Sal from EV3

Host: Young

Guest: Sal from EV3 Ventures

Key Points:

1. Introduction & Background:
   • Sal is the founder of EV3 Ventures, a venture firm focused on decentralized infrastructure in the crypto space.
   • Sal’s journey into crypto began in the early 2000s with SETI, a network that allowed people to contribute spare compute usage to search for signs of extraterrestrial life.
   • Sal’s personal experience with hyperinflation in Venezuela made Bitcoin particularly appealing to him.
   • Before EV3, Sal worked at Goldman and Rivet Capital.
2. Escape Velocity’s Investment Thesis:
   • The firm is primarily interested in decentralized infrastructure, specifically applications that are credibly neutral.
   • They are particularly excited about decentralized wireless (dewire), aiming to create microgrid networks of radios that provide internet connectivity without relying on centralized systems.
   • Sal believes that the current telco model is outdated and that there’s a need for more innovative, decentralized solutions.
3. Deepin (Decentralized Physical Infrastructure Networks):
   • Sal believes that deepin projects will face geographical restrictions due to the need to interface with legacy systems and regulatory environments.
   • Generating revenue for deepin projects requires understanding and navigating these legacy systems, which vary by country.
4. Advice for Founders:
   • Sal emphasizes the importance of passion, ambition, and a long-term vision for founders in the deepin space.
   • He warns that launching a token in the crypto space is a one-directional decision with permanent consequences, so it’s crucial to get it right from the start.
5. Extraterrestrial Life:
   • Sal is deeply curious about the existence of extraterrestrial life and believes that society is on the cusp of acknowledging its presence.
   • He sees potential business opportunities related to this realization, especially in the realm of infrastructure resiliency.

Contact:

• EV3 Ventures can be found at EV3.XYZ or on Twitter at Danconia_Crypto.

Transcript

Young: Hello, everyone. I’m very excited to kick start My series on the Merkle again, and today we have a special guest, a very good friend, very respected writer on Web3 Sal from EV3 Ventures if you haven’t heard of them or haven’t read their various blog posts online, I highly recommend it it’s always very enjoyable Hearing things from someone who has been through traditional financial markets.

So Sal, welcome to the show Thank you, I’m excited to be here. Great. Maybe you could start off by telling us more about your background, where you started, and how you eventually landed up in WebTree

Sal: Absolutely I One thing, thanks for having me on the show, excited To, Get to share the escape velocity story and chat a little bit about the area of crypto that we’re interested in With your listeners.

I’m the founder of a venture firm called escape velocity I have a partner whose name is Mahesh who we run the fund together We’ve been investing personally in crypto for a long time and professionally for a couple of years now But started EV3 last year to focus on decentralized infrastructure and that for us means, crypto we think of as It’s a very computer that can make a commitment and that enables this entire sort of application space of developers to build to build applications that are credibly neutral.

That was never possible before. And we got really obsessed with this idea of , how do we build infrastructure or real world applications that also can make commitments that just enables a whole new generation of entrepreneurs to build exciting new fair applications in really big markets that are underserved.

I got into crypto actually, but before a long time ago when I was a kid, before Bitcoin there was this the first what I consider a crypto ne or d pin network maybe, was a network called SETI, where people could contribute their spare compute usage to try to search for signs of extraterrestrial life out of this huge the data collected from this massive Telescope in Arecibo, Puerto Rico.

And so this was around in like the early 2000s. There was a predecessor to it called Folding at Home, where, before humans had folded the genome people could similarly contribute their compute power to try to fold the human genome. And this was like my path into crypto, I was just really nerdy about aliens, and I was like trying to mine signs of alien life from laptops and in my childhood, and that led me down getting into tour and music sharing and the deep web and a whole bunch of other things that eventually led me to discover bitcoin I’m also from venezuela.

And so as a teenager, I went through a couple years. I was living in the states And so it’s very fortunate not to experience at first hand, but in Venezuela in 2017 and 2018 the country took slash five zeros off the currency in one year and then slash six zeros off the currency the next year. So it was one of the worst periods of hyperinflation anywhere in the world in the past couple of decades.

And so the, going through that as a teenager made, it made Bitcoin stick in my head in a pretty strong way.

