We Don’t Have a Static Investment Thesis
// Avoiding Narrative Gravity & Ego-Based Allocation

A thesis is a pain to write. Once it’s published, it may (on occasion) support investor focus and improved returns. But, only if it’s right. Most of the time a thesis creates a distortion field that prioritizes ventures that confirm it and make it very difficult for investors to reconsider their position as the market evolves. We have done away with the static investment thesis to avoid two trappings in particular:

1. Narrative Gravity: Once a thesis is articulated, data tends to be filtered through it. Investors unconsciously prioritize signals that confirm their thesis and discount those that contradict it.
Their thesis then builds up a “narrative gravity”, particularly problematic in web3 where narratives can outweigh market logic. This narrative gravity attracts investment opportunities explained by the thesis but not necessarily validated by available data in the market. 

2. Ego-Based Allocation: A thesis creates a mandate between an investor and their LPs. But, in the noisy and highly public domains of crypto, a thesis can also become investor identity. The more public and polished it is, the harder it is to walk away from.
When a thesis diverges from the market, an investor may succumb to “ego-based allocation” to uphold their public persona and position. This can be devastating for LP dollars. But, it can also be detrimental for the space, as allocators keep founders working on projects that the market doesn’t want by funding them.

We Have Core Beliefs
// Following Founders in Pursuit of New Adaptive Peaks

We have avoided a conventional, static thesis because, as founders, we have pivoted and adapted to find ourselves both standing on the event horizon and left in its wake. We know that being adaptive is critical for a venture's success. And, we believe it should be for venture investors too. Our thesis tends to be more dialogue than dogma, and is generally the latest iteration of our thinking, necessarily a work in progress, and always ready for interrogation. What has remained consistent are three core beliefs:

1. The tides have shifted to favour startups (again) 
We believe now is the time for startups. The past decade has favoured incumbents (with SaaS business models that emerged following the internet boom). But, in 2022 rising rates curtailed investor exuberance and several cohorts of disciplined and high performing ventures emerged. At the same time, cloud platforms and open source environments reduced barriers to entry for these disciplined entrepreneurs. And, of course, founders are building in regulatory environments and markets increasingly friendly (and even hungry) for crypto (and AI) products and innovation. 

2. Startups are most likely to find new “adaptive peaks”
We believe that startups (and their founders) are driving the future. Startups are best suited to identify gaps and fill them. And, the best founders are unafraid to move through murky waters in pursuit of new offerings and operating models that best serve emerging user requirements.

In evolutionary theory, a fitness landscape maps traits (size, speed, camouflage) against survival outcomes. A species climbs toward a “peak” through small adaptations. But to reach a higher peak, with better odds for survival, they sometimes need to descend into a valley, temporarily becoming less fit. In nature and business alike, large, entrenched species or entities tend to get stuck on their adaptive peak. As the fitness landscape (read: market context) changes, they often die on that hill. Small, fast species (like startups) can experiment, moving nimbly through the mud, to find themselves optimized for a new playing field. 

We actively seek out founders in pursuit of new adaptive peaks, whether they know it or not, because this is the only way a venture can create and or capitalize on market dislocation (making incumbents irrelevant by giving users an unlock, not just an upgrade).

3. Blockchain will drive market dislocation
We believe that the blockchain is the basis for market dislocation. Disruption is what happens when one company overtakes another through innovation, superior offerings, and/or value. Startups today, particularly blockchain startups, have the potential for moredislocation. Market dislocation comes with a fundamental shift in capital flows, technology, regulation, or consumer behaviour. Incumbents aren’t just outdone or overtaken, they are completely invalidated alongside the status quo market structure. Under dislocation, entire business categories lose meaning. If disruption is competitive, dislocation is systemic. If disruption creates unicorns, dislocation creates new asset classes. 

Blockchain is redefining how economic relationships are formed, priced, and enforced. With blockchain infrastructure in place, there are new rules (or no rules) over who can issue and own assets. Web3 applications will fundamentally change how trust can be offered and value can circulate.

The ventures within the blockchain space that can identify and work toward new adaptive peaks (creating new business models, user experiences, operating models, etc.) are most likely to create and/or capitalize on market dislocation.  

