Crypto is contrarian once again.
But like previous cycles, tenacious entrepreneurs will continue manifesting the future. Killer apps are only beginning to emerge in the form of decentralized infrastructure and digital commodities. That’s why we’ve raised a $25mm fund to back early-stage founders building at the frontiers of crypto.
We believe crypto’s best days are ahead of us. Developer infrastructure has only recently hit the inflection point necessary for entrepreneurs to compete in complex, $1T+ markets like telecommunications, energy, transportation, and healthcare. A handful of protocols will become disruptors in these industries, ushering in the next great era of venture returns. We are grateful to have the support of world-class investors who share our vision, including the founders of Ribbit, a16z, Framework, Multicoin, Thrive, Fortress, Softbank Vision Fund, Castle Island, CMT Digital, and GPs/Senior Partners at Apollo and Dragonfly.
Being different means everything to us. We learned the investing business from high-conviction contrarians — like them, we aren’t afraid to look wrong in the short-term, and we refuse to waste time on incremental ideas.
Before Escape Velocity, Sal invested in early-stage crypto/fintech at Ribbit Capital after starting his career at the Carnegie Mellon University endowment and the fintech M&A group at Goldman Sachs. Mahesh invested in projects from LBOs and stocks to incubations at Apollo, after studying economics and religion at Harvard with a focus on monetary policy, financial regulation, and incentive systems.
We started Escape Velocity around a shared conviction that digital infrastructure and commodities will drive global GDP from $100T to $1,000T during our lifetimes.
The world is only beginning to wake up to the power of digital commodities and decentralized infrastructure. The old way of building infrastructure is failing left and right (a telco network or energy grid built from scratch today would look almost nothing like AT&T or ConEdison). Infrastructure is exponentially more valuable when it is open, composable, and neutral. We already have fundamental technology capable of producing energy, connectivity, and transportation at a fraction of the current realized costs: as decentralized models take hold, the moats of yesterday’s incumbents—scale and switching costs—will fade away, unlocking trillions of dollars of economic value.
So why do so many people—including several smart investors—confidently pronounce the death of crypto in 2023?
Given the noise of crypto’s high-profile recent failures, it’s unsurprising that many miss the sea change happening underneath the world’s most critical industries. Digitization demands exponentially higher capacity and reliability in our core resources: storage, bandwidth, and compute. We believe the most important cryptonetworks will leverage token-based models in these $1T+ markets, serving users at radically lower costs and enabling net new use cases to emerge.
Two core, interrelated theses stand out to us:
- Decentralized Physical Infrastructure Networks (DePIN): DePIN projects use token-incentive systems to build trustless, or trust-minimized, physical infrastructure:
- Decentralized Wireless (DeWi): Wireless networks and telco infrastructure-built peer-to-peer and managed by open source software/hardware.
- Decentralized Power (DePo): Energy production/storage networks that manage energy resources and usage.
- Proof-of-Physical-Work (PoPW): Projects that replace centralized or marketplace incumbents with decentralized models in areas such as hospitality, transportation, surveillance, healthcare, etc.
- Digital Commodity Networks: Leveraging distributed computing resources to exponentially increase the capacity of networks:
- Storage: Networks that allow participants to monetize excess storage capacity, such as Arweave or Filecoin.
- Compute: Networks that allow participants to access abundant and powerful computational resources, such as Ethereum or Solana.
- Bandwidth: Telecommunications networks that transfer data over long distances, such as Helium or XNET.
The past few months have made for an interesting market in which to launch an investment partnership. The mainstream economic narrative is dominated by higher-for-longer interest rates, smaller-for-longer deficits, and a resurgence of value investing… the prevalence of late-stage software buyouts reveals the fact that investors see more value in optimizing existing technologies than investing in new ones… and the VCs who threw crypto conference afterparties at 1Oak in 2021 have been too hungover to show up to hackathons
For us contrarians, therein lies the opportunity. It’s never been easier to be a non-believer. But how often is the easy thing the right answer?
With that, we are proud to announce that Escape Velocity is officially open for business. We partner closely with founders and communities to help networks reach escape velocity. We invest as early as possible with initial checks of $250K-$1.5M and a decade-long time horizon. And we are proud partners to the teams at Andrena, XNET, MachineFi, and Glowstick.
You can learn more at our website, and follow our ideas on substack and twitter.