Young: Amazing. And you first worked in Goldman for a bit and then another vet, another fund before launching Escape Velocity.

Sal: Yeah. So professionally, I, my first job out of school was actually at a university in Falmouth.

So the folks at Carnegie Mellon University were were kind or dumb, depending on who you ask, enough to hire me but had an awesome experience there getting to invest across asset classes. From a very sort of wide point of view and hang out with a bunch of really impressive people and investment managers.

And figured out that I probably wasn’t going to work in private equity or hedge funds. And I didn’t look up to a lot of those people, but there were a select few people in venture that I really looked up to. Went into the traditional finance path, worked at Goldman. That’s where I met my my co founder, Mahesh.

We both went off to do investing jobs myself at a firm called Rivet Capital, which is, where we met when you were working at Multicoin and Mahesh worked at a big private equity firm called Apollo Global.

Young: Fantastic. So moving on to Escape Velocity itself can you tell me more about the main thesis that Escape Velocity invests along, because I do think it has evolved quite a bit since we actually first spoke.

Sal: Yeah, absolutely. Things never stay still in crypto. At a core level, our thesis is about decentralized infrastructure. And like I mentioned at the beginning, that’s infrastructure that can make commitments. We try to take a very Thesis driven approach to where we deploy capital.

So deepen is a massive space. We have a strong point of view and are invest in very few companies relative to the size of the opportunity. But we think these companies can be very big. And so the first space that we really got obsessed with was we call it dewire decentralized wireless.

Basically the idea of how do we build like microgrid networks of radios that can provide internet connectivity. To people by talking to each other rather than by relying on One big central cable in the ground or routing through a central data center The reason we got really excited about this industry One it’s absolutely massive that there’s more than a trillion and a half dollars of cash flows that go to providing internet connectivity through Either fixed or mobile internet globally every year these companies have Really not innovated since kind of like the late 90s.

Like we figured, there was a move from voice networks to data networks, but the way that we build telco networks is still the same. You raise a shit ton of money, you go and buy Spectrum from the government, you buy a bunch of radios from Nokia or Ericsson, you try to build towers or you buy them from someone, and it’s a very labor and an intensive process, and the way that customers buy internet is very broken, like it’s this, it’s like energy, like you just expect it to work, and it’s a core basic commodity, like everyone should have internet access in a perfect world, right?

And yet, the what the actual product experience of buying internet is you might have multiple providers, you have a different provider for your home internet versus your cell phone internet, there’s all these fees that you don’t understand what you’re paying for, they’re bundling in really weird services with your cell phone for some reason.

There’s these dynamics around you get a handset for free, but now you’re paying it off over many years. Like, all these really weird games, when all you really want is internet everywhere for free, or for really cheap. And so this is a problem that we think we can spend, multiple decades trying to solve, basically, and make tens of billions of dollars trying to solve this problem and get connectivity for people.

And so this is how we think about networks. You think about how… Is infrastructure built today and where is it under their populations or areas or certain use cases for which truly not working and with crypto where the technology. Where the underlying technology already works. For example, in cellular, like the radios, the chips, these are all well defined technologies that I’ve worked for many years.

The hard part is coordinating it all and creating an ecosystem around it. And that’s where crypto is uniquely capable of. Through open source hardware and composability, you can bring people together to work together that never would have before. And so for internet connectivity, it’s like bringing in landlords who before would have no interest in being part of a telco network.

Now, oh, I can get tokens for, sticking a box on my roof and contributing to this global thing, even though I don’t know anything else about it. It lowers the barrier and kind of democratizes the ability to participate in these networks. And that’s what Those are the types of things that we think can be really globally important networks over time.

Young: Very interesting. So EV3 has a very core focus on physical infrastructure a shared network for capital resources coordinated through crypto incentives. Would you have a view on perhaps other sorts of networks, digital resources, or perhaps more, more generally, the service resources?

Talking about, say, marketplaces as for internet software services.

Sal: Yeah I think these are interesting. Crypto as a whole, as a coordination technology, I think will solve a lot of problems. And any marketplace, I think, can be made better by having some level of incentive alignment with crypto. That said I do think that there are, like, Three to five really special opportunities to build an asset that’s like a super asset.

