Aug 4, 2022 · 59m · capital-allocators
Avichal Garg – Programmer-Centric Crypto Investing at Electric (Manager Meetings, EP.34)
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In this episode of Manager Meetings, Evanston Capital's Manish Gandhi interviews Avichal Garg, co-founder of Electric Capital, exploring his engineering-first approach to crypto venture investing, proprietary developer analytics, and protocol value capture across market cycles.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 10.3% of the talking time here. How this is scored →
Ted as informed peer 4.7 Guest teaching 3.8 Guest disagreement 1.0 Ted pushing back 0.9
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 18:50 Challenging mainstream contagion narrative
Garg firmly rejects the notion that crypto protocols failed in 2022, arguing that decentralized on-chain primitives worked as designed while opaque off-chain leverage caused the crisis.
Hardest push from Ted ▶ 48:36 Questioning high-valuation NFT marketplace investmentGandhi presses Garg on justifying Magic Eden's $1.5 billion Series B valuation during a severe drop in NFT market volumes.
Biggest teaching moment ▶ 26:40 Smiling curve value capture masterclassGarg provides an extensive strategic framework demonstrating how standalone middle-layer DeFi protocols get economically squeezed between user-facing apps and base layer protocols.
Ted holds their own ▶ 17:35 Rigorous framing of systemic risk and insolvencyGandhi displays sharp market knowledge by systematically enumerating recent systemic collapses across Terra, 3AC, Celsius, and BlockFi to challenge market viability.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Episode Overview: Manish Gandhi and Avichal Garg | 4 | 2 | 1 | 1 | Ted Seides opens with context on Evanston Capital and Electric Capital before Manish Gandhi warmly invites Avichal Garg to share his background. Garg reflects on growing up as an immigrant outsider and how that mindset prepared him for contrarian investing. | |
| Early Career, Operator Background, and Founding Electric Capital | 4 | 2 | 0 | 0 | Gandhi asks about Garg's early career at Stanford and Google/Facebook. Garg elaborates on viewing himself as a product engineer rather than an investor and describes the genesis of Electric Capital. | |
| Launching in 2018 and Embracing Bear Market Cycles | 5 | 3 | 1 | 1 | Gandhi highlights the contrarian nature of launching a dedicated crypto fund in the 2018 bear market. Garg details the immense friction in early fundraising and explains why bear markets produce the highest-quality founder interactions. | |
| Data-Driven Conviction in Long-Term Crypto Fundamentals | 4 | 4 | 2 | 1 | When asked about his strong conviction, Garg reframes his stance as skepticism grounded in hard data rather than blind belief. He cites developer retention, demographic shifts, and stablecoin velocity as objective metrics. | |
| The Founding Partnership with Curtis Spencer | 6 | 5 | 2 | 2 | Gandhi poses a pointed question about the 2022 crypto contagion, asking whether high-profile collapses signal a dead end. Garg counters by pointing out that transparent on-chain DeFi protocols remained resilient while opaque off-chain centralized entities failed. | |
| Tangible Industry Evolution: L1s, L2s, NFTs, and DAOs | 5 | 4 | 1 | 1 | Gandhi inquires into what has been learned across layer-1s, layer-2s, NFTs, and DAOs during the market downturn. Garg walks through concrete implementations showing that infrastructure that was purely theoretical in 2018 is now functioning live at scale. | |
| The Value Capture Smile Curve and Defensible Protocol Moats | 6 | 6 | 2 | 1 | Gandhi brings up Electric's disciplined pass on early DeFi yield farming due to moat concerns. Garg provides a thorough breakdown of the smile/U-curve value capture framework, explaining why middleware protocols risk being squeezed between layer-1s and consumer interfaces. | |
| Sponsor Message: Ridgeline Asset Management Platform | 4 | 4 | 0 | 0 | Following a sponsor read, Gandhi asks about Electric's widely cited annual developer report. Garg outlines how crawling open-source repositories provides proprietary signal while publicizing the data generates massive ecosystem goodwill. | |
