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Multicoin Capital: How to be a Contrarian

The trick to being a great venture capitalist is being non-consensus and right. Multicoin Capital is a perfect example. In Part 2 of our trilogy, we explore how the fund reasons from first principles and remains disciplined. 

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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 how Multicoin Capital finds and makes its investments.

  • Multicoin is thesis-driven. The firm spends considerable effort researching relevant markets and trends to determine which approach is likeliest to win. The majority of Multicoin’s investments have arisen through this process. 
  • Investments must be “first-order correct.” Multicoin’s founders Kyle Samani and Tushar Jain pride themselves on thinking from first principles. They expect every investment to fundamentally make sense. This might sound logical but is often at odds with speculative industries like crypto. 
  • Debate helps hone ideas. Multicoin’s investment committee meetings can be fierce, with employees passionately arguing different perspectives. The goal is to surface blind spots and ensure the creation of an “idea meritocracy.”
  • Win through rigor. Multicoin’s team can be intense participants in a fundraising meeting by their own account. Above all, they push founders on how a given market might develop. When it comes time to secure allocation in a deal, that same intensity can prove an asset. Entrepreneurs want someone at the table that improves their thinking.
  • Bridging the US and China offers unique value. Crypto is a global phenomenon, yet most of the sector’s investment firms focus on a single geography. Multicoin has taken a different approach. By establishing a presence in China, it can help its projects access new markets with on-the-ground support and expertise. 

Every venture capitalist hopes to be a contrarian. Many Medium posts and Twitter threads have been penned in bald pursuit of this coveted denomination. Such interest is not motivated by vanity alone – it is, after all, quite suave to cut an iconoclastic figure. Rather, that is where the money is. 

As the saying goes, venture is a game of being “non-consensus and right.” It’s easier to understand the second of these: you do not make money if you are wrong. The importance of being non-consensus can be trickier for a newcomer to grasp. Because of venture capital’s skewed distributions, it is not enough to just be right – you must be right about something that everyone else ridicules or ignores. Only these opportunities produce enough value dislocation for monster returns. Accepted wisdom yields little alpha. 

Multicoin Capital embodies this dictum. Not only has it been right (a lot), it has been right in the face of vociferous disbelievers. Few firms have been willing to look so foolish for so long in commitment to their convictions. 

How does Multicoin do this? What does it mean to run a fund that is genuinely contrarian? Which factors allow the investment team to find and fund offbeat winners so reliably? 

Based on my time spent with Multicoin, its limited partners (LPs), and portfolio founders, I’ve developed an understanding of how it answers these questions. In today’s piece, we’ll explore Multicoin’s investment process from start to finish, touching on: 

  • Thesis formation. Some funds operate opportunistically, investing in great founders that surface new ideas. That’s not Multicoin’s style.
  • Sourcing opportunities. Once Multicoin has a thesis in mind, it searches for projects with a similar view of the world. Doing so involves making some noise.  
  • Evaluating investments. The partnership only funds businesses it believes are “first-order correct.” Adhering to this rule has involved missing some winners. 
  • Surfacing blindspots. To sharpen its thinking and disabuse itself of weak arguments, Multicoin runs investment committees that operate like debates. 
  • Sizing bets. Once Multicoin has decided to invest in a company, it thinks about how to size its investment. Part of what has made it most effective is its willingness to bet big.
  • Adding value. With few exceptions, every investor tries to support its portfolio companies. Multicoin goes particularly deep with its founders and is proactive in providing support. 
  • Aggressively doubling down. Part of Multicoin’s approach is to follow its best bets with further investment. It does this even when other VCs seem to be taking a step back. 

Let’s get to it. 

Step 1: Form a thesis

Among the various ways you might compare venture investors, one of the more illustrative is positioning them on the spectrum between “opportunistic” and “thesis-driven.”

The opportunist believes that radical innovation cannot be predicted. In recognition of that ignorance, the best approach is to find visionary entrepreneurs with a clearer image of what the future holds. The fundamental posture is one of reactivity and receptivity: you are keen to be surprised by ingenuity and happy to assess what appears before you. As Multicoin co-founder Tushar Jain described, it is not unlike “swiping on Tinder.”