I guess that’s not just like a marketplace with rights attached to it in a tokenized form, but that it’s really like when I think of tokenized, the perfect asset in my mind is a piece of to tokenized bandwidth that gets me a pro ratter, right? Of all the internet connectivity in the world.

And if one of these D u I networks were to work, I think that’s actually what you own. It’s like a token. I can have a pro rata share of all the internet connectivity capabilities or capacity of the world at any given point in time in the future. And if you look at like how money was formed these features can be the basis of commodity money.

It can be the basis of a whole lot of, it’s like a real hard asset. In that case, that can be collateral. For in DeFi there’s a lot of other layers of like composability you can tap into in that way, which I think are not true. You know this like we’ll use crypto for I think that can be used for a lot of marketplaces basically But there are a few unique opportunities, which is like create the global bandwidth asset create the global energy asset which are really special and those are like the one trillion dollar opportunities in crypto that maybe, hopefully we find one of in our lifetime, but that’s really what we’re out to find and try to

Young: shoot for.

Yeah it’s a bigger market, basically. Absolutely. . I remember asking you this question when I was at Multicoin . Why aren’t you looking at data dolls or all the other cool, sexy stuff, ZKs, technical innovations? Yeah, it is a bigger market and a more asymmetric opportunity in that sense do you have a view on the kind of event path or the sort of things the catalysts that need to happen For these VPN networks to really achieve that global adoption that you were talking about.

Sal: Yes, it’s I think there’s many things but if I had to boil it down to three, it’s There’s a couple of things that are for the entire crypto market necessary. I think those are like liquidity. If you invest in crypto, I think it’s because you believe it will survive and it’s reflexive to the upside.

And so when there’s not a lot of liquidity, like a lot of these networks are very resilient and will survive, but it’s hard to have a spark. To create something special and so I think liquidity and relatedly regulatory clarity are two things that just brought the crypto we need to lower the barriers for everyday people to come and have fast scale adoption For deepin specifically there’s this aspect of how useful are the networks that you’re building?

It’s easy to build infrastructure. That’s not useful at all. It’s just like if you’re, like, the government in the 1920s, you can pay people to dig holes and just fill them back up, and this is good for the economy, technically, because it’s GDP, but it actually is completely useless.

This is one could argue that it’s Helium’s LoRa network on the basis of usage today. Nobody’s using it. And so the, it might as well have been just like digging a hole and filling it back up. Now, it’s very non trivial to build a physical infrastructure network that just works and coordinates itself like autonomously.

And so I think like this is a, there are different levels of complexity and of like ambitiousness that you can go for in terms of use case. And we need to prove that these networks can build something of value that, that people can will go and buy tokens or burn tokens or take tokens and create sort of the demand side of the ecosystem that hasn’t happened as much yet, either in DY with Helium and all the Helium followers have very low utility in the storage side, even, the leading storage networks have sub 2 3% utilization as a percentage of their capacity.

Okay. And many networks are really not even generating revenue at all, right? They’re in the bootstrapping the supply side phase of the network. And this is the investor sentiment right now is doubting whether some of these d, dPIN as a whole category can actually generate revenues.

But this is one of the things where as soon as one does it, the, it’ll become clear that many of these other networks that are high quality actually have a clear path to generating a lot of high quality revenue that’s not correlated to crypto prices, but it’s true. True. Like the denominated revenues, it’s dollar per dollars for gigabytes or dollars for megawatts or whatever else.

Young: And I assume the first two, achieve that, that the end state or the adoption that opens the floodgates to others will be something that, that will be something that can work, can attract demand even on perhaps a smaller scale? Would that be right to say? Is there any particular sector you’re watching out for and why?

Sal: I don’t think of them as sectors, more so as very specific strategies that you can use. The, you can try to have the thin, the very thin layer where you basically don’t interact with the end customer, but you hand off the customer ownership layer to somebody else. So I think of somebody like XNet in the DY space, which…

They’re partnering with carriers. And so the carrier continues to own your, if you have at t or Verizon and you walk in an XNET cluster, you might never know that you’re actually contributing to the Xnet network. Your phone will still continue to say Verizon or at t just in the background that the transition hap or sorry, that the transaction happens on a B two B basis.

