GRTiQ Podcast: 184 Max Scruffur

The following podcast is for informational purposes only. The contents of this podcast do not constitute tax, legal or investment advice. Take responsibility for your own decisions, consult with the proper professionals and do your own research.

Max Scruffur (00:20):

Think of that data is a huge market and I think going after and controlling, if not dictating, the flow of data creates multi-billion dollar companies.

Nick (01:01):

Welcome to the GRTiQ Podcast. Today, I’m speaking with Max Scruffur, head of research at WWVentures, a venture capital firm with unique focus on social capital and web3 investments. Max has a diverse background having started as an entrepreneur with various side hustles in his youth and later moving into the world of venture capital and crypto. I personally became aware of Max early on in my entry into web3 and I’m thrilled for the opportunity to have this chance to interview him. During the interview, Max shares his fascinating journey, beginning with his entrepreneurial spirit in high school where he ran successful side business like hosting eSports events, then even operating a Minecraft server. We then dive into his early interest in crypto, including his role in a Bitcoin to fiat transactions back in 2010, and his deep passion for tokenomics, which is driven by his love for game theory. Max also offers insights into the future of web3, the intersection of AI and blockchain, and the unique approach WWVentures takes by leveraging social capital with influencers to help drive engagement. We started the conversation today by talking about Max’s upbringing and early life in Los Angeles.

Max Scruffur (02:16):

Thanks for having me on. It’s a pleasure. Excited to chat through the Episode here. Grew up in Los Angeles, California for about 19 years before separating. It’s a beautiful area.

Nick (02:27):

And what were you like as a young person? Some of the things you were into, I noticed before we pushed record, some sports memorabilia in the background there, so what types of things interested you as a young person?

Max Scruffur (02:37):

Yeah, I used to watch a lot of football with my dad, so I became a Tom Brady fan being a Los Angeles native, even with the Chargers, didn’t have the Rams at that point, but my dad grew up on the East Coast. I loved watching sports with him. He was a big Tom Brady fan and looked like he would develop over my childhood. Played a lot of sports growing up. Learned poker very early on, contributed over to what I do a lot of today, which is some poker on the side, but a young person, a lot of football, a lot of sports, and that was kind of my childhood. This was pre-iPhones and all that, so there’s a lot of outdoor time compared to what we see now, so it was a lot of fun as a kid, you had to spend a lot of time away from a screen.

Nick (03:22):

And that interest in poker, how did that start?

Max Scruffur (03:25):

Yeah, when I was a kid, my dad probably irresponsibly taught me poker when I was five. We used to play with Beanie Babies around a poker table and control multiple of them playing hands, and so he taught me the basics of playing poker.

Nick (03:39):

That’s amazing. We’ll return to that. I have some follow up questions about your interest in poker, but as you grew up, you went on and pursued a degree in business administration at university. Talk to us about what you were thinking about at that time in your life, why business and what did you envision doing career-wise?

Max Scruffur (03:58):

It all corresponds to my life in high school, I was kind of a baseline entrepreneur doing random side hustles. In high school, I used to run a business where I did college kids’ homework and essays for them for a flat fee. I used to run a Minecraft server that generated a good chunk of revenue. Post high school, I started an event hosting service or company that focused around hosting eSports events and competitions and that did exceedingly well. We partnered with Red Bull at one point, partnered with ASTRO Gaming and then some inexperience around the team allowed it to fall apart unfortunately, but allowed me to pursue some new interest. Ended up moving to North Carolina, did community college and worked as a Starbucks manager for a while in the early days and started developing this vision of wanting to go into business in some way, shape or form.

(04:46):

Finance and economics was the main focus before transferring over to the University of North Carolina at Chapel Hill, Tar Heels, and started pursuing an interest in investment banking before tailing off, and this was in the year of 2020, 2021, and found some major success at that point in crypto. Other than the success I found in 2017. 2020, 2021 was probably the major pinpoint and led into me starting to use economics into facilitating different analysis across tokens as well as building tokenomic models. So my career vision really transitioned from full circled from entrepreneur to wanting to be investment banking and finance to full circling back to entrepreneur once again.

