over collateralized. But bitcoiners I think would be happy in certain scenarios. So going back to the house thing, okay, great. I will allow you to buy this house with no money down. And potentially I'm going to look at this of I can collateralize the house and collateralize the bitcoin that is still in custody. And the bitcoiners will get the bitcoin back when the house is paid off. So you get the upside of the bitcoin and you get the house. So I think bitcoiners are constantly thinking about this. What we tell investors all the time is the things that we are looking to invest in are high growth tech companies and when they cash flow, they will cash flow bitcoin. And if that happens, you have a company that can exceed Bitcoin's annual 30 to 50% growth rate and it's treasury asset that is built in, that doesn't require board approval, that doesn't require a shareholder vote is Bitcoin. And it's this explosive thing. We have examples within the portfolio right now that at the early stages have exceeded, greatly exceeded Bitcoin's growth rate. Whether we are right on that thesis longer term and that plays out like we were talking about by the time these later liquidity events to be determined. But if you're evaluating this and investing in a fund, you should probably just whether it's a financial advisor or whether it's an AI, think of it as a private equity bucket. I'm investing in venture capital. This is my entire investment portfolio.
- [36:28]
Scott Melker
And you're not 100% in Bitcoin. You want to take 20% and invest it in X and you choose someone you trust to do that for you.
- [36:36]
Nico Lechuga
Exactly.
- [36:37]
Scott Melker
In that case also Bitcoin doesn't have to be the benchmark because you actually just want some diversity.
- [36:42]
Nico Lechuga
Exactly. Yeah. We have a number of investors that were doing that. They're like this is uncorrelated to bitcoin from here. And this serves as my venture capital buckler. I would say it's not for everybody and you have to be in the right investment position to take the swing in it. But we think if we are right, longer term with the fund, it will outperform bitcoin. And why we're spending all of our time here evaluating these companies, building these relationships, supporting the companies is because we believe that these companies do have the ability to outperform Bitcoin.
- [37:14]
Scott Melker
So obviously Jeff Booth is one of my favorite people to have on the show. He's one of my Favorite people in general, and I'm sure one of yours as founder, co founder, but he has very unique and very particular views on where bitcoin needs to go and how it needs to be used to eventually achieve the vision that people have for Bitcoin. And one of those is sort of the premise that you said that's been difficult, which is payments. Jeff is one of the few bitcoiners out there who actually says, go spend your bitcoin to dominate your life in bitcoin. Use your Bitcoin because you, you can't be a currency without it actually being used. I think I had him on a month ago and we discussed this at length. Is that a core premise? You know, as a company who's attached to him, do you share the same sort of core beliefs or do you have to, you know, change those slightly because it's a business and not a thesis on, you know, where bitcoin goes. And do you think payments becomes or transacting becomes a core part of bitcoin in the future? Because I see it moving in the other direction right now. I agree with him actually, 100% for it to become what it could be. That needs to happen. But right now nobody wants to spend their Bitcoin, it feels like.
- [38:24]
Nico Lechuga
So I agree with you on the latter. I think no one wants to spend their Bitcoin. And I agree with him on the part of people have to spend their Bitcoin in order for it to become. I think that the one component that we're missing here from me sitting in an investor seat is the timing. So if we are evaluating a project of like we had talked about at the beginning of the conversation that deals with bitcoin payments. So we are enabling Bitcoin payments on Shopify, wix, Squarespace, we are abstracting away the regulation complexity in Europe or the US the first question that we dive into is just the data. So like you can look at overstock that has allowed crypto payments for a while, I think is the company. And when you dive into the data, it's like a subset of a subset. It's like less than, I believe 2% that is utilized the last time the data was out with those payments. I think that two thing, a couple things have to change and I think we can bifurcate Bitcoin the network and bitcoin money. One, if we're talking about bitcoin money. So I'm spending actual bitcoin not using bitcoin the network to transact using like a tether, stablecoin across it, then part of the regular, the regulation and tax environment has to be peeled back. I can't feel like I'm getting hit with this tax thing and it's in the back of my, my mind.