So we think this is one strategy of bringing cash flows into deep end sooner on. I think there are interesting opportunities also on the consumer side when I think of. As a whole if you were to take a random person on the street and say, Hey, you, the infrastructure that you own or have access to, try to generate like 500 of cash from it as soon as possible.

What would you do? The two pieces that I think are the most interesting are, one, you can sell someone a solar panel. If you walk into your neighbor’s house and you sell them a solar panel, you can clip 1, 000 or 1, 500 today for selling that lead with doing no extra work. So I think there is some sort of deep in, you know, if the goal is to find demand quickly, tapping into areas like that can be really promising.

I think of another opportunity along those lines is like a decentralized Turo type of thing, right? Everyone has a car. You rent out your car for a weekend, you might make three or four or 500 bucks off that, off like utilizing your underutilized infrastructure. And so these are, yeah, when you take the frame of like, how do we de risk.

Demand generation as quickly as possible. These are like the things with in venture terms, like fastest payback in terms of investment that you can tap into and deepen. So this is another strategy where it’s the opposite, right? It’s like fully, it’s, you’re only capturing like the customer demand referral part of piece of the value chain.

But you’re also making, showing demand really quickly with not a lot of hard work behind it. .

Young: Gotcha. Super interesting. And I suppose fall, If we talk about Deepin It seems like a market that will undergo some sort of geographical segregation what is your view on that? Do you think certain areas in the world are going to adopt this infrastructure faster than others?

Sal: There are geopolitical reasons for why for the same reason that like you probably have a bank and, in each country or the banks are not global in the way that the five projects are global, you might see actually deep in might look more like centralized in that way, in the sense that governments might say, actually my I’m okay having open source telecommunications infrastructure, but I have to have some more control over it than, like Then like money, which is naturally borderless in nature.

I, Generate let me put it this way, actually. Generating revenue for a lot of these projects interacting with whatever the centralized grid is, It requires it, it’s very different in different markets. In the UK, the energy market is much different than in the US. In the US, for example, we have, For telcos, we have three spectrums.

So we have this band called CVRS, where. Anyone up to certain power limits can transmit on in addition to Wi Fi and a bunch of others. In the UK you have Wi Fi, but you don’t have this cellular CBRS spectrum that anyone can use. And in the UK, you have, you can have a full stack energy this is a model that is at least doable if you have a lot of money in the UK, whereas in the US it’s not really It doesn’t really make sense to speak of a full stack energy provider.

So yeah, they’re on a long enough timescale. Everything, every crypto network, I think, is very decentralized and very global. But relative to other things in crypto, Deepin will likely have more geographic restrictions just because generating revenue requires interfacing with these legacy parts of the grid.

Right, gotcha.

Young: All right, very interesting. That’s a loads of knowledge our listeners to work with. you work with founders day to day and as people come to you, people pitch to you , what sort of, founders, you are looking for founders who can really take ideas as ambitious as a deep end project from zero to one?

Sal: I think the way, the most helpful way of framing advice that I can give to founders in this is to think of people who start a venture fund or work at a venture firm. Basically, as an investor, you have 20, if you’re really lucky, you have 20.

Really, most people, some might get 3, some might get 5, some might get 10 shots on goal. If you start a venture fund during bull times, you might get 20 shots on goal, but that’s where it caps out. You’re not going to get many more than that. You get to choose over your investing career, 20 founders, one of them has to build a generational company, or your entire career is down the toilet, and like investors don’t usually have a lot of functional skills, so there’s not a lot of other stuff you can do.

And so what we’re really looking for is someone who I can confidently say you’re one of the top 20 people I’ll need for the rest of my life who I want to dedicate all my working resources behind. And what does that mean? For us it means somebody that’s extremely passionate about the thing that they’re working on.

It deep in is if you want to make fast money deep in is very much not the place for you and so I recommend you go to other areas and naturally, entrepreneurs that gravitate towards the space have a longer time horizon And a healthy respect for the complexity of what they’re building.

There’s also, for specifically venture scale companies, a level of ambition that has to be, like, you should freak people, normal people out on the street with your level of ambition. That’s just the type of exits that we look for as the return hurdles for venture capitalists are very high.

