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March 20, 2022

Multicoin Capital: The Outsiders

Multicoin Capital may be the best-performing venture fund of all-time. The crypto investor has won big by making highly concentrated, non-consensus bets on Solana, Helium, The Graph, and others.

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You can listen to an audio version of The Generalist on Spotify or Apple Podcasts. As a note, this is Part One of the Multicoin Trilogy. Over three pieces, we unpack the fund's history, performance, investment process, and future. Read Part Two and Part Three, next.

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Actionable insights

If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about Multicoin Capital’s origins. (We’ll refer to the firm as “Multicoin” going forward.) 

  • Multicoin may be the highest-returning venture fund of all-time. Firms like Union Square Ventures and Lowercase Capital are legendary for funds with 14x and 76x returns, respectively. Multicoin’s first-ever venture vehicle appears to have them beat.  
  • The firm has won by taking a contrarian approach. When Multicoin started, the investing landscape was dominated by funds focused on Bitcoin and Ethereum. Founders Kyle Samani and Tushar Jain saw opportunity elsewhere, making contrarian bets on Helium, The Graph, and Solana. 
  • To drive outsized returns, make concentrated bets. Part of Multicoin’s genius is its willingness to back up its conviction with capital. Many of the firm’s best-performing investments were sized aggressively, contributing to the fund’s outpermance.   
  • Investing in EOS was a flop…that led to Multicoin’s biggest winner. The firm’s outspoken support for alternative blockchain EOS rubbed some the wrong way. When that project floundered, critics celebrated Multicoin’s mistake. But it was by backing EOS that Multicoin recognized the potential for monster hit, Solana. 
  • Multicoin has its critics, but founders are extremely positive. In the partisan world of crypto, Multicoin’s strident support of its investments can anger dissenters. Loathed by some as a result, the firm is loved by its entrepreneurs. Portfolio founders are exceptionally positive about Multicoin’s contributions. 

In 2017, Kyle Samani and Tushar Jain decided to start a hedge fund for cryptocurrencies. Neither one of them had held an investing job before, let alone run a fund of their own. They had not worked at one of the sector’s budding startups nor built a protocol. They were not friends with Vitalik Buterin or Gavin Wood or some other crypto luminary who might have walked them into buying Ethereum at its public offering price. Their names meant nothing, and with the exception of a few clever personal investments beginning in 2016, they had little record to suggest they were suited to the endeavor at hand. They were, in short, crypto outsiders. 

It has proven to be their greatest weapon. While Samani and Jain may not have had the bonafides of a tenured manager or the expertise of a blockchain builder, they brought formidable gifts to bear, not least a willingness to question the status quo. Even a space as novel and fluid as crypto in 2017 had sacred cows and accepted wisdom. With no preconceptions to cherish or cliques to guard, Samani and Jain could hone their investing acumen with few biases, conducting deep research and reasoning from first principles. 

The result is a portfolio that looks starkly different to almost any other firm of its era. Today, Multicoin is not just a viable participant in the crypto investing landscape but one of its dominant forces. It has earned its formidable reputation by making concentrated, non-consensus bets into massive winners like Solana, The Graph, Helium, and others. It is high-conviction, contrarian investing at its best.

Achieving such returns has not been easy. Not only have several of Multicoin’s best investments been close to collapse at various points, the firm itself has weathered negative performance and brutal market shocks. Some of its highest-profile investments, like EOS, have ended in ignominious failure. And yet, Samani and Jain have outperformed their peers, producing returns that may very well be historic. 

In today’s piece, we’ll unpack what makes Multicoin special, touching on: 

  • Unlikely origins. Kyle Samani’s first business involved building apps for the ill-fated Google Glass device. Tushar Jain also started a company that failed to pan out.  
  • Thinking in public. Without an established investing track record, Samani and Jain built a reputation through their thoughtful writing on the crypto space. 
  • LPs’ assessments. Those that invested in Multicoin’s early vehicles saw more than just two intelligent, hungry investors. They saw an idiosyncratic strategy with asymmetric upside.
  • Strategic shifts. Though Multicoin began as a US hedge fund, it has expanded its mandate over time.
  • Four bets. Multicoin’s personality as a fund can be best understood by looking at a quartet of investments, three of which were massive winners. One was a disaster. 
  • Returns and reputation. Investors may be mostly judged by their financial returns, but reputation among founders may be the more important leading variable. 

We’ll go even deeper into the firm’s operations, decision-making, and future in Parts 2 and 3. Sign up to make sure you don’t miss it. 

Origins: Genesis block

If they had succeeded in building their first businesses, Kyle Samani and Tushar Jain would be entrepreneurs in the healthcare sector. Failure led the pair down a stranger path. 

City of empires

Every August, Washington Square Park fills with a new class of teenagers. Ringed by the dorms and classrooms of New York University (NYU), the Greenwich Village landmark serves as the gathering place for the institution’s newest denizens: the incoming freshman class. 

Among those that arrived in downtown Manhattan in late summer of 2008 were Kyle Samani and Tushar Jain. Standing six-foot something, broad shouldered and outspoken, Samani stood out. The son of a dentist and technology entrepreneur – his father started a medical records platform named VersaSuite – he conveyed a brash Texan confidence. Though he had grown up reading tech blogs and studiously memorizing the processing power of Nvidia’s graphic cards, he had matriculated with the goal of making his mark in the old world of finance. “I thought programmers were losers,” Samani said; finance was the place for an aspiring alpha like him. 

Jain had the shorter journey. Raised in Queens, he shared Samani’s interest in technology with a particular affection for games. He had spent many an afternoon and evening playing through worldbuilders like Age of Empires and Civilization. Like Samani, Jain saw himself making his dent on Wall Street. They met that first week on campus, becoming friends. 

The global financial crisis soon exposed the frailty of Samani and Jain’s ambitions: Wall Street was burning. A few weeks into their freshman year, Merrill Lynch sold, Lehman Brothers collapsed, and AIG narrowly avoided the same fate. Finance was not the sector of promise and power, it was an industry in decline. 

As Wall Street capitulated, Silicon Valley grew stronger. Steve Jobs launched the App Store that year, catalyzing a wave of new startups. Not long after he had arrived on campus, Samani found himself retreating from finance and gravitating towards tech. As businesses like Uber, Venmo, WhatsApp, and Instagram came to the fore, Samani started thinking of himself less as a budding financier, more as an entrepreneur in the making. “Every day, I was reading funding announcements,” he said of this period. “It had a really big impact, and made me realize I wanted to do entrepreneurship.” 

Samani’s clarity was coupled with admirable confidence and some naivete. “There was definitely a moment in time when I was convinced that VCs couldn’t find enough twenty-somethings to give millions of dollars to build. I was absolutely convinced that was true.” 

Impatient to start his adventure, Samani returned to Austin for his senior year, learning the trade of business-building by working at his father’s company. When midterms and final exams required it, he flew back to New York City, crashing on Jain’s couch. 

Jain had gone through a similar transformation since crossing the Queens Midtown Tunnel. Like Samani, he’d come to feel that traditional finance was not the field for someone looking to make their mark. He recalled attending a “Dean’s Roundtable” featuring the Chief Investment Officer of a large asset manager, and finding the elder man’s advice insipid. If you wanted to have a shot working at his shop, the CIO had said, you needed to spend two years in banking, two in private equity, and then two at business school. Perhaps then you would be ready to operate in such rarified air. Jain remembered thinking the advice sounded like “a ‘color between the lines,’ ‘follow the instructions’ type of thing.” That wasn’t him, he knew. “I just couldn’t do that.” 

When graduation came, Jain assessed three options. He could work at Credit Suisse, the bank he interned at one summer, join another financial institution from which he’d received an offer, or move to Austin. Samani had told him he could get his friend a job at VersaSuite, though it couldn’t pay him anything like the salary he would have earned on Wall Street. What he lost in remuneration, he would earn back in freedom and responsibility. 

Four years earlier, Jain would have jumped at the chance to work at a prestigious firm like Credit Suisse. Yet, he found himself turning the banking job down and accepting a role that paid him a third of what he was set to make. Like Samani, he had been enticed by the opportunity to learn the ropes of building a company.

Shiny objects

Samani and Jain lasted a year at VersaSuite. Though it beat the grunt work and bludgeoning dullness of entry-level finance, the pair were “too ambitious” to sit still, according to Jain. In May of 2013, both men left to build healthcare businesses of their own. Despite living together and picking the same sector to tackle, Samani and Jain set out in different directions. 

Just the month before they took the leap, Google released a device that would quickly become a synecdoche for the tech sector’s glib optimism: Google Glass. The AR headset sat like a pair of bifocals but framed a tiny screen rather than a lens. 

By his own admission, Samani found himself succumbing to “shiny new object syndrome,” absorbed with thoughts of how the device might disrupt various industries. It was a new form factor for computing, after all – surely Glass would produce meaningful innovation, offering opportunity to savvy entrepreneurs just like the App Store had done. It wasn’t long before Samani had settled on a use case, serving surgeons and other healthcare professionals. Equipped with a Google Glass device, practitioners could pull up electronic medical records or relevant images to guide care. The front-facing camera made it simple to record patient interactions or operations for later viewing. Propelled by his enthusiasm and budding healthcare bonafides, Samani succeeded in raising $5.5 million for his new business: Pristine. 

Jain was more circumspect about Google’s latest toy. Though he and Samani did almost everything together, and seemed to make a good team, he didn’t want to spend the next phase of his life building applications for an unproven wearable device. Instead, Jain focused on leveraging the observations he’d made at VersaSuite. His year at the software company had shown him just how rapidly electronic medical records were proliferating, in large part thanks to financial incentives included in the American Recovery and Reinvestment Act, better known as the 2009 stimulus package. As Jain recalled, eligible physicians received as much as $40,000 for digitizing their files, causing a mushrooming of patient data. “What is the best use of this data?,” Jain recalled asking himself. The answer, he decided, was clinical trial recruitment. Not only did it cost pharmaceutical businesses a bundle, matching patients to new treatments could be literally life-saving. Like Samani, Jain raised a seed round to bring ePatientFinder to life. His platform made it easy for physicians to query their database and identify patients eligible for new trials.

As it happened, both businesses followed a similar trajectory, growing to a few million in revenue and a couple of dozen employees before negotiating a sale. Pristine, Samani’s company, weathered a particularly tumultuous journey. Not only did Samani discover that the lack of a hands-free display wasn’t among a surgeon’s “top three most pressing problems,” Google effectively killed the Glass project. As Samani deadpanned in our discussion, “that was a problem.” A pivot to serving insurance businesses kept the lights on, but in the end, Pristine was sold for scraps. “No one made any money,” Samani said. 

Jain fared slightly better, avoiding the kind of cataclysm Samani had to manage through. In total, he raised $11 million in funding for ePatientFinder but struggled to catch up to larger players. The sluggishness of innovation in the space impeded rapid iteration: sales took a year, trials lasted months, and product feedback came, at best, every quarter. “It was always really slow. Like, so slow,” Jain noted with a sigh. Recognizing he would need to raise considerably more money to endure this endemic lethargy, he opted for a sale. Eligo Health Research, a competitor with more money and a deeper product, stepped in. 

Nearly four years out of college, Samani and Jain had speedrun through their various ambitions, albeit without achieving the outcome of which they’d dreamt. They had successfully avoided the lure and lucre of Wall Street for entrepreneurship, raising venture capital money, attracting real customers, and securing an exit. Yet, neither seemed to feel much satisfaction with the way things had turned out. Just as they had in those first years of college, Samani and Jain began to look outward, searching for the next horizon at which to run. 

Jain cottoned on to the potential of cryptocurrency first. Though Satoshi Nakamoto’s whitepaper arrived in 2008, just a few weeks after the duo arrived in Manhattan to begin their schooling, Jain learned about it in 2013. Finding it interesting, he bought two bitcoin via Coinbase at a time when each unit cost a few hundred dollars. “I learned about it and thought, ‘OK, this is cool,’” Jain said. “But I’m busy. And I can’t build anything with it.’” Intrigued but not compelled, he turned his energy back towards startups. 

Though Jain was earliest to bitcoin, Samani was first to discover Ethereum. After selling Pristine, he spent his free time browsing AngelList, looking for a startup to join or perhaps a business that could spark his next idea. Samani set himself the goal of reviewing at least one hundred companies a day, across different sectors. One morning he might pick healthcare, the next he would move on to fintech. It didn’t take long though for him to realize he was spending most of his time looking at businesses that fell under AngelList’s “blockchain” category. As he dug into the startups emerging in the space, he saw the same name crop up over and over again: Ethereum. Nearly all of the companies he was looking at were building on it. Samani found the whitepaper, read it, then sent it over to Jain. Soon, both had invested.

Over the next nine months or so, Samani and Jain fell down the crypto rabbit hole. What started as curiosity about Ethereum developed into a broad obsession. Samani found his free time increasingly eaten up by investigations of distributed systems, cryptography, monetary policy, and Austrian economics. To sharpen their thinking, Samani and Jain sought other devotees with which to trade notes, becoming core members of local bitcoin meetups. One in particular attracted an interesting group, including the founders of enterprise blockchain, Factom. A future Multicoin LP, Adam Mastrelli, attended these sessions and described their tenor. Discussions ranged widely though they often centered around how crypto might change the world. Lyn Ulbricht, mother of Silk Road founder Ross Ulbricht, occasionally joined proceedings to read her son’s missives from prison. Mastrelli also took note of one person in particular: Kyle Samani. “You quickly discern who knows what they’re talking about and who doesn’t,” Mastrelli said of the meetings. Samani certainly did.  He always seemed to be “owning the room,” by Masterelli’s recollection, a tall, larger than life character with long-hair and frank opinions.

