 Live from Toronto, Canada, it's theCUBE. Covering Blockchain Futurist Conference 2018. Brought to you by theCUBE. Liberal, welcome back to live coverage day two of theCUBE here in Toronto, Ontario and Canada for the untraceable Blockchain Futurist Conference. Wall-to-wall covers day two, a lot of action going on, tons of great content, tons of great after-hours networking, just overall great vibe. In light of the market, crashing, Bitcoin stabilizing, some old coins getting crushed. We got it all before you here. I'm John Furrier, your host for theCUBE and our next guest is Nathan Ethan, who's the Chief Investment Officer, Arcadia Crypto Advisors Ventures, Arcadia Crypto Ventures. Welcome to theCUBE, good to see you. Hey, good to see you too, John. Thank you for having me here. Cube alumni in the know. Okay, so first of all, you're an investor in crypto. Everyone's running for the hills. A dip is happening, a crash, if something to say. Your perspective, what's happening in the market? See, happening in the market, so typically, just like in any asset class, there was a huge run-up that happened very quickly. It didn't go up slow, all right? And so the geeks were in early. The libertarians came in after that. Then there were speculators. And the retail market also came in and they all came in together, let's say in the December, after the November Thanksgiving weekend, everybody learned about cryptos, they came in. All right, the next set of guys haven't come in. All right? There's nothing to hold them there. Nobody's holding them there. And they were expecting the institutional investors to come in, and that hasn't happened due to custody problems, ETF problems, and all that stuff. All right, it started going down. The weekends are folding. The weekends are keeping on folding. And as with any technology, any bubble, people have come in, now they feel that, okay, the world is coming to an end and they are selling all their stuff. All the ICOs that have raised money in Ether, selling the Ether. All this together is pushing it down. And everybody's waiting for that. The next set of investors are the, every 10X, an asset goes up. There's a new set of guys who are supposed to come in. And this time it hasn't come in and they're waiting for that. You were on a panel here at the events on a lot of different panels. But one panel I watched, you were on. You talked about the Chokin model. People were holding Ether. It was kind of a debate. And Bradley Rodder, another investor, was saying, hey, too many Chokins out there. You had a different perspective. But one of the things I want to get your reaction to is that people who held on to the Ether lost their runway. And that creates a harder road to hoe. So people were converting to fiat. This is a big issue. How are we going to get by this? Just hold on to the Ether, more people going to come in. The dynamics of investing in this Chokin model, has it changed? How are you looking at it? And obviously how do you help startups? Okay. So regarding a lot of Chokins, the first thing is there are a lot of Chokins out there. See that is going to happen. It's like in the 1999, okay? A lot of websites and a lot of internet companies, pet.com, everybody is an internet company. Same way, everybody is a Chokin. 95 to 99% of them are going to go away. And the good ones will rise from those ashes, okay? Now regarding runway, a lot of these projects have pretty much raised enough money for 50 years of runway, okay? So it has crashed to one fifth. Okay, they have 10 years worth of runway. Typically in the olden days, a small company with an idea or an MVP was max going to raise one million to two or three million, right? Yeah. You know, all of them anyway have that even after Ether has crashed. I'm saying just don't panic, okay? You still have 10 years worth of runway. Utilize that, build a product because the high period may be over where you can just raise money on a white paper. You got the money, build your stuff, you promised your investors I'm going to build this great thing. So this is where we're going to see the great founders, to the average and the bad ones where they've hit a wall, they don't know what to do, they'll fold their hands and walk away. Really good founders, they're resilient. They will, no matter how hard they push to the wall, they're going to come up with the product, you see? And they're going to try to meet customer demands. They're going to get to that feedback loop, check what the customer wants, and start delivering. So basically what you're saying is there's so much money being raised, and I agree with you by the way, if you go to the classic venture capital route, if you had a PowerPoint or a prototype or even some working product with recurring revenue, you know, your series A preferred stock financing will be anywhere from three to 15 million. Oh my God, yeah. And that's high end. That's a high end. 15 million would be on the high end. That's a high end. I see us are raising 50 million, in some cases 70 plus million. So even if you cut that in half, it's still a better outcome on the front, first round. I agree with that, so I think that's interesting. The other one that you mentioned is that I think is a dynamic that we're seeing here at the show is, in the hallways, everybody's talking about flight to quality. And I was talking yesterday on the wrap up with Dave Vellante that you can tell the good deals from the bad deals by, is the venture architecture working for the coin, or is the coin working for the venture architecture? And so this flight to quality, combined with how people are optimizing their build out, it's critical. Yes. Talk about some things that you're seeing with this flight to quality. Is there anything in particular, is it blockchain, is it token economics, where's the quality deals from your perspective? See, I feel quality lies in the founder always, okay? The founding team, because the idea really, you know, if you really ask me, what is an idea? Ideas are just like mental masturbation. Guys who sit there can come up with so many ideas, right? That's what ideas are, okay? Now taking these ideas to fruition, like building it, there's a capital raising part, okay? Now a lot of people are good at capital raising, they're raising money, and a lot of capital coming in. That's awesome, because you need capital to attract talent to the space, because a lot of talent who are maybe in astrophysics, or in mechanical engineering, you want that talent to come here and come with ideas and build the stuff, okay? The capital has come in. Now once the capital has come in, you really have to build the stuff. Even after you build the stuff, you have to go find the customer, right? You have