The secret to Multicoin Capital's success
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The secret to Multicoin Capital's success
a16z is the master helmsman of Web3.0, Paradigm incubates and innovates at the application layer, while Multicoin Capital, driven by research papers, is one of the biggest VC winners in the new public chain era.
Navigating Web3 tides with focused insightsTechFlow:
Looking back at this bull market, one of the biggest winners in the crypto world has undoubtedly been various crypto venture capital firms. If we must categorize them, my ranking would be: those gaining both fame and fortune, those gaining profit without fame, those gaining profit but with a bad reputation, and those with neither profit nor recognition...
Some crypto VCs care more about money, while others value their reputation more. At the top are those who not only make money but also earn respect from entrepreneurs and investors in the industry—such as a16z, Paradigm, and Multicoin Capital...
a16z is the chief navigator of Web3.0, Paradigm excels in application-layer incubation and innovation, and Multicoin Capital—the thesis-driven firm—is one of the biggest VC winners of the new public chain era, having invested in numerous Layer 1 projects including Solana, Dfinity, Algorand, Hedera Hashgraph, NEAR Protocol... Among these, the most pivotal investment was Solana...
In March 2018, Multicoin Capital led Solana’s seed round at $0.04/SOL. As of November 3, Solana's price surged past $230, with a total market cap exceeding $69.8 billion, ranking fifth globally. Calculating return on investment at this point is meaningless. Nevertheless, Multicoin Capital’s investment methodology and portfolio remain worth studying.
TechFlow has compiled audio notes from Blockcrunch’s podcast interview with Kyle Samani, co-founder of Multicoin Capital, hoping it will be helpful to you.
1. How have Multicoin Capital's investment theses evolved and developed?
Kyle Samani: Our firm revolves around three core investment theses: open finance, Web3, and non-sovereign currencies. These theses guide our investment direction. If I were to add another, it might revolve around creator monetization or the metaverse. But I believe these three core themes will remain essential over the next decade.
2. Do you actively seek projects that fit your three core themes, or do you take more of a top-down approach where you invest based on exceptional founders and teams?
Kyle Samani: A bit of both. Most of the time, we focus heavily on theoretical research because we're good at analysis. During investment committee meetings, we spend 80% to 90% of our time discussing market structure—critical questions like what problems exist in today’s world, whether current models have weaknesses, whether the team can propose innovative ideas, and whether network effects are possible. We pay relatively less attention to product and team.
3. Your investment in Solana is one of your most successful. You invested against the trend, and you wrote a blog post explaining why. What gave you such strong conviction to double down?
Kyle Samani: It was Ethereum’s lack of progress on scaling that solidified my belief. Ethereum launched in July 2015—six years ago—and still hasn’t effectively solved its scalability issue. We’ve seen smart people building projects like Starkware and dYdX, but after six years, Ethereum still lacks a solid scaling strategy. That made me lose full confidence in it, which in turn strengthened my conviction in Solana. Despite its technical risks, Solana actually solved some real problems, which is why we doubled down.
4. What is your process when making a new investment? For example, what key things must you do?
Kyle Samani: In many ways, it's similar to most venture capital firms. However, we spend significantly more time analyzing market structure—understanding how the market operates and what levers the team can use to move forward.
5. Are there certain products you would never invest in because they contradict your thesis?
Kyle Samani: I’m highly skeptical of long-term value capture for certain products—for example, yield or liquidity aggregators. We frequently receive deals in this niche, but we don’t invest. There’s a delicate balance between being strictly thesis-driven and being open to opportunistic opportunities. Take Helium, for example. When we first got involved, we couldn’t predict its success. But after analyzing its history and economic mechanisms, we gained enough confidence to participate.
6. You mentioned your initial predictions for Solana and Helium were conservative compared to actual outcomes. How important is predicting actual results in crypto investing?
Kyle Samani: I did believe Solana would rank among the top five cryptocurrencies, and I said so privately several times. Now being sixth is very close. Predicting Helium’s outcome was much harder—they have different networks, developing IoT, 5G, and other networks, none of which share a unified success metric. I’ve realized it’s extremely difficult to predict outcomes at the outset. You just need to set a minimum threshold for yourself.
7. Before concluding that a thesis is invalid, what criteria do you check?
Kyle Samani: It's hard to generalize, because proving a thesis invalid is a gradual process. Some teams, like Starkware, are tackling extremely difficult technical and mathematical challenges. This requires patience. As long as they maintain sufficient focus and dedication, that’s what matters most—especially before the product even exists.
8. In an interview three years ago, you estimated Ethereum’s chance of success at 20%. Has your view changed now?
Kyle Samani: I don’t think Ethereum’s price will go to zero, but I believe its relevance will decline over the next three years—and that has a 50% probability.
9. What do you consider the best framework for investment thinking? How do you assess the probability of an event?
Kyle Samani: I think estimating probabilities is extremely difficult. The most scientific approach is to identify the main types of risks you’re taking on. Broadly speaking, these include:
- Technical risk (problem unsolved or nearly unsolved)
- Execution risk (what the market really is)
- Leverage (how the protocol gains traction)
10. How do you view opportunity cost?
Kyle Samani: It’s widely believed that 90% of all decisions people make destroy value. We don’t typically try to reforecast our entire portfolio every quarter. Instead, we review each decision made during the quarter to determine whether it was driven by skill or luck.
11. Criticism of team members can hurt morale. How do you balance criticism and praise?
Kyle Samani: This is a fundamental management challenge. Different people respond differently to criticism and praise. Personally, I actually prefer criticism over praise. When criticized, I may get upset, but it also pushes me to work harder. On our team, we’ve known each other for over a decade—we’re close friends who understand each other deeply and have built strong emotional bonds and collaboration. As the final investment decision-maker, I usually give feedback in a way that isn't overly emotional. I let team members know how we made a mistake, encourage them, and help them do better next time.
12. How do you limit your portfolio to a certain number of positions? At any given time, how do you decide how many investments to make, or ensure sufficient concentration in your highest-conviction theses rather than spreading too thin?
Kyle Samani: Multicoin prefers concentration over diversification. There’s no special method here—it’s simply a function of our risk tolerance.
13. Over the past three years, do you think most of your returns were driven by personal skill? Did you anticipate this becoming your advantage, or do you think it might weaken over time?
Kyle Samani: Solana was clearly our best investment in the last cycle. Core scaling issues, key governance problems, data storage, and similar challenges have mostly been resolved. The remaining unsolved issues involve bridges and some zero-knowledge proofs. The investable opportunities are now shifting from technical solutions to consumer products. Investing in “the next Snapchat” is completely different from investing in something like Solana—and that may not be our strength.
14. If you could focus solely on one vertical within the crypto industry for your research over the next one to three years, would any particular area immediately come to mind?
Kyle Samani: I think the most interesting area is protocols resembling Helium—protocols that incentivize people to perform real-world actions by generating real-world value.
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