Jul 22, 2022 · 53m · news
Kyle Samani: Why Bitcoin is Not a Hedge Against Inflation | 20VC #909 · 20VC with Harry Stebbings
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Kyle Samani, co-founder of Multicoin Capital, joins Harry Stebbings on the 20VC podcast to discuss his journey into crypto, Multicoin's rigorous, document-driven investment playbook, and the unique mechanics of token economics and decentralized networks.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 23.3% of the talking time here. How this is scored →
Harry as informed peer 2.8 Guest teaching 4.4 Guest disagreement 3.0 Harry pushing back 3.1
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 47:32 Kyle Dismisses Bitcoin as 'Nonsense'
Kyle rejects the popular narrative of Bitcoin as an inflation hedge, bluntly calling it unproductive nonsense and questioning why anyone would own non-productive assets.
Hardest push from Harry ▶ 23:51 Harry Challenges Multicoin's Harsh CultureHarry directly challenges Kyle on whether Multicoin's confrontational, document-tearing review process prevents junior team members from speaking out.
Biggest teaching moment ▶ 11:30 Kyle Teaches Helium's Decentralized Economic ModelKyle provides a comprehensive breakdown comparing traditional telecom capital expenditures to Helium's token incentive model, reshaping Harry's understanding of decentralized network bootstrapping.
Harry holds his own ▶ 14:06 Harry Defends Network Lock-InHarry draws on core VC principles around defensive moats to challenge Kyle's claim that tokens reduce network effects, arguing that hardware commitment creates durable lock-in.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Kyle Samani's Background and Founding Multicoin | 1 | 1 | 0 | 0 | Harry opens with a warm, open-ended question about Kyle's journey into crypto and the creation of Multicoin. Kyle walks through his background from Google Glass to discovering Ethereum and founding the fund without any host interruption or challenge. | |
| Painful Lessons and Defining High Performance | 1 | 1 | 1 | 1 | Harry asks standard high-level podcast questions regarding painful lessons learned and high performance, throwing in a brief joke about drinking mojitos. Kyle candidly discusses scrapping trading to focus purely on thesis formation and cognitive health. | |
| The Economics of Tokens versus Traditional Equity | 2 | 6 | 3 | 3 | Harry frames himself as a traditional SaaS investor and asks basic questions about what tokens are and how they differ from equity. Kyle educates him on cash flows and directly corrects Harry's assumption that token utility and equity value naturally align. | |
| Bootstrapping Decentralized Network Effects with Helium | 1 | 7 | 1 | 1 | Kyle delivers a long breakdown of Helium's physical hardware network to demonstrate how token issuance bootstraps network effects and aligns early risk with reward. Harry listens passively, letting Kyle explain the capital formation mechanics. | |
| Defensibility of Networks and Democratic Wealth Distribution | 4 | 5 | 4 | 5 | Harry challenges Kyle's claim that tokens reduce network effects, arguing that hardware commitment and token holdings lock users in. Kyle rejects Harry's view, explaining that retail demand for venture-scale returns easily drives users to bootstrap competing networks. | |
| Operational Complexity of Tokens and Market Liquidity | 3 | 4 | 3 | 4 | Harry quotes Avichal Garg regarding liquidity being a double-edged sword and presses Kyle on maintaining discipline during 70% portfolio drawdowns. Kyle casually dismisses volatility concerns with his rule that prices don't matter if you don't look at them. | |
| Multicoin Capital's Silent and Rigorous Investment Process | 3 | 3 | 5 | 7 | Harry strongly pushes back against Multicoin's intense, silent memo review process, asking if such brutal feedback frightens younger team members into silence. Kyle unapologetically defends the culture, stating that fortitude is required and active disagreement is the only way to find truth. | |
| Portfolio Construction Philosophy and Prioritizing the Market | 4 | 5 | 4 | 5 | Harry pushes traditional VC wisdom that early-stage investing is entirely about founders rather than markets. Kyle firmly disagrees, revealing that Multicoin spends 93% of its evaluation time debating market structure rather than product or founder traits. | |
