Electric Capital's ten-year fund plan: being a long-term investor
Founder Garg believes that engineers will ultimately dominate all large enterprises, including in venture capital and capital markets.Author: Nianqing, Chain Catcher
Recently, the crypto venture capital firm Electric Capital raised a total of $1 billion for two new crypto funds, with $400 million allocated to equity and tokens, and $600 million dedicated solely to tokens and stablecoins.
Electric Capital did not disclose the supporters of the new funds, only stating that they are almost entirely university endowments, large non-profit organizations, and foundations. Previously, when Electric Capital launched a $110 million crypto venture fund on August 4, 2020, the supporters were also primarily world-renowned university endowments and charitable foundations.
Historically, these institutions have rarely collaborated with companies related to crypto and blockchain, and these investors are known for their long-term investment strategies. Avichal Garg, co-founder of Electric Capital, mentioned in an interview, "Everyone here needs to have a long-term vision; these types of risk assets take a long time to realize their potential." This group of investors is crucial to Electric Capital's "ideal investment approach," as these two large funds will be locked for 10 years.
Investment Strategy and Landscape
Since founding its first fund in 2018, Electric Capital has aimed to become a long-term investor.
Electric Capital and its founders have invested in well-known cryptocurrency companies and projects such as Anchorage, Bitwise, Celo, Coda, Derivadex, Elrond, Mobilecoin, Oasis, and NEAR.
To date, one of Electric's best investments has been Near Protocol. Founded in 2017, Near has rapidly developed and became the third fastest-growing crypto ecosystem in 2021, attracting over 100 full-time developers. Electric invested $500,000 in Near in 2018 and continued to invest in the following years. That initial $500,000 "bet" has now multiplied a hundredfold, worth over $60 million.
Electric's recent investment focus is primarily on crypto infrastructure and some tool-based projects.
According to Electric Capital's official blog, the five investment trends of this $1 billion fund mainly include: DAO, NFT, DeFi, decentralized infrastructure, and projects that enhance user experience accessibility.
In specific explanations, Electric listed the following reasons:
- DAOs will enable global communities to allocate resources to initiatives of all sizes;
- NFTs will form the asset layer of Web3 and the cornerstone of new financial tools;
- DeFi will democratize the use of global financial products;
- Infrastructure will allow engineers to build the next generation of applications, avoiding central failures or control points;
- Accessible and user-friendly experiences will attract more users to Web3.
（Electric elaborated on the specific investment research thinking behind each of these trends in its official blog, click here for details.）
Co-founders Curtis Spencer and Avichal Garg emphasized that although these investment types may seem broad, they will focus on projects with strong community engagement and fair token distribution.
Why is this crucial? Avichal Garg explained that in the past, token distribution heavily relied on internal team members, whereas the new trend is that 60%-65% of tokens will be allocated to the community. Many emerging, healthy ecosystems, such as Yearn Finance and Olympus, which have grown the fastest in the past year, are community-intensive.
Moreover, good economic incentives encourage token holders to do the right thing for the network, and long-term holding yields higher returns, providing more opportunities for long-term investors.
Electric's founders also revealed that in their investments, they aim for no more than 10% of a project's token supply and prefer to hold 1%-5% of the project's investment network.
Additionally, Electric promotes a co-creation "new paradigm investment" approach and new types of partnerships. The Electric team is predominantly composed of engineers, with 8 out of more than a dozen employees being software developers and 2 being product UI designers. This characteristic also distinguishes Electric from other crypto investment funds.
Electric will deeply engage in the projects within its portfolio, providing liquidity through its built infrastructure, driving key governance proposals, and helping teams better understand their ecosystems through authoritative survey data. Electric releases an annual developer report each year, which has become, in a sense, an industry standard for the developer ecosystem of crypto networks.
Currently, Electric has invested in over 100 crypto tech startups, with a cumulative market value exceeding $50 billion and has traded billions of dollars in derivatives. Its investment landscape is as follows:
The team is primarily composed of engineers, influencing investment decisions with technical knowledge
Electric was founded by 39-year-old entrepreneur Avichal Garg and 40-year-old software engineer Curtis Spencer.
In 2001, when Avichal Garg was still a high school student, he began his entrepreneurial journey by co-founding an educational technology startup. Garg then continued to major in computer science at Stanford University and later worked as a product manager at Google. Subsequently, he and Curtis Spencer co-founded Spool, a mobile content caching startup that allowed consumers to save articles and videos on their phones. Facebook acquired Spool in 2012, after which the two continued to work at Facebook. In 2018, they decided to enter the crypto space and founded Electric Capital.
Electric Capital co-founders Curtis Spencer (left) and Avichal Garg
The two founders can be considered serial entrepreneurs, having previously founded eight companies and sold six of them, and have invested in non-crypto companies such as Airtable, Boom Supersonic, Color Genomics, Cruise, Figma, Newfront Insurance, Notion, and Threads.
As mentioned earlier, engineers make up the majority of the Electric team. Founder Garg believes that "engineers will ultimately dominate all the largest enterprises," even in venture capital and capital markets, as seen with the recently raised $200 million crypto fund Hack VC, which also has an engineering team.
Most software engineers and designers at Electric have backgrounds from "big tech" companies and prestigious universities, coming from Facebook, Microsoft, Google, YouTube, and others. This is precisely why Electric can skillfully utilize its technical knowledge in investments, analyzing vast amounts of open-source code published in repositories like GitHub, and then estimating the number and quality of engineers in various projects, assessing which ecosystems are developing the fastest. This hard data strongly supports investment decisions.
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