The FTX fallout has not only rocked the Web3 and cryptocurrency landscape, with their bankruptcy pulling back the curtain on a company that shockingly fell to another deep drop in the market, but it also had a profound impact on the Crypto VC investors who operate in the sector.
Double Down founder and general partner Magdalena “Mags” Kala and Dragonfly general partner Tom Schmidt discussed their opinions on everything that has gone down over the past week during the crypto conference in Miami, Florida, where a number of national and even Miami investors converged.
“I am worried about contagion risk and for the other shoes to drop,” Schmidt said (h/t TechCrunch). We’re still holding our breaths and taking a pause to reevaluate what we will do in the coming year.”
“I’m more worried about builders not entering the space, builders leaving the space and the overall lack of LP appetite going forward,” he continued.
Kala shared her thoughts adding that she felt fortunate.
“A lot of those who raised last year don’t want to have to raise again in 2023,” Kala said. “And so I think we will see a slowdown and higher bar for projects.”
Schmidt added that his fund had been “very slowly” working on deploying their third fund.
“I have a reputation for being critical, and going deep to understand what’s happening,” he said. “Our long-term thesis is to use technology to create a new set of financial services, a financial substrate. And what we’re looking for are companies that fit that idea…at the same level of diligence.
“The thing about FTX and Alameda is that it was so unbelievable when you heard it,” he said. “We were never fans. This was supposed to be blue chip and have blue chip investors backing them but the numbers never made sense. If you looked at how much they were making and how much they were spending on stadium sponsorships and donations, nothing really made sense.”