The following transcript is taken from episode nineteen of The Scoop, The Block's flagship podcast. Listen below and subscribe to The Scoop on Apple, Spotify, Google Play, Stitcher, or wherever you listen to podcasts. Email feedback and revision requests to [email protected]. This transcript has been edited for clarity and length.

Founded in 2013, Pantera Capital is one of the oldest investors in the nascent market for digital currencies. Having previously made headlines for it's eye-popping 25,000%+ returns in bitcoin back in the heyday of 2017 -- it might also be one of the most recognizable brands. On this episode of The Scoop, The Block welcomed Pantera Capital partner Paul Veradittakit to talk about the firm's history, why it sees more room for investing in the crowded cryptocurrency exchange market and how the firm plans to fend off new upstart challengers in the years to come.

Frank Chaparro Ladies and gentlemen thank you so much for tuning into what is going to be a very special episode of The Scoop. Coming in all the way from San Francisco we have Paul V. and I'm saying Paul V. because I cannot pronounce his name. This is where our amazing co-host Matteo Leibowitz going to shine.

Frank Chaparro He's over at Pantera Capital where he is a partner at the venture capital investing firm. They have a very wide ranging portfolio which includes full disclosure -- an amazing media outlet based in New York City called The Block. But they aside from that, amazing investment, which is just great: 100x, they have a very wide ranging portfolio: Abra, Civic, Brave, Blockfolio, Bitstamp, Bakkt are just some of them but there are many many others. And probably the largest in the space or at least one of the largest with 600 million dollars under management. Of course they're known for their very impressive leader Dan Morehead who has been an investor for several decades and started the firm back in 2003 as a macro hedge fund and then ultimately he found his way as we all have at some point down the crypto rabbit hole. Paul was one of the earlier employees once they made that switch and we're really excited to have you on. Let's just dive right into it. Let's dive right into V.C. world and think about the trends shaping that space. Seeing all the deal flow go through, you're seeing the trends kind of similarly to us before they happen and getting to judge these companies based on their products.

Matteo Leibowitz It's a symbiotic relationship.

Frank Chaparro What was it that you said yesterday? They judge products based off their money. We judge them with our words. Was that what you said?

Matteo Leibowitz We invest in these products with our words. Both are equally valuable.

Frank Chaparro I think so too. Let's let's go into how you approach that. Just broadly.

Paul Veradittakit For Pantera, being that early in the ecosystem we had an opportunity to really become thought leaders. Do whatever we could to push the ecosystem forward, that meant everything from investing to spending time and really helping to focus on regulations, helping people with banking. It's really deploying capital but it's actually going beyond that to really provide our thoughts on what's needed for the ecosystem, helping to provide some of these value added services. On the investing side, it's changed quite a bit. When I joined Pantera in 2014 they were only really 20 companies, I could write them all on a napkin and and then from there it was deciding which ones are going to be cornerstones of the ecosystem. Guys like Circle, Xapo, Bitstamp, 21 at the time, guys like Coinbase and then shifting over -- our thesis has really expanded but some of it still stayed the same, since 2014 we've always been looking for ways to get people into this ecosystem. How do you get mainstream people using crypto currencies? Well the first thing was around how do you provide the onramp to get into cryptocurrency? How do you get it? How do you store it? How do you secure it? How do you start doing things with it? Which you know all the way up until now has been a lot of speculation. Alot of our infrastructure projects have really started off with exchanges, wallets, security providers and then after that it was some early use cases around like how do we move Bitcoin across the world? How do we do cross-border payments? And then now since the ICO boom it's really infrastructure that's going to support a multi-token world, a smart contract, decentralized application world. Of course being able to now get onramps for not only decentralized applications but also institutional capital. And so it's really expanded over to institutional infrastructure, consumer finance, decentralized finance developer tools, gaming, NFT, security tokens. We're spreading ourselves across all these different verticals. At the end of the day knowing that like capital is going to be more of a commodity, we're building a platform where as you enter in the Pantera portfolio you get to really connect with other companies and really leverage those resources. one of our most awesome investments is The Block. Who wouldn't want their words to be out there as a sort of a weapon to get the message out.

Frank Chaparro So you guys have five categories in terms of how you break down the way you allocate capital into exchanges. Infrastructure, finance, payments and enterprises. Where would The Block fit into that? And how did those categories influence your investment decision making? Are they the same?

Paul Veradittakit I think for us like we consider The Block to be one of the cornerstones of the ecosystem. Again like if this is going to get large you're going to need people to distill all of these technologies, all of this information into things that people can digest, read, understand, be able to show to their mom etc. You guys do that. You guys provide that service to the ecosystem. We see a lot of growth potential. We see a lot of help that you guys can provide to the rest of our companies. I sort of put you guys in that like information sort of dissemination almost like a Blockfolio sort of thing where it's going to education, media, like could be big data. There's so many different ways that The Block could evolve. At the end of the day there's only a small number of folks that can get into that category of information dissemination and I see you guys being a crucial piece of that.

Frank Chaparro Well I appreciate that. I think what's interesting is that exchanges are sort of often it's own category as opposed to falling under infrastructure and the the amount of investments you've made in that space have been 2, right? You have Bakkt and then I'm seeing an undisclosed investment. Have you announced that?

Paul Veradittakit I'm not really quite sure. We have a bunch of undisclosed.

Matteo Leibowitz It's a Latin American exchange.

Paul Veradittakit Oh yeah. That one's not disclosed yet. Our thesis is... we started off with Bitstamp. For a while it was and still is you one of the top global exchanges. Then we started saying that, hey well every geography is really really unique. If you go to... Every single time we do an exchange investment especially since the beginning -- they sent me all around the world I've been to Brazil I've been to Argentina. I almost went to Africa, I avoided it. I've been to the Philippines, I've been to everywhere just to basically understand regulation, understand how difficult it is to get bank accounts, understand how different it is to market to each of these demographics so you really need these local teams and we need guys like Coinbase are going to be interested in expanding to all these different geographies because of bitcoin potentially being a store of value. Capital controls and things like that and so we decided to invest into local wallets and exchanges that are going to be providing regulated fiat onramps to consumers because we think that there is a reason for crypto currencies to exist for many different use cases and you need liquidity and therefore that's been a huge thesis we've pretty much gotten you know exchange in every single geography out there.

Frank Chaparro And just to be clear I was incorrect. You guys invested in two funds, excuse me two exchanges with venture fund number three.

Paul Veradittakit We've invested in Korea. Two of our largest exits: Bitstamp and Korbit have been acquisitions by larger companies.

Frank Chaparro And so it's all about that geography aspect, so it's not like there are additional services or ways to operate that would would result in exchanges being more investable than anything else. It just has to do with you seeing them having to exist in very specific geographies...

Paul Veradittakit They have to exist in those geographies and there's nuances in terms of regulations, banking, marketing to those geographies. What's interesting is that each geography is different in terms of some of the use cases. I mean for instance Latin America I think in terms of payments, in terms of lending, those are bigger problems over there than it is in the in the developed world. If you get merchants involved, if you get a credit card, a debit card those are things that just don't necessarily exist -- banking isn't that prevalent. When we made the investment in the Philippines, there's three times more Facebook accounts then there are bank accounts in the country. So when we invest in the coins IPH I mean they're more about you know about a I think a tenth of the population was using that app and it was more just because it was a new digital bank than in cryptocurrency but crypto was actually a way for them to get familiar with digital banking and then from there like they are able to pay their bills they're able to do peer to peer payments. I mean there's nothing that none of that infrastructure existed in countries like the Philippines.

Continue Reading

on The Block

Featured