Through these get-togethers and their independent studying, Samani and Jain realized that their attention had irrevocably shifted to crypto. As Jain remembered, “I thought, ‘I can’t do anything else. I’m obsessed. All I want to do is think about this and talk about this.’” As Samani put it, by spring of 2017, he and Jain recognized they had developed a “full-time internet hobby” waiting to become a profession.

Evolution: The making of Multicoin

Over the following five years, Samani and Jain succeeded in building one of crypto’s preeminent investing firms. Multicoin’s ascent owes much to the duo’s willingness to think in public. 

Thinking in public

At first, it wasn’t immediately obvious what form Samani and Jain’s new profession would take. They were entrepreneurs – perhaps their best bet was to start a crypto project of their own? It was certainly the era for it. As enthusiasm for the space grew, all manner of optimists, hucksters, and opportunists set to work launching their own coins, financed by Initial Coin Offerings (ICOs). 

The ICO boom of 2017 saw surreal projects like Dentacoin make their debut, proposing to disrupt the dental industry by providing tokenized rewards for better oral hygiene. Jain summarized the market’s unhinged musings: “People were thinking you're gonna have this coin to pay for coffee, and you're gonna have this coin to pay for bananas…It was just the dumbest thing I’d ever seen. It made no sense.” What Jain and Samani realized was that while the sector showed technological promise, few thought critically about investing. Amid FUD and FOMO, who was cryptocurrency’s Benjamin Graham? The famous financier had defined the practice of “value investing,” creating heuristics by which to appraise companies. Few frameworks had been advanced to help navigate the sickly confection of ICOs.

Despite their more quantitatively focused education, both Jain and Samani were adept writers. Perhaps by sharing their analysis on different projects and trends they might make an impact? As Jain said: 

We thought, “Oh, what if we share our heuristics? It’ll help the capital in the ecosystem be better allocated to those who are actually building interesting things and not to the likes of Dentacoin.”

It seemed like the right place to start. Another question naturally followed: if the duo were outlining their thoughts on what made for a strong investment in the sector, shouldn’t they invest themselves?

Their early investments in Ethereum had paid off with the currency increasing from around $10 per token to north of $200. Jain’s 2013 bitcoin investment wasn’t doing badly either. While these wins gave them some latitude, if they wanted to run a true fund, they would need outside capital. They set to work, using their apartment as a de-facto HQ. 

Multicoin Capital

To Samani and Jain’s mind, the opportunity was obvious. Cryptocurrencies were poised to reorganize the world and yet no one really knew how to judge them yet. Those that were first to understand the sector could capitalize, locking in potentially mammoth returns. Better yet, few institutional investors seemed to be chasing the opportunity – and those that were kept a low profile. By Jain’s recollection, the only notable crypto funds in early 2017 were Polychain and MetaStable, neither of which shared research publicly. If they did it right, Samani and Jain might establish a voice and brand in that vacuum. 

Just because they saw the opportunity didn’t mean that LPs would. As it turned out, winning converts was a challenge. Institutional investors had little interest in a sector beset by scammers and most traditional venture firms saw crypto as faddish. With few other options, Samani and Jain raised from friends, family, and former backers. They also put in a considerable amount of their own money. By August of 2017, they’d pulled together around $2 million to run a hedge fund strategy. In an announcement post published that month, Samani and Jain unveiled the name of their new firm: Multicoin Capital. 

With money at their disposal, the new fund managers set about executing their strategy. Both Samani and Jain wrote frequently, publishing articles on crypto economics, prediction market Augur, smart contract defensibility, and regulation. They also took shots at projects they felt were overvalued, starting with Ripple. It represented the first example of Multicoin publicly sharing their research even at the expense of popularity. The willingness to anger a certain token’s boosters to express their view became a hallmark of the fund, with Multicoin eventually invoking the ire of Litecoin and Ethereum Cash bulls, among others. 

By December of 2017, Multicoin had built some momentum. Brian Smith, a former Tiger Management analyst and the ex-VP of finance of a publicly-traded e-commerce software provider, joined as COO and CFO – a significant coup for the young fund. Multicoin also added another General Partner, Vinny Lingham. The founder of Civic, a beneficiary of the ICO craze to the tune of $33 million, brought a builder’s expertise to the table. Though a GP in name, Lingham left the decision-making to Multicoin’s other partners. Not long after, Matt Shapiro, a long-time investment banker, joined as a principal – Shapiro quickly established himself as a critical member of the team, becoming a Partner. 

In addition to adding talent to the roster, Multicoin ended 2017 by going viral. Samani’s post “Understanding Token Velocity” swept across crypto Twitter and relevant chat rooms, garnering attention from both entrepreneurs and investors alike.

Next Sunday, we dive into how Multicoin makes its investment decisions. Sign up to make sure you don't miss it.

Idiosyncratic by design

Throughout 2018, Multicoin courted and won new LPs – many of whom carried real clout. In March of that year, Reuters published a story about some of the fund’s newest investors, a group that included Marc Andreessen, Chris Dixon, and David Sacks. Shortly after that article was published, Fred Wilson joined. Years later, when Jain asked the Union Square Ventures’ GP why he’d invested, Wilson replied “You guys are willing to be wrong in public.” It is no coincidence that Wilson himself published thoughts on an almost daily schedule – in Jain and Samani he seemed to see others bold enough to air their convictions. Thanks to savvy capital management alongside this influx of investors, Multicoin’s assets under management (AUM) stood at $50 million around this point. 

What was it about Multicoin that appealed to limited partners? In researching this piece, I had the chance to speak to several, alongside others in the industry. 

First and foremost, Multicoin’s writing made a difference. When I asked Marcos Veremis, a former Managing Director at Cambridge Associates, how he discovered the firm, he replied, “Very simply, I started reading their write-ups…they wrote some excellent pieces.” Jain noted that many followed this path: 

Prominent VCs saw the content we were putting out there. They realized we were thinking about it in interesting ways, coming up with frameworks and heuristics to understand what was happening. That’s what got the flywheel spinning for us.

In truth, it wasn’t just that Multicoin’s thoughts were interesting, but that they were different. In 2018, the funds that had emerged shared a view of the sector that centered on Ethereum. “Back in 2018 it was all about Ethereum, Bitcoin, and some new Layer 1s,” Veremis noted. 

Multicoin didn’t take that view. Relatively early on, the fund began backing non-consensus projects and advancing contrarian views. John Robert (JR) Reed, a Partner at Multicoin and head of the firm’s communications practice, remembered the drawbacks of this non-consensus positioning: 

In the early days, all the other funds were screaming from the rooftops about bitcoin. We weren’t talking about bitcoin at all. So, we sit down at investor meetings and they’d ask “Why aren’t you talking more about bitcoin?” It was a weird sticking point for a long time. People weren’t ready to look at the entire asset class. 

In some instances, Multicoin directly challenged Ethereum, too – a sensitive position given the industry’s many devotees. As we’ll discuss later, Multicoin’s backing of EOS – a blockchain that sought to provide a high speed alternative – would prove particularly controversial. 

Multicoin’s moves made them unpopular even as it set them apart. Ray Hindi, Managing Partner of L1 Digital spoke about this dynamic in the context of evaluating an investment into Multicoin: “The Ethereum community would say, ‘Yeah, Multicoin…crappy fund.’” But in Hindi’s view, those that dismissed Multicoin failed to appreciate how intelligent the team was and how valuable it was from a portfolio construction perspective. While every other manager was doubling down on Ethereum, Multicoin had crafted a collection of high-beta positions. “You look at the obvious funds back then and they all had the same names, the same themes,” Hindi said. A crypto investor active at the time summarized Multicoin’s appeal well: “They were pretty much as smart as everyone else, but their portfolio looked totally different.”

Beyond Multicoin’s public writing and contrarian views, other attributes attracted investors. Ray Hindi pointed to the quality of the team, and in particular how well Samani and Jain seemed to work together. “They really complimented one another,” he said, adding that because of their long-standing relationship, the risk of a broken partnership seemed especially low – something that wasn’t true of other managers he’d assessed. 

Brian Walls of Bridge Alternatives was also impressed by Multicoin’s leadership. As he explained, one of the reasons he invested in the fund in 2018 was because of the conviction Samani and Jain possessed as well as their quick “refresh rate.” In a space in constant flux, Multicoin’s team seemed especially adept at refining and updating their mental models. 

Despite these strengths, many LPs rejected Multicoin – a decision sure to grate with the benefit of hindsight. Walls remembered hosting a hedge fund conference featuring Kyle Samani alongside other prominent crypto managers like BlockTower’s Ari Paul and Polychain’s Olaf Carlson-Wee. According to Walls, the research the trio presented “went over like a lead balloon.” The traditional finance crowd showed little interest in crypto’s innovations. “They were kind of classic incumbents,” Walls said. “They had their business, they had their investing strategy, they had money under management.”

One source remembered a conversation with an endowment around this time. Considering an investment into Multicoin’s fund, they cited the risk such an unproven team posed. If Multicoin failed, the endowment manager’s job might be on the line. By contrast, investing in Sequoia or indeed Paradigm, boasting a partnership with established bonafides, carried no such risk. The endowment passed, a decision that may have cost millions given Multicoin’s subsequent performance. “Now, they would totally want to get into Multicoin if they could,” the source chuckled.

Private market opportunities 

In addition to bringing new, distinguished backers aboard, 2018 prompted a change in Multicoin’s strategy — arguably its first major shift. When the fund had started, the idea of applying a venture capital model to the crypto space didn’t make sense. Rather than selling equity in private rounds, new tokens blasted their offerings to public investors via ICOs. As the SEC started to clamp down on this practice given its resemblance to selling unlicensed securities, new models came to the fore. A more serious class of crypto entrepreneurs recognized that to succeed in building something durable, they would need more than manic money. Advice, guidance, and professional support were useful. As a result, some projects began to offer private token sales in advance of public liquidity. 

At first, Multicoin created a side-pocket to capture these opportunities, but it was an uneasy fit with the hedge fund model. In taking this step though, the firm realized that LPs wanted access to private rounds. “Our LPs started coming to us,” Jain recounted, “They would say ‘Hey, we read about this deal you did. Can you allocate more of my capital to venture?’”

To adapt, Multicoin set out to raise a dedicated private market fund. Even after attracting luminaries like Marc Andreessen, raising the vehicle was far from simple. Matt Shapiro, who runs much of Multicoin’s investor relations practice, remembered the period from mid-2018 to mid-2020 as “just tough…really tough.” 

Those difficulties had been caused, in large part, by a bitter bear market. Though the year began with crypto prices ascending to feverish all-time highs, it finished in the doldrums. In January of 2018, Ethereum approached $1,400; by December it had sunk beneath $85. 

“Everyone saw the thing go up and then it went down 90%,” Shapiro said, adding, “A lot of the tourists or people who had just started paying attention got washed away.”

Like many others, Multicoin’s performance plummeted over the year with the fund logging gross returns of -32.9%, as reported by The Block. Though disappointing on their face, parsing those returns required more context. The firm’s annual letter provided it, showing that Multicoin had actually outperformed several benchmarks, including bitcoin and an index of the ten top tokens named the “Hold 10” by provider, Bitwise. 

The Block

The firm fared especially well in the latter half of the year. When the market cratered hard in November, Multicoin shone. While that helped performance in the short-term, one LP noted that it may have caused unwarranted optimism. “From that point on, they had the confidence they could time markets,” the source remarked, adding, “Timing doesn’t exist [in crypto].”

Despite their comparatively positive performance, many relished Multicoin’s bad year. One source that wished to remain anonymous remembered the sentiment being that Multicoin “had lucked into a bull market and now these guys are going to learn their lesson.” Samani’s often argumentative online persona had created enemies, particularly as he took shots at Ethereum. “People were really ready to hate on Kyle, hence Multicoin,” the same source reported. 

Expanding in Asia

Conditions improved in 2019. Bitcoin, which had bottomed under $4,000 in December of 2018 reached $13,000 by the following summer. Multicoin thrived in the better weather, making many of its most impactful investments. While the firm first took a position in Solana in May of 2018, it added to its stake the next year, buying out several existing private holders. In July of 2019, CoinDesk reported Multicoin had led a $20 million financing for the blockchain, receiving tokens rather than equity. (The firm added to that position in 2021 via its second venture vehicle.) Other savvy investments in 2019 included Helium, Arweave, and Binance Coin. 

Multicoin’s investment into Binance revealed something of the fund’s character, and opened its eyes to new horizons. Notably, Samani had initially worried about using Binance: “I remember the Binance ICO,” he said. “I thought they had misspelled ‘finance.’ I figured it was a scam. We weren’t going to expose our LPs to counterparty risk.” Quickly, his and Jain’s opinions changed. The breadth of assets available on the platform made it invaluable and the speed of the Binance team’s execution – regulation be damned – was impressive. In a matter of months, Samani had gone from skeptic to believer and was willing to back up his bullishness. 

One source highlighted this bet as indicative of Multicoin’s different risk profile and in particular, the firm’s willingness to court reputational damage. At the time, few US funds wanted to get anywhere near Binance because of its looseness in sticking to the rules. To this source, Multicoin seemed to be asking, “What is there to lose?” They followed up, adding, “You either lose in a big way or win in a big way. Multicoin won.” The firm bought Binance’s token, BNB, near a bottom of $6; today, it trades for $388.

In diligencing Binance, Samani started to realize how little the firm understood about the Asian crypto markets: “We started to feel like we needed to be closer to everything going on there. And as an American, that’s not going to happen.” Multicoin began looking for an investor embedded in the regional ecosystem, though it wasn’t easy. According to Samani, some of the largest global recruiting firms turned down their business, saying that it was too challenging a task. In the end, Samani relocated for a month and a half to conduct interviews on the ground. At a conference in Shanghai, he met Mable Jiang, an investor at a crypto-focused family office. What started as friendly sparring over the potential for regional Layer 1s led to further meetings. Before too long, Samani made his pitch to Jiang: she should join Multicoin and head up the firm’s Asia initiatives. 