The thesis-driven investor takes a different approach. By studying a particular market or trend, this individual commits to a specific perspective they believe will be predictive. Once codified, the thesis-driven capitalist searches for investments that match their mental model. The hope is that by forming a point of view, the investor better knows where to look and what attributes to prioritize. 

Great gray territory exists between both poles: an opportunistic financier may prioritize certain domains while even the most thesis-driven capitalist must possess some flexibility. 

Multicoin Capital sits at one end of the spectrum. As Jain noted, “We start from the thesis-first. A lot of investors say that, but we do it in an extreme form.” Indeed, Jain emphasized that the firm’s priority is to form theses rather than scout investments: 

I frequently joke with our investment team that their job is not to find good investments. I don’t care if they find good investments. I want them to find good theses. And we happen to monetize their theses by investing.

Jain argues that this framing is fundamentally pragmatic: “Someone that forms theses is more valuable than someone who finds investments, because you’re likely to get several bites of the apple. It’s more important to know what’s true.”

That final point is where Multicoin’s thesis-formation begins, by asking, “What is true?” Notably, this is the case for both hedge fund and venture investments – the firm operates as a single team executing a coherent strategy across vehicles. In our conversations, Samani and Jain talked me through how they go about forming new perspectives for Multicoin, at large. 

First, they identify a promising market. This might begin at a high-level – picking something like “DAOs” as a starting point, for example – before telescoping into a narrower subject. Once a space has been selected, Multicoin sets about trying to understand the “dimensions” and “design decisions” in the space. How might different teams address a relevant opportunity? Why might they use a specific technical stack over another? What choices and concessions will they need to make? Figuring out the trade-offs is particularly important, according to Jain: 

This is useful because when you’re operating at the very edge of what is possible, usually there is no right answer. It’s a trade-off. You say, “Oh, I’m gonna design it X way, but then you lose Y.”

Once mapped out, Multicoin hones in on the most exciting elements of the design space, looking for places to make “big, pointed bets.” Though this might sound like a trivial addendum, it’s critical to understanding Multicoin’s strategy. The firm explicitly does not want to paper a certain market or business model. “We don’t like to say, ‘Play to earn is interesting, so let’s invest in a play to earn company in India, the Philippines, and Argentina,’” co-founder Kyle Samani said. “We have no problem playing in red oceans,” he added, referring to competitive markets, “but if we’re going to play in a red ocean, we want to be very, very clear about why the team we invest in is taking a unique approach that will build structural moats and ultimately produce returns to scale." 

The commitment to precision here is one of the primary strategic differentiators between a fund like Multicoin and one like Tiger. Though both are thesis-driven, Tiger focuses on macro trends; when it finds an approach it considers fruitful, it invests in iterations across markets. Multicoin is much more surgical.

You can see how this plays out by studying Multicoin’s writing. In late 2020, for example, it published “Trade-offs in the Decentralized FTX Space.” Written by Tushar Jain and Spencer Applebaum, the piece outlines the opportunity for a “decentralized FTX” to emerge and talks through the pros and cons of different approaches. Jain and Applebaum highlight ten traits as desirable for a decentralized derivatives exchange, including the ability to bootstrap liquidity and the enablement of “moderately high” leverage.

Four months after Multicoin published that piece, it announced an investment in Perpetual Protocol, one of the challengers it had identified. Unsurprisingly, “Perp.fi” boasts many of the objectives the team had outlined, offering deep liquidity and high leverage. 

In this respect, Multicoin seems to perfect a kind of “venture manifesting,” using its blog as a vision board to summon the startups it wants to see. Scroll through its contents, and you’ll observe a remarkably direct connection between initial articulation and eventual investment. Discussions of decentralized storage morph into an investment in Arweave, while thoughts on speed and scalability lead to Solana. 

The pattern illustrates that Multicoin’s self-characterization as thesis-driven is much more than lip service but borne out by its established portfolio.

