Crypto Investing Strategy From VC Who Backed FTX, Solana
- Edith Yeung backed some of crypto’s hottest companies at the seed stage.
- She explains her investing strategy that’s leveraged within the $100 million VC fund that she co-founded.
- And she shares 2 start-ups in her portfolio that are flying under-the-radar.
Edith Yeung describes herself as a “baby VC”, given that she only has eight years of experience in the venture capital space under her belt.
But really, she’s downplaying her already impressive achievements.
In her previous role as a partner at 500 Startups and now as a general partner at Race Capital, she’s invested in some of the leading data and fintech infrastructure companies, including three “decacorns” – companies valued at $10 billion – crypto exchange FTX and networks Solana and Stellar, as well as one unicorn, Agora.io, at the seed stage.
She co-founded Race Capital in 2019, a $100 million fund focused on enterprise computing, including data and fintech infrastructure. Despite being a more generalist fund, the firm became known for identifying winners in the crypto space at an early stage, such as Solana, Lightning Labs and FTX.
Identifying winners
Yeung admits there’s not much to see in many of these companies at the seed state.
Most of the investments center around finding individuals who are excited about a very specific space and vertical.
This excitement should then transfer to Race Capital’s team, Yeung said. As a former software developer, she should want to jump in and build with them.
“I’m an operator at heart, who happens to invest, not a finance person trying to understand tech,” Yeung said.
Although some might think Yeung’s technical background would give her an advantage in finding investments, this isn’t necessarily the case at the seed stage.
Over the years, Yeung’s learned that getting involved at that very early stage means getting comfortable with investing in things that you don’t understand, because ideas and strategies change so much. If you want to understand the investment, then it’s better to focus on growth where everything is pre-proven, she said.
“Just over the years, I would say 99% of the folks in this space, especially in the crypto space. it’s all about money and it’s actually rare to find teams that really want to build something substantial,” Yeung said.
In 2013, Yeung bought her first bitcoin and has experienced a number of bull- and bear-cycles. And so, she’s able to identify the founders that are in it for the long-haul.
Solana
One example is Solana, a layer one blockchain solution. Yeung met founder Anatoly Yakovenko before he’d even completed the network’s whitepaper.
She was one of the few VCs willing to take a gamble on Yakovenko’s vision, as he built out the blockchain during what has come to be known as the crypto winter. In 2018, she took part in the firm’s pre-seed round as a partner at 500 Startups, alongside two partners from Abstract Ventures for an undisclosed amount.
Fast forward to June of this year, and Solana raised $314 million in a token sale led by a16z and Polychain. In 2019, the firm had already raised $20 million in a Series A round.
In many cases, Yeung is looking to build with the team, helping to remove barriers for the team. She helped find Solana office space.
“[The Solana team] actually hung out at the 500 Partners office in San Francisco for about eight months,” Yeung said. “And then I found another email in August of that year, I actually introduced them to their first office, it was a sublease from another project.”
FTX
With FTX, a cryptocurrency exchange founded by 29-year-old billionaire Sam Bankman-Fried, Yeung helped out with the company’s public relations strategy
“I actually went to the FTX team and said, ‘Look, I want to write your press release, I want that help to make you make you known,'” Yeung said. ” … FTX seed round was led by Proof of Capital because I actually wanted to help on pitching and help them talk to journalists because they didn’t know anybody. Now, of course, Sam is on TV every day, they don’t need help anymore.
But in some sense, I think it’s really being able to jump in, get your hands dirty and get things done and I love doing that.”
Yeung led FTX’s seed round for $8 million through Race Capital, which was formerly known as Proof of Capital. FTX is now seen as one of the hottest investments in the crypto space. Its most recent Series B round values the company at $18 billion.
Startups to watch
Despite finding clear winners in the crypto space when discussing startups to watch in Race Capital’s portfolio, Yeung highlights two very different companies outside the crypto realm.
1) Opaque Systems
Opaque Systems is a company working to build a solution that helps individuals access and work with sensitive data in a cloud environment securely, even across multiple organizations.
This is becoming increasingly important as companies need to build out GDPR-compliant solutions.
Opaque raised $9.5 million in a seed round in July.
2) GoodNotes
GoodNotes is a note-taking app for the iPad.
“GoodNotes is the most popular note sharing platform on the iPad to start,” Yeung said.”Students love to draw these beautiful class notes using GoodNotes. They have been around for a while and we are the only investor for GoodNotes. They’re awesome, just a super-dedicated team … so we’re super excited about them.”
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