Multicoin’s foresight was rewarded. As we’ll discuss later in the trilogy, by forging relationships in China and beyond, Multicoin expanded its sourcing aperture, developed expertise rare among US-based firms, and added invaluable portfolio support. When it comes time for a US investment to expand into Asia, few funds are better positioned to provide strategic advice and tangible assistance. 

The year ended with Multicoin initiating a position in another exchange. In spring of 2019, Sam Bankman-Fried pitched the firm on investing in FTX’s native token, FTT. “We passed,” Samani said. “We were all gung-ho on Binance at the time.” Multicoin kept track of Bankman-Fried’s work, though. By Q4 of 2019, they’d seen enough to be convinced, buying into FTT at a time when the token traded at less than $5; it topped out close to $80 last year before retracting to $43.

After the mayhem of the previous year, 2019 ended on a high. Though the market had been choppy, with bitcoin soaring and ether sinking, Multicoin had executed on multiple fronts, finding unusual investments and expanding its opportunity set. Samani and Jain must have ended the year in relatively good spirits. After all, Bitcoin’s production was set to halve in May of 2020, an event many thought would boost prices. In preparation, Samani and Jain had decided to go “very long.” It did not take much time for 2020 to knock the spark out from Multicoin’s optimism.

Collapse

With the benefit of hindsight, we know that Multicoin made several outstanding investments in 2019 and 2020. At the time, though, the fund’s outperformance was not yet obvious. Many that associated Multicoin almost exclusively with EOS blamed it for the project’s various woes. Meanwhile, The Graph, Helium, and Solana had yet to take off. Worse, all three were running out of money. Conditions were about to get a lot tougher. 

On March 12, 2020, the crypto market broke. Bitcoin tumbled 50% over a two-day period, slipping beneath $4,000. In Samani’s view, the sudden downturn arose from a fundamental flaw in the sector's market structure. Because of the fragmentation among trading venues and slowness of Bitcoin and Ethereum networks, during periods of high-use, arbitrageurs are not able to re-balance pricing, resulting in large discrepancies. As prices fall, crypto mining becomes unprofitable, inducing miners to shut down operations, further increasing network congestion. Accompanied by cascading liquidations, the market entered a death spiral that Jain believed would have continued to its logical conclusion if BitMex, a popular exchange, had not favorably stumbled:

I was ready for the price of bitcoin on BitMex to go to zero. If BitMex had not gone down at the exact moment that it did, I think bitcoin would have gone to zero on that day. BitMex said they went down for maintenance. I think that was very fortuitous timing.

Samani reflected on the impact of that day on Multicoin, saying, “We were never insolvent. But we were hit very hard.” Jain called it “one of our darkest hours.” 

Bright spots emerged from the downturn. Multicoin made another strategic adjustment, deciding to stop actively trading its portfolio. “We realized you couldn’t predict black swans like this,” Jain said, “In January of 2020, you couldn’t have predicted what would happen in March. We decided to stick to where we have an edge: asset selection and thesis-formation.” Multicoin went from trying to time the markets to barely paying attention to them. “LPs ask me all the time what I think of the market,” Jain said. “I don’t know. I don’t have an opinion.”

Ray Hindi from L1 Digital noticed an improvement after Multicoin made the switch. “I still remember us discussing with them that what they were really good at was running idiosyncratic risk.” After digesting that, Multicoin “turned it around in a major way,” according to Hindi. 

The market’s disintegration also gave Multicoin a chance to prove their conviction – to themselves and the rest of the market. The team doubled down on Solana at a time when most investors were taking a step back from active deployment. They also invested in music streaming platform Audius, an act of validation that stuck with founder Roneil Rumberg. “It’s not like there were people lining up out the door to lead that round,” Rumberg said. “[Multicoin] had the stone cold resolve to move forward.”

As markets stabilized, Multicoin pulled out of its slump. Solana and The Graph’s mainnets launched that year, bringing two longstanding investments to life. Not to say that the rest of 2020 was smooth sailing. In July, the firm published research about Chinese cryptocurrency exchange, Huobi, announcing Multicoin was long its endemic token, HT. “We were pattern matching,” Jain said, alluding to the notion that the HT bet might play out similarly to BNB. “They were basically trying to be Binance. But their execution was not there. And they faced a whole lot more regulatory pressure than Binance did,” Jain said. Unlike Binance’s CEO, CZ, Huobi’s founders “weren’t willing to take the necessary actions for the business” to navigate that uncertainty, per Jain. In the end, HT’s value increased, but not meaningfully. 

The firm’s investment in dForce was nearly a greater debacle. Just four days after the DeFi protocol announced Multicoin’s investment, hackers siphoned off $25 million. For Mable Jiang, it felt like a disaster – dForce was the first project she’d backed. “It was extremely, extremely big news for the firm at the time,” Jiang said, “Especially since our AUM wasn’t that large.” Worried LPs called Samani and Jain to understand what was happening.

As Jiang remembered it, “Magically, the money came back.” Just a few days after it had disappeared, hackers returned what they had taken. Beyond the lucky ending of the episode, what stuck with Jiang most was the GP’s handling of the crisis and their unwavering support for her. Multicoin had weathered yet another storm, and the good times were finally about to recommence in earnest.  

On fire

If Multicoin struggled to raise money earlier in its life, it would have no such trouble at the end of 2020. “They were turning down money,” Brian Walls of Bridge Alternatives recalled. Many who mysteriously “didn’t see the email” for Multicoin’s first venture firm suddenly jumped at the chance to gain asymmetric exposure to the booming crypto sector. 

In May of 2021, Multicoin announced the new $100 million vehicle, named “Venture Fund II.” By then, the sector was halfway through a ludicrous upswing that saw established and insurgent currencies hit all-time highs. Things would only get better for Multicoin. Helium’s token appreciated from $1.30 at the start of the year to a high of $55.22. Solana began 2021 priced at $1.52 before skyrocketing to over $260, attracting users, developers, and significant investment in the process. Though many others benefited from the bull market, Multicoin seemed to win bigger than perhaps any other fund with many of its longstanding bets paying off at once. 

Zhu Su, founder of Three Arrows Capital, encapsulated this sentiment, listing out Samani and Jain’s investments, adding “I gotta say, [M]ulticoin has absolutely crushed it this cycle.” 

As we’ll soon learn, the extent to which Multicoin has “crushed it” may not just be remarkable but historic. 

Four bets: GRT, HNT, EOS, SOL

Multicoin lists 27 projects and companies in its portfolio; over the course of its five-year life, the firm has undoubtedly held and traded dozens of other assets. While all are part of Multicoin’s story, four investments define what Samani and Jain have built more than any others: The Graph, Helium, EOS, and Solana.

The Graph

In February of 2018, Kyle Samani received a cold Twitter DM from Yaniv Tal, the founder of a protocol to query the blockchain. Tal had been impressed by Samani’s post titled, “New Models for Utility Tokens” which explored token models and mechanics. After trading a few quick thoughts, the pair hopped on a call to discuss Tal’s startup: The Graph.

Tal explained the need for a protocol that queried networks like Ethereum. While ConsenSys, founder of MetaMask, had founded a centralized alternative named Infura, Tal felt it was unlikely to be the right long-term solution. His project leveraged the open-source GraphQL coding language that had been developed at Facebook six years earlier. 

In Samani, Tal found a kindred spirit. “I knew what Infura was, and I knew why Infura was dumb,” Samani said. The service scaled querying by operating a swathe of individual nodes – an inefficiency that made no sense in his view. After the call, Samani spent about forty-five minutes researching Tal’s solution before reaching conviction. To validate his enthusiasm, Samani talked it over with Jain before running it past a Multicoin LP who had coincidentally helped create GraphQL at Facebook. Their endorsement further strengthened Multicoin’s belief prompting the firm to make a high-conviction, high-concentration bet, investing 4% of the hedge fund into The Graph’s seed round. Samani and Jain would double-down on their investment in the years that followed.

The Graph

Multicoin’s investment in The Graph not only reveals the firm’s willingness to take concentrated positions, it prompted one of the strategic changes mentioned earlier. After carving out part of the hedge fund to make the investment, Multicoin realized it was likely to invest in other private market rounds, prompting the firm to spawn a venture vehicle.

Though The Graph’s path has had plenty of bumps and challenging fundraises, Multicoin’s faith has paid off many times over. Today, the protocol’s token, GRT, has a fully diluted market cap of $4.1 billion. 

Helium

Remarkably, the founder of Helium also contacted Samani after reading one of his posts – further proof of the high ROI of Multicoin’s written work. Amir Haleem’s distributed wireless network did not initially leverage cryptocurrency. However, as Haleem had learned more about the nascent space, he realized it was the perfect fit for what he was building. The problem was that he had little experience in structuring economics for a project like this. “I was pretty naive about the token economics at the start,” Haleem said. 

Haleem and Samani struck up a correspondence. Over the next years, they traded emails, jumped on occasional calls, and when circumstances allowed, met up in person. In January of 2019, Haleem was finally ready to raise a new round of funding. He immediately asked if Multicoin would invest. Once again, Multicoin made a highly concentrated bet on the business, deploying more than 11% of its venture fund, following on via the hedge fund, and running an SPV for LPs. 

Then, they got to work helping Haleem strategize the tokenomics of the project. “We spent three months helping Amir think through what the token would be, because we firmly believed token incentives could be a meaningful differentiator for Helium,” Jain said. Haleem couldn’t believe the level of support Multicoin provided. In our conversation, he spoke about how often venture capitalists use the phrase “let me know how I can be helpful” as a kiss-off but Multicoin rolled up their sleeves in a way he’d never seen before. 

On top of their funding and strategic assistance, Multicoin stepped up when it came time for the Helium network to debut, buying 75 hotspots at the Austin launch event and setting them up in the city. “Amir made us pay full retail price,” Jain chuckled. Again, such efforts were richly rewarded. Helium’s fully diluted market cap is $5.1 billion. Given the size of the telecom industry, there’s plenty of room to run. Jain commented on that topic, noting: 

We spent a lot of time strategizing with Helium because we care a lot and we want to see it work. Everyone in the world deserves internet connection and it needs to be cheap. And the market is big enough to be worth our time.

EOS

Not all of Multicoin’s investments have been quite so successful. Among the fund’s missteps, none loom so large as its investment in EOS. Multicoin’s dalliance with the Layer 1 failed to produce returns and discolored the firm’s reputation to some in the industry. 

By February of 2018, Kyle Samani had grown disillusioned with Ethereum. The protocol wasn’t shipping at anything like the speed at which he had hoped. Worse, many of the most talented contributors had left. “In the two years I had been following Ethereum, the scaling roadmap had changed three or four times. And I realized that all of the devs retired, they all just went away.” Gavin Wood, one of Ethereum’s co-founders had moved onto a new project, Polkadot, while Vitalik Buterin wasn’t moving quickly enough. 

Frustrated by the inactivity, Multicoin started searching for Ethereum alternatives. One of the firm’s analysts suggested investigating what Dan Larimer was building at EOS. Though he had yet to pull off a major hit, Larimer had built several well-known projects including decentralized exchange Bitshares and blockchain social media platform, Steemit.

“By early 2018, we started to come around on EOS,” Samani remembered. “We said to ourselves, ‘You know what? This guy has learned a lot about shipping blockchains and he ships more than almost anybody else in crypto.’” 

It didn’t hurt that Larimer’s newest project, EOS, had raised $4 billion over a year-long ICO, giving it the resources to execute. Larimer had also attracted a solid team equipped to hit a June launch deadline.

Beyond Larimer’s experience, a vital part of Multicoin’s calculation was the congestion on the Ethereum network. CryptoKitties had launched in November of the previous year, demonstrating how increased demand raised gas prices to exorbitant levels. Samani and Jain felt it was inevitable that a blockchain that solved this problem would emerge, allowing for low-cost and high throughput. To achieve that speed, EOS compromised on decentralization, a view that industry purists found hard to swallow. “At the time, the idea of not moving towards maximum possible decentralization was considered an anathema,” said one of Multicoin’s LPs, Marcos Veremis.

In April of 2018, Multicoin shared their thesis on EOS and announced their investment: 

EOS is a blockchain and smart contract platform with a focus on speed, scalability, and user experience. EOS uses delegated proof of stake (DPoS) and a “token ownership as bandwidth” model to achieve high throughput and zero transaction fees.

EOS’s token traded at $15.34 the day Multicoin published its post. 

If Multicoin had stopped with this announcement, it might have avoided much of the blowback. But that wasn’t the firm’s style. When Samani and Jain invested in a company, they backed it to the hilt and weren’t afraid to let the world know. On Twitter in particular, Samani and Jain advanced the gospel of EOS to an audience that mostly wanted nothing to do with it. Ethereum adherents found it absurd that someone might dethrone their preferred network, while crypto’s liberatarian elements chafed against the idea of a mostly centralized project.

When EOS floundered, many reveled in ridiculing the outspoken fund. “We thought it was a very clever, innovative model,” Samani remarked. “It just turned out not to work. The system became unusable within six months.”

Beyond simple schadenfreude, some commentators questioned Multicoin’s intentions. At the time, it was not uncommon for investors to “pump and dump,” bigging up an investment only to sell once retail investors had bought into the hype. Twitter critics at the time often implied that Samani and Jain were nothing better than EOS bagholders, trying to offload onto greater fools. 

While retail investors are right to be skeptical of the industry’s whales, that preconception didn’t chime with Multicoin's fundamental strategy. From the very beginning, Samani and Jain took a thesis-driven approach to investments backed by research. Moreover, though the firm did actively trade, for the most part it sought to buy and hold in pursuit of compounding gains.