Nick (05:33):

This theme of entrepreneurship comes up a lot on the podcast and so I’m always interested in kind of double clicking on that, but what drew you to that space? I mean it almost seems like there’s two mentalities in the world, those that don’t want to work for anybody and do their own thing and those that are fine with it, and it seems to me you’re more of a entrepreneur.

Max Scruffur (05:50):

Yeah, corporate bureaucracy is brutal. I worked at Wells Fargo for a bit in college as a bank teller and I always got [inaudible 00:05:58] from my manager and I tried to question inefficiencies and processes at branch of branch levels and was always told they don’t care. They’re running this set of standard operations, better not to ask questions and just do what you’re told. It doesn’t really fly with me. I like improving processes and feeling like I am doing things efficient as possible, and it’s really hard to do that in large corporate structures. It fits way more into easier pivots and fully changing processes and smaller team levels, which just kind of leads you into startups, VC and entrepreneurism. The second tailwind of that, my dad was a music producer and ran his own business for my entire life, so I’m sure that nurture debate also adds into it. What ended up stemming into me just wanting to always do my own thing and coming up with ideas and just bringing them to light.

Nick (06:48):

And so if you take your experiences and as you said your father is entrepreneurial, what are then the one or two characteristics that you think, hey, if you want to be an entrepreneur, you got to have at least this or that?

Max Scruffur (07:02):

Yeah, so there are two ideals here. Number one is ideation. You have to be able to come up with ideas. But number two, which is the most important part of it, is just bringing the idea to life and that’s where I think a lot of people fail. It’s easy to start an idea, it’s hard to say, “These are the steps I need to take to make this idea possible.” And I think having that characteristic of being a go-getter and being able to have the optimism around this idea is functionable and can create value and can make money and believing in that enough to take the step to take a risk and making that possible is generally the biggest characteristic in what determines if someone can be an entrepreneur or not.

Nick (07:44):

So you mentioned in a moment ago, but it was in the early days of crypto that you became interested in it and you said you did quite well. Talk to us about that moment or that moment in time when you first became interested in crypto and what some of those initial impressions were.

Max Scruffur (08:00):

So we’re going to take a 15, 14 year journey back. Back in 2010, I wouldn’t say this was the peak interest, but this is the start to the journey. In 2010, back when I was doing entrepreneurial activities, I actually did found a market for Bitcoin to fiat transactions when exchanges didn’t exist. This was pre-coin base and to buy a Bitcoin, you would go on a sketchy site and purchase with PayPal or purchase OTC on a Formsite, and I was one of the people who ran those exchange services on a Formsite. I had a fairly large reputation or good reputation from running these other services and businesses from the form and decided I can charge transaction fees to get people to go from Bitcoin to fiat and back and forth and review it as an investment principle, rather just saw market demand and figured I can charge flat fees for doing a relatively easy process with minimal risk the way that I set it up.

(08:55):

And I think the peak interest then came in 2016, 2017. This is actually when I started caring about the future of where the tech and crypto makes sense. I started looking at ETH and Chainlink ETH right after the ICO in 2016 thinking about the ideation of how smart contracts can play into traditional finance and enterprise. And then the facilitation of building out Chainlink started looking at how Oracle’s played such an important role in making that process of smart contract integration possible. Then I was hooked, started diving into deep research, figuring out and analyzing different ways to where smart contracts could play into and different companies that could be built out using them and was peak interest at that point. I started investing and putting all the capital I could into this really irrational optimistic idea that luckily came to fruition today, but that was the start of the really peak interest in crypto.