- [39:45]
Scott Melker
Yeah, your coffee being 40% more expensive doesn't make a lot of sense.
- [39:49]
Nico Lechuga
So I think that like if one country was like if the US were to, were to do that, that would be a huge, huge step.
- [39:57]
Scott Melker
Yeah. Actually all these guys who are transferring 10, 20, 30,000 bitcoin in a clip to treasury companies to be tax efficient would go buy, just buy stuff with bitcoin if the taxes weren't so awful. Right, right.
- [40:10]
Nico Lechuga
Yeah. Right. So that's one component. The other part is the network and I think that this is where that bifurcation we were talking about comes in. If the network, which we're moving in the direction can support a massive stablecoin then the network will grow and all these other bitcoin infrastructure companies will grow with it and you kind of are bootstrapped by the stable coins until the world is ready to transact in bitcoin. It's kind of my thesis.
- [40:38]
Scott Melker
Does that mean that we need a massive stablecoin on bitcoin? Because that's been to me one of the biggest head scratchers is that we haven't seen that yet. I mean we've seen tether talk about it, I think coming to lightning. We've seen lightning incorporated in some places. But why isn't there a $100 billion market cap stablecoin that moves on bitcoin?
- [40:58]
Nico Lechuga
I think until. So using Lightning you had to have the Taproot asset protocol. And Lalo just, I forget six or eight months ago they sent a different asset across lightning and so the infrastructure really was not there in order to support a stablecoin going across it. And then you have to have the stablecoin issuer want to support that like a big known stablecoin issuer. There are stable coins that can be transacted across lightning right now, but you know, wouldn't use them. You're not going to use.
- [41:30]
Scott Melker
You can do it on tether, right? I think. Yeah.
- [41:32]
Nico Lechuga
Yes. So I think that that's happening and that's coming. I don't think we're far away from that like talking to different teams. I think the transaction again on bitcoin or utilizing bitcoin in this everyday means if the tax part of it would pull back like you and I then would spend.
- [41:52]
Scott Melker
When you just look at the evidence, like thinking this through, most tether transactions, which is obviously the largest. Stablecoin I think most people think are happening on Ethereum, but they're happening on Tron. So your average person who wants to send somebody five bucks, I think they just don't give a shit remotely how they do it fast, cheap and grandma, as you said, or your mom, like uxui is simple enough that a friend can say, hey, download this app, I'm going to send you 10 bucks. And they don't know that they've got a Tron wallet and they probably haven't written down their seed phrase. And so maybe that's the challenge is that like it's a big leap to care when you're sending a microtransaction what the base layer network is for it.
- [42:32]
Nico Lechuga
I completely agree with you and I think that this goes back to the other point of if you're going to be solving something, it has to be better than any other solution by like an order of magnitude. You can't be 30% better and introduce friction into people's lives because they don't care. And so when we will look at these projects like a number of. I think one of the good questions to ask is what would this look like? Is this easier on Solana, Is this easier on Tron, Is this easier on Ton? And then for the stablecoin component of this project, would it be better suited on one of those other chains today? And if that's the case and there's additional complexity because of that, then we probably need to evaluate is this the right thing to invest in.
- [43:15]
Scott Melker
That makes perfect sense. So obviously you made it very clear that you don't invest in anything that has a token associated to the point where you have it in your contract that nobody will launch a token even down the road if you're going to invest. That said, we're seeing a lot of layer twos and token issuance even by companies building on Bitcoin. Right. So what do you make of that trend?
- [43:40]
Nico Lechuga
So I want to just clarify one component of this. So we do, we block and it's a consent, right. For them to be able to issue a token. What we believe internally is that there will be some time period where you have tokenized equity with real companies, like big companies.
- [43:57]
Scott Melker
That's different. That's like non fungible token. But yes.
- [44:01]
Nico Lechuga
So this is like we are supportive of that. We just want to. So we invested in Roxam. Right. Like Roxam tokenized assets.
- [44:08]
Scott Melker
Right. Makes a lot of sense. Okay, sure.