One external source with knowledge of Multicoin’s trading history, remarked, “You could accuse them of pumping a position if they exit that position. But they don’t exit.” Though Multicoin certainly championed EOS at every opportunity in those days, they never seem to have used it as a catalyst to exit. Samani shared that the firm exited its EOS position at the end of 2018. “We probably sold the bottom of EOS,” he said. Another source remarked, “I think they lost a lot. I don’t think it was about a quick flip.”

Ultimately, while Multicoin’s guilelessness rubbed some the wrong way, the primary complaint seems like a stylistic one. Every investor backing early-stage companies in a volatile sector should not be expected to have a 100% hit rate. “They had a thesis, but obviously they were wrong,” Hindi from L1 Digital noted. “This is a risk that is unavoidable.”

Solana

If Multicoin had not invested in EOS, it might have missed its greatest winner. In reference to EOS, Marcos Veremis remarked, “It eventually led them to Solana. Which was one of the biggest home runs for a fund ever.”

After spending months digging into Larimer’s project, Multicoin was primed to recognize the potential in another high-throughout blockchain. In April of 2018, Samani was introduced to a former Qualcomm developer, Anatoly Yakovenko, who was building a project named “Loom.” Yakovenko’s pitch deck referred to it as “NASDAQ for the blockchain,” by Samani’s recollection.

In the pair’s first meeting, Yakovenko made an impression – though not an entirely positive one. “There were a few things that struck me about that first conversation,” Samani remembered. “One was that he was horrible at explaining how it worked. The second was that he had a specific use case in mind.” While many of the entrepreneurs Samani met tended to think about their projects in academic, theoretical terms, Yakovenko was laser-focused on building a high performance blockchain-based order book.

As Samani got to know Yakovenko better, he began to think he was dealing with a particularly unusual entrepreneur. While other teams labored over a meticulous whitepaper, Yakovenko barely bothered putting one together. All of his efforts seemed to be focused on making the most performant blockchain possible. “He was by far the most differentiated Layer 1 founder we had met,” Samani said. 

Though impressed by Yakovenko, it took the team a few months to grasp the full potential of what he was building. By early summer of 2018, it clicked. In May, Multicoin led a round in the project now named Solana. As mentioned earlier, the firm aggressively doubled-down in 2019 and 2020, buying stakes from less-convicted investors. 

As with EOS, some crypto commentators have criticized Multicoin’s involvement with Solana. In many respects, these reproofs follow a similar logic, referring to Solana's relative focus on speed over decentralization and Multicoin’s role as a vocal supporter. Beyond these knocks, detractors point to the fact that Solana raised private funding, giving venture firms the chance to buy in at preferable rates. While there’s a debate to be had regarding the tradeoffs projects make when selling to “insiders,” focusing too heavily on this point ignores the reality of Solana’s history. Helium’s founder, Amir Haleem, summarized this well, noting that when it came to Yakovenko’s project, “Access was not really the challenge.” Outside of Multicoin and one or two others, no one was clamoring for SOL tokens for most of the project’s life. An associated criticism is that by allowing “whales” to buy in, projects allow their tokens to be unfavorably concentrated. If one large VC sells its stakes, the entire ecosystem can shudder and slump. Worse, bad actors with this power can collude to drive up prices or coordinate dumps. 

Again, advancing these arguments in Multicoin’s case seems to dramatically undersell the firm’s impact and misunderstand the fundamental relationship between investor and business. “They were pretty intimately involved in every major turning point, every major decision, every funding round that we had,” Solana co-founder Raj Gokal said of the firm. “Multicoin felt like a third co-founder to me and Anatoly.” Perhaps Multicoin’s most impactful contribution was its orchestration of a partnership with Sam Bankman-Fried, who agreed to build a decentralized exchange on top of Solana. Not only did it bring Yakovenko’s vision to life, but it brought Solana to the attention of the broader ecosystem, galvanizing its extraordinary 2021. 

Data from CoinGecko

To this day, when Solana runs into issues, Gokal said of Multicoin, “They’re the first people I call.”

Performance: Returns and reputation

Myriad ways exist to evaluate investors. How much ownership can they reliably secure in a business? How frequently do they win head-to-head duels against other firms? What weapons do they have at their disposal that other allocators do not? 

Ultimately, two factors may matter most: financial returns and market reputation. The savvy of turning one dollar into ten, or more, is all that will matter to most LPs at the end of the day – but it is a lagging indicator. Especially in venture markets, where deals are gated, reputation is pivotal. In the current market, founders’ opinions matter most. Builders hold the power and to keep winning the iterated game of VC, funds must please the entrepreneurs they back. On both fronts, Multicoin appears to be excelling. 

Returns

In discussion with various Multicoin LPs, I gained a clear picture of the firm’s financial performance. Through their assistance, I have been able to compile what I believe is the most thorough and up-to-date appraisal of Samani and Jain’s returns. Multicoin declined to comment on performance.

As things stand, Multicoin has four entities on which it can be appraised: its three venture vehicles and evergreen hedge fund. Notably, Multicoin has yet to confirm its most recent venture fund, though a report from The Information from October suggested it would sit around $250 million. Given its newness, we can safely ignore this for now.

We can begin by looking at Opportunities Fund I, the venture vehicle Multicoin raised in July of 2018. One LP shared the fund’s returns as of Q3 of 2021, including multiple on invested capital (MOIC) and the distributions to paid in capital (DPI). The figures are, frankly, mind-boggling: 

  • Gross MOIC of 114.7x
  • Net MOIC of 89.1x
  • DPI of 47.0x

For context, a venture firm that returned a 10x multiple on invested capital is considered legendary. Union Square Ventures, one of the most reliably excellent investors of all-time, famously scored a 13.87x multiple on their 2004 vintage, at least as of 2018. That fund included Twitter, Zynga, and Tumblr. 

In 2015, Fortune ran a story about Lowercase Capital under the headline “Is this the best-performing VC fund ever?” Chris Sacca’s 2010 vintage had a DPI of 3.47x and a further net MOIC of 76.19x. 

Notably, Multicoin’s Opportunities Fund I is just four years old, making it younger than both of those historic vehicles. Of course, the volatile nature of the crypto sector means that Multicoin’s numbers will fluctuate – these come from the heart of the bull market. Conversely, many of Multicoin’s winners have yet to reach full value. It may already be the highest-performance venture fund of all-time; its returns may look even wilder in another four years. 

Solana was the vehicle’s biggest winner, but by no means its only one. Out of twenty-seven investments, ten have returned a gross MOIC of 10x or more already, with many stretching far beyond that figure: 

Per information shared by a Multicoin Capital LP

As alluded to earlier, Multicoin did an exceptional job sizing its biggest winners, making concentrated bets in Helium, Arweave, Solana, Serum, and Algorand in particular.

One of the challenges of a crypto fund that performs this well is managing LP distributions. Because Multicoin is such a significant investor and supporter of its portfolio, converting its winners to cash doesn’t make sense. Not only would it shock the positions themselves, it might curtail meaningful growth. Projects like Solana have appreciated rapidly but could still compound for a long time yet. To get around this, Multicoin has distributed some of its returns in tokens. The firm does so only for assets in which it intends to maintain a position itself for future appreciation. 

Though newer, Venture Fund II appears to be off to a strong start. Though I received less detailed information on this vehicle from LPs, one was able to share high-level performance. As of September of 2021, the fund was up 5-6x on a gross MOIC basis. The LP source I spoke with noted they considered the figures conservative given holdings were marked as if done so by an auditor. As such, they may not include locked up tokens or discounts. Given Venture Fund II is less than 18 months old, these figures are extremely impressive. 

Finally, we can turn to Multicoin’s hedge fund. Ray Hindi of L1 Digital gave me the clearest picture of this vehicle’s performance. He noted that L1 Digital started investing into Multicoin in fall of 2018. Over time, his firm doubled down several times, eventually allocating $4.5 million to the fund. By his calculation, that stake is now worth $115 million, a 25.5x return. An Axios report from late last year suggested that the hedge fund had returned 20,287% since its October 2017 inception. 

Intriguingly, Hindi noted there was one other fund he had seen that operated in Multicoin’s league from a returns perspective: 1kx. Created by the former founders of a German carpooling service, 1kx succeeded by taking the opposite approach to Multicoin. While Samani and Jain’s fund pursued alternative Layer 1s and other idiosyncratic projects, 1kx leaned into Ethereum and the ecosystem it spawned, arriving early to DeFi, NFTs, and DAOs. “Those two outperformed everyone that we know,” Hindi said, “And both did extremely well for very different reasons.”

Multicoin’s first venture vehicle is the stuff of an LP’s wildest dreams. Its impressive performance in fund two and its hedge fund suggest it not only has the ability to generate extraordinary returns but the consistency to maintain them. 

Reputation

Sequoia launched a crypto fund in 2022. That it exists at all is testament to the sector’s growing power, but the time it took for the institution to embrace the movement hints at a broader trend. Funds that dominated the web2 venture world were sluggish to recognize the opportunity posed by Bitcoin, et al. Among Tier 1 firms, arguably only a16z proactively made the jump. 

Inaction from the top of the food chain has left space for insurgents. Ask a crypto founder who they believe to be the highest-signal investors in the space, and they’re likely to list firms that didn’t exist a decade ago: Multicoin, Polychain, Paradigm, Delphi, Dragonfly, Libertus, 1kx, Variant, Electric, Framework, Archetype and others. These firms emerged in direct response to the crypto revolution and have established themselves as venture’s leaders in the space, capable of winning duels against old-world megafunds and monoliths. 

Multicoin’s record undoubtedly puts them near the top of this preeminent group, though some still hold the firm’s investment in EOS and outspoken style against them. “People either love them or hate them,” one fellow crypto investor said. Another noted that in a few instances, they’d introduced founders to the firm who had been turned off by Samani’s “dismissive, rude, and aggressive” style. 

Those that know Samani say that this intensity carries no ill-intent. The same source that spoke of Samani’s bluntness with founders explained that though the GP might call “bullshit” on an opinion he disagreed with, “he’s just expressing an opinion.” Roneil Rumberg, co-founder of Audius, made a similar point: “Kyle comes off brusque sometimes, but he’s actually a really sweet guy. I think that’s just his way to spar with ideas.”

To some founders, Multicoin’s directness is a draw. When asked about the fund’s style, business lead of The Graph, Tegan Kline, said it was “very in-line with the culture of The Graph: bring your ideas to the table and fight for it.”

Multicoin and its partners are popular for other reasons, too. Though Samani may not always be the most diplomatic speaker – though some suggest he has become more refined in recent years – several people spoke of him in hushed tones. “Kyle is very special,” LP Ray Hindi said. One of Samani’s most pronounced strengths is the manner in which he battles for his founders. “He will fucking go to bat for his companies,” a fellow crypto-investor said, “He will pick fights for whoever. No fight is too big for Kyle Samani.” Those that find themselves on the wrong side of the skirmish dislike Samani; those on his team adore him for it.

Beyond this fierce commitment to founders, Samani is also an unusual thinker. Those that work with him describe his processing abilities as almost virtuosic. Partner Matt Shapiro said:

I’ve dealt with a lot of people in my life. I’ve been in the room with well-known and successful people – CEOs of huge companies, and all of that. I’ve never met someone and thought “Oh my god, this guy is heads and shoulders smarter than I am.” Kyle makes me feel that way. The neurons in his head…he just gets to the right answer way faster than everybody else. 

Samani acts as a perfect foil for the subtler Tushar Jain. Audius’ Rumberg described him as “mild-mannered, pensive,” as well as someone that “speaks very precisely.” When Jain does talk, he usually has something important to say. “Tushar is extremely strategic,” Kline said, a quality that can be impactful for a portfolio business. “I ran into him in Lisbon,” Kline mentioned, referring to Solana’s developer conference, “We had a ten-minute conversation that totally changed my next three months.”

With Samani and Jain at the helm, Multicoin’s leadership appears particularly well-balanced. “There’s a nice yin and yang to their relationship,” Audius co-founder Forrest Browning said. 

Multicoin may have detractors, but those that matter most – the firm’s entrepreneurs – are uncommonly bullish about its work. “Multicoin is one of the top two funds that are the most helpful to us,” Kline said. Helium’s Haleem remarked that even after all Multicoin did to help him get his network off the ground, “They seem to continually find ways to be valuable.” Solana’s Gokal mentioned that the general market had “no idea” of the firm’s softer side: “People that have worked with Multicoin know that these are the nicest people, not even in crypto, in tech.”

Ultimately, Rumberg may have put it best: “A lot of people have plenty of bad things to say about Multicoin. Not one of them is a founder in their portfolio.”

Kyle Samani and Tushar Jain are not successful in spite of being outsiders, but because of it. Arriving without preconceptions allowed Multicoin’s GPs to see opportunities where others didn’t, though that alone does not explain their performance. A ferocious desire to understand the space from the bottom-up, a willingness to take contrarian positions, and the nerve to make big bets have all been vital contributors to Multicoin’s success. 

In Part Two, we’ll examine the structure of Samani and Jain’s firm and how it makes its decisions. 

Read Part Two and Part Three, next.

Learn the playbooks of today's global giants. Join 56,000 others to get our next Sunday briefing.  

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*Past performance doesn’t guarantee future results. See important Reg A disclosures. See offering circular.

You can listen to an audio version of The Generalist on Spotify or Apple Podcasts. As a note, this is Part One of the Multicoin Trilogy. Over three pieces, we unpack the fund's history, performance, investment process, and future. Read Part Two and Part Three, next.

In collaboration with Masterworks...