Nick (09:51):

When you think back to what you were doing in 2010 and then again this resurgence in the tech that emerged in 2016, are you shocked at where we are today? I mean, did you see the industry and the adoption curve being what it’s been or are you surprised on the other hand that maybe it’s been slower and you would’ve expected by now more to have happened?

Max Scruffur (10:13):

I think the most overused statement we have is web3 is a UX problem, user experience problem, and that still is intertwined today. We invested so much in infrastructure over the years only to build out a system that is still full of friction and very difficult for non-native users to use. Even with legitimacy and the political paradigm shift that’s allowing the industry to grow more heavily in the US and other areas, it’s still very difficult for non-native users to come and use these applications. And honestly, we can get deeper into this later in the podcast, but I think the biggest value add for crypto is an incentivization layer of how we can use tokens to incentivize user behaviors and unfortunately we can’t get there until the user experience is way easier and easier to onboard new users into this complex infrastructure. So to answer back to the question, I am not surprised.

(11:09):

I think that this was always the course of action noting that this technology would improve how we handle the current processes and traditional enterprise, but I am surprised that how slow user experience has been developed, it is not much different today than what it was in 2020 and 2021. There are some simplicities like account abstraction has made it easier for users to come and make a wallet, but it is still the complex process of what it was and hopefully we see some change in that soon so we can start see real innovation.

Nick (11:45):

This question overlaps with what you just said there, but I still want to ask it, which is, I mean in addition to this UX situation, there’s also this argument about we have far too much infra and not enough sort of consumer-facing dapps. Again, I know there’s some overlap here, but can you take a position on that pretty well-stated argument that we see everywhere?

Max Scruffur (12:07):

Yeah, so as an investor I think infrastructure is overinvested, but underdone as a user, I think infrastructure just isn’t there and doesn’t support the build out of consumer facing applications that could actually start to see millions and millions of users start to be onboarded. You start to see the preliminary process of it with things like friend.tech where you have non-native users using that all the way to Polymarket. Polymarket diving into the more political landscape and being able to acquire users based on gambling is a big one, especially seeing a lot of non-native web through users using Polymarket as a go-to predictions market, starting to see this build out of interest and ability for consumers to use these.

(12:53):

But we have an infrastructure problem in terms of infrastructure needs to be at a place where you have a high incentive for new developers to come and say, “Hey, I could build this cool consumer facing idea in crypto and I can onboard people in markets that I’m familiar to marketing to.” I don’t think the web3 market is big enough to say, “Hey, our target market is web3 native users because you’re never going to reach a multi-billion dollar revenue producing company doing that.” So the answer is we need better infrastructure that allows consumers to access these and I think that investing-wise, it doesn’t really need too much more money to do that. I think we should already be there.

Nick (13:38):

And so if I dovetail off that great take there into this question about the relationship between web2 and web3, is web3 a disruption of web2 technology? Is it more of a revolution against some of the ethos of web2? I mean, how do you place that?

Max Scruffur (13:54):

Yeah, so I don’t think there is going to be a disruption. I think it’s the integration of making processes that are trustless, that protect users, that allow users to monetize data IP and do things that they weren’t really relevant to do. I guess in some terms of disruption, when I mentioned data, you’re looking at a lot of oligopoly ownership of user data being sold throughout counterparts as its own market and users don’t get to monetize that themselves and that unlocks this potential of users being able to monetize different parts of them and what they do that is currently just controlled by huge centralized entities and bodies. But that’s just one tale of multi-tail dimension of what we can see. So I think there’s some disruption, but honestly I think the majority of it is deeper integration of using web3 tech to facilitate better user incentives and on board users at a much cheaper rate comparatively mostly focusing on that user acquisition cost. But yeah, I think it’s a mix of both.

Nick (15:01):

So I want to return then to your story arc a little bit here, and as I said earlier, I became aware of your work and the things that you were publishing early on in my journey into web3 and you wrote a lot about and continue to about tokenomics. Can you explain to us sort of what sparked your interest and drew you into taking such a depthful and insightful perspective on tokenomics?