Though the fund favors operating with this study-first-deploy-second approach, the partnership accepts there is a time for flexibility. Per Samani:

Our strong preference is to invest with a theory on how the market will play out and why a certain team will win. We have also concluded that there are some markets where it is not possible to make that determination with conviction.

By Samani’s estimation, roughly 10% of Multicoin’s investments fall into the latter camp. Project Galaxy, a provider of digital credentials, is one such example. Despite not having a cemented view on how the market would play out, Multicoin reached conviction on the entrepreneur and felt Galaxy’s team was pursuing a viable strategy. 

Step 2: Source opportunities 

Once Multicoin has a thesis in mind, it searches for companies. As is true of other investment houses, it relies on inbound and outbound interest.

Since its inception, much of Multicoin’s efforts have focused on growing its inbound interest. From the very beginning, Jain and Samani understood the power of building an audience, recognition that has helped their shop build one of the best compendiums of crypto thinking in the space. Multicoin has leaned into this strategy, even expanding its geographical breadth. In 2020, Mable Jiang kicked off the firm’s Mandarin podcast, which she noted had become China’s number one crypto show. According to Jiang, English versions have won over listeners in Vietnam, Thailand, and Singapore. Project Galaxy CEO Harry Zhang noted that he had discovered the fund through their media work: “I read the research papers published by the Multicoin guys, and they were really good.” He added that Multicoin was an “obvious” Tier 1 player in the Chinese market. 

Multicoin doesn’t limit its audience creation to traditional media. Indeed, much of its presence has been built on Twitter, where Samani is particularly active. As mentioned in last week’s piece, Multicoin’s bombastic tone can rub some the wrong way, but it appears to be, at least partially, a calculated strategy. A version of the fund’s 2018 Annual Letter that circulated publicly notes that Samani and Jain “frequently employ Cunningham’s Law.” That dictum states, “the best way to get the right answer on the internet is not to ask a question; it’s to post the wrong answer.” Despite appearances, Multicoin’s more pointed tweets may seek to inform the writer rather than inflame the reader. Samani reiterated this reading of the 2018 annual letter, saying, “A meaningful percentage of my tweets are fishing expeditions. It’s extraordinarily effective.” Samani and Multicoin also seem to have tempered this approach over the past two years, a shift noticed by other investors in the space. 

A relatively new source of potential inbound has manifested thanks to the firm’s close association with Solana. In a brilliant marketing move, the high-speed Layer 1 is spinning up “hacker houses” worldwide – with Multicoin maintaining a presence at almost all of them. As the next generation of Solana developers builds, many will naturally gravitate toward Multicoin. 

As you might expect, a meaningful percentage of opportunities arrive through outbound efforts. This occurs both passively and actively. For one thing, everyone at Multicoin is an omnivorous consumer of content, with Samani particularly prolific. By his account, he begins his 6:00 am days by reading for four hours, filling the company’s Slack channel with relevant tidbits. He subscribes to a “painfully large number of newsletters,” perusing up to thirty a day. Often these missives come from companies he has spoken to and wants to track, along with the work of other investors and thinkers. Samani notes he spends “no less than an hour a day” on Twitter, time that is not wasted in his view, given how effectively the algorithm has tuned itself to his tastes. In search of opportunity, the firm’s analysts and associates may find themselves dipping into Discord or Reddit. 

Multicoin’s team hones its perspectives by talking to other investors and builders. Among other venture funds, both Variant and Libertus were mentioned among a “handful of investors in crypto that thinks for themselves,” per Jain. Multicoin’s GPs also namechecked Tarun Chitra, CEO of Gauntlet, as a particularly giga-brained conversationalist.

Beyond these efforts, Multicoin also drums up business the old-fashioned way: by hitting the road. Particularly in the fund’s early days, both partners traveled extensively to grow their network and meet the industry’s budding builders. Samani noted that in both 2018 and 2019, he was on the road for 120 days of the year, attending conferences and hackathons from coast to coast, continent to continent. “We just met everybody,” Samani said, “And that turns out to have been very important.”

