Dialogue with Hack VC Managing Partner Alexander Pack: The hacker of hackers in investment, the technology expert in technology

整理：Zen，PANews

In the late 1950s, a student organization at the Massachusetts Institute of Technology called the Tech Model Railroad Club (TMRC) began to officially use "hack" and "hacker" to refer to the methods of solving problems and the people engaged in this process, respectively. When it was first invented, "hacker" was entirely a positive term, carrying a sense of respect, symbolizing exceptional skills, bold innovation, and a unique style.

Regarding this hacker culture, Steven Levy summarized hacker values in his book "Hackers: Heroes of the Computer Revolution," published in the 1980s, which included ideas such as "information should be free, distrust authority, and create beauty and art with computers." The decentralized and open spirit advocated by later blockchain and cryptocurrency developments also inherits and evolves from these values. Nowadays, various ecosystems in the crypto industry commonly host hackathons to discover and invest in outstanding hackers, promoting the prosperity of the ecosystem and the industry. Among them, Alexander Pack, the managing partner of Hack VC, is an investor particularly fond of hacker culture—this is evident from the name of his investment firm.

It is worth mentioning that the largest programmer conference in history, Hack Summit, was founded eight years ago by Ed Roman, another fund manager at Hack VC, and has since accumulated over 130,000 engineers from more than 50 different countries. The Hack Summit held at the end of March this year featured Ethereum founder Vitalik and SEC commissioner Hester Peirce as keynote speakers.

Recently, Alexander gave an exclusive interview to PANews, sharing his stories in the crypto career, investment strategies, and current trends in regulation and new technologies.

From Dragonfly Capital to Hack VC

In 2014, 22-year-old Alexander worked at a venture capital firm in Hong Kong focused on fintech and began investing in cryptocurrencies for the first time. At that time, cryptocurrency was not yet considered an industry, with no billion-dollar companies, and Ethereum had not even been launched. However, Alexander believed that cryptocurrency could ultimately change the global financial system, and he found what he wanted to do for the rest of his life. He later joined Bain Capital in the U.S. as the Director of Internet Investments and helped the firm launch its crypto investment business.

In 2018, Alexander ventured out on his own, co-founding the crypto venture fund Dragonfly Capital with Bo Feng, serving as its first managing partner. The firm has since become one of the largest crypto funds in Asia. In 2020, Alexander left Dragonfly Capital and founded Hack VC. In the fall of 2021, Hack VC completed a $200 million seed fund for cryptocurrency, with investors including Sequoia Capital, Fidelity, and a16z's Marc Andreessen and Chris Dixon.

Alexander stated that the name Hack VC reflects the uniqueness of the investment team: they are hackers investing in hackers, and technical experts investing in deep technology. Hack VC focuses on early-stage investments, specifically in the technological infrastructure that drives the mainstream adoption of crypto, preferring to maintain smaller and more agile investment sizes than many of their peers. "For me, the thing I love most in this world is finding a great founder with a new idea and investing from the very beginning, often before a product or business plan exists, usually as an incubator. When you raise too much money, it's hard to do that."

Focusing on Market and Technology, Bear Markets are the Best Time to Build Excellent Technology

For nearly a decade, Alexander has been a long-term institutional venture investor in the crypto space, which has essentially run through his entire career. To date, he has invested in over 100 companies and projects, including many unicorns in areas such as L1, L2, DeFi, and CeFi. Alexander considers himself fortunate, stating, "When you spend almost as long in an industry as it has existed, it's easier to grow alongside it." Nowadays, many of his early friends run crypto companies, protocols, and funds worth billions of dollars, and these individuals are often his investment targets or investors (LPs).

Alexander mentioned that they try to identify new technologies that are most likely to cause significant paradigm shifts in the future and invest early. When he started investing in L1, L2, and DeFi projects, the industry had not yet clearly categorized or named these types. "Generally speaking, our goal is not only to invest in category leaders but also in category creators, even discovering a new category before it has a name." Most of Hack VC's due diligence time is spent evaluating the market and technology. Alexander believes that without an outstanding team and community, nothing will ultimately succeed. Therefore, they end up investing in the founders of the project and the broader community.