And there’s actually very few, it’s really hard to build a massive company. Very few people do it. It doesn’t happen by accident. It takes a ridiculous amount of ambition and focus and dedication and sacrifice. And , we meet a lot of, entrepreneurs that are really solid that we have no doubt can go and make a hundred million dollars for themselves.

But that, actually doesn’t move the needle enough from a venture perspective for us to be willing to use one of those 20 bullets in our revolver . And yeah, those are the things. If people have an authentic passion for what they’re building and a track record of actually executing on it and a ridiculous level of ambition to build something big that’s where we get excited.

Young: On that note, would you say for the aspiring founders or founders out there who are listening there are some great content as to bootstrapping launching token networks on EV3’s website. Probably we’ll link it in the show notes below. Would you say you have some core pieces of advice for people who are entering the industry bootstrapping a token network specific to the D PIN area.

Sal: In terms of actually structurally launching a token, a regular founder would have no reason to ever be involved with these until you’re like an IPO stage and you’re dealing with golden inventors and they’re

here running sensitivity tables for you and telling you your CAC and LTV and the dilution that you’re going to take and how much fees are for raising capital and how debt markets are, going to look 12 months forward, like all this stuff that you wouldn’t necessarily need to know crypto founders need to know it like from day one.

And so I think finding that, that there’s only two ways to learn, which is use all the crypto projects and get rubbed and lose money and just be a DGen like that is you just have to do it to be part of the culture. And there’s no better way to learn than to make mistakes and lose money.

Also, getting good advisors , those are good mistakes to make on small amounts of capital. You don’t want to make those with other people’s money, you want to make those with like tiny amounts of your own money. Finding good partners who’ve seen it before is really important. People in the cohorts in crypto are short.

People come and go, but the people who stick around long enough, typically you can do reference checks and find out who are the people that have acted with solid long term interests of themselves and their partners over time. I think that’s critically important.

I guess also understand that like the way that people do things today. It is completely broken. If you take the median path, you will fail. That’s true of being an entrepreneur in general, but especially true of the token launch methods today.

If you take the market status quo way to launch a token, you’re dooming yourselves for failure. And so despite it for deep and founder specifically, not being a core part of their business, it is critically important to somehow learn the lessons of the folks that have come before and avoid the mistakes that kind of grew in our project because , one thing about launching crypto networks is that they are one directional in a way that Web2 businesses are not, there’s a lot of permanent choices that you make early in a crypto network that once the circulating supply is out there you can’t take back compared to a web 2 company where you actually can so it’s very critical to get things right from the start.

Young: Yes, very path dependent indeed amazing round off. I have one last question If you had a crystal ball, and you could ask one question about the future 10 years from now. It could be anything, doesn’t have to be crypto.

What would you ask?

Sal: I would ask if there’s signs of extraterrestrial life on Earth by then or how adjusted is society to, there actually are already signs, but I would ask is it common knowledge or what, what’s, describe the median person’s like attitude towards extraterrestrial this is one of the things where I feel like we’re right on the cusp of it.

entering the Overton window and how you would expect people to react when it becomes obvious that they’re like aliens is It actually would take quite a while for it to like fully hit people’s minds And I think we’re like in month one of 36 of this really hitting people’s minds.

It’s oh shit There actually are aliens and we have undeniable evidence of it now And I actually think there’s gonna be a lot of business opportunities around this. I think Deepin is a big part, resiliency of infrastructure is a big you’ll see a lot more wealthy people starting to invest in, solar and microgrids and batteries, but just things around resiliency of their own.

Also I’m just very curious about it, so that’s probably, if I had a ten year look into the future, I’d probably ask where we, where humans are in the overture window of alien life, both because it’d be really interesting and because you can make a lot of money by knowing when to time it.

Amazing. Yeah.

Young: If you find the answer early, definitely tell me as well. I’d love to know. Oh thank you so much. It’s been a great conversation. I’m sure our founders fellow VCs out there would have enjoyed this podcast very much. And maybe this let our listeners know where they can find you and what’s the best way to reach out.

Sal: Yeah. Thank you all for having me. It’s been awesome getting to chat. Our website is EV3. XYZ and or you can find us on Twitter at Danconia underscore Crypto. Danconia, like the Atlas Shrugged character.

Young: Super and thank you so much once again.