Step 3: Evaluation

The real work begins once an investor has an opportunity to assess. Due to its thesis-driven roots, Multicoin has a particular lens through which it evaluates deals. 

In our discussion, Samani referred to Marc Andreessen’s canonical essay, “The only thing that matters,” in which the a16z founder argues that between team, product, and market, investors should focus on market. Multicoin agrees with this reading – with a twist. Market matters, but in particular, understanding how a market will play out matters most.

To make that assessment, Multicoin studies how closely a project maps to its own view of the market. Does it bear the advantageous traits Multicoin considers most important? How will it fare as the space develops? Samani remarked on the importance of answering these questions: 

We spend an inordinate amount of time talking about how we think the markets are going to play out. What do we believe, and at what probability?

The goal is to ensure Multicoin has thought through an investment’s maturation and the potential second and third-order effects of initial success or failure. More than almost anything else, this assessment seems to be at the heart of the fund’s evaluation, and as we’ll discuss in a moment, it absorbs investment committee meetings.

Compared to its evaluation of the market, Multicoin spends “shockingly little time on team and product," according to Samani. In part, that's because great entrepreneurs often struggle to explain the novelty of their work. “I’ve discovered that most of the time, founders are unable to clearly articulate their thesis,” Samani said. As mentioned in last week’s piece, Solana founder Anatoly Yakovenko is an example.

Outside of these factors, the team evaluates what systemic advantages a business might have. Samani and Jain cited network effects and psychological arbitrages as interesting lenses for evaluation. 

“I think most people misunderstand them,” Samani said of network effects. “Most of the time when people refer to them they’re overstated. And then there are a handful of times when people dramatically understate them.” Portfolio company Helium is an example of a business with profound network effects that may still be underestimated. The decentralized wireless network grows more powerful and performant as nodes join the system. 

Though not a Multicoin investment, Samani pointed to PoolTogether as an example of a psychological arbitrage. The protocol offers a gamified savings product: users get a chance to win a larger reward by depositing money. Since this reward is produced through DeFi staking, even those that don’t win have their money returned and earn native token POOL for taking part. The longer you keep your money in PoolTogether, the more POOL you make – a mechanism that incentivizes saving.

If there is a cardinal sin for a potential Multicoin investment, it is being deemed “first-order incorrect.” What does that mean? In short, the team believes the product in question does not make sense and is fundamentally flawed in some respect. Multicoin takes this assessment seriously, with Jain describing himself and Samani as “first-order principles snobs.”

The stringency with which Multicoin makes this determination has resulted in missing out on high-performing investments, including Uniswap and Yearn Finance. Both have broken into the top one hundred projects by market cap, rising from relative obscurity. Uniswap is a top twenty-five ecosystem with a fully diluted market cap of $10.6 billion. 

Though missing a breakout winner may sting a little, Multicoin doesn’t mind much. To Samani and Jain, both projects remain first-order incorrect. In Uniswap’s case, Multicoin believes that the protocol is an ineffective method of price discovery and that the fundamental mechanics of the system mean it will never be able to add trading fees. “Holding all else equal, if Uniswap adds fees, the system stops working,” Samani said. “If that happened, token holders would become strictly parasitic to market makers and takers.” Jain quickly added, “You can’t have parasites in an open-source system. They get forked out.”

Multicoin’s skepticism of Yearn follows a similar logic, though with a variation. Yearn explicitly does charge fees, though Jain doesn’t believe in the durability of this revenue. “People are willing to pay YFI fees today,” he said, referring to Yearn’s token. “That is explicitly happening. But that’s irrational. And the long arc of the market always bends towards rationality.”

Such assessments do not arrive without significant thought and some hand-wringing. In the case of Yearn, Multicoin considered an investment no fewer than four times over several months. “Now, it’s a miss because we saw it at the beginning,” Jain said. “We could have farmed it, we could have owned it and we would have made a bunch of money. But, I’m OK missing that…And I still think we’re right.” 

