Thinking Like a VC: Crypto Startup Investment

We analyze whether a crypto tied to real estate could become a widespread default currency. Benefits could include transparency and minimizing money extraction by institutions. Risks include incentivizing overdevelopment and mispricing assets. We explore impacts on society, investing prospects, and probability of mainstream adoption.

Malcolm Collins: [00:00:00] I hope that this talk has helped listeners who don't understand like what VCs are actually thinking or what's going on in the world of like people who are pricing assets or deploying capital how they think about things.

And and how they think about the future because I think this has been a good like educate to give like a broader picture on this. And I think it might be something that I might do, you know, if it does well, or if people like it recurringly just sort of analyze ideas in sort of a critical way that can help the average person understand what's actually going on with all this

Would you like to know more?

Malcolm Collins: Hello!

It is wonderful to be with you here today. We have a guest today who was actually a fan of the show Chris Lehman, who reached out. You know, a very typical profile of a lot of the fans when we meet them, which is smart entrepreneur, you know, Harvard grad, like, working on a cool project. And we were talking about the project he was working on and it got me thinking oh, sorry, before I go any further, I do, I do need to point out why is Simone not with us [00:01:00] today? She has pneumonia and she is pregnant which means she can't do all the normal medications you would do if you got pneumonia. And so she's just been laid out, you know, in and out of the hospital recently, but you know, fingers crossed she's fine.

But I'm able to do this, this wonderful interview. So, so we were talking about his project is in the crypto space. And I was like, well, you know what I could do, what everybody does in the crypto space these days is there's all these shows that like shill projects in the crypto space, right? Like they're like, Oh, this is so cool.

And everything like that. And I was like, you know what I think our audience would prefer, which is like a really. Sort of, critical dive into one, the project, and I'm going to look at it from a few angles. Um, you know, will it make the world a better place? Which I think is always something you're sort of thinking of when you're talking about Web3 technology.

Two, is it a good immediate investment? Like if you had capital, like me as a former VC would I invest in it? And three, what is the probability of it achieving its long term [00:02:00] objective? And so that's what we're going to go over. So, maybe the audience is like this, maybe the audience won't, but I'd love you to start by talking a little bit.

And I, I always want to promote, you know, when I have audience members who are working on stuff, I always want to do what I can to promote that stuff so long as I think it's, it's like broadly in line with, with what we're doing that the community is doing. So start by going over what your project is.

Chris Lehman: Yeah, absolutely. And thanks for the kind words and hope someone feels better soon. Definitely wouldn't want the, the kids go kid gloves treatment here on the podcast. Uh, um, but yeah, so, so I guess to start briefly before I go into the, I guess, full pitch and envision groma, which is my current project is a real estate and fintech company here in boston, about three years old and has the long term goal of launching a real estate backed cryptocurrency will go into significant detail.

I expect about. Why that's actually a good thing. Or you know, people can decide on on the merits of that. But you know, I think fundamentally, the [00:03:00] project is motivated by the idea that society works best when financial gains are coupled with actual economic productivity. And in a lot of ways today, society is really not geared that way in ways that cause people to behave in ways that while they individually optimal are societally suboptimal.

And so we think that by fixing two of the biggest institutions in society today, money and housing. You, you can actually fix a lot of those incentive misalignments. And so the long term goal talking, you know, decade plus out is actually having a fully operational scaled real estate backed cryptocurrency, but there are a lot of.

intermediate steps that we're working on today to actually scale up and scaffold sustainably to get there. Yeah. So

Malcolm Collins: I want to hear your hypothesis on the three core areas that I was thinking of as an investment. I guess we'll start with short term prospects as an investment. And keep in mind, like this is, we're not trying to get people to like give money to a crypto project or something like this is only [00:04:00] accredited investors.

It's like at the VC stage now. So this is all hypothetical from the perspective of our audience, but I think it will help our audience who haven't experienced what it's like to work in venture capital, especially mission driven venture capital, like the way they're going to think about things. So first, let's think just as an investment, like, what are your thoughts on, you know, Three, four year time horizon, why it would do well, why it would do poorly.

Chris Lehman: Yeah. A good, great question. And, and I'll, I guess start by clarifying one thing about the organizational structure here, which is that we have a pretty classic op co prop co structure. And what that means is that we have one side of the company, which is the operating company where all the actual employees work that's kind of the VC funded tech company model, right?

So we closed our series a midway through last year, raised 30 million for that. You know, that's. VC high net worth you know, very much the standard raise for that kind of thing. And that's where you expect kind of the high risk, high return, typical VC profile. Before

Malcolm Collins: you go further, I'm going to explain [00:05:00] a few of these words to listeners, because I think this is just great for listeners to learn about like what's going on in the world of VC.

Yeah. Opco PropCo model is a model that is used by any. Venture capital company. And venture capital is a high risk investments, which makes it different from private equity, which is typically looking for lower risk investments. So on average, only one in every 13 venture capital investments makes capital, like, like makes cash positive or is really a Financially relevant to affirm, but that means that these companies that are need to do astoundingly well, like they need to be like hundreds of times larger than they were when you invested in them off it, you know, and what this means from the perspective of property is property can almost never do that.

It's a high capex asset. So if a VC, when I am going to people and I am raising money, those people are called my LPs or limited partners. Those limited partners will give me money for me to deploy in this specific high risk, high reward [00:06:00] model. Unfortunately, what that means is if a company is doing something that sort of like has a lot of real estate or otherwise capital assets associated with it I can't invest in that given what I promised my LPs, the people who gave me all this money.

And so what a company will do is it will do something called the opco propco model, which is it basically creates an umbrella under it, which is a separate company, which raises money that is either debt, which is often used for real estate investing because that's easy to get on a real estate asset.

Cause you have sort of a hard asset or it's raising money from like typical real estate investors