to go and acquire customers, and all these three things coming together are so hard in reality. And that's why the venture capital always gave a little bit of money to make sure that these guys are not wasting the whole thing in there, right? Well, the other thing I want to get on a few is here, is that in the old days, Silicon Valley, you'd have to move there, the VCs were there. We're now talking about a global phenomenon, and the capital formation is both inside the United States and outside the United States, and certainly inside the United States, you're starting to see the formation around traditional structures, security choking, which is more like, it feels like a security, more of a third financing model. Equity's now involved. Outside the United States, a booming utility token market. Your thoughts on how that's progressing, still open, still crazy, what's your thoughts? So the capital model, the beauty that has happened today is, earlier you had to pitch to 200 VCs, or 300 VCs to get one guy to put money into it. Most of the time, they'll be wasting your time, all right? So you had to go to them and to get a million, and you didn't have any other option. You couldn't get it from a small enthusiast of your project to give you 500 bucks or 1,000 bucks. So now you have that option. Okay, now that option is being cut by regulation where the SEC and people like that come in saying, oh, you can't do that. It has to be a security token. All right, let's make it a security token. The moment you make it a security token, my question is, can you raise money from outside? Are you stopping that? Then again, it doesn't really make sense. You're cutting the small investor of you, the chance for him to buy into a guru, okay? It was only the VCs like Sequoia or somebody like that who could access a deal like Google. Now you have a chance for something like Google to come out with the common man who's putting 500, like Ethereum. There was no venture capitalist or Wall Streeter who got involved in Ethereum. The real money was made by very common people who supported a decentralized world computer. Well, we're seeing VCs get it now. Mark entries went entries and Horowitz is getting involved. We're starting to see VCs dabble in there. Has that changed the investment dynamic at all? It has because the VCs, they have this feeling they've missed out, right? So now they're putting five and $10 million into a project, valuing a project of 300 million. It changes the dynamics because now all these guys, like there are so many projects that are raising like 100 million, okay? Because the VCs or these private investors are giving 10, 15, 20 million. Like Andreessen, for example, they've raised a $300 million fund. They can't invest 10,000 to 50,000 to 100,000, right? They have to push 10 million to manage the money. That is skewing stuff. And I personally, I'm not very interested in those kind of projects because it's without a community power at that time. So I don't know how the token economics is going to be fruitful for the second investor, the third investor. And Block Tower, we found out yesterday is also investing and kind of putting a fund together. A venture fund, it's interesting. See how that shakes that. I wonder if it's going to change the dynamic. You mentioned community, obviously a big part of that. Big community here at the Futurist event in Toronto. So they got a Canadian culture, a lot of Ethereum DNA here in this area. What are you hearing at this event? What are some of the things that you're hearing in the hallways? Obviously you've been on some panels at this event and you're highly networked. What are you hearing? What's, your ears to the ground, what's it telling you? All right, you were talking about Block Tower and Ari Paul, yes, they are doing a venture fund and it's great, he's a very, very smart investor and they're going to do very well. On the ground, so most of the questions right now are coming. So we've reached the point that, okay, we have the block chains or the bitcoins. We want it to be faster, all right? Everybody's looking for scalability. Who can bring scalability? The EOS guys are out there, they're saying they can do, you know what, 5,000 or 10,000 or 100,000 transactions per second. So scalability is a very, very big thing. I personally consider something like interoperability bigger, interoperability in the sense. All right, so now you have these multiple chains. It's just like multiple types of phones. Now imagine you had an AT&T phone and you couldn't call the Verizon customer, all right? We are at that point, we have all these chains. There's Ethereum, there's One Chain, there's EOS. Okay, I build, let's say a distributed app, let's say it's a poker app on Ethereum. But I can't play with the guy who is on EOS, right? What if he also wants to play poker and there's a poker app? Is there somewhere we can make this integrated and interoperable? Now to make it interoperable, if you go into details, there are assets, there are tokens on both sides. How can we transfer tokens from one chain to the other chain, making sure there's no double spend happening? I mean, there's two things. Obviously, consumability, making it easy to use one and two, I think you're right on. Interoperability is huge, you got to have that. Oh, interfaces, as you said. Interfaces is big, to make it simple. It's still the geek's area. A lot of people are using command line prompts. You can't expect the common man sitting at home. It's just like email, email was there from 1978. It's only when all these tools, like it became 94 and the browser came in that people started using it. So those things have to come in. A lot of work's got to get done, certainly on the blockchain side. Well, great to have you on. Get to see you. Congratulations on your panels and just after you're doing here. Good job. Thanks for coming on. Appreciate it. Thank you so much. Any predictions, by the way? You want to do it? Any predictions? I don't know, I'm not a predictions guy. I just go with the market. Price of Bitcoin, 20,000? Oh, no, I never get into those predictions. I don't want to get it. I think it's possible that the bear market can continue for a longer time based on the fact that the newer money cannot come in. It has happened before. Bitcoin has fallen so many times at the 70, 80% range and then it stayed stagnant for a year before the next run up came. Yeah. And it certainly, we're both in the shops, and we're long. Yeah. Nathan, thanks for coming on. It's Cube Coverage here live in Toronto, Ontario, Cube Coverage with the untraceables, blockchain, Futurist Conference here, two days, day two, Cube Coverage. We'll be back after this short break. Thanks for watching.