The corollary of disciplined investing is that you must be OK missing out on opportunities that don’t align with one’s perspective. Multicoin is exceptional at maintaining its control. As Jain noted, “It’s OK for someone else to make money on a deal.” Those that fail to internalize this suffer from what Jain calls “Gotta Catch’ Em All Disease.” A description of symptoms from Jain as follows: 

There’s a fallacy people have where they think, “Oh, this is going to make money, I need to be in it.” That’s just indexing. It’s much more important to have conviction and go big than to start thinking, “I have a piece of this, I have a piece of that, and if I miss this deal, my collection will be incomplete.”

Multicoin is OK with missing a deal. Above all, it wants to make sure that the companies and projects it backs make sense. 

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Step 4: Debate

If an investment is considered promising, it eventually makes its way to one of Multicoin’s investment committees. While many VCs run some version of this meeting, it feels essential to Multicoin’s approach. In pursuit of deeply-researched, high conviction investments, Samani and Jain put new positions through a gauntlet designed to surface risks and blind spots. 

It begins with writing, which is, according to Mable Jiang, “the most important thing at Multicoin.” To start, a team member crafts a memo outlining their perspective with particular attention to the market and its development. Anyone can bring a deal to the table, whether they’re an investor or not. “We have a very flat hierarchy,” partner Matt Shapiro noted. 

Once a document has formed, the rest of the team is encouraged to read and comment, poking holes in arguments and offering different perspectives. Asynchronous debate carries into synchronous meetings that are often intense. Partner and Head of Communications, John Roberts (JR) Reed spoke about this, saying: 

The process of reaching a decision is friction-full. Sometimes there’s heated debate. And sometimes people need to walk away or change the mode of communication – switch from verbal to written to verbal again. But through all of that trial by fire, you come out with the most hardened, battle-tested idea.

To Jain, the key to engaging in a productive dialogue is to “disagree frequently and disagree well.” You might wonder how to disagree well. To Multicoin, it comes down to two primary factors. First, “you need to fundamentally respect the other person,” believing they have a valuable perspective to share. Second, “you must be curious.” Specifically, Jain notes that “You have to be willing to keep asking, ‘what am I missing?’ until you get to the bottom of the issue. You just have to keep peeling and peeling.”

Not every debate is solvable. In those instances, Multicoin seeks a resolution of conviction, not consensus. Ultimately, Jain says it often comes down to whether the team believes the expected value of a position is likely to be positive and significant — or not. It’s a simple framing that allows for doubt while crediting conviction. 

Of course, not all decisions require such intense deliberation. Given Multicoin’s established relationship with founder Sam Bankman-Fried and sophisticated understanding of the exchange market, choosing to invest in FTX US’s recent round didn’t take long. “We didn’t have to discuss it for more than eight seconds,” Samani said.

Step 5: Winning

Arguably, there is no tighter venture market than crypto right now. Sector-specific funds like Paradigm, Electric Capital, and a16z have all sized up; newcomers like Haun Ventures have entered the race with deep pockets; traditional players like Bessemer and Bain have decided to make plays.

How does Multicoin win allocation against funds with larger teams and more capital to deploy? In part, it does so by picking esoteric fishing spots and identifying promising projects that other funds have passed over. As mentioned in Part 1 of this trilogy, Solana, Helium, and The Graph struggled to raise before becoming massive hits.

When Multicoin does play in “red oceans,” as Samani called competitive spaces, it relies on a few weapons. The first is its genuine interest and expertise, particularly in the markets in which a project is operating. Per Samani: 

I think a common thing you’ll hear about us is that, whether we end up investing or not, we typically ask the hardest and most nuanced questions about how the market will play out. We really press them on that. And that’s probably been the single most effective tool of winning deals. Founders realize those questions are forcing them to think about their market in a way they hadn’t before.

Multicoin also recognizes that venture capital is a service business. “Entrepreneurs want investors that move at their speed,” Jain remarked. To accommodate that pace, the team makes themselves broadly available to all of their investments and aims to respond to outreach as rapidly as possible. “There aren’t a lot of firms where people respond to messages at 10 pm,” Samani said. “Founders get a quick turnaround time.”

