How to Become a VC with Haseeb Qureshi | Layer Zero

Welcome to Layer Zero. Layer Zero is a podcast of unscripted conversations with the people that make up the Ethereum community. Crypto is built by code, but it's composed by people, and each individual member of the crypto community has their own story to tell. Cypherpunks understood that the code they write impacts the people that use it, and Layer Zero focuses on the people behind the code, because Ethereum is people all the way down, and it always has been. Today on Layer Zero, we're talking with Haseeb Kureshi of Dragonfly Capital. And Haseeb, we've had him on the Bankless podcast before, but always to talk about some sort of thesis or mental model. And instead, in this particular episode, we talk about just the dynamics of being a venture capitalist in Web3. So if you are interested in learning what's it like to be a VC and also what it might be like for you to find a path into becoming a VC, this might be the episode for you. I think everyone, at least most people, when they get into the world of crypto, always kind of daydream about like one day they'll be a part of a venture capital fund and one day they'll be on the research desk. And I certainly had that dream myself. And kind of growing through the industry, I realized that wasn't necessary for me. But if that is what you are interested in, this episode is going to be perfect. We talk about what it's like to establish relationships with your portfolio companies. We talk about what it's like to add value to your portfolio companies. We also talk about the timing on when it becomes time to actually sell your investments and how you credibly and honorably actually find liquidity on the projects that you've had relationships with and what that means. And we also get into the concept of airdrops, whether airdrops are going to be here for the long term, or maybe they were just kind of a 2020 to 2021 thing and really what it means to have a long term thesis in Web3 versus just kind of looking at what's going on in the present moment. So a really wide ranging conversation all about kind of investing in crypto, as we all do. So I hope you enjoy this conversation with Haseeb Kureshi. What's up, Haseeb? How's it going?

I am doing well. How about yourself?

Pretty good, pretty good. Currently stuck between extremely bullish about the merge, but extremely bearish about most everything else.

Yeah, that is reasonable. There's been a lot of good news about the merch. There has also been a lot of bad news in the world. So I think I agree with you. It does feel like we're

in crypto, there's like a little bit of narrative exhaustion, it feels like. People are getting a little bit tired of hearing the same old stories.

But I

don't know. I feel like fundamentals still look really good.

So I'm feeling confident.

Yeah, narrative exhaustion is definitely one, but also I've gotten a sense of like bull market exhaustion over the last like two months. Maybe kind of the same thing, just like, oh, like, sweet, another play to earn game. All right, sweet, another like NFT profile picture thing. All right, all right, like we're done with that. Talking about the merge again. All right, like cool. We've been talking about that for a while. Just like how many like crypto runs on attention, and sometimes, like, well, like DeFi tokens, that was a thing that invigorated us in 2020, and then that kind of like spun out. And then NFTs that kind of ran its course and gaming. And then it seems to be like in bull markets, we have these iterative cycles of new things that can capture people's attention, but eventually, like the sparkly new ideas kind of run out, and then people kind of like sober up. It kind of feels like where we are right now.

Yeah.

Well, macro is definitely the driver's seat this year. And it's also, you know, Bitcoin and ETH are doing most of the talking for the crypto market, which is also a sign that, like, again, it's primarily about macro.

Right.

At the same time, you know, I remember in January, we were getting so many gaming pitches. It was like five metaverse pitches a week. It was like just exhaustingly repetitive. That's slowing down.

So I'm definitely seeing less kind of metaverse automatically raise tons of money, hype.

It feels like investors are starting to catch on.

I am still seeing a lot of Dow infrastructure, but I was seeing a lot of that a month ago. We were seeing like

So many people telling the same story about Dow infrastructure, Dow infrastructure sucks. We're going to build better tools for DAOs.

That's finally slowing down.

Uh-huh.

And so now it does feel like

there's a little bit of an dearth of ideas.

You know, we went through a few cycles of like, okay, you know, DeFi on new L1s. And then it was metaverse. And then it was Dow infrastructure. And now I'm like, I'm not sure what the

pattern matching, like, okay, here's the startup of DeJoure

Mm-hmm.

is. I'm seeing more follow ons

from companies that already have established their businesses. And I'm seeing less interesting things happening at the very, very early stages right now.

So when you're engaging with all of these like startups, these seed opportunities, angel investment opportunities well, not angel investment for me, is seed investments.

The investment for us.

Yeah, seed investment for you. Yeah. How do you keep the bull market mania at arm's length and also still do your job? How do you balance those two things?

Well, the the nice thing is that at seed, um, the market has fairly limited impact on seed, right? So seed prices go up, seed prices go down. It kind of depends on the supply of capital. But uh what's happening in public markets tends to have limited impact on what's happening there. The public markets have more and more impact on later stage rounds. And so it's you can kind of imagine like a

almost like a spring, and it's like really hard to push that spring all the way down to seed.

But you know, series D, Series E, Series C, they get affected pretty rapidly by changes that are happening in public markets. But the effect of that push and pull is not only graduated, but it's also uh there's some latency in how long it takes for that to show up in seed.

So

for the most part, public markets don't affect seed too much.

It's more about ideas and more about like what markets are hot that are driving entrepreneurs in a particular direction, right? So you see

more concentration of ideas

in certain areas when those things are hot

in public markets.

So, you know, like you mentioned, there are always NFT projects raising, there's always NFT studios, there's always

Things that are tethered to the themes that are exciting in public markets. But for the most part, you can kind of ignore what's happening in publics when you're looking at C series deals. When you go further afield to like series A and beyond, then it really starts to matter.

Axie Infinity alone triggered an absolute mania in play-to-earned games.

Yep.

Like this one thing

Like started to move billions of dollars of capital outside of its own token into like you know play-to-earn games. The next axie, we want to be the next axie was like a line for a really, really long time. But like when you invest in these things, like you're minimum locked up for a year and usually much more than that. And so you have no amount of like guarantees that like you know the play-to-earn gaming thing is gonna be around let alone in three months, let alone like one plus years. Right. So, how do you just manage like, well, play-to-earn games is a really hot topic right now, and maybe the fundamentals are there, and we do want exposure to that concept. And so, like, you know that, like, yes, this is an investable theme, but are the startups that are coming to my desk right now going to be the thing that actually capitalizes on that? I guess it's another reframing of the same question, just like the mania and demand for it's like, oh, like play to earn gaming, we got to invest in that versus like, well, is it really gonna be a thing in a year again? How do you navigate those waters?

Yeah, that's precisely the right way to think about it. Is that

Yeah.

it's not enough to say this thing is hot right now. You have to draw the economics forward and really understand like, look, by the time that we get liquidity on our investment

and the things that we're investing in now, which are pre launch games.

Mm-hmm.

Like from pre-launch game to actually getting a game in the market and monetized, and then you know the token gets launched and your lockup eventually starts to expire and you start getting liquidity,

that is gonna be multiple years.

Mm-hmm.

And so it's really not a question of what is Axi Infinity being valued at by the market today.

The right question is where do you think this market's gonna be in three years?

Mm-hmm.

And you know, for us, or I'm gonna say for me personally,

I'm actually um

I'm very bearish on this current generation of play to earned gaming.

I don't think it's particularly sustainable.

And I also, I mean, look, I've been in crypto long enough to know that, like, although in general you should assume that markets are smarter than you are