When fintech collides with art: Investing magic is born

Since its launch in 2017, innovative art investment app Masterworks has earned significant attention. Over the last year, the company has been featured in the WSJ, Forbes, and Bloomberg. This attention was accompanied by significant capitalization – Masterworks raised a $110 million Series A at a $1 billion valuation. 

Masterworks’ unicorn valuation comes from growing assets under management, with the company now overseeing more than $500 million. On top of that, Masterworks has offered investments into 116 paintings with three successful exits. 

Here’s their track record to date:

  • George Condo's “Staring into Space”: +31.7% net IRR (2020-2022)
  • Banksy’s “Mona Lisa”: +32% net IRR (2019-2020)
  • Albert Oehlen’s “Doppelbild”: +33.8% net IRR (2020-2021)

I didn’t participate in any of these, unfortunately. But I did recently invest in my sixth painting via the platform. This time around, I bought shares in the work of one of my favorite artists: Rothko. If you want to invest alongside me, skip the waitlist with my special link.*

Actionable insights

If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about Multicoin Capital’s origins. (We’ll refer to the firm as “Multicoin” going forward.) 

  • Multicoin may be the highest-returning venture fund of all-time. Firms like Union Square Ventures and Lowercase Capital are legendary for funds with 14x and 76x returns, respectively. Multicoin’s first-ever venture vehicle appears to have them beat.  
  • The firm has won by taking a contrarian approach. When Multicoin started, the investing landscape was dominated by funds focused on Bitcoin and Ethereum. Founders Kyle Samani and Tushar Jain saw opportunity elsewhere, making contrarian bets on Helium, The Graph, and Solana. 
  • To drive outsized returns, make concentrated bets. Part of Multicoin’s genius is its willingness to back up its conviction with capital. Many of the firm’s best-performing investments were sized aggressively, contributing to the fund’s outpermance.   
  • Investing in EOS was a flop…that led to Multicoin’s biggest winner. The firm’s outspoken support for alternative blockchain EOS rubbed some the wrong way. When that project floundered, critics celebrated Multicoin’s mistake. But it was by backing EOS that Multicoin recognized the potential for monster hit, Solana. 
  • Multicoin has its critics, but founders are extremely positive. In the partisan world of crypto, Multicoin’s strident support of its investments can anger dissenters. Loathed by some as a result, the firm is loved by its entrepreneurs. Portfolio founders are exceptionally positive about Multicoin’s contributions. 

In 2017, Kyle Samani and Tushar Jain decided to start a hedge fund for cryptocurrencies. Neither one of them had held an investing job before, let alone run a fund of their own. They had not worked at one of the sector’s budding startups nor built a protocol. They were not friends with Vitalik Buterin or Gavin Wood or some other crypto luminary who might have walked them into buying Ethereum at its public offering price. Their names meant nothing, and with the exception of a few clever personal investments beginning in 2016, they had little record to suggest they were suited to the endeavor at hand. They were, in short, crypto outsiders. 

It has proven to be their greatest weapon. While Samani and Jain may not have had the bonafides of a tenured manager or the expertise of a blockchain builder, they brought formidable gifts to bear, not least a willingness to question the status quo. Even a space as novel and fluid as crypto in 2017 had sacred cows and accepted wisdom. With no preconceptions to cherish or cliques to guard, Samani and Jain could hone their investing acumen with few biases, conducting deep research and reasoning from first principles. 

The result is a portfolio that looks starkly different to almost any other firm of its era. Today, Multicoin is not just a viable participant in the crypto investing landscape but one of its dominant forces. It has earned its formidable reputation by making concentrated, non-consensus bets into massive winners like Solana, The Graph, Helium, and others. It is high-conviction, contrarian investing at its best.

Achieving such returns has not been easy. Not only have several of Multicoin’s best investments been close to collapse at various points, the firm itself has weathered negative performance and brutal market shocks. Some of its highest-profile investments, like EOS, have ended in ignominious failure. And yet, Samani and Jain have outperformed their peers, producing returns that may very well be historic. 

In today’s piece, we’ll unpack what makes Multicoin special, touching on: 

  • Unlikely origins. Kyle Samani’s first business involved building apps for the ill-fated Google Glass device. Tushar Jain also started a company that failed to pan out.  
  • Thinking in public. Without an established investing track record, Samani and Jain built a reputation through their thoughtful writing on the crypto space. 
  • LPs’ assessments. Those that invested in Multicoin’s early vehicles saw more than just two intelligent, hungry investors. They saw an idiosyncratic strategy with asymmetric upside.
  • Strategic shifts. Though Multicoin began as a US hedge fund, it has expanded its mandate over time.
  • Four bets. Multicoin’s personality as a fund can be best understood by looking at a quartet of investments, three of which were massive winners. One was a disaster. 
  • Returns and reputation. Investors may be mostly judged by their financial returns, but reputation among founders may be the more important leading variable. 

We’ll go even deeper into the firm’s operations, decision-making, and future in Parts 2 and 3. Sign up to make sure you don’t miss it. 

Origins: Genesis block

If they had succeeded in building their first businesses, Kyle Samani and Tushar Jain would be entrepreneurs in the healthcare sector. Failure led the pair down a stranger path. 

City of empires

Every August, Washington Square Park fills with a new class of teenagers. Ringed by the dorms and classrooms of New York University (NYU), the Greenwich Village landmark serves as the gathering place for the institution’s newest denizens: the incoming freshman class. 

Among those that arrived in downtown Manhattan in late summer of 2008 were Kyle Samani and Tushar Jain. Standing six-foot something, broad shouldered and outspoken, Samani stood out. The son of a dentist and technology entrepreneur – his father started a medical records platform named VersaSuite – he conveyed a brash Texan confidence. Though he had grown up reading tech blogs and studiously memorizing the processing power of Nvidia’s graphic cards, he had matriculated with the goal of making his mark in the old world of finance. “I thought programmers were losers,” Samani said; finance was the place for an aspiring alpha like him. 

Jain had the shorter journey. Raised in Queens, he shared Samani’s interest in technology with a particular affection for games. He had spent many an afternoon and evening playing through worldbuilders like Age of Empires and Civilization. Like Samani, Jain saw himself making his dent on Wall Street. They met that first week on campus, becoming friends. 

The global financial crisis soon exposed the frailty of Samani and Jain’s ambitions: Wall Street was burning. A few weeks into their freshman year, Merrill Lynch sold, Lehman Brothers collapsed, and AIG narrowly avoided the same fate. Finance was not the sector of promise and power, it was an industry in decline. 

As Wall Street capitulated, Silicon Valley grew stronger. Steve Jobs launched the App Store that year, catalyzing a wave of new startups. Not long after he had arrived on campus, Samani found himself retreating from finance and gravitating towards tech. As businesses like Uber, Venmo, WhatsApp, and Instagram came to the fore, Samani started thinking of himself less as a budding financier, more as an entrepreneur in the making. “Every day, I was reading funding announcements,” he said of this period. “It had a really big impact, and made me realize I wanted to do entrepreneurship.” 

Samani’s clarity was coupled with admirable confidence and some naivete. “There was definitely a moment in time when I was convinced that VCs couldn’t find enough twenty-somethings to give millions of dollars to build. I was absolutely convinced that was true.” 

Impatient to start his adventure, Samani returned to Austin for his senior year, learning the trade of business-building by working at his father’s company. When midterms and final exams required it, he flew back to New York City, crashing on Jain’s couch. 

Jain had gone through a similar transformation since crossing the Queens Midtown Tunnel. Like Samani, he’d come to feel that traditional finance was not the field for someone looking to make their mark. He recalled attending a “Dean’s Roundtable” featuring the Chief Investment Officer of a large asset manager, and finding the elder man’s advice insipid. If you wanted to have a shot working at his shop, the CIO had said, you needed to spend two years in banking, two in private equity, and then two at business school. Perhaps then you would be ready to operate in such rarified air. Jain remembered thinking the advice sounded like “a ‘color between the lines,’ ‘follow the instructions’ type of thing.” That wasn’t him, he knew. “I just couldn’t do that.” 

When graduation came, Jain assessed three options. He could work at Credit Suisse, the bank he interned at one summer, join another financial institution from which he’d received an offer, or move to Austin. Samani had told him he could get his friend a job at VersaSuite, though it couldn’t pay him anything like the salary he would have earned on Wall Street. What he lost in remuneration, he would earn back in freedom and responsibility. 

Four years earlier, Jain would have jumped at the chance to work at a prestigious firm like Credit Suisse. Yet, he found himself turning the banking job down and accepting a role that paid him a third of what he was set to make. Like Samani, he had been enticed by the opportunity to learn the ropes of building a company.

Shiny objects

Samani and Jain lasted a year at VersaSuite. Though it beat the grunt work and bludgeoning dullness of entry-level finance, the pair were “too ambitious” to sit still, according to Jain. In May of 2013, both men left to build healthcare businesses of their own. Despite living together and picking the same sector to tackle, Samani and Jain set out in different directions. 

Just the month before they took the leap, Google released a device that would quickly become a synecdoche for the tech sector’s glib optimism: Google Glass. The AR headset sat like a pair of bifocals but framed a tiny screen rather than a lens. 

By his own admission, Samani found himself succumbing to “shiny new object syndrome,” absorbed with thoughts of how the device might disrupt various industries. It was a new form factor for computing, after all – surely Glass would produce meaningful innovation, offering opportunity to savvy entrepreneurs just like the App Store had done. It wasn’t long before Samani had settled on a use case, serving surgeons and other healthcare professionals. Equipped with a Google Glass device, practitioners could pull up electronic medical records or relevant images to guide care. The front-facing camera made it simple to record patient interactions or operations for later viewing. Propelled by his enthusiasm and budding healthcare bonafides, Samani succeeded in raising $5.5 million for his new business: Pristine. 

Jain was more circumspect about Google’s latest toy. Though he and Samani did almost everything together, and seemed to make a good team, he didn’t want to spend the next phase of his life building applications for an unproven wearable device. Instead, Jain focused on leveraging the observations he’d made at VersaSuite. His year at the software company had shown him just how rapidly electronic medical records were proliferating, in large part thanks to financial incentives included in the American Recovery and Reinvestment Act, better known as the 2009 stimulus package. As Jain recalled, eligible physicians received as much as $40,000 for digitizing their files, causing a mushrooming of patient data. “What is the best use of this data?,” Jain recalled asking himself. The answer, he decided, was clinical trial recruitment. Not only did it cost pharmaceutical businesses a bundle, matching patients to new treatments could be literally life-saving. Like Samani, Jain raised a seed round to bring ePatientFinder to life. His platform made it easy for physicians to query their database and identify patients eligible for new trials.

As it happened, both businesses followed a similar trajectory, growing to a few million in revenue and a couple of dozen employees before negotiating a sale. Pristine, Samani’s company, weathered a particularly tumultuous journey. Not only did Samani discover that the lack of a hands-free display wasn’t among a surgeon’s “top three most pressing problems,” Google effectively killed the Glass project. As Samani deadpanned in our discussion, “that was a problem.” A pivot to serving insurance businesses kept the lights on, but in the end, Pristine was sold for scraps. “No one made any money,” Samani said. 

Jain fared slightly better, avoiding the kind of cataclysm Samani had to manage through. In total, he raised $11 million in funding for ePatientFinder but struggled to catch up to larger players. The sluggishness of innovation in the space impeded rapid iteration: sales took a year, trials lasted months, and product feedback came, at best, every quarter. “It was always really slow. Like, so slow,” Jain noted with a sigh. Recognizing he would need to raise considerably more money to endure this endemic lethargy, he opted for a sale. Eligo Health Research, a competitor with more money and a deeper product, stepped in. 

Nearly four years out of college, Samani and Jain had speedrun through their various ambitions, albeit without achieving the outcome of which they’d dreamt. They had successfully avoided the lure and lucre of Wall Street for entrepreneurship, raising venture capital money, attracting real customers, and securing an exit. Yet, neither seemed to feel much satisfaction with the way things had turned out. Just as they had in those first years of college, Samani and Jain began to look outward, searching for the next horizon at which to run. 

Jain cottoned on to the potential of cryptocurrency first. Though Satoshi Nakamoto’s whitepaper arrived in 2008, just a few weeks after the duo arrived in Manhattan to begin their schooling, Jain learned about it in 2013. Finding it interesting, he bought two bitcoin via Coinbase at a time when each unit cost a few hundred dollars. “I learned about it and thought, ‘OK, this is cool,’” Jain said. “But I’m busy. And I can’t build anything with it.’” Intrigued but not compelled, he turned his energy back towards startups. 

Though Jain was earliest to bitcoin, Samani was first to discover Ethereum. After selling Pristine, he spent his free time browsing AngelList, looking for a startup to join or perhaps a business that could spark his next idea. Samani set himself the goal of reviewing at least one hundred companies a day, across different sectors. One morning he might pick healthcare, the next he would move on to fintech. It didn’t take long though for him to realize he was spending most of his time looking at businesses that fell under AngelList’s “blockchain” category. As he dug into the startups emerging in the space, he saw the same name crop up over and over again: Ethereum. Nearly all of the companies he was looking at were building on it. Samani found the whitepaper, read it, then sent it over to Jain. Soon, both had invested.

Over the next nine months or so, Samani and Jain fell down the crypto rabbit hole. What started as curiosity about Ethereum developed into a broad obsession. Samani found his free time increasingly eaten up by investigations of distributed systems, cryptography, monetary policy, and Austrian economics. To sharpen their thinking, Samani and Jain sought other devotees with which to trade notes, becoming core members of local bitcoin meetups. One in particular attracted an interesting group, including the founders of enterprise blockchain, Factom. A future Multicoin LP, Adam Mastrelli, attended these sessions and described their tenor. Discussions ranged widely though they often centered around how crypto might change the world. Lyn Ulbricht, mother of Silk Road founder Ross Ulbricht, occasionally joined proceedings to read her son’s missives from prison. Mastrelli also took note of one person in particular: Kyle Samani. “You quickly discern who knows what they’re talking about and who doesn’t,” Mastrelli said of the meetings. Samani certainly did.  He always seemed to be “owning the room,” by Masterelli’s recollection, a tall, larger than life character with long-hair and frank opinions.

