William Quigley: Yes, so I think in entrepreneurship, what are the obvious things to avoid, I roughly know. So when I hear a pitch, you know, I can give what I think is a very valuable perspective. And I have an advantage; I don’t care if you like me; I’m willing to tell people directly. Entrepreneurs need to know that the word ‘entrepreneur’ didn’t even exist twenty-five years ago; now everyone is an entrepreneur. The worst thing is that venture capitalists, especially young ones, never want to tell an entrepreneur that their idea has a major problem because this might upset the entrepreneur. There’s another reason, which is that in case that deal turns out well later, if you’ve been encouraging them, maybe they could still come back in the next round of investment. That’s why I tell most people to never ask, ‘Is this a good idea? Is this a good business?’ type questions. This is something I often say in due diligence workshops for young team members. You know, don’t ask such questions because you won’t get the answer you want. So when people come to pitch me, I really just want to hear crypto-related stuff; that’s true. I’ve done a lot, right? I’ve made about two hundred investments in the cryptocurrency space, probably founded or co-founded thirty different companies, so I have a lot of background in this area. If someone wants to do something, I would say, don’t bother asking others because who cares, right? Just like if we had asked people what they thought about Tether at the time, people were voluntarily expressing opinions about Tether, and it was generally considered a bad idea; stablecoins were pointless. Logically… right? So you see, if they can’t see that stablecoins are obviously a good thing, why would you think they would see your weird idea as good? To give some encouragement to the young people, especially, I know what it feels like to miss out on something. It’s like when I graduated from college in the late eighties; the eighties felt like a ‘Greed is Good’ era, and many graduates, including myself, felt, wow, and then you know Wall Street started to decline, and we thought, wow, we missed out, missed out on all this wealth, all these good things. Of course, those things on Wall Street in the eighties are now irrelevant. I want to emphasize one point, especially for young people, the first wave of technology is what I call the tenfold effect. People are using technology in familiar ways, making products better, faster, cheaper. They are still doing the things they normally do, but now better, faster, cheaper. This could be worth ten times the value; the value you contribute through this technology has increased tenfold. Who cares? The next wave is seismic. The next wave is when people have pondered this technology for a long time, start to think abstractly, and then start doing things that couldn’t have been done without this technology, right? So without the internet, search engines couldn’t exist, right? So anytime you have the ability to do things that previous technologies couldn’t achieve, you have the opportunity to achieve nearly infinite profits because you will be the first, and no one knows how to compete with you because a new business model is like a new species, and no one knows how to think about it. So I would say to all those who say... wow, you know, I missed the whole cryptocurrency thing, etc., you missed the first act because in most cases, it’s all derivative, right? First, we had Bitcoin, then we forked a lot of Bitcoin, we did Dogecoin and so on, then we put smart contracts on-chain, and now we are doing all kinds of cool things with smart contracts. But we will also come up with other things that could be worth a hundred times if you try to do something mainstream now. For example, there might be a novel stablecoin in the future, but if you just say, oh, my stablecoin will be backed by gold and offer yields, I don’t know; I think if you can make money, go for it, but it’s not that transformative.
Alex Popovic: I think if you want to say this, I saw a really interesting article two weeks ago, actually, was it you who said it? About the time intervals between great innovations in the cryptocurrency industry, and how there hasn’t been a big innovation in a while.
William Quigley: Yes, it’s me, and this time is three years.
Alex Popovic: I’ve been thinking about this since then. Because when you first said it, I thought, no way, it can’t have been that long, because you know, I’ve been really keeping up with the news in this field, and there are a lot of nuanced things that look like bigger deals, but really when you peel back the surface and look at the essence, I want to say, dude, you’re right; I’ve been thinking about this since then. I think it’s interesting; I’m wondering what the next big innovation will be under the regulatory game.
William Quigley: Yes, innovation is a very elastic word, right? Marketers use it because they add a color to the product line, right? Of course, you can argue about what is transformative innovation and what isn’t. You and I could make a list; I assume most of us would say similar things, but there might be some differences. Like you know, I was thinking, like state digital currency at the IGEN layer, equivalent of smart contracts, etc.? I think yes, it’s cool, just like the digitalization of staking is used well, but it may not compare to the concept of staking itself, right? We haven’t done much in terms of innovation. I feel we are a bit stagnant, and there are two possibilities. One is, oh, this cow has no milk left, like we’ve squeezed all the cool stuff out of this technology. The other is, ah, you know, we’ve hit a creative bottleneck, we’re all looking at the same news, making the same money, we need someone to come in who thinks about things very differently and says, oh, if you pair this thing with that thing, that would be great. I don’t know which one it is, but I do feel a bit bored. I look at all the news you guys make, and I always think, is it an additional SKU for the product? You know, smaller packaging? Lighter? Or is it a new feature on the blockchain? I haven’t seen a new feature on the blockchain in three years.