- [44:10]
Nico Lechuga
So like, like we had had from the beginning of the fund, the belief that there would be an exchange that would be dominated if, if Bitcoin is going to be the world's reserve currency that would be denominated in Bitcoin that you would have like an Nvidia Apple to list on. So like that's being built with Roxum. What'll happen with some of these portfolio companies six, seven, eight years down the road? Maybe sooner they will want to list in that type of environment and like that equity will be tokenized in this way. But it's not going to be a token in the way that you think of.
- [44:39]
Scott Melker
Like we think of crypto, that's, that's different. But a great point because I think there's a lot of crypto people differentiate from Bitcoin, are very excited about real world assets being tokenized and I think they don't realize that that's not going to be the pump they're looking for.
- [44:54]
Nico Lechuga
Right.
- [44:54]
Scott Melker
Because it's going to be very difficult for them to actually invest in because JP Morgan and Goldman Sachs, when tokenizing an asset and trading it between each other, it's not going to need some public crypto token that you bought in a presale.
- [45:07]
Nico Lechuga
Right. Totally, completely agree to your point of the layer twos and the other tokenized projects. I think it's very exciting that different developers are excited about building on bitcoin. So if we look at Citrea Alpin Botanics, Bob Babylon, these are very academically complex projects, solving, very interesting, I would say, programming things on top of bitcoin and they're doing it in all different ways. And they're also providing an environment where we think about thermodynamics, where the energy is moving from these other ecosystems to bitcoin. Now, are some of those projects just hot air 100%. And are some of them just looking at a token pump? Yes. Are some of them looking to replicate what has happened on Ethereum Solana Ton? Sure. But that doesn't mean that we're not going to get some seriously great developers that come into here or that we open up the ecosystem to other people from our seat. It's always a question of, okay, when we're evaluating a project, like, what evidence do we have that this thing, especially at the Series A, has, has some degree of product market fit. How do we believe that they're not in the camp of requiring what we would like to call like two miracles? Or like think of a rocket. So a rocket going up in the air. Every additional stage of a new Rocket firing to take something to space introduces additional complexity. Now when those rockets have to be fired by external features, which some of these layered projects have to have. So they would have to be the go to scaling solution on Bitcoin for their sequencer to work. That is, I would say, uncomfortable for the stage that we're investing in for.
- [46:49]
Scott Melker
Us to place capital that makes sense because it's hard to handicap things that are beyond that company's control necessarily.
- [46:55]
Nico Lechuga
100%. Yeah, that's exactly accurate. Yeah.
- [47:00]
Scott Melker
And you're having no problem, I would imagine, finding people to pitch you.
- [47:05]
Nico Lechuga
We are having a lot of, a lot of people pitch us. Yeah. No issue there. The deal flow's been great though. Like, I think that. So just for the listeners, typically with a fund at this stage, you want to deploy the initial capital to your core portfolio companies which you're then going to follow on into in three, maybe four years. So you would anticipate at the stage that we're at being like 25 to 30 something, 33% deployed with the projects that we have in diligence right now that we very much so like they meet all these different metrics. There's a high chance we're at like 51% between initial and follow on capital that you would earmark. So the deal flow is really good and we're not.
- [47:58]
Scott Melker
And you're not writing a $50 million check out of your 100. So you're going to have to find 50 investments or 40 investments or whatever it is to deploy the entire fund. 30 to 40. I don't know if you're doing two, three million bucks a clip.
- [48:11]
Nico Lechuga
Yeah. So thinking of the core portfolio companies that are in there and you wanting 12, so you're writing like a three to call it $6 million check and then reserving like a quarter of the fund for following on investments a little bit for earlier stage to try or lower the cost basis. Like, we're very, very selective and we could go a quarter or two quarters without placing capital. Sure. But then if we see something that we really like, like we go after.
- [48:30]
Scott Melker
It makes perfect sense.
- [48:32]
Nico Lechuga
Yeah. So I, I, I mean, I'm very, very happy with where we're at with the space. I think it's like getting to work with the brain trust that we have internally is amazing.