Through these get-togethers and their independent studying, Samani and Jain realized that their attention had irrevocably shifted to crypto. As Jain remembered, “I thought, ‘I can’t do anything else. I’m obsessed. All I want to do is think about this and talk about this.’” As Samani put it, by spring of 2017, he and Jain recognized they had developed a “full-time internet hobby” waiting to become a profession.

Evolution: The making of Multicoin

Over the following five years, Samani and Jain succeeded in building one of crypto’s preeminent investing firms. Multicoin’s ascent owes much to the duo’s willingness to think in public. 

Thinking in public

At first, it wasn’t immediately obvious what form Samani and Jain’s new profession would take. They were entrepreneurs – perhaps their best bet was to start a crypto project of their own? It was certainly the era for it. As enthusiasm for the space grew, all manner of optimists, hucksters, and opportunists set to work launching their own coins, financed by Initial Coin Offerings (ICOs). 

The ICO boom of 2017 saw surreal projects like Dentacoin make their debut, proposing to disrupt the dental industry by providing tokenized rewards for better oral hygiene. Jain summarized the market’s unhinged musings: “People were thinking you're gonna have this coin to pay for coffee, and you're gonna have this coin to pay for bananas…It was just the dumbest thing I’d ever seen. It made no sense.” What Jain and Samani realized was that while the sector showed technological promise, few thought critically about investing. Amid FUD and FOMO, who was cryptocurrency’s Benjamin Graham? The famous financier had defined the practice of “value investing,” creating heuristics by which to appraise companies. Few frameworks had been advanced to help navigate the sickly confection of ICOs.

Despite their more quantitatively focused education, both Jain and Samani were adept writers. Perhaps by sharing their analysis on different projects and trends they might make an impact? As Jain said: 

We thought, “Oh, what if we share our heuristics? It’ll help the capital in the ecosystem be better allocated to those who are actually building interesting things and not to the likes of Dentacoin.”

It seemed like the right place to start. Another question naturally followed: if the duo were outlining their thoughts on what made for a strong investment in the sector, shouldn’t they invest themselves?

Their early investments in Ethereum had paid off with the currency increasing from around $10 per token to north of $200. Jain’s 2013 bitcoin investment wasn’t doing badly either. While these wins gave them some latitude, if they wanted to run a true fund, they would need outside capital. They set to work, using their apartment as a de-facto HQ. 

Multicoin Capital

To Samani and Jain’s mind, the opportunity was obvious. Cryptocurrencies were poised to reorganize the world and yet no one really knew how to judge them yet. Those that were first to understand the sector could capitalize, locking in potentially mammoth returns. Better yet, few institutional investors seemed to be chasing the opportunity – and those that were kept a low profile. By Jain’s recollection, the only notable crypto funds in early 2017 were Polychain and MetaStable, neither of which shared research publicly. If they did it right, Samani and Jain might establish a voice and brand in that vacuum. 

Just because they saw the opportunity didn’t mean that LPs would. As it turned out, winning converts was a challenge. Institutional investors had little interest in a sector beset by scammers and most traditional venture firms saw crypto as faddish. With few other options, Samani and Jain raised from friends, family, and former backers. They also put in a considerable amount of their own money. By August of 2017, they’d pulled together around $2 million to run a hedge fund strategy. In an announcement post published that month, Samani and Jain unveiled the name of their new firm: Multicoin Capital. 

With money at their disposal, the new fund managers set about executing their strategy. Both Samani and Jain wrote frequently, publishing articles on crypto economics, prediction market Augur, smart contract defensibility, and regulation. They also took shots at projects they felt were overvalued, starting with Ripple. It represented the first example of Multicoin publicly sharing their research even at the expense of popularity. The willingness to anger a certain token’s boosters to express their view became a hallmark of the fund, with Multicoin eventually invoking the ire of Litecoin and Ethereum Cash bulls, among others. 

By December of 2017, Multicoin had built some momentum. Brian Smith, a former Tiger Management analyst and the ex-VP of finance of a publicly-traded e-commerce software provider, joined as COO and CFO – a significant coup for the young fund. Multicoin also added another General Partner, Vinny Lingham. The founder of Civic, a beneficiary of the ICO craze to the tune of $33 million, brought a builder’s expertise to the table. Though a GP in name, Lingham left the decision-making to Multicoin’s other partners. Not long after, Matt Shapiro, a long-time investment banker, joined as a principal – Shapiro quickly established himself as a critical member of the team, becoming a Partner. 

In addition to adding talent to the roster, Multicoin ended 2017 by going viral. Samani’s post “Understanding Token Velocity” swept across crypto Twitter and relevant chat rooms, garnering attention from both entrepreneurs and investors alike.

Next Sunday, we dive into how Multicoin makes its investment decisions. Sign up to make sure you don't miss it.

Idiosyncratic by design

Throughout 2018, Multicoin courted and won new LPs – many of whom carried real clout. In March of that year, Reuters published a story about some of the fund’s newest investors, a group that included Marc Andreessen, Chris Dixon, and David Sacks. Shortly after that article was published, Fred Wilson joined. Years later, when Jain asked the Union Square Ventures’ GP why he’d invested, Wilson replied “You guys are willing to be wrong in public.” It is no coincidence that Wilson himself published thoughts on an almost daily schedule – in Jain and Samani he seemed to see others bold enough to air their convictions. Thanks to savvy capital management alongside this influx of investors, Multicoin’s assets under management (AUM) stood at $50 million around this point. 

What was it about Multicoin that appealed to limited partners? In researching this piece, I had the chance to speak to several, alongside others in the industry. 

First and foremost, Multicoin’s writing made a difference. When I asked Marcos Veremis, a former Managing Director at Cambridge Associates, how he discovered the firm, he replied, “Very simply, I started reading their write-ups…they wrote some excellent pieces.” Jain noted that many followed this path: 

Prominent VCs saw the content we were putting out there. They realized we were thinking about it in interesting ways, coming up with frameworks and heuristics to understand what was happening. That’s what got the flywheel spinning for us.

In truth, it wasn’t just that Multicoin’s thoughts were interesting, but that they were different. In 2018, the funds that had emerged shared a view of the sector that centered on Ethereum. “Back in 2018 it was all about Ethereum, Bitcoin, and some new Layer 1s,” Veremis noted. 

Multicoin didn’t take that view. Relatively early on, the fund began backing non-consensus projects and advancing contrarian views. John Robert (JR) Reed, a Partner at Multicoin and head of the firm’s communications practice, remembered the drawbacks of this non-consensus positioning: 

In the early days, all the other funds were screaming from the rooftops about bitcoin. We weren’t talking about bitcoin at all. So, we sit down at investor meetings and they’d ask “Why aren’t you talking more about bitcoin?” It was a weird sticking point for a long time. People weren’t ready to look at the entire asset class. 

In some instances, Multicoin directly challenged Ethereum, too – a sensitive position given the industry’s many devotees. As we’ll discuss later, Multicoin’s backing of EOS – a blockchain that sought to provide a high speed alternative – would prove particularly controversial. 

Multicoin’s moves made them unpopular even as it set them apart. Ray Hindi, Managing Partner of L1 Digital spoke about this dynamic in the context of evaluating an investment into Multicoin: “The Ethereum community would say, ‘Yeah, Multicoin…crappy fund.’” But in Hindi’s view, those that dismissed Multicoin failed to appreciate how intelligent the team was and how valuable it was from a portfolio construction perspective. While every other manager was doubling down on Ethereum, Multicoin had crafted a collection of high-beta positions. “You look at the obvious funds back then and they all had the same names, the same themes,” Hindi said. A crypto investor active at the time summarized Multicoin’s appeal well: “They were pretty much as smart as everyone else, but their portfolio looked totally different.”

Beyond Multicoin’s public writing and contrarian views, other attributes attracted investors. Ray Hindi pointed to the quality of the team, and in particular how well Samani and Jain seemed to work together. “They really complimented one another,” he said, adding that because of their long-standing relationship, the risk of a broken partnership seemed especially low – something that wasn’t true of other managers he’d assessed. 

Brian Walls of Bridge Alternatives was also impressed by Multicoin’s leadership. As he explained, one of the reasons he invested in the fund in 2018 was because of the conviction Samani and Jain possessed as well as their quick “refresh rate.” In a space in constant flux, Multicoin’s team seemed especially adept at refining and updating their mental models. 

Despite these strengths, many LPs rejected Multicoin – a decision sure to grate with the benefit of hindsight. Walls remembered hosting a hedge fund conference featuring Kyle Samani alongside other prominent crypto managers like BlockTower’s Ari Paul and Polychain’s Olaf Carlson-Wee. According to Walls, the research the trio presented “went over like a lead balloon.” The traditional finance crowd showed little interest in crypto’s innovations. “They were kind of classic incumbents,” Walls said. “They had their business, they had their investing strategy, they had money under management.”

One source remembered a conversation with an endowment around this time. Considering an investment into Multicoin’s fund, they cited the risk such an unproven team posed. If Multicoin failed, the endowment manager’s job might be on the line. By contrast, investing in Sequoia or indeed Paradigm, boasting a partnership with established bonafides, carried no such risk. The endowment passed, a decision that may have cost millions given Multicoin’s subsequent performance. “Now, they would totally want to get into Multicoin if they could,” the source chuckled.

Private market opportunities 

In addition to bringing new, distinguished backers aboard, 2018 prompted a change in Multicoin’s strategy — arguably its first major shift. When the fund had started, the idea of applying a venture capital model to the crypto space didn’t make sense. Rather than selling equity in private rounds, new tokens blasted their offerings to public investors via ICOs. As the SEC started to clamp down on this practice given its resemblance to selling unlicensed securities, new models came to the fore. A more serious class of crypto entrepreneurs recognized that to succeed in building something durable, they would need more than manic money. Advice, guidance, and professional support were useful. As a result, some projects began to offer private token sales in advance of public liquidity. 

At first, Multicoin created a side-pocket to capture these opportunities, but it was an uneasy fit with the hedge fund model. In taking this step though, the firm realized that LPs wanted access to private rounds. “Our LPs started coming to us,” Jain recounted, “They would say ‘Hey, we read about this deal you did. Can you allocate more of my capital to venture?’”

To adapt, Multicoin set out to raise a dedicated private market fund. Even after attracting luminaries like Marc Andreessen, raising the vehicle was far from simple. Matt Shapiro, who runs much of Multicoin’s investor relations practice, remembered the period from mid-2018 to mid-2020 as “just tough…really tough.” 

Those difficulties had been caused, in large part, by a bitter bear market. Though the year began with crypto prices ascending to feverish all-time highs, it finished in the doldrums. In January of 2018, Ethereum approached $1,400; by December it had sunk beneath $85. 

“Everyone saw the thing go up and then it went down 90%,” Shapiro said, adding, “A lot of the tourists or people who had just started paying attention got washed away.”

Like many others, Multicoin’s performance plummeted over the year with the fund logging gross returns of -32.9%, as reported by The Block. Though disappointing on their face, parsing those returns required more context. The firm’s annual letter provided it, showing that Multicoin had actually outperformed several benchmarks, including bitcoin and an index of the ten top tokens named the “Hold 10” by provider, Bitwise. 

The Block

The firm fared especially well in the latter half of the year. When the market cratered hard in November, Multicoin shone. While that helped performance in the short-term, one LP noted that it may have caused unwarranted optimism. “From that point on, they had the confidence they could time markets,” the source remarked, adding, “Timing doesn’t exist [in crypto].”

Despite their comparatively positive performance, many relished Multicoin’s bad year. One source that wished to remain anonymous remembered the sentiment being that Multicoin “had lucked into a bull market and now these guys are going to learn their lesson.” Samani’s often argumentative online persona had created enemies, particularly as he took shots at Ethereum. “People were really ready to hate on Kyle, hence Multicoin,” the same source reported. 

Expanding in Asia

Conditions improved in 2019. Bitcoin, which had bottomed under $4,000 in December of 2018 reached $13,000 by the following summer. Multicoin thrived in the better weather, making many of its most impactful investments. While the firm first took a position in Solana in May of 2018, it added to its stake the next year, buying out several existing private holders. In July of 2019, CoinDesk reported Multicoin had led a $20 million financing for the blockchain, receiving tokens rather than equity. (The firm added to that position in 2021 via its second venture vehicle.) Other savvy investments in 2019 included Helium, Arweave, and Binance Coin. 

Multicoin’s investment into Binance revealed something of the fund’s character, and opened its eyes to new horizons. Notably, Samani had initially worried about using Binance: “I remember the Binance ICO,” he said. “I thought they had misspelled ‘finance.’ I figured it was a scam. We weren’t going to expose our LPs to counterparty risk.” Quickly, his and Jain’s opinions changed. The breadth of assets available on the platform made it invaluable and the speed of the Binance team’s execution – regulation be damned – was impressive. In a matter of months, Samani had gone from skeptic to believer and was willing to back up his bullishness. 

One source highlighted this bet as indicative of Multicoin’s different risk profile and in particular, the firm’s willingness to court reputational damage. At the time, few US funds wanted to get anywhere near Binance because of its looseness in sticking to the rules. To this source, Multicoin seemed to be asking, “What is there to lose?” They followed up, adding, “You either lose in a big way or win in a big way. Multicoin won.” The firm bought Binance’s token, BNB, near a bottom of $6; today, it trades for $388.