| Investing in Liquid Early-Stage Tokens | 5 | 5 | 1 | 1 | Gandhi asks how Electric navigates the liquid token market where early-stage risk converges with public liquidity. Garg explains that tokens go public at the bottom of the S-curve to reward early users, requiring entirely new valuation frameworks and institutional operational tooling. | |
| Engineering-First Organizational Architecture | 5 | 4 | 1 | 1 | Gandhi invites Garg to explain Electric's unique organizational structure. Garg draws parallels to tech incumbents like Amazon, noting that Electric is deliberately structured like an engineering software startup rather than a traditional VC firm. | |
| Crypto-Native Operational Support for Protocols and Founders | 4 | 3 | 0 | 0 | Gandhi asks how Electric provides hands-on support for web3 founders. Garg explains crypto-native operations such as on-chain governance staking, spinning up Asian validator nodes, and building custom smart contracts for portfolio teams. | |
| The Multi-Chain Thesis and NEAR Protocol | 5 | 4 | 1 | 1 | Gandhi asks about the multi-chain thesis and Electric's specific bet on NEAR Protocol. Garg lays out the rationale for a heterogeneous layer-1 landscape, highlighting NEAR's sharding architecture and developer-friendly abstractions. | |
| NFT Market Defensibility and Backing Magic Eden | 6 | 5 | 2 | 2 | Gandhi questions leading Magic Eden's Series B at a $1.5B valuation amid dropping NFT transaction volumes. Garg defends the pricing using revenue multiples and draws an analogy to Airbnb vs. Uber to argue that differentiated NFT inventory offers higher long-term defensibility than fungible crypto exchanges. | |
| Long-Term Vision: Unlocking Global Human Brain Power | 3 | 2 | 0 | 0 | Gandhi asks for Electric's macro vision and wraps up with lightning-round closing questions. Garg presents his thesis on unlocking untapped global brain power before answering brief personal habit and philosophy questions. |
Statements from this episode (29)
Garg: Founders must tolerate being perceived as dumb for years
“And it turns out that psychological position is very important if you're going to be a founder or if you're going to be an investor in something like crypto. You have to be comfortable with people thinking you're dumb for many years at a time.”
Garg: Crypto VC firms must operate like engineering-driven software companies
“The way to do investing in crypto would be really different. And it would look a lot more operational. It would look a lot more like a software company than it would a traditional investment firm.”
Electric Capital found raising a $1B fund easier than $10M
“Bizarrely, it was easier for us to raise a billion dollars than it was to raise that first ten million dollars.”
Garg: The best investments happen when crypto is deeply unpopular
“Curtis and I always joke that the best investments are when nobody wants to talk to us and we're slowly getting there. When we're very, very unpopular is actually the right time to be investing.”
Ethereum developer counts remained flat despite 80 percent price drops
“The number of developers that are continuing to write code in Ethereum, despite prices being down 60 to 80%, it's flat. The number of full-time developers hasn't gone down. They're still writing code.”
Garg: DeFi protocols like Maker and Aave did not fail in 2022
“DeFi worked. DeFi didn't fail here. Maker is still going. Frax is still going. Ethereum is producing blocks. You can send money around using stable coins. You can still take money out of Aave. All the systems that are designed to be over collateralized and res…”
Garg: 2022 crypto failures were caused by opaque off-chain behavior
“The systems that failed by and large were because of off-chain opaque behavior.”
Garg: Crypto valuations will overcorrect to the downside
“We tend to think a lot of these things will overcorrect relative to the value that they've created and relative to the value that they will create.”
Magic Eden generates hundreds of millions in revenue run rate
“You look at something like Magic Eden on Solana, the run rate for that business is hundreds of millions of dollars a year. The GMV is billions and billions of dollars a year of assets being purchased, and that's on another new L-one in Solana.”