- [48:40]
Scott Melker
Dude. If I could sit in a room with Preston, Jeff and Lynn on any given occasion, you know, it's pretty powerful brain trust and yourself of course. Sorry. But you know, it's just really an incredible group. So I have to Ask the last fund you basically raised, deployed, executed entirely in what we'll call a very unfavorable environment for the industry.
- [49:05]
Nico Lechuga
Yeah, yeah.
- [49:06]
Scott Melker
How much has the regime change and sort of having the governor lifted, all obstacles raised removed, now affected your core business? Or was the fact that you're on Bitcoin and there was really always some clarity on Bitcoin, not as much of an impediment as maybe it had been for the rest of the industry.
- [49:22]
Nico Lechuga
I think just like clearing through the noise. This is the worst private equity fundraising environment in the last 25 years across the board. And when you and I first talked before the complete meltdown, we had set out to raise between 25 and $30 million, because that's where this stage the industry was. And you are like, know what the other VC funds had in crypto?
- [49:47]
Scott Melker
Billion. They were raising like Andreessen was $4 billion. Fund Peak Insanity right around then we.
- [49:55]
Nico Lechuga
Were like, we want to raise 25 to 30 million dollars. First venture capital fund we had line of sight, let's say all these verbals and you know, part of it's going to fall out verbals for above the 30. And then we're like, okay, we're going to initiate the first close. And this is like the market started to fall, dude. The first close on fund one was like $11 million. And then you just like grind it out for the next.
- [50:19]
Scott Melker
I was not a unique butterfly. I was just a part of the crowd. Yeah, I mean, we all saw it. It was just timing melted down.
- [50:28]
Nico Lechuga
We ended up raising $25.2 million, but it was a slog. And we deployed that fund and really just were able to, I would say, execute on what we had had was a thesis and a belief at that time period. The second fund, I would say the regime change has been really helpful. It's been helpful to have the data from the first fund. It's been helpful that 90 to 95% of our investor base is family offices. Like, we don't require institutional money. Some of those family offices have done quite well over the past number of years. And they are looking for a place that can handle the diligence and give them access to companies that they wouldn't else be able to place capital into. And we've kind of become one of the go to places to get that exposure.
- [51:17]
Scott Melker
That makes perfect sense. So looking at where Bitcoin is now, we're recording on Friday. This will come out Sunday. Let's call it 120. It's probably 117. I haven't looked. But calling it 120, it's a big number. Where do you think we sit in this cycle? And as you're looking at this, obviously, do you think cycles are even really relevant or is bitcoin sort of changing into a different beast? Those who believe in the four year cycle would have believed altcoins would have been going nuts for the last six months and nothing happened there. I think the traditional four year cycle and the impact of the halving maybe are being diminished.
- [51:54]
Nico Lechuga
This is a really good question. I think that we're probably going to see higher highs and not as low lows. And I think that one of the components of this is the newer entrance. There is friction as they enter. So if you and I enter bitcoin right now and we have a life event, you and I can just go out and sell the bitcoin, it doesn't matter. But if a publicly traded company enters bitcoin or decides to allocate a certain percentage to its treasury asset, it's going to require board approval to sell it.
- [52:29]
Scott Melker
Approval. They might have to actually contact the sec. They certainly can't puke on a random Sunday at noon when they feel like it, right?
- [52:37]
Nico Lechuga
Yeah. During a market meltdown it becomes very hard to liquidate the position. And same thing for a Treasury asset of a sovereign. And because of that, I think the market contagion that you've seen when you had the Celsius FTX like three arrows meltdown, that they were just all able to liquidate overnight, I think that that is going to cause some calmness with the market. I think to the point of that Jack Mallers was saying of there are super, super, there's well capitalized buyers, extremely well capitalized buyers that will just reach out and grab it. I think that we're just in the early innings of broader market adoption. Whether it's people using it as a Treasury asset or sovereigns or just like my mom deciding more of her position to be in Bitcoin. I think the other part though, the thing that I would think that I would lean on of like what causes the downturn. I think it's some of these positions becoming like over their skis for the amount of like leverage that they've taken out to, to buy this asset would cause a downward spiral. But I think because of that, yeah, you could see this. And again I'm not a great prognosticator in this regard as to where does the price go, but I think you could make an argument that because of that the cycles are not as profound as you've seen them in the past.