One lever Multicoin is loath to pull to win a deal: valuation. To maximize the potential to hit a grand-slam, Multicoin looks to maintain pricing discipline. Every rule has an exception, of course. “I’m very clear with the team: there is a time and place to be valuation insensitive,” Samani added in our discussion. Such an event rarely occurs – roughly once per year by his estimation – but when it arrives, the team jettisons the rulebook. One such example was Serum, the decentralized exchange built by Sam Bankman-Fried, leveraging Solana. Given Bankman-Fried’s reputation, Serum was fully valued, but Multicoin recognized it was an investment for which it was worth straying. “We knew Sam was the guy to build this,” Samani said, “And it was Anatoly’s vision to build an order book on Solana. It was simply too good to pass up.”

Step 6: Size

To compensate for Serum’s high valuation, Samani noted that the fund had “aggressively” sized their position. This gets at another critical step in Multicoin’s process: deciding how much to invest in a given deal. 

If you were to plot Multicoin’s performance compared to venture benchmarks, it would sit in a wilderness of white space – far beyond top quartile, decile, or even percentile markers. Part of the reason Multicoin has been so successful is that it has had the gumption to make concentrated investments. According to Jain, the confidence to take these positions traces back to the research that occurs at Step 1: “The understanding of the design space and the trade-offs involved gives us the conviction to go big.” Reasonably, Multicoin tends to make its most substantial investments when both its Managing Partners are bullish. “We loved all of the big winners,” Jain said of him and Samani. “That’s why we had the conviction to size them aggressively. I don’t think we’ve had big wins that we didn’t size.”

Depending on the type of investment, the money itself might come from Multicoin’s hedge fund or venture fund. As mentioned, the same team works across both and the fundamental thinking remains the same. “The difference is just liquidity,” Jain said. 

One additional quirk is that the hedge fund allows Multicoin to take short positions, though the fund does this less and less. You might wonder why given the number of much-hyped scam projects in crypto. Indeed, Samani mentioned the value short selling has in exposing disreputable projects, particularly those relying on unsustainable economic models. “Shorting is a very interesting way to try and break a Ponzi,” he said, identifying Olympus, a recent project, as one example. Multicoin’s short activity has not been limited to potential Ponzis. In the past, it has successfully shorted Zcash, Monero, and Ripple. 

So why pull back on the approach? “Shorting is hard to do profitably,” Jain said, “There’s asymmetric downside rather than asymmetric upside.” Moreover, it presents reputational risks, which matter now that Multicoin runs a venture fund. “Even though shorting makes markets more efficient, it doesn’t look good when a hedge fund makes money and other people lose money,” Jain said.

Ultimately, Multicoin seems to be skating toward a long-only model – perhaps with the odd exception. That looks a coherent fit given its proclivity to go very long, very aggressively in its venture vehicles. 

Step 7: Proactively support

Multicoin is not a hands-off investor. It is constantly, proactively looking for ways to help its investments think and execute better. Efforts in this regard are varied, but it starts by simply keeping portfolio companies top of mind. Per Samani: 

We’re always sharing ideas or news with them. Not things like, “Oh my god, here’s a competitor, they’re going to kill you.” More so, we’ll send someone a message saying, “Hey, I saw this piece, and it made me think about what you’re doing. Here’s something you might want to consider.”

Entrepreneurs backed up this claim unprompted. Project Galaxy CEO Harry Zhang remarked, “They always think about how they can help without you asking.” Samani added that though roughly 80% of the messages he might send “don’t go anywhere,” it didn’t matter. “I want them to know that I’m thinking about them. And 20% of the time, it ends up being useful.” Given that Samani estimates he sends about twenty such messages a day to founders in the portfolio, a 20% hit rate is significant.