Syndicate enabled over 5,000 DAOs to launch within nine months
“You look at DAOs, decentralized autonomous organizations, where investors in a company called Syndicate, which is essentially DAO infrastructure, makes it really easy to create a DAO and use that infrastructure. They now have over 5000 DAOs that are using the …”
Garg: Decentralized storage protocols like IPFS are competitive with AWS
“And beyond that, even decentralized infrastructure. You have things like IPFS, Interplanetary File System, which is incentivized with Filecoin, or RWE, which is a permanent data store. And these things work. You can actually store data on them. Depending on wh…”
Garg: Value chains form a U-curve where middle integrators get squeezed
“What you can visualize is sort of a U-curve, which is to say that if you're on the far left and you really own the user relationship, you can capture a ton of value. And if you're on the far right, you have some CapEx-heavy hard technology problem. You can lik…”
Garg: Uniswap will try to capture end-user interface value
“So I think in the case of somebody like Uniswap, you're going to see them try to capture more end-user-facing value and try to own that interface.”
Garg: Most DeFi protocols will fail to capture defensible value
“A lot of these protocols ultimately we think will not capture that much value despite there being very useful. It's just going to be really tough for them to actually capture significant value defensively over time.”
Garg: Following developers is one of early-stage investing's best heuristics
“One of the best heuristics is follow the developers.”
Electric Capital built software crawling GitHub to track developer activity
“We built a system that crawls all of GitHub and GitLab and a bunch of open source repositories and figures out where there's real developer activity.”
Andreessen Horowitz built a media company monetized via venture capital
“One of the things they got right, they essentially built a media company that monetizes with venture capital, and they realized that that top of funnel investment flow is really valuable.”
Liquid crypto tokens are seed and Series A startups gone public
“Essentially, these are seed stage and series A companies that have gone public.”
Every Electric Capital core investor holds a computer science degree
“Everybody on the core investment team has computer science degree.”
Electric Capital employs full-time engineers instead of VC associates
“We don't have associates and principals. We just hire engineers. So we have eight engineers on staff and these are killer people.”
Crypto startups cannot rely on Facebook or Google for customer acquisition
“Many of the traditional customer acquisition channels you can't use like Facebook and Google don't make it easy to advertise crypto things. You just can't use those channels.”
Garg: Crypto will be a multi-chain environment governed by power laws
“We tend to think the world is going to be multi-chain. It's not going to be one chain to rule them all. And there probably is going to be some sort of power law there. So the big winner will be really big. We tend to think Bitcoin and Ethereum will be really b…”
Garg: NEAR Protocol is in the top five to survive long term
“They're easily in the top five of things that will actually persist and will survive and have a real value and real ecosystems built on top of them.”
Garg: NFTs are probably how crypto goes mainstream
“The high level here is I've come to believe that NFTs are probably how crypto goes mainstream.”
Magic Eden captured 95 percent Solana market share in nine months
“And Magic Eden has, in nine months, gone from zero to 95% market share on Solana.”
Magic Eden had a $100M revenue run rate when Electric Capital invested
“At the time that we made the investment, they were doing like a hundred million or so annualized run rate, ARR for their business.”
Garg: NFT marketplaces are more defensible businesses than cryptocurrency exchanges
“The belief we've come to is that the NFT markets Are actually going to be more defensible than the cryptocurrency markets. And it's because the assets that you're purchasing are by definition, unique and distinct.”
Garg: Y Combinator companies will create $500B to $1T in value
“Like, look at Y Combinator. They were giving people 25 to 250,000 dollars, and out of that came Stripe and Airbnb. When you add up all those companies, I think they're probably going to end up creating five hundred billion to a trillion dollars of value.”
Garg: There are no good venture investments, only missed size or omissions
“There are no good investments in venture. It's either investments where you said no, you should have said yes, or it's investments where you said yes, but you should have put in a lot more money. There's just no good venture investments.”