Having experienced several bull and bear cycles, Alexander stated that bull markets will be driven by large-scale new mainstream applications of cryptocurrency, which will be propelled by improvements in infrastructure. Ultimately, it is a new technology, a new technological industry, so the speed of technological development determines everything. The good news is that bear markets are the best time to build excellent technology; in many ways, the pace of development of technological infrastructure is faster than ever. In bull markets, everything is noisier. It is difficult to stand out among investors, meet potential business partners, and even the costs of hiring and marketing are more competitive.

Abandoning Investment in the Wild Gambler SBF and His FTX

Currently, FTX founder Sam Bankman-Fried (referred to as "SBF") has been found guilty on seven counts by a jury, facing a maximum sentence of 115 years. No one expected that SBF would fall from being a "crypto genius" to a super fraudster behind bars. In fact, Alexander was the first investor in SBF's hedge fund Alameda Research, initially reaching a high-level agreement. At that time, SBF had not yet launched FTX through Alameda and had intended to conceal this idea.

During the months Alexander conducted his investigation, Alameda continued to incur rapid losses, and only under questioning did SBF admit to the fact that he was incubating a cryptocurrency exchange. Alexander expressed support for founders with new ideas and proposed leading the seed round financing for FTX. However, subsequent due diligence was not smooth; Alexander's team found it difficult to understand SBF's performance record, including some unclear funding issues. Additionally, they had many disagreements with SBF on key points of the deal, such as SBF insisting that Alameda and FTX were two independent companies, thus pricing them separately, even though they were using the same employees and computers, and the funds raised by Alameda were used to cover FTX's startup costs.

After more detailed due diligence, Alexander's team ultimately abandoned the investment. SBF was very angry with Alexander personally and even tried to blacklist him in the industry. "It was terrible at the time, but in hindsight, it turned out to be a blessing in disguise." Alexander commented on this past, saying, "Interestingly, throughout our entire relationship, I admired SBF to some extent. I thought he was one of the smartest and most strategic people I had ever met. I was very sure he would achieve great success, even though he lacked the integrity I look for in founders. Of course, the supervillains in movies are also smart and successful."

Regulatory Pressure Indicates the Systemic Importance of Cryptocurrency to the World

For a long time, the crypto industry has struggled under regulatory pressure, and the collapse and scandals of leading companies like FTX have further intensified U.S. regulation and legislation of the crypto industry. In this regard, Alexander believes that, in some ways, this is actually a good thing, as it indicates the systemic importance of cryptocurrency to the world. Unless something has the importance to change the world, the government will not bother to regulate it. He noted that the internet faced strict regulatory scrutiny in its early days, and artificial intelligence is now beginning to attract regulatory scrutiny as it has become significant enough. Cryptocurrency is no different.

"Ultimately, some regulation is beneficial for cryptocurrency, as we see in the U.S., where untrustworthy entities like FTX are being replaced by regulated companies like Coinbase and Circle, as well as trusted existing firms like BlackRock and Fidelity."

In addition to the impact of policy regulation, the explosive development of the AI industry is also a topic of interest for crypto practitioners, and the comparison between the two has added a bit of chill to the deeply bearish crypto market. Currently, artificial intelligence is the hottest industry in the entire tech field, with a large influx of entrepreneurs, and some venture capital firms that previously focused solely on crypto, such as leading crypto VC Paradigm, have begun to shift or diversify their investments into AI. Alexander describes himself as a loyal fan of artificial intelligence. In fact, he and his partners have invested in about 30 AI companies, some of which have already achieved success.

"The breakthroughs in model quality last year sparked a new trend of 'generative AI,' which will have an incredible impact on cryptocurrency." Alexander believes that the intersection of cryptocurrency and artificial intelligence has not been fully explored, much like DeFi in 2018 or smart contract platforms in 2016; this is an interesting and hard-to-describe new trend that will ultimately become a huge, disruptive new category. Ultimately, artificial intelligence may solve serious user experience issues present in today's decentralized applications. Conversely, AI models will utilize decentralized applications in areas like DeFi and payments, making them more useful and capable of complex financial activities.