Max Scruffur (15:25):

Yeah, I have a really nerdy interest in game theory, which also leads to my deeper interest in poker, but I love economics and game theory and game theory is just understanding what drives user behavior and how we can create models that drive users to make certain decisions based on what maximizes their utility or what gives them the most value per person. So this mix of understanding how can we use and create a token economy that allows users to be highly incentive to do certain actions without devaluing and also an investment at the same time, you create this these almost like problem solving based games for yourself where you have to create an entire economy of where the user isn’t highly incentivized to always cash out their tokens for fiat, which is a very difficult problem to solve.

(16:17):

We still haven’t really gotten there, we’re slowly getting there, but it’s a lot of problem solving that led me into the interest into how can we implement game theory components into these token models and then how can we also create these token models where it makes sense and creates value in the long term for investors. It’s not an easy thing to create, but it leads to highly interesting models and unique build outs that we haven’t really seen in the past, especially since tokens are so new in infancy still.

Nick (16:50):

I think when it comes to products and services, people pay attention to punchy things like value proposition and utility, but in the web3 space, it seems like there’s also this component of understanding a project’s tokenomics and as I said, you’ve written a lot about this and you provide a lot of insight. Are you sometimes surprised by how little people pay attention to or understand the tokenomics of certain projects?

Max Scruffur (17:16):

Not at all. I don’t think you needed to for a while. And now people are starting to realize that tokenomics matter a whole lot more. You see in 2016, 2017, 2020, 2021 as a venture capital, as an investor, you can just invest in hype and make a ton of money and the components really didn’t matter around the token. It was just treated as really overvalued equity where these investors would look at companies and they’re like, “Okay, this can generate a lot of value and be a large component player in the space.” And the token doesn’t matter because it’s going to pump, and investors and VCs could just make thousands upon millions upon hundreds of millions of dollars just looking at the hype semantic of how this will play into the general interest of the retail investors versus what the token actually does.

(18:07):

And now this year has been quite punishing for a lot of investors who are so used to spray and praying that they’re realizing that hype based semantics, low FDV, sorry, high FDV, low float mechanics of tokens where retail gets punished and private sale investors make a ton of money. It’s starting to come to an end, especially with overdilution, too many projects launching, not enough capital to start putting money in these to make the project continue go up even with high FDVs.

(18:33):

And it’s starting to play into a role where you actually do need an ecosystem and a token and a strategy around creating value around that token to create profitability for investors and retail because once you start losing profitability for investors, you start failing to have funding grounds and building out innovations that can make founders and investors in retail a lot of money once the hype wore off, which is starting to, and once the overdilution is coming, so there’s not enough capital to make these pump, well, now you need to make an ecosystem where value is accrued and put into the token so things can go up without even worrying about the dilution. You focus a lot more on user acquisition, user experience, traction, product market fit, and the components around traditional startups and use those to put value into a token or rather use a token as well to put value into those. You create an actual full ecosystem model and the hype and spray and pray finally wearing off will finally make people have to start diving into these unique components of investing in web3.

Nick (20:41):

So there’s this blog post floating out in the world, and I’ll put a link in the show notes to it, but sort of forwarded this idea that token is the product and I’ve heard it come up time and time again. So given everything you just shared and your current perspective of the market and the future of the industry, how much credence or credibility do you give to this idea that the token in fact is the product?

Max Scruffur (21:05):

Yeah, so I think that it is a component of the product and it is a crucial part of the product. So my big example here would be looking at Venmo or Uber Eats referral rewards. Venmo, for a lot of the people in their mid-30s, did a $5 to refer your friends in college. I think I was in high school at the time, but some friends I have were telling me the story about how they would get their beer money by referring their friends to Venmo to collect their $5 and instantly cash it out. So they now are incentivized with small rewards to bring users to the application to use it, and they win and the company wins, the company gets traction, new users’ engagement, possible retention, and the consumer gets $5 per person. But now they coordinate that over if they offered $5 or five tokens of Venmo token, are we going to say that Venmo is the token, Venmo is the product?

