In the dynamic world of cryptocurrency, the transition from founder to venture capitalist (VC) is less common than in traditional tech sectors. This intriguing phenomenon was recently highlighted in a discussion on the 'When Shift Happens' podcast, featuring Diogo Monica, a notable figure in the crypto space. Let's dive into the reasons behind this trend and what it means for the future of crypto investments.

The Rarity of Crypto Founder VCs

Diogo Monica, known for his roles at Haun Ventures, Anchorage, and NEAR Protocol, shared his insights on why successful crypto founders often do not become VCs. Unlike traditional tech, where founders frequently pivot to venture capital after a successful exit, the crypto industry sees fewer such transitions. Monica pointed out that the pool of truly successful crypto companies is relatively thin, which limits the number of founders with the resources and inclination to become VCs.

Early Liquidity Events and Misaligned Incentives

One significant factor Monica discussed is the nature of early liquidity events in crypto. These events, which allow founders and early investors to cash out their stakes, often occur much earlier in the crypto space compared to traditional tech. This early liquidity can lead to misaligned incentives, where founders might prefer to exit rather than reinvest in new ventures. As Monica explained, "Crypto doesn't have that many successful companies, and those that succeeded early often had weird liquidity moments that took away the incentive to keep building or reinvest in others."

This dynamic is crucial because it affects the availability of operator-led funds in crypto ventures. Operator-led funds, where the general partners (GPs) have firsthand experience in building companies, are less common in crypto. Monica himself might be one of the few exceptions, having both founded and invested in crypto projects, which gives him a unique perspective on the industry.

Implications for Crypto Ventures

The lack of crypto founder VCs has several implications for the industry. Firstly, it means fewer GPs with "real scars" from building in the trenches, which can impact the quality and insightfulness of investments. Secondly, it highlights a gap in the ecosystem where experienced operators could potentially drive innovation and growth through venture capital.

For blockchain practitioners and investors, understanding this trend is essential. It suggests a need for more structured pathways for successful founders to transition into VC roles, possibly through mentorship programs, dedicated funds, or industry initiatives. As the crypto space matures, such transitions could become more common, fostering a more robust investment landscape.

Conclusion

Diogo Monica's discussion on the 'When Shift Happens' podcast sheds light on a critical aspect of the crypto industry: the rarity of founders becoming VCs. Early liquidity events and misaligned incentives play a significant role in this trend, affecting the availability of operator-led funds and the overall investment ecosystem. As the industry evolves, addressing these challenges could lead to a more vibrant and experienced pool of crypto VCs, ultimately benefiting the entire blockchain community.

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