| Analyzing Network Effects and the Challenge of Information | 3 | 6 | 2 | 3 | Harry asks how Multicoin models market returns despite unpredictable macroeconomic black swans. Kyle educates Harry on mathematical network effect curves (sublinear vs superlinear) and explains why Multicoin rejects SaaS investments due to weak network effects. | |
| Information Curation and the Drivers of Bull Markets | 4 | 5 | 3 | 3 | Harry brings up a thesis from Kyle's co-founder Tushar and asks whether bull markets are driven by capital formation breakthroughs or simply 100x leverage. Kyle reframes the dynamic, arguing that while hidden leverage exists, novel capital formation structures ultimately trigger bull cycles. | |
| Sizing Investment Teams and Post-Decision Reviews | 4 | 4 | 2 | 3 | Harry asks about investment team scaling limits and post-decision reviews. Kyle explains that Multicoin routinely TWAPs out of failed positions post-token launch, which surprises Harry given traditional VC illiquidity. | |
| Quick-Fire Questions on Bitcoin, Solana, and Delphia | 3 | 6 | 8 | 2 | In a fast-paced quick-fire section, Kyle displays strong combativeness by declaring Bitcoin to be unproductive 'nonsense' and slamming Ethereum's lack of a scaling strategy. Harry accepts these controversial takes and concludes by expressing how much he learned. |
Statements from this episode (32)
Samani: Stripe was overhyped for merely processing credit card payments
“I had played around with Stripes APIs maybe a week or two prior. And I was quite frankly, not terribly impressed. I was like, you can take a credit card payment. Like, why is this the most hyped up company in the world?”
Samani: Crypto funds cannot combine trading, fundamental research, and venture
“We cannot be the best at everything. We tried to for our first. 36 months, 24 to 36 months trade the market and do fundamental research and do venture. And we realized you cannot, you just cannot do all of the above.”
Samani: Multicoin holds investments indefinitely and ignores asset prices
“We scrapped the trading, the market, and I no longer look at the prices of anything. We now are 100% focused on thesis formation with our holding period is indefinite.”
Samani: Top crypto assets like Bitcoin and Solana lack obvious DCF models
“The largest assets by market cap, notably Bitcoin, Ethereum, Solana, et cetera are assets that don't really have an obvious DCF.”
Samani: Value accrual to both tokens and equity creates conflicting incentives
“In almost all cases, there should not be value accrual to tokens and equity. There are a couple of exceptions to that. But as a general rule, that is true. For teams that try and pitch you value accrual to both, it is almost certain that those two things are i…”
Samani: In crypto venture deals, equity will be worth nothing
“Mechanically speaking, with a lot of the private round market deals that get done these days they're legally structured as SAFs, excuse me, as SAFs with token warrants or equity rounds with token warrants, but the primary asset that we believe will have value …”
Samani: Tokens only make sense for coordinating permissionless public behavior
“Tokens only make sense if you need to incentivize behavior in a permissionless fashion among the public at large. To have them all coordinate on, on some sort of broader shared objective.”
Samani: Helium cuts 99% of traditional wireless telecom costs
“And the goal of this model is, or what's great about this model is you physically remove 99% of the cost from the system. So labor cost goes to zero. Land cost goes to zero. Backhaul cost goes to zero. You just physically remove like all of the costs.”
Samani: Token incentives bootstrap physical networks by aligning risk and upside
“This is, I think like the textbook example of using token incentives to bootstrapping network. Where you actually are both able to assign risk and reward and couple those things in, in a real meaningful way. And in which the participants of the network, in thi…”
Samani: Retail investors have a far higher appetite for venture-like returns
“One thing I've discovered is there's a lot more demand for venture scale return, or I should say venture skew of returns among retail than you would previously think.”
Samani: Tokens help distribute wealth rather than concentrate it
“Without question, tokens help distribute wealth.”
Samani: Excluding customers from equity will be viewed as a regulatory bug
“The fact that norms today around business are those parties typically have no equity ownership. I think we'll be looked upon, I think in 20 years we'll be looked back as a bug of capital markets regulation, not as a feature.”
