The goal of a Venture Capital firm is to job to analyze the risks and growth potential of an emerging business. Especially in innovation, a VC helps drive the forefront of technology by funding the needs of a startup.
While venture capitalists enter the market to obtain a slice of the pie, they play an essential role by providing business expertise, resources and network connections, which may differentiate one project from another.
As an angel investor, the role Wangarian play is no different from a VC. He plays a vital role as a private investor who funds startups at the early stages, often with his own money.
Previously an investment banker for J.P. Morgan, Wangarian “fell in love with what Web3 technology represented and discovered DeFi…” and made the unconventional decision to leave the IB space and venture into web3. He first joined Arthur Cheong as a principal at DeFianace Capital in 2020 before starting Tangent with Jason Choi, who was at Spartan Labs as a general partner and head of research.
The birth of Tangent
Tangent’s goal is simple: “to be the highest impact investor on a per dollar basis.” They provide a wide range of advisory services across different verticles for projects they invest in.
Inclusive of the board of advisors, the eight act as an angel collective and “invest in a small number of startups every quarter, eventually adding to 10-15 projects annually.”
While most venture arms specialize in specific areas of crypto, Tangent’s approach is different. Instead, they cover a more comprehensive range of verticles within the web3 we know today.
The mentors in the team are also selected strategically. They are industry leaders who will provide advisory in NFT Architecture, Gaming, Protocol incubating, Infrastructure, Bridges and DeFi, among many others.
“Each mentor has a specific verticle they are responsible for… every application out there falls into one of these six verticles.“
Wangarian’s investment strategy
After going through over 200 pitches, Wangarian discussed the four-step approach to evaluating any project. Sometimes all retail investors should think about it before making any investment decision.
1. Founder market fit
How suited can this founder able solve a specific problem?
Does he have the specific industry knowledge no one else has?
Does his experience result in him being able to execute things no one else can?
2. Total addressable market
How big is this market?
Is it big enough for a product need to be there to solve a problem?
3. General industry thesis
Does it make sense for the product to come into play in the market?
Valuation in Web3 is nothing like traditional finance. While most of the metrics in Crypto are qualitative, the DCF models we know of in traditional finance are less likely to be used.
In some cases, products in crypto projects are not live yet, so it will “be generally difficult to forecast or generate assumptions for a DCF model.”
A few weeks ago, Tangent invested in an order book-specific L1 blockchain called SEI.
Narratives of Web3
While narratives are a function of the general market, “every narrative you hear has to be heard from someone else.” Understanding where you stand on this information food chain is essential. How close you are to the source will give insight into how early you are riding the narrative.
In a space where narratives come and go very quickly, “sizing your bets” could be one approach an individual take. While you hear multiple crypto billionaires being made in the last bull market, Crypto is still a speculative space. Sizing your bets has always proved to have better results in the long term.
“I don’t think any narrative now will give you a 10x; the market right now is not aggressive enough for that.” While market structure can change back to its bullish ways, the most immediate ecosystem that came to Wangarian’s mind was a certain layer2 built on Ethereum, Arbitrium.
Although it is not unknown information and “cycles have already been done on the Arbitrium ecosystem, there may be some sort of flows in and out of Arbitrium when it comes out.”
Additionally, “liquid staking derivatives on Ethereum may have potential” with the recent Ethereum merge being successful.
Ethereum as an asset class has seen better days. Although the successful Ethereum merge finally came to fruition, there is still a need for a global response. “I don’t think there will be a significant ETH catalyst that will push it to its ATH, but this could change with institutional inflows.”
Current gaps within Web3
“The infrastructure today is not ready to onboard the next billion users in web3… it is a very big problem”
And this problem starts right at the beginning with creating a web3 wallet. To date, despite significant efforts to make UX better, Metamask is still an “extremely cumbersome process” for the non-crypto native.
Government regulation is next in line. With various countries taking a different view on crypto, some more forceful than others, “It is a problem the government of the world has to take a stance on.”
The latest ruling and arrest of the Tornado Cash developer also signal negative sentiments. It shows how government bodies are unwilling to embrace open-source software created by web3.
While these issues are prevalent in hindering mass adoption, the need to solve UI/UX problems in terms of wallet architecture by being safe and easy to use and compliance with government regulations is essential in bringing on the next billion users.
“I suspect this is going to be a battle that will take the next 5 to 10 years to solve”
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: Chain Debrief