Alex Popovic: And most of the news isn’t really big news; it’s just announcements of partnerships. That’s one of my favorite types of news because every time someone tells me, oh, so-and-so has partnered with so-and-so, I always say, yeah, actually, I partnered with Toyota yesterday because I drove to work in a Toyota. Because a lot of announcements like that are just... like the recent one, what was it, what big news was it, really interesting because it’s so obvious. Sorry, I’m going to offend some people, it’s Zebec, saying that Zebec Network has a partnership with Visa Mastercard. I say, you mean Zebec is paying them for their services, so Mastercard has a new customer, but their marketing says it’s a partnership? There are a lot of examples like that, right? It’s like everyone says they partner with Amazon because they use AWS; they are paying for Amazon’s data storage, yet they say they are Amazon’s partners.
William Quigley: I’m glad you mentioned that because a few years ago, my team and I sat down, and we had the same conversation about payments, because a blockchain collaborated with Alibaba, specifically Alipay, and I said, oh, that’s interesting. I don’t know, were you there at the time? There would be an announcement about to be made?
Alex Popovic: Right, I was there. It’s because I like to share, and every time someone does this to me, I always share that meme of the helmet lord preparing in the spaceship for the announcement.
William Quigley: Yes, then your digital currency will triple because you are going to make an announcement. Well, these guys announced their partnership with Alibaba, specifically Alipay, no matter what. Two weeks later, word got out that in their merchandise store, you could buy hats and stuff using Alipay as one of the payment options. So, I don’t know how I would handle it if I were a journalist, listening to people pitch this crap.
Alex Popovic: Oh my God, I know, sometimes you can really tell when the news is slow because there are so many announcements like that at that time.
Evan Mann: So, William, I want to ask you, you’ve talked about ideas you’ve observed, ideas you’ve been involved with, or just ideas that have been pitched to you by others. I really want to know, is there an idea that immediately comes to mind for you now, like the best pitch you’ve ever heard? The worst pitch? Or the best idea or pitch you’ve proposed or received? I want to know how to distinguish between the two because, you know, I could stand in front of the room dressed well and give a great pitch, saying all the right things, but that doesn’t necessarily mean it’s the best idea. Sometimes, the two are aligned, and I’m just thinking randomly.
William Quigley: Let me answer it this way, I have made a lot of investments, so those pitches must be pretty good, right? But I would say this, it’s a different kind of pitch that I teach my team; I like the type of pitch they respond to. I believe that all great business opportunities come from a deep insight into something. If you don’t have that deep insight, you might be doing well with imitation, but it will always be less than that idea with deep insight. So that’s what I’m talking about, the area I like. It’s like, when I’m being pitched, what I’m thinking in my mind is, what good idea did this person come up with that made them decide to say, I’m going to do this? What I like to hear is that if I am going to do a highlight reel of great pitches, I have decided to invest multiple times during the first pitch, although I wouldn’t say it at the time, but I’m listening, and then I hear something, and I think, oh, this might go into the ‘likely’ category. And then it’s probably like this, the entrepreneur shows me some kind of industry-style silhouette, right? It shows, like, this company has these distributors selling these products; these service providers provide services. No matter how the industry is organized, they understand how the existing organization of that industry works. And then they say something, that’s when I know it’s going to be insightful, they say something like, have you ever thought about why? And then I think, oh, I’ve never thought about why, but now that you mention it. Have you ever thought about why plumbers charge four hundred dollars an hour or something? Have you ever thought about why this page exists in rental car agreements? So I really like that because that’s something someone noticed after wandering in that field for a long time. And then in Silicon Valley, what happens is that the mid-level product person goes to their boss or their boss's boss and says, hey, you know what? I think we should do this; I think we shouldn’t just sell software on a disc; maybe we should do it as a subscription, or whatever. And they are told it’s a stupid idea, we don’t care, etc. And then they have two reactions: one, they bow their heads; two, they think deeper. And then when they get rejected by the company, by their boss, they think a lot, and then they come out and find people like me. And another thing an entrepreneur needs to do is that a good venture capitalist can help them. With that insight, with that thing you really need to do, how much value can you capture? The amazing thing about global digital capitalism is that a small thing you do could be worth billions of dollars. Let me give you an example from the payment space, Plaid, if you’re familiar. What happened was that we, the people with multiple companies, always had to deal with bank people to get some silly APIs or whatever. These people had the insight to say, hell, you know what? I think it’s not just us who have this problem. I wouldn’t have believed at first that you could build an entire company around such a simple thing, but it turned out that when you have five billion people trying to connect to banks, it really worked. So those, for me, are the best pitches. A pitch where they have insight, and then they think of how much value can be extracted from that insight, those are the best pitches.
Evan Mann: Is it because founders don’t spend enough time really understanding the problem? Or is it because they don’t communicate it well when it’s conveyed?