While Multicoin plays the percentages when providing advice, it also more tangible support. In particular, the fund provides strong marketing and PR help through Reed. LP Adam Mastrelli described the addition of Reed in 2018 as “monumental” because of the new value he brought to the table. Multicoin’s founders confirm this assessment. Tegan Kline of The Graph referred to Reed as a “total savant,” while Solana co-founder Raj Gokal said he taught the project “everything we know about PR, marketing, product launches, and managing a community.” In the often confusing crypto world, having someone that understands the technology that can also craft a compelling message is extremely valuable. 

Another way Multicoin provides support is by helping projects expand into China. Since hiring Mable Jiang in 2019, the firm has established an influential, impactful presence in the country’s ecosystem. For example, as part of Solana’s excursion into Asia in 2020, Jiang helped craft a “hyper-local” engagement strategy that leveraged WeChat and domestic social media platforms. Jiang also excelled at business development introductions and helped Solana hire Chinese talent. With the benefit of 18 months, Jiang noted that “the awareness of Solana in China is much higher.” Far from an isolated example, Jiang provided similar value to Helium and The Graph, assisting both projects in hiring regional employees.

Multicoin’s ability to offer cross-continental support is a rare advantage. No other US crypto fund has such an established base in China. Meanwhile, China’s most prominent firms like HashKey and Fenbushi remain focused on Asia. Samani commented on Multicoin's approach, saying:

Crypto capital markets are inherently global. We recognized this early on and try to help all of our portfolio companies by aggregating knowledge of major cultures on our team.

Beyond PR and Chinese market expertise, Multicoin appears to be keen to add value in other ways, depending on the circumstance. As mentioned in Part 1, the team played an influential role in helping Helium define its tokenomic structure, for example. To Mong, that episode was symbolic of the flexibility with which Multicoin aims to help, “It’s pretty clear that they don’t use a templatized approach with their portfolio.”

Finally, Multicoin seeks to advance its companies by advocating for progressive crypto regulation. Last year, former Chapman and Cutler Partner Greg Xethalis joined to head up internal legal functions and direct Multicoin’s efforts in Washington. Xethalis previously worked on the first bitcoin ETF proposals and represented several prominent crypto operators over nine years in the space. In our conversation, he noted that Multicoin “wants to be involved in DC.” In particular, he outlined two priorities for “common sense” legislation. The first is to establish how bitcoin and other digital assets should be treated from a taxation perspective. The second is to create a framework for network launches and DeFi, which allows the space to grow onshore, albeit with “certain guardrails.” Though there is no single law that could solve the industry’s issues, Xethalis acknowledged, he and the firm are keen to advocate for an accommodative environment in the US. Multicoin’s regulatory interest is another example of proactively aiding its companies.

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Step 8: Aggressively follow on 

Some decisions you have to learn the hard way. In 2019, Multicoin acted early to buy BNB, Binance’s native token. That was a sharp trade given BNB’s more than 6,300% ascent over the following three years. However, Multicoin missed some of the upside. “We trimmed that position too quickly and it just kept going,” Jain recalled with a sigh. “We still have some but we could have had a lot more and it has just compounded into a huge market. We learned you need to let your winners ride.”

Mercifully, it appears to have been an isolated lapse in judgment. By and large, Multicoin has leaned into its winners rather than cut them back. As discussed, Multicoin bought stakes in Solana from other investors early in the project’s life when many had lost faith in it. (Those sales must needle terribly today.) Samani and Jain similarly made follow-on investments in Helium, The Graph, and several others. After buying FTX’s token FTT, the team tracked Sam Bankman-Fried’s work closely enough to help capitalize the creation of Serum and participate in FTX US’s recent round. When Multicoin feels it is on to a winner – even if other investors disagree – it doubles or triples down. 

Multicoin Capital has earned that rarest of venture capital honorifics: contrarian. It has a demonstrated history of picking non-consensus investments and being proven right. Making that happen has required much more than a bolshy Twitter presence, sassy marketing, or provocative conference. It is the result of the firm’s most fundamental tenet: to think for oneself. 

In the final part of our trilogy, we’ll turn to the future and explore where the fund is searching for its next winners.

Read Part One and Part Three, here.

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