To complement our current core beliefs, we have developed a mental model that categorizes ventures based on their solution and uses this as a proxy for how they might find a new adaptive peak. 

Here is how we have connected the dots between a venture’s solution type and their ability to find a new adaptive peak, creating or capitalizing on market dislocation:

Type 1 // Competing Solutions take Iterative Steps Toward New Adaptive Peaks
Competing solutions with their differentiated offerings can sit on the bleeding edge of their product category, edging users toward new operating models, pricing schemes, and forms of participation. But they generally remain tethered to the current state of play. This means that their only chance of attaining a new adaptive peak is with momentum behind them. When they get there, the competition won’t be far behind.

Type 2 // Challenging Solutions Drive Users Toward New Adaptive peaks
Challenging solutions that offer users completely new ways of working are most likely to land on a new adaptive peak in the near term. Their focus on incentivizing behavioural change also means they are the most likely to shepherd users into accepting new operating models. They are the most likely to champion dislocation because they work with users along the way.

Type 3 // Emerging Solutions Makes Moonshots Toward New Adaptive Peaks
Emerging solutions are the most future oriented in terms of their offering, which is often completely disconnected from the current competitive landscape. However, that disconnection only leads to dislocation if customers follow. Because emerging solutions often make no attempt to meet users where they are today, they can forfeit go-to-market capabilities and risk becoming an unused pipe dream. 

The Key Takeaways  
//Go-to-market is the Link

The key link between solution type and how a venture pursues a new adaptive peak is their go-to-market approach. 

• If competing ventures commit to a simple attraction and retention approach, they may be unable to escape the status quo. They can become too invested in current models and never move toward a new adaptive peak. 

• If emerging ventures are too disconnected from current users (not meeting users where they are, hoping to go viral) they may risk leaving users behind. While a new peak may be identified, if no one wants or knows how to move away from the status quo there can be no dislocation. 

• The best approach introduces a counter to the status quo (taking a bigger swing than competing ventures) and ushers users toward this new peak through incentives (helping them to the other side of dislocation). Challenging ventures are most likely to take this approach. These ventures typically see their product as a process and their roadmap or release schedule is designed to support a go-to-market that conscientiously moves users into new ways of working.

We target challengers because they are the most likely to land on a new adaptive peak, creating or capitalizing on market dislocation. They do this by releasing solutions that push beyond the status quo and rethink how to solve a user's pain (current or foreseeable). These solutions tend to be closer to unlocks than the iterative improvement of a competing solution. Because they are often building for a current pain, they also tend to meet users with offerings in the here and now. These offerings tend to be more concrete and have more immediacy than emerging solutions, which often live too far in the future.

It’s this happy middle, in terms of a go-to-market approach, that makes them more likely to find a new adaptive peak: they’re divorced from the current peak but don’t leave users behind. This is especially important in the blockchain space where timing can kill the best solutions. Emerging solutions can often look like new infra with unclear value propositions that become dead chains. And, competing solutions can look like the saturation of NFT Marketplaces in ‘22 or ’23; those that claimed dominance didn’t necessarily adapt with the market and lost relevance. The same is likely to happen for some L2s, perp. DEXs, or prediction markets.

B2B2C // Onchain Existence
B2B2C offerings tend to rethink how we work onchain and thrive in conjunction with integration partners. With greater unlocks come an increased breadth of use cases. These challengers need to ensure they start with focused and relevant and accessible ones that don’t sacrifice huge opportunities in the future.

B2C // Hyper-Focused Solutions
B2C offerings tend to orbit around the specific needs of a user group. They come with incredible growth potential when they address sizable demographics with urgent needs. They often need to move fast, making no missteps that could compromise their trustworthiness, before larger players descend on their emerging user base. When working with composable architecture they shouldn’t reinvent the wheel, but must take precautions against components that aren’t contextualized for their specific demographics. 

B2B // Ubiquitous Needs
B2B solutions often deliver the essential or underlying tech that ecosystems or applications require. These solutions, quite simply, need to have the best tech. to flourish. Achieving sufficient decentralization so that they have the capacity to move away from dated licensing or SaaS models will help them move to new adaptive peaks with flexibility.