- [53:58]
Scott Melker
If we want people to watch the podcast, you have to say bitcoin is going to be $5 million by 2027 or something like that.
- [54:05]
Nico Lechuga
Yeah.
- [54:07]
Scott Melker
Can't say it.
- [54:08]
Nico Lechuga
You could talk to one of my partners about that.
- [54:09]
Scott Melker
Yeah, I was going to say Jeff's really good for that. I think Jeff said to me in the podcast something to the effect of the fair value of bitcoin right now is like $70 million a coin.
- [54:19]
Nico Lechuga
Right.
- [54:19]
Scott Melker
All right, man. We're cooking with gas right now. I like that.
- [54:24]
Nico Lechuga
Yeah, exactly.
- [54:26]
Scott Melker
Imagine that world.
- [54:28]
Nico Lechuga
I can't even imagine that world. Yeah.
- [54:30]
Scott Melker
I want to know what dystopian Mad Max future that is where bitcoin's chilling at 72 million a coin.
- [54:36]
Nico Lechuga
Right.
- [54:37]
Scott Melker
Definitely going to need an army to take you to Gastown.
- [54:41]
Nico Lechuga
Yeah, seriously. And then the part of just. There's only so many things, I think, in that scenario where people that have a lot of bitcoin would buy and then push the money back into the economy. So we do want. If we want this to be used for transactions, you need some type of exchange for goods and services where people want to do that. So we'll see. It depends on the timing. Timing component. Right. Like, if that happens in 50 years.
- [55:07]
Scott Melker
70 years to be very different.
- [55:08]
Nico Lechuga
Yeah, yeah, exactly. Yeah. I think your point on the treasury stuff is spot on. I think that we get a situation. I'm curious what happens when. Because right now everybody's making this trade of what, two trades? Millennium Citadel are making one trade of they're buying the pipe at X and they see the initial trade and they're going to pop out of that, which is fine. That's what the PMs are going to hit. But then the treasury companies, well, twofold. And I would be curious who you could get on that would really give you this bit of information. So I would make an argument that depending on who the sponsor is of the company, they might even be in it for a quick trade themselves.
- [55:49]
Scott Melker
Yeah, I think that's 100% true. I think that you're like, this is like ICOs. It's like the token thing that you described, just with public markets, much more liquidity and I guess a little more transparency maybe. But if you send in a million dollars in bitcoin and the next day you're a publicly traded company and you have $7 million in stock, who's not going to sell some of that great trade?
- [56:14]
Nico Lechuga
And I think that the way through the noise that I would kind of look at. And the way that you would discern is if someone was the sponsor and they instead looked like the operator, so they align the incentive with them with the long term business. Then I think you're building something that probably they're looking at it from the standpoint of like I want an underlying business with a bitcoin as a Treasury asset and I've made use of someone's going to do that of market forces right now in order to make this happen.
- [56:43]
Scott Melker
So capitalizing a future cash flow business by taking advantage of the opportunity to collect bitcoin right now, that's how I view Saylor. I don't know what he'll do, but to some degree I think there will be some other operating business there down the road.
- [56:57]
Nico Lechuga
But I haven't seen anybody like none.
- [56:59]
Scott Melker
Of these have any vaguely allude to it. Like, and I'm not hating on anyone especially. But I remember Pomps, you know, he said something like we're going to. That will be based on the appreciation of bitcoin and you know, future financial products to be built. But purposely vague seems like. And this is the. Everybody's making their money.
- [57:19]
Nico Lechuga
Yeah, exactly. And I think like from bitcoiners, like it's amazing. These big name bitcoiners, I think that they've missed out on these like tokens pumps and I think like to do the former. What I was saying, like if you said like hey, the administration's here and I have an opportunity to build like something that's sustainable and long lasting, you would probably say the timing is right for it now. But the other part is just like it is so easy for people to make 40 to 50 million dollars right now by being a sponsor of a SPAC.
