Aug 20, 2018 · 31m · 20vc
20VC: The 2 Core Areas Value Will Accrue In Crypto, Why Crypto Will Drive The Re-Centralisation of Talent Back Into Silicon Valley & Why Regulation Is The Opposite of What We Should Be Concerned By in Crypto with Avichal Managing Partner @ Electric Capita
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20 Minute VC, host Harry Stebbings interviews Avichal Garg, Managing Director at Electric Capital, about the fundamentals of cryptocurrency investing, value accrual across blockchain layers, and contrarian perspectives on regulation and talent recentralization in Silicon Valley.
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 30.4% of the talking time here. How this is scored →
Harry as informed peer 4.0 Guest teaching 4.4 Guest disagreement 1.0 Harry pushing back 2.6
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 22:34 Rejection of decentralized team model
Avichal directly rejects the prevailing crypto narrative that remote decentralized teams work, forcefully arguing that complex scaling requires physical proximity and tribal knowledge concentrated in Silicon Valley.
Hardest push from Harry ▶ 24:14 Challenging Bay Area cost practicalitiesHarry refuses to accept Avichal's Silicon Valley centralization thesis without challenge, raising practical objections around prohibitive engineering costs and scaling constraints in the Bay Area.
Biggest teaching moment ▶ 17:26 State surveillance reframeAvichal educates Harry by completely flipping conventional regulation fears, explaining how public ledgers risk becoming totalitarian surveillance tools for authoritarian governments rather than being banned.
Harry holds his own ▶ 12:06 Holding guest accountable on dApp ROIHarry demonstrates strong market knowledge by bringing up an off-air remark and holding Avichal accountable to explain why dApps and distributed computation offer poor investment returns despite massive capital inflows.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Podcast Station Identification | 1 | 2 | 0 | 0 | Harry introduces Avichal and asks a broad background question about his entry into crypto and starting Electric Capital. Avichal delivers an uninterrupted narrative covering his career history at Google, Facebook, YC, and reading the Bitcoin white paper. | |
| Angel Tech Investing vs. Crypto Investing and VC Pattern Matching | 4 | 5 | 1 | 2 | Harry asks targeted questions regarding angel investing comparisons and VC pattern matching errors in hype cycles. Avichal educates on how traditional VCs risk repeating Web 1.0 mistakes by backing incumbent models rather than platform-native crypto projects. | |
| The Four Buckets of Crypto and Value Accrual | 6 | 5 | 1 | 4 | Harry actively probes Avichal on an off-air assertion regarding the poor ROI case for dApps and distributed compute. Avichal lays out a clear four-bucket taxonomy of crypto value accrual and explains why high private valuations ruin return potential. | |
| Managing Market Volatility, Store of Value, and Liquidity | 4 | 4 | 0 | 2 | Harry questions how crypto can serve as a store of value given extreme volatility and liquidity traps. Avichal details three structural market changes that will suppress volatility and draws historical comparisons to 1930s wealth preservation. | |
| Crypto Regulation, Anonymity, and Geopolitical Risks | 5 | 6 | 1 | 3 | Harry brings up regulatory concerns and quotes Fred Wilson, challenging the threat landscape. Avichal reframes regulatory threat entirely, arguing US regulation will clarify the market while authoritarian state surveillance on public ledgers represents the true Orwellian danger. | |
| Decentralized Teams and the Recentralization of Talent in Silicon Valley | 5 | 6 | 3 | 5 | Avichal offers a strong contrarian stance rejecting decentralized teams and predicting crypto talent will recentralize in Silicon Valley. Harry pushes back directly on the practical engineering costs and scaling constraints of Bay Area hiring. | |
| Quickfire Round with Avichal Garg | 3 | 3 | 1 | 2 | Harry leads a rapid quickfire round covering books, networking, and industry perspectives. Avichal addresses Charlie Lee's stance on ICOs, noting bad actors rather than the fundraising mechanism itself pose the true existential threat. |
Statements from this episode (14)
Garg: Cryptocurrencies represent software eating money across global markets
“I think what's happening is that cryptocurrencies are this massive platform shift in the world. They represent a change in a lot of different dimensions and everything from how we build companies to business models to, you know, I think this is software eating…”
Garg: Crypto-native companies will accrue the most long-term value
“So I think that's always the risk for the VCs or for the ecosystem in general is that investors pursue things that pattern match to things that we already know rather than identifying the places where the platform is natively able to do things that we weren't …”
Garg: Crypto dApps and computation will not create most long-term value
“Even though most of the dollars today, I think, are going towards those last two buckets of distributed computation and distributed applications, I don't think that's actually where most of the really new value will get created in the long term.”
Garg: Late-stage crypto token valuations in 2018 are out of whack
“And right now, what you have at the late stage is a lot of money and a lot of risk. And so you haven't really de-risked it, but there's a lot of money going in. And so as an investor, you look at that and you say, wow, that's a pretty tough place to put money.…”
Garg: Crypto volatility will drop over five years, improving store-of-value status
“I would expect that over time, over the next, say, five years, the volatility will go down in the space, and it will start to look like a better and better store of value.”
Garg: Crypto protocols achieve secondary liquidity in two to four years
“The fact that many of these protocols or companies can go public, so to speak, onto these markets, onto the secondary markets in two or three or four years instead of seven to 10 years from an investor's perspective is a huge advantage.”
Garg: Retail crypto investing without full-time dedication is highly risky
“On the retail side, I think it's really, really tough. I think unless this is basically a full-time job, it becomes kind of like day trading or speculating, which I think is very, very risky, and so hopefully people are not risking money that they can't afford…”
Garg: US government crypto regulation has been nuanced and sophisticated
“And if you look at the way that the U S government in particular, I think has handled crypto. I think they've been very nuanced and sophisticated in their handling of this.”
Garg: Regulatory certainty in crypto will boost investment and innovation
“And so I think, actually, in practice, what's going to happen is the government will clean up Our understanding of where those lines are, and once we have that regulatory certainty, we'll actually create even more investment and more innovation, because then e…”
Garg: The real threat to crypto is authoritarian adoption, not bans
“The real risk, in my opinion, therefore, is not that the government bans this stuff. I think the real risk, actually, is that nefarious governments fully, fully embrace it.”
Garg: Fully decentralized teams cannot effectively scale complex tech projects
“Yeah, I generally think decentralized teams won't work. I think in the very, very early days of any platform, they can work, and it's because there is not that much competition, and a lot of what you need to build out is infrastructure, and you have a small nu…”
Garg: Crypto companies will eventually recentralize in Silicon Valley
“So what I would expect will happen is actually, over time, crypto companies will actually recentralize in large part to Silicon Valley.”
Garg: ICO scammers threaten to gut the crypto space from inside
“I look at ICOs strictly defined as people raising large crowdfunding rounds from relatively technically unsophisticated investors as a symptom, which is that there are a lot of scammers who are taking advantage of this ecosystem. And I think those bad actors c…”
Garg: Electric Capital invested in Coda for zero-knowledge blockchain compression
“We did an investment in a company called Coda that has some novel ways to compress the blockchain itself using zero knowledge proofs. And the reason I think this is really interesting is what it allows is for a much, much smaller blockchain, which allows for m…”