In diligencing Binance, Samani started to realize how little the firm understood about the Asian crypto markets: “We started to feel like we needed to be closer to everything going on there. And as an American, that’s not going to happen.” Multicoin began looking for an investor embedded in the regional ecosystem, though it wasn’t easy. According to Samani, some of the largest global recruiting firms turned down their business, saying that it was too challenging a task. In the end, Samani relocated for a month and a half to conduct interviews on the ground. At a conference in Shanghai, he met Mable Jiang, an investor at a crypto-focused family office. What started as friendly sparring over the potential for regional Layer 1s led to further meetings. Before too long, Samani made his pitch to Jiang: she should join Multicoin and head up the firm’s Asia initiatives. 

Multicoin’s foresight was rewarded. As we’ll discuss later in the trilogy, by forging relationships in China and beyond, Multicoin expanded its sourcing aperture, developed expertise rare among US-based firms, and added invaluable portfolio support. When it comes time for a US investment to expand into Asia, few funds are better positioned to provide strategic advice and tangible assistance. 

The year ended with Multicoin initiating a position in another exchange. In spring of 2019, Sam Bankman-Fried pitched the firm on investing in FTX’s native token, FTT. “We passed,” Samani said. “We were all gung-ho on Binance at the time.” Multicoin kept track of Bankman-Fried’s work, though. By Q4 of 2019, they’d seen enough to be convinced, buying into FTT at a time when the token traded at less than $5; it topped out close to $80 last year before retracting to $43.

After the mayhem of the previous year, 2019 ended on a high. Though the market had been choppy, with bitcoin soaring and ether sinking, Multicoin had executed on multiple fronts, finding unusual investments and expanding its opportunity set. Samani and Jain must have ended the year in relatively good spirits. After all, Bitcoin’s production was set to halve in May of 2020, an event many thought would boost prices. In preparation, Samani and Jain had decided to go “very long.” It did not take much time for 2020 to knock the spark out from Multicoin’s optimism.

Collapse

With the benefit of hindsight, we know that Multicoin made several outstanding investments in 2019 and 2020. At the time, though, the fund’s outperformance was not yet obvious. Many that associated Multicoin almost exclusively with EOS blamed it for the project’s various woes. Meanwhile, The Graph, Helium, and Solana had yet to take off. Worse, all three were running out of money. Conditions were about to get a lot tougher. 

On March 12, 2020, the crypto market broke. Bitcoin tumbled 50% over a two-day period, slipping beneath $4,000. In Samani’s view, the sudden downturn arose from a fundamental flaw in the sector's market structure. Because of the fragmentation among trading venues and slowness of Bitcoin and Ethereum networks, during periods of high-use, arbitrageurs are not able to re-balance pricing, resulting in large discrepancies. As prices fall, crypto mining becomes unprofitable, inducing miners to shut down operations, further increasing network congestion. Accompanied by cascading liquidations, the market entered a death spiral that Jain believed would have continued to its logical conclusion if BitMex, a popular exchange, had not favorably stumbled:

I was ready for the price of bitcoin on BitMex to go to zero. If BitMex had not gone down at the exact moment that it did, I think bitcoin would have gone to zero on that day. BitMex said they went down for maintenance. I think that was very fortuitous timing.

Samani reflected on the impact of that day on Multicoin, saying, “We were never insolvent. But we were hit very hard.” Jain called it “one of our darkest hours.” 

Bright spots emerged from the downturn. Multicoin made another strategic adjustment, deciding to stop actively trading its portfolio. “We realized you couldn’t predict black swans like this,” Jain said, “In January of 2020, you couldn’t have predicted what would happen in March. We decided to stick to where we have an edge: asset selection and thesis-formation.” Multicoin went from trying to time the markets to barely paying attention to them. “LPs ask me all the time what I think of the market,” Jain said. “I don’t know. I don’t have an opinion.”

Ray Hindi from L1 Digital noticed an improvement after Multicoin made the switch. “I still remember us discussing with them that what they were really good at was running idiosyncratic risk.” After digesting that, Multicoin “turned it around in a major way,” according to Hindi. 

The market’s disintegration also gave Multicoin a chance to prove their conviction – to themselves and the rest of the market. The team doubled down on Solana at a time when most investors were taking a step back from active deployment. They also invested in music streaming platform Audius, an act of validation that stuck with founder Roneil Rumberg. “It’s not like there were people lining up out the door to lead that round,” Rumberg said. “[Multicoin] had the stone cold resolve to move forward.”

As markets stabilized, Multicoin pulled out of its slump. Solana and The Graph’s mainnets launched that year, bringing two longstanding investments to life. Not to say that the rest of 2020 was smooth sailing. In July, the firm published research about Chinese cryptocurrency exchange, Huobi, announcing Multicoin was long its endemic token, HT. “We were pattern matching,” Jain said, alluding to the notion that the HT bet might play out similarly to BNB. “They were basically trying to be Binance. But their execution was not there. And they faced a whole lot more regulatory pressure than Binance did,” Jain said. Unlike Binance’s CEO, CZ, Huobi’s founders “weren’t willing to take the necessary actions for the business” to navigate that uncertainty, per Jain. In the end, HT’s value increased, but not meaningfully. 

The firm’s investment in dForce was nearly a greater debacle. Just four days after the DeFi protocol announced Multicoin’s investment, hackers siphoned off $25 million. For Mable Jiang, it felt like a disaster – dForce was the first project she’d backed. “It was extremely, extremely big news for the firm at the time,” Jiang said, “Especially since our AUM wasn’t that large.” Worried LPs called Samani and Jain to understand what was happening.

As Jiang remembered it, “Magically, the money came back.” Just a few days after it had disappeared, hackers returned what they had taken. Beyond the lucky ending of the episode, what stuck with Jiang most was the GP’s handling of the crisis and their unwavering support for her. Multicoin had weathered yet another storm, and the good times were finally about to recommence in earnest.  

On fire

If Multicoin struggled to raise money earlier in its life, it would have no such trouble at the end of 2020. “They were turning down money,” Brian Walls of Bridge Alternatives recalled. Many who mysteriously “didn’t see the email” for Multicoin’s first venture firm suddenly jumped at the chance to gain asymmetric exposure to the booming crypto sector. 

In May of 2021, Multicoin announced the new $100 million vehicle, named “Venture Fund II.” By then, the sector was halfway through a ludicrous upswing that saw established and insurgent currencies hit all-time highs. Things would only get better for Multicoin. Helium’s token appreciated from $1.30 at the start of the year to a high of $55.22. Solana began 2021 priced at $1.52 before skyrocketing to over $260, attracting users, developers, and significant investment in the process. Though many others benefited from the bull market, Multicoin seemed to win bigger than perhaps any other fund with many of its longstanding bets paying off at once. 

Zhu Su, founder of Three Arrows Capital, encapsulated this sentiment, listing out Samani and Jain’s investments, adding “I gotta say, [M]ulticoin has absolutely crushed it this cycle.” 

As we’ll soon learn, the extent to which Multicoin has “crushed it” may not just be remarkable but historic. 

Four bets: GRT, HNT, EOS, SOL

Multicoin lists 27 projects and companies in its portfolio; over the course of its five-year life, the firm has undoubtedly held and traded dozens of other assets. While all are part of Multicoin’s story, four investments define what Samani and Jain have built more than any others: The Graph, Helium, EOS, and Solana.

The Graph

In February of 2018, Kyle Samani received a cold Twitter DM from Yaniv Tal, the founder of a protocol to query the blockchain. Tal had been impressed by Samani’s post titled, “New Models for Utility Tokens” which explored token models and mechanics. After trading a few quick thoughts, the pair hopped on a call to discuss Tal’s startup: The Graph.

Tal explained the need for a protocol that queried networks like Ethereum. While ConsenSys, founder of MetaMask, had founded a centralized alternative named Infura, Tal felt it was unlikely to be the right long-term solution. His project leveraged the open-source GraphQL coding language that had been developed at Facebook six years earlier. 

In Samani, Tal found a kindred spirit. “I knew what Infura was, and I knew why Infura was dumb,” Samani said. The service scaled querying by operating a swathe of individual nodes – an inefficiency that made no sense in his view. After the call, Samani spent about forty-five minutes researching Tal’s solution before reaching conviction. To validate his enthusiasm, Samani talked it over with Jain before running it past a Multicoin LP who had coincidentally helped create GraphQL at Facebook. Their endorsement further strengthened Multicoin’s belief prompting the firm to make a high-conviction, high-concentration bet, investing 4% of the hedge fund into The Graph’s seed round. Samani and Jain would double-down on their investment in the years that followed.

The Graph

Multicoin’s investment in The Graph not only reveals the firm’s willingness to take concentrated positions, it prompted one of the strategic changes mentioned earlier. After carving out part of the hedge fund to make the investment, Multicoin realized it was likely to invest in other private market rounds, prompting the firm to spawn a venture vehicle.

Though The Graph’s path has had plenty of bumps and challenging fundraises, Multicoin’s faith has paid off many times over. Today, the protocol’s token, GRT, has a fully diluted market cap of $4.1 billion. 

Helium

Remarkably, the founder of Helium also contacted Samani after reading one of his posts – further proof of the high ROI of Multicoin’s written work. Amir Haleem’s distributed wireless network did not initially leverage cryptocurrency. However, as Haleem had learned more about the nascent space, he realized it was the perfect fit for what he was building. The problem was that he had little experience in structuring economics for a project like this. “I was pretty naive about the token economics at the start,” Haleem said. 

Haleem and Samani struck up a correspondence. Over the next years, they traded emails, jumped on occasional calls, and when circumstances allowed, met up in person. In January of 2019, Haleem was finally ready to raise a new round of funding. He immediately asked if Multicoin would invest. Once again, Multicoin made a highly concentrated bet on the business, deploying more than 11% of its venture fund, following on via the hedge fund, and running an SPV for LPs. 

Then, they got to work helping Haleem strategize the tokenomics of the project. “We spent three months helping Amir think through what the token would be, because we firmly believed token incentives could be a meaningful differentiator for Helium,” Jain said. Haleem couldn’t believe the level of support Multicoin provided. In our conversation, he spoke about how often venture capitalists use the phrase “let me know how I can be helpful” as a kiss-off but Multicoin rolled up their sleeves in a way he’d never seen before. 

On top of their funding and strategic assistance, Multicoin stepped up when it came time for the Helium network to debut, buying 75 hotspots at the Austin launch event and setting them up in the city. “Amir made us pay full retail price,” Jain chuckled. Again, such efforts were richly rewarded. Helium’s fully diluted market cap is $5.1 billion. Given the size of the telecom industry, there’s plenty of room to run. Jain commented on that topic, noting: 

We spent a lot of time strategizing with Helium because we care a lot and we want to see it work. Everyone in the world deserves internet connection and it needs to be cheap. And the market is big enough to be worth our time.

EOS

Not all of Multicoin’s investments have been quite so successful. Among the fund’s missteps, none loom so large as its investment in EOS. Multicoin’s dalliance with the Layer 1 failed to produce returns and discolored the firm’s reputation to some in the industry. 

By February of 2018, Kyle Samani had grown disillusioned with Ethereum. The protocol wasn’t shipping at anything like the speed at which he had hoped. Worse, many of the most talented contributors had left. “In the two years I had been following Ethereum, the scaling roadmap had changed three or four times. And I realized that all of the devs retired, they all just went away.” Gavin Wood, one of Ethereum’s co-founders had moved onto a new project, Polkadot, while Vitalik Buterin wasn’t moving quickly enough. 

Frustrated by the inactivity, Multicoin started searching for Ethereum alternatives. One of the firm’s analysts suggested investigating what Dan Larimer was building at EOS. Though he had yet to pull off a major hit, Larimer had built several well-known projects including decentralized exchange Bitshares and blockchain social media platform, Steemit.

“By early 2018, we started to come around on EOS,” Samani remembered. “We said to ourselves, ‘You know what? This guy has learned a lot about shipping blockchains and he ships more than almost anybody else in crypto.’” 

It didn’t hurt that Larimer’s newest project, EOS, had raised $4 billion over a year-long ICO, giving it the resources to execute. Larimer had also attracted a solid team equipped to hit a June launch deadline.

Beyond Larimer’s experience, a vital part of Multicoin’s calculation was the congestion on the Ethereum network. CryptoKitties had launched in November of the previous year, demonstrating how increased demand raised gas prices to exorbitant levels. Samani and Jain felt it was inevitable that a blockchain that solved this problem would emerge, allowing for low-cost and high throughput. To achieve that speed, EOS compromised on decentralization, a view that industry purists found hard to swallow. “At the time, the idea of not moving towards maximum possible decentralization was considered an anathema,” said one of Multicoin’s LPs, Marcos Veremis.

In April of 2018, Multicoin shared their thesis on EOS and announced their investment: 

EOS is a blockchain and smart contract platform with a focus on speed, scalability, and user experience. EOS uses delegated proof of stake (DPoS) and a “token ownership as bandwidth” model to achieve high throughput and zero transaction fees.

EOS’s token traded at $15.34 the day Multicoin published its post. 

If Multicoin had stopped with this announcement, it might have avoided much of the blowback. But that wasn’t the firm’s style. When Samani and Jain invested in a company, they backed it to the hilt and weren’t afraid to let the world know. On Twitter in particular, Samani and Jain advanced the gospel of EOS to an audience that mostly wanted nothing to do with it. Ethereum adherents found it absurd that someone might dethrone their preferred network, while crypto’s liberatarian elements chafed against the idea of a mostly centralized project.

When EOS floundered, many reveled in ridiculing the outspoken fund. “We thought it was a very clever, innovative model,” Samani remarked. “It just turned out not to work. The system became unusable within six months.”