Samani: Multicoin only invests if intended hold horizon is forever
“It doesn't for us and the reason it doesn't is we have some basic thresholds for making investments, and one of those thresholds is we will only make an investment if our intended hold horizon at the time of investment is forever. That doesn't mean we can't se…”
Multicoin Capital IC begins with seven minutes of silent Google Doc commenting
“Once, you know, we are talking about a new asset in investment committee, the subsequent six or seven minutes are silent. It's everyone having a bunch of Google doc comment conversations concurrently.”
Samani: Finding truth in investment decisions requires active, intense disagreement
“The process of actually recognizing the truth fundamentally requires active disagreements. Because the human brain is subject to everyone has their own biases and whatever heuristics they're using. And they're, as they write a memo are, some of which are inher…”
Multicoin Capital hires blindly based on writing quality rather than resumes
“Step one of our hiring process is write an essay better than what's on our blog. I actually, I don't read your name. I don't read your background. I don't read your resume. I don't care. I just start reading the first words of your document.”
Multicoin Capital operates without reserves or formal portfolio construction rules
“We have basically no formal rules of any form of portfolio construction nature. We don't do any notion of reserves and multi coin. We just deploy and raise our next fund.”
Samani: Sector-based portfolio targets in venture capital are value-destructive
“I think it's extremely value destructive to do so because you can't know ahead of time what you, like, we could not forecast helium. It would not, if we had any constraints on what is in strike zone or not, then helium would have been out of strike zone.”
Multicoin writes check sizes from $1M to $300M across all stages
“We are stage agnostic. We will write one million dollar tickets. We will write three hundred million dollar tickets and we will do everything in between.”
Samani: Multicoin spends 93% of investment evaluation time analyzing markets
“Multicoin prioritizes I'd say 93% of our discussion time is on market. I would like glance at a couple screenshots of the product, but I don't really care. And founders, I only care that the founder market fit is like, makes sense.”
Samani: Early-stage investors lack rigor evaluating returns to scale
“I think most folks at the earliest stages of investments are not nearly rigorous enough in discussing where the returns to scale come from.”
Samani: Almost all product network effects are sublinear
“Almost all network effects are sublinear.”
Samani: Multicoin avoids SaaS investments due to weak network effects
“We basically don't do SaaS businesses for this reason. Not like, and I say this as someone who used to be very enthralled by SaaS. But very few SaaS businesses have meaningful network effects.”
Samani: Reads three to four hours daily but stopped reading books
“I don't read books anymore. But my daily reading time, although it is not on my calendar is probably on the order of three to four hours.”
Samani: Three Arrows Capital blowup is minor relative to entire crypto market
“This three AC blow up is like bad, but like, again, there, the total cost of blow up here is two, three billion. I don't know, against the total market cap of whatever Eight hundred billion. It's still not, like, a huge number. So yeah, not, not that bad in th…”
Samani: Capital formation innovations, not leverage, drive crypto bull markets
“That's not what creates the bull markets. What's created the bull markets is, yeah, I think actually I should say the last two bull markets has been novel formations, novel breakthroughs in capital formation.”
Samani: Investment teams larger than 10 people are net value-destructive
“I believe that the core unit of an investment firm is the investment team. And I am of the view that if investment team is larger than 10, you are now net value destructive to the overall investment team process and culture.”
Samani: Multicoin has spent over a year TWAPing out of one position
“But we can happily T WAP over, over six months. We have one position we've been T WAPing for a year.”
Samani: Bitcoin is nonsense and not an inflation hedge
“No. Bitcoin is nonsense. It does not, there are so many ways to, you can choose to have a productive asset or a nonproductive asset. And then there are many assets that are naturally good hedges against inflation. The obvious of which is like Walmart and Amazo…”
Shorts cut from this episode
▶ MILLIONAIRE Life Hack 🤑🤑 #shorts · 20VC with Harry Stebbin (@36:14)
▶ The MILLION $$$ Job interview 👩💻 #shorts · 20VC with Har (@25:09)
▶ What is it like to join a $430 Million fund? 💰 #shorts · 20 (@21:51)
▶ PREDICTION: Solana will beat Ethereum · 20VC with Harry Steb (@48:13)
▶ THREE KINDS of Network Effects · 20VC with Harry Stebbings (@32:07)
▶ Is Bitcoin a hedge against inflation? · 20VC with Harry Steb (@47:33)