- [57:49]
Scott Melker
I mean when you start talking about like reverse merger RTOs backs, like all three in the same like transaction, you know that you've got into some wild territory. Like I don't see how JP Morgan and Goldman Sachs backing any of these, you know, their investment banks taking these public, you know, like it's wild.
- [58:07]
Nico Lechuga
Yeah. Or the lawyers, right? Like, like if you had, if you had like Kravath or Wachtel that was like, hey, we're going to play ball with like one of these things. Like it would probably be like the thing. The thing is different. Like watch those. The greatest M and A attorneys in the world. Like bar none, they're the best. So if they were like, hey, I'm going to back something. You're not. You're seeing Reed Smith, do the documents for this to my, like it's not, it's not to say it won't happen, but I haven't seen it yet.
- [58:37]
Scott Melker
Yeah, I haven't seen it yet. And from what I hear, the demand is drying up already. So. Yeah, we'll see. At least for the. I think it's becoming difficult to just go out and pay bucks.
- [58:47]
Nico Lechuga
$4 billion like insane. Yeah, I'm sure you're being pitched left, right and center.
- [58:52]
Scott Melker
I am. And so like I actually came on as advisor recently for a publicly traded Canadian company. It's like a syllabin company, very small. But my literally contingency for me to do it was that they never said treasury company. They listed as a bitcoin balance sheet company and we're just taking 1.5 million of their 10 million cash and buying bitcoin efficiently. That's it.
- [59:13]
Nico Lechuga
Awesome.
- [59:14]
Scott Melker
That's great. I'm like, I will help you. I have a friend with a great algorithm that we can buy bitcoin a little bit better and you go about your life and run your business.
- [59:23]
Nico Lechuga
That's awesome.
- [59:24]
Scott Melker
The day it was announced, two investment banks called and we're like, we'll match your 10 million treasury with another 10 million if you convert to a bitcoin treasury company. We have investors that want to do this and we're like, no, this is my, you know, my partner, the founder, He's a friend of mine. I'm like, this is his passion. Like he believes deeply in psycho siloabin and has done. This is his company. He's not a bitcoin treasury company. Yeah, they're like spin that into another business. And I was like man, come on. But yeah, to his credit, we very quickly said no to 10 million bucks.
- [59:58]
Nico Lechuga
But it's longer term shareholder value I think is like that. So the part, the other thing that I think that. So two things. I think that if you had long term incentives with some of these and like you had one of those big names that we hit from the banking and the legal front on this is probably different. Then the second thing is if someone that could raise a lot more money came out and did less and here's the reason why. So like the sponsors get a promote share, right? But if you were really about like.
- [60:22]
Scott Melker
The Thomas Lee or the like whatever the.
- [60:25]
Nico Lechuga
If you went out and you raised 400 million instead of like a billion dollars because you're saying like I can more multiply shareholder value quicker, like I'm gonna grow this business and I'm in this for, like, the long term, but this is all I want. I don't need any more money, which is to the point of, like, what you just did there. Like, I don't need the 10 million. I have the money that I have right now. Like, yeah, that. That would. That would scream to me, like, okay, I should probably pay attention to whatever the hell that is.
- [60:52]
Scott Melker
Yeah, I agree. It's going to get really weird. Nico, man, thank you so much. That was really an awesome conversation and very different from most of the conversations we've had because we really haven't gotten, even in, even with your partners, into the VC side of what you're doing and how you sort of view the market and how you invest. So really, really, really helpful, I think, for the audience and really great conversation, man.
- [61:14]
Nico Lechuga
Scott, thank you so much for having me on. Always happy to talk to you. It's absolute pleasure, especially on a Friday. Thank you so much.
- [61:20]
Scott Melker
You got it. Let's do it again soon. Thanks, Nico.
- [61:22]
Nico Lechuga
Sounds great. Thanks, Scott.
- [61:23]
Scott Melker
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