Beyond simple schadenfreude, some commentators questioned Multicoin’s intentions. At the time, it was not uncommon for investors to “pump and dump,” bigging up an investment only to sell once retail investors had bought into the hype. Twitter critics at the time often implied that Samani and Jain were nothing better than EOS bagholders, trying to offload onto greater fools. 

While retail investors are right to be skeptical of the industry’s whales, that preconception didn’t chime with Multicoin's fundamental strategy. From the very beginning, Samani and Jain took a thesis-driven approach to investments backed by research. Moreover, though the firm did actively trade, for the most part it sought to buy and hold in pursuit of compounding gains.

One external source with knowledge of Multicoin’s trading history, remarked, “You could accuse them of pumping a position if they exit that position. But they don’t exit.” Though Multicoin certainly championed EOS at every opportunity in those days, they never seem to have used it as a catalyst to exit. Samani shared that the firm exited its EOS position at the end of 2018. “We probably sold the bottom of EOS,” he said. Another source remarked, “I think they lost a lot. I don’t think it was about a quick flip.”

Ultimately, while Multicoin’s guilelessness rubbed some the wrong way, the primary complaint seems like a stylistic one. Every investor backing early-stage companies in a volatile sector should not be expected to have a 100% hit rate. “They had a thesis, but obviously they were wrong,” Hindi from L1 Digital noted. “This is a risk that is unavoidable.”

Solana

If Multicoin had not invested in EOS, it might have missed its greatest winner. In reference to EOS, Marcos Veremis remarked, “It eventually led them to Solana. Which was one of the biggest home runs for a fund ever.”

After spending months digging into Larimer’s project, Multicoin was primed to recognize the potential in another high-throughout blockchain. In April of 2018, Samani was introduced to a former Qualcomm developer, Anatoly Yakovenko, who was building a project named “Loom.” Yakovenko’s pitch deck referred to it as “NASDAQ for the blockchain,” by Samani’s recollection.

In the pair’s first meeting, Yakovenko made an impression – though not an entirely positive one. “There were a few things that struck me about that first conversation,” Samani remembered. “One was that he was horrible at explaining how it worked. The second was that he had a specific use case in mind.” While many of the entrepreneurs Samani met tended to think about their projects in academic, theoretical terms, Yakovenko was laser-focused on building a high performance blockchain-based order book.

As Samani got to know Yakovenko better, he began to think he was dealing with a particularly unusual entrepreneur. While other teams labored over a meticulous whitepaper, Yakovenko barely bothered putting one together. All of his efforts seemed to be focused on making the most performant blockchain possible. “He was by far the most differentiated Layer 1 founder we had met,” Samani said. 

Though impressed by Yakovenko, it took the team a few months to grasp the full potential of what he was building. By early summer of 2018, it clicked. In May, Multicoin led a round in the project now named Solana. As mentioned earlier, the firm aggressively doubled-down in 2019 and 2020, buying stakes from less-convicted investors. 

As with EOS, some crypto commentators have criticized Multicoin’s involvement with Solana. In many respects, these reproofs follow a similar logic, referring to Solana's relative focus on speed over decentralization and Multicoin’s role as a vocal supporter. Beyond these knocks, detractors point to the fact that Solana raised private funding, giving venture firms the chance to buy in at preferable rates. While there’s a debate to be had regarding the tradeoffs projects make when selling to “insiders,” focusing too heavily on this point ignores the reality of Solana’s history. Helium’s founder, Amir Haleem, summarized this well, noting that when it came to Yakovenko’s project, “Access was not really the challenge.” Outside of Multicoin and one or two others, no one was clamoring for SOL tokens for most of the project’s life. An associated criticism is that by allowing “whales” to buy in, projects allow their tokens to be unfavorably concentrated. If one large VC sells its stakes, the entire ecosystem can shudder and slump. Worse, bad actors with this power can collude to drive up prices or coordinate dumps. 

Again, advancing these arguments in Multicoin’s case seems to dramatically undersell the firm’s impact and misunderstand the fundamental relationship between investor and business. “They were pretty intimately involved in every major turning point, every major decision, every funding round that we had,” Solana co-founder Raj Gokal said of the firm. “Multicoin felt like a third co-founder to me and Anatoly.” Perhaps Multicoin’s most impactful contribution was its orchestration of a partnership with Sam Bankman-Fried, who agreed to build a decentralized exchange on top of Solana. Not only did it bring Yakovenko’s vision to life, but it brought Solana to the attention of the broader ecosystem, galvanizing its extraordinary 2021. 

Data from CoinGecko

To this day, when Solana runs into issues, Gokal said of Multicoin, “They’re the first people I call.”

Performance: Returns and reputation

Myriad ways exist to evaluate investors. How much ownership can they reliably secure in a business? How frequently do they win head-to-head duels against other firms? What weapons do they have at their disposal that other allocators do not? 

Ultimately, two factors may matter most: financial returns and market reputation. The savvy of turning one dollar into ten, or more, is all that will matter to most LPs at the end of the day – but it is a lagging indicator. Especially in venture markets, where deals are gated, reputation is pivotal. In the current market, founders’ opinions matter most. Builders hold the power and to keep winning the iterated game of VC, funds must please the entrepreneurs they back. On both fronts, Multicoin appears to be excelling. 

Returns

In discussion with various Multicoin LPs, I gained a clear picture of the firm’s financial performance. Through their assistance, I have been able to compile what I believe is the most thorough and up-to-date appraisal of Samani and Jain’s returns. Multicoin declined to comment on performance.

As things stand, Multicoin has four entities on which it can be appraised: its three venture vehicles and evergreen hedge fund. Notably, Multicoin has yet to confirm its most recent venture fund, though a report from The Information from October suggested it would sit around $250 million. Given its newness, we can safely ignore this for now.

We can begin by looking at Opportunities Fund I, the venture vehicle Multicoin raised in July of 2018. One LP shared the fund’s returns as of Q3 of 2021, including multiple on invested capital (MOIC) and the distributions to paid in capital (DPI). The figures are, frankly, mind-boggling: 

  • Gross MOIC of 114.7x
  • Net MOIC of 89.1x
  • DPI of 47.0x

For context, a venture firm that returned a 10x multiple on invested capital is considered legendary. Union Square Ventures, one of the most reliably excellent investors of all-time, famously scored a 13.87x multiple on their 2004 vintage, at least as of 2018. That fund included Twitter, Zynga, and Tumblr. 

In 2015, Fortune ran a story about Lowercase Capital under the headline “Is this the best-performing VC fund ever?” Chris Sacca’s 2010 vintage had a DPI of 3.47x and a further net MOIC of 76.19x. 

Notably, Multicoin’s Opportunities Fund I is just four years old, making it younger than both of those historic vehicles. Of course, the volatile nature of the crypto sector means that Multicoin’s numbers will fluctuate – these come from the heart of the bull market. Conversely, many of Multicoin’s winners have yet to reach full value. It may already be the highest-performance venture fund of all-time; its returns may look even wilder in another four years. 

Solana was the vehicle’s biggest winner, but by no means its only one. Out of twenty-seven investments, ten have returned a gross MOIC of 10x or more already, with many stretching far beyond that figure: 

Per information shared by a Multicoin Capital LP

As alluded to earlier, Multicoin did an exceptional job sizing its biggest winners, making concentrated bets in Helium, Arweave, Solana, Serum, and Algorand in particular.

One of the challenges of a crypto fund that performs this well is managing LP distributions. Because Multicoin is such a significant investor and supporter of its portfolio, converting its winners to cash doesn’t make sense. Not only would it shock the positions themselves, it might curtail meaningful growth. Projects like Solana have appreciated rapidly but could still compound for a long time yet. To get around this, Multicoin has distributed some of its returns in tokens. The firm does so only for assets in which it intends to maintain a position itself for future appreciation. 

Though newer, Venture Fund II appears to be off to a strong start. Though I received less detailed information on this vehicle from LPs, one was able to share high-level performance. As of September of 2021, the fund was up 5-6x on a gross MOIC basis. The LP source I spoke with noted they considered the figures conservative given holdings were marked as if done so by an auditor. As such, they may not include locked up tokens or discounts. Given Venture Fund II is less than 18 months old, these figures are extremely impressive. 

Finally, we can turn to Multicoin’s hedge fund. Ray Hindi of L1 Digital gave me the clearest picture of this vehicle’s performance. He noted that L1 Digital started investing into Multicoin in fall of 2018. Over time, his firm doubled down several times, eventually allocating $4.5 million to the fund. By his calculation, that stake is now worth $115 million, a 25.5x return. An Axios report from late last year suggested that the hedge fund had returned 20,287% since its October 2017 inception. 

Intriguingly, Hindi noted there was one other fund he had seen that operated in Multicoin’s league from a returns perspective: 1kx. Created by the former founders of a German carpooling service, 1kx succeeded by taking the opposite approach to Multicoin. While Samani and Jain’s fund pursued alternative Layer 1s and other idiosyncratic projects, 1kx leaned into Ethereum and the ecosystem it spawned, arriving early to DeFi, NFTs, and DAOs. “Those two outperformed everyone that we know,” Hindi said, “And both did extremely well for very different reasons.”

Multicoin’s first venture vehicle is the stuff of an LP’s wildest dreams. Its impressive performance in fund two and its hedge fund suggest it not only has the ability to generate extraordinary returns but the consistency to maintain them. 

Reputation

Sequoia launched a crypto fund in 2022. That it exists at all is testament to the sector’s growing power, but the time it took for the institution to embrace the movement hints at a broader trend. Funds that dominated the web2 venture world were sluggish to recognize the opportunity posed by Bitcoin, et al. Among Tier 1 firms, arguably only a16z proactively made the jump. 

Inaction from the top of the food chain has left space for insurgents. Ask a crypto founder who they believe to be the highest-signal investors in the space, and they’re likely to list firms that didn’t exist a decade ago: Multicoin, Polychain, Paradigm, Delphi, Dragonfly, Libertus, 1kx, Variant, Electric, Framework, Archetype and others. These firms emerged in direct response to the crypto revolution and have established themselves as venture’s leaders in the space, capable of winning duels against old-world megafunds and monoliths. 

Multicoin’s record undoubtedly puts them near the top of this preeminent group, though some still hold the firm’s investment in EOS and outspoken style against them. “People either love them or hate them,” one fellow crypto investor said. Another noted that in a few instances, they’d introduced founders to the firm who had been turned off by Samani’s “dismissive, rude, and aggressive” style. 

Those that know Samani say that this intensity carries no ill-intent. The same source that spoke of Samani’s bluntness with founders explained that though the GP might call “bullshit” on an opinion he disagreed with, “he’s just expressing an opinion.” Roneil Rumberg, co-founder of Audius, made a similar point: “Kyle comes off brusque sometimes, but he’s actually a really sweet guy. I think that’s just his way to spar with ideas.”

To some founders, Multicoin’s directness is a draw. When asked about the fund’s style, business lead of The Graph, Tegan Kline, said it was “very in-line with the culture of The Graph: bring your ideas to the table and fight for it.”

Multicoin and its partners are popular for other reasons, too. Though Samani may not always be the most diplomatic speaker – though some suggest he has become more refined in recent years – several people spoke of him in hushed tones. “Kyle is very special,” LP Ray Hindi said. One of Samani’s most pronounced strengths is the manner in which he battles for his founders. “He will fucking go to bat for his companies,” a fellow crypto-investor said, “He will pick fights for whoever. No fight is too big for Kyle Samani.” Those that find themselves on the wrong side of the skirmish dislike Samani; those on his team adore him for it.

Beyond this fierce commitment to founders, Samani is also an unusual thinker. Those that work with him describe his processing abilities as almost virtuosic. Partner Matt Shapiro said:

I’ve dealt with a lot of people in my life. I’ve been in the room with well-known and successful people – CEOs of huge companies, and all of that. I’ve never met someone and thought “Oh my god, this guy is heads and shoulders smarter than I am.” Kyle makes me feel that way. The neurons in his head…he just gets to the right answer way faster than everybody else. 

Samani acts as a perfect foil for the subtler Tushar Jain. Audius’ Rumberg described him as “mild-mannered, pensive,” as well as someone that “speaks very precisely.” When Jain does talk, he usually has something important to say. “Tushar is extremely strategic,” Kline said, a quality that can be impactful for a portfolio business. “I ran into him in Lisbon,” Kline mentioned, referring to Solana’s developer conference, “We had a ten-minute conversation that totally changed my next three months.”

With Samani and Jain at the helm, Multicoin’s leadership appears particularly well-balanced. “There’s a nice yin and yang to their relationship,” Audius co-founder Forrest Browning said. 

Multicoin may have detractors, but those that matter most – the firm’s entrepreneurs – are uncommonly bullish about its work. “Multicoin is one of the top two funds that are the most helpful to us,” Kline said. Helium’s Haleem remarked that even after all Multicoin did to help him get his network off the ground, “They seem to continually find ways to be valuable.” Solana’s Gokal mentioned that the general market had “no idea” of the firm’s softer side: “People that have worked with Multicoin know that these are the nicest people, not even in crypto, in tech.”

Ultimately, Rumberg may have put it best: “A lot of people have plenty of bad things to say about Multicoin. Not one of them is a founder in their portfolio.”

Kyle Samani and Tushar Jain are not successful in spite of being outsiders, but because of it. Arriving without preconceptions allowed Multicoin’s GPs to see opportunities where others didn’t, though that alone does not explain their performance. A ferocious desire to understand the space from the bottom-up, a willingness to take contrarian positions, and the nerve to make big bets have all been vital contributors to Multicoin’s success. 

In Part Two, we’ll examine the structure of Samani and Jain’s firm and how it makes its decisions. 

Read Part Two and Part Three, next.

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*Past performance doesn’t guarantee future results. See important Reg A disclosures. See offering circular.