William Quigley: I don’t think it’s because it wasn’t communicated well, because that’s fixable, right? When I incubate things, I have incubated things; you know, they might not have that kind of insight into value capture, but working with them, you can say, wait a minute, let’s dig deeper, there might be a dark horse. So I don’t think it’s because… I think it’s because many entrepreneurs are looking at a process, a ten-step process; they say there’s a problem in step four of the process, and they say, yes, I can fix step four of the process, and then you say, yes, I believe you can fix it; I also believe it really has a problem, but you know what? You can only capture zero point five percent of the total value from fixing that step? The reason it hasn’t been fixed is because there’s no value to capture there. So you have to have a mind that can see the value chain and figure out where the extraction points are, where there’s huge profit potential. It’s a super rare entrepreneur, those entrepreneurs, later we look at them, almost like Darth Vader, because they are so good at finding all the loopholes in the system and knowing where to get, right? But those are the best entrepreneurs. I used to feel frustrated when I talked to people, you know, regardless of what we call them, entrepreneurs, I would wish they would think this way, but now that I’m older, I think, very few people think this way. It’s like there will be a lot of people coming to me with a business idea, they say, I built it, I have customers, you know, people like me, and then I say, your maximum scale might be a hundred million-dollar company, your maximum scale, which means I can’t take this company public. That’s not typical entrepreneurial thinking. You might think you could teach this in business school or something, but for some reason, it seems it hasn’t been taught.
Alex Popovic: A few days ago, I was listening to an episode of Stephen Bartlett's show where he talked about the Blue Ocean Theory in the business world. He quoted that book, which I didn't know about before, but I'm starting to understand now. The statistics he shared completely surprised me, which is that statistically, if you can occupy a blue ocean, it means you are unique in that space, and you have no competition. The red ocean is where everyone is fighting, the water is blood-red, and competition is fierce. You are always competing with others in your niche. And in the blue ocean, it’s like you are alone, the water is calm, and everything is nice. Joe Rogan, in the early days of his long solo-hosted podcasts, is an example he gave; he was in a blue ocean, and now everyone is trying to catch up to him, and he still dominates and is still number one, and far ahead, just because he has been there for a long time. Statistically, people who occupy a blue ocean can maintain a leadership position in their niche for an average of ten to fifteen years. I'm curious, especially from your perspective in the cryptocurrency space, do you think that timeframe will hold? To me, Tether is a great example of a blue ocean; it was a leader a long time ago and still is. You might think that maybe the changes in cryptocurrency move faster than in any other space, and that timeframe could be significantly shortened?
William Quigley: Sure, if everyone can get banking services, you know, Tether being able to get a bank account should shock your audience. Billions of dollars of funds flow to an entity because it can get a bank account. I used to tell people coming to my cryptocurrency company to be CFO, now they know, but in the first ten years they didn’t know, they would say, what’s the most important thing, and I would say, getting and maintaining a bank account. Now these people have worked in regular businesses and they say, well, my mom can open a bank account, and my daughter can too, but it’s not possible in the cryptocurrency space. By the way, the reason Coinbase was able to achieve its current status, I don’t think almost everyone knows this, I know because I used to have a company doing the niche business Coinbase originally did, a Bitcoin purchasing service, I also had one, and our bank accounts were always being shut down, and then Coinbase was able to get a bank account from Silicon Valley Bank as a test for about a year, just like that, guys, that’s why Coinbase created value, I don’t care how much value it created. It’s the only Bitcoin purchasing service in the U.S. that can maintain a bank account. Think about it, but that’s ridiculous, it’s like we shouldn’t be so biased. I asked the people at Silicon Valley Bank, I said, why did you choose them? Oh, you know, we know one of the venture capitalists or something, I said, well, choose two or three, but for whatever reason, I… I told my business partner at the time, they just got a bank account. You don’t need to be very smart; everyone wants to buy Bitcoin, but most people don’t know how to buy it, so you go online, and then ultimately it’s an app, but you go online, and they only sell Bitcoin and need a one percent, two percent, three percent transaction fee, but that’s… so anything related to regulatory constraints, those rules are not quite the same, right? You need some insight to know that people want to buy Bitcoin, but you also need to either bribe someone or you need a sugar daddy to give you permission to do something. And historically, venture capitalists have not liked these kinds of businesses, by the way. Venture capitalists used to hate regulated businesses; it’s only in the last five or six years that they’ve started saying, oh, we want to go into defense contracting, or oh, we want to go into fintech. Before the financial crisis, there might have been only two or three venture capital firms known for doing fintech in the U.S.; no one wanted to do it. Too much red tape.
Evan Mann: William, do you have any final thoughts you’d like to share with all of our audience friends? A piece of advice, a question, or something they can do for you because you’ve generously shared your time?
William Quigley: Well, I would say, keep some exposure to cryptocurrency. I always tell people that if they listen, they will do well. A small suggestion, if you don’t feel the need to buy Bitcoin immediately, buy when the fear and greed index drops below twenty; I think you will be satisfied with the price you pay, and it will drop below twenty again sooner or later. Don’t buy when it’s going up because prices always have corrections.
Evan Mann: Yeah, you know, the classic ‘buy high, sell low’ rule never works, right? William, thank you for the profound insights you bring to everyone every time; I really appreciate it!
William Quigley: You’re welcome.
*Disclaimer: This article is for informational purposes only and does not constitute any investment advice!