(22:09):

No, we’re going to say that Venmo is the product and the token is the incentivization piece to bring new users to it. So we are now looking at the component of the actual product, but the problem here is you have to still look at this from a holistic perspective because you have investors who are investing in the token as well. So not only do you have to create the incentivization piece of it, which is the component, now you have to also generate an ecosystem where they can spend this token, where they can find ways to use it without giving them just the exit, which is that token is cash, I want cash. It is a component to start, which is the incentivization layer, and then it starts to fully dictate around an ecosystem of the product. I don’t think that it’s fair to say the token is the product.

(22:56):

The product always creates the revenue and the product is the way to create value for the token. So the product is always first. Why that blog post makes sense is because it’s a 2020 ideal. When you invest in infrastructure in 2020, you don’t care about the infrastructure, you care about how high the token can go and what the comparables are. You’re investing in this idea that the token is your exit of returning an investor ROI, whether it’s yourself or a fund, and you don’t care. You just don’t care about the infrastructure at all. And now you have to start thinking about the component basis of what the token can do for the revenue creation and user acquisition for the actual product.

Nick (23:38):

Is there a gold standard in your mind of a project who’s sort of solved for all these things you’re talking when it comes to being successful in communicating and incentivizing and driving value for a token?

Max Scruffur (23:51):

Yeah, I don’t think there is a perfect model. I think the only thing that makes sense at the moment is Layer 1s with high user volume like ETH and Solana. There’s a reason why these tokens are high performers and that’s because there’s an ecosystem around the token. The token has incentivization pieces in terms of staking and running the network, and then the use of those ETH tokens are now used across an entire ecosystem of developer applications in different ways. You have to use your ETH token for gas in order to actually use the network.

(24:23):

So instead of holding USDC, it just makes much more sense to hold ETH, especially if you’re using it as an active participants across many different applications across the network. So that’s the idea of this is how it starts as an incentive and this is how it develops into an ecosystem, but we haven’t seen that, right? You just see a lot of ways like, “Oh, we’re going to build out a token and it’s going to pump and investors are going to make money and we’re going to make a ton of money as founders.” And eventually, we’ll start to see more unique ideas around what ecosystems look like outside of Layer 1s. I’m really excited to see that, but ETH and Solana are probably the perfect examples of what incentivization into ecosystem looks like.

Nick (25:03):

Longtime listeners of this podcast know that I asked this question to Shar from Multicoin that joined me a while ago. I want to ask it to you as well, and it’s this idea about conventional models of how we think about value creation and capture. And again, if we bolt on this unique nature of tokenization and what’s going on in web3, how has web3, and again, a lot of this stuff you just sort of referenced relate to how it’s redefining value creation and capture.

Max Scruffur (25:33):

It has a lot to do with token incentives. I mean, it’s going to be a recurring theme is I’m huge on incentivized behavior, but it’s hard and really expensive to acquire users now in web2, you have a lot of competing projects with a lot of capital for VCs from the tech boom from 2010 till now, it’s really easy to get capital and really hard to acquire users, and I think web3 solves that problem.

Nick (26:01):

So let’s return then to your personal story. So talk to us about how you got it started professionally after you graduated from university.

Max Scruffur (26:09):

So in 2020, I was still working at Wells Fargo and I started to help build out tokenomic models for some DeFi projects in DeFi boom of 2020. Really simple models just looking at different game theory mechanics and different ways we can create inflation and dilution of the token to where people are just more incentivized to hold and engage in the application and found some good success doing that across the few months as well as day trading. And eventually it hit December of 2020, I was just hitting insane returns on the investments and interactions I was doing across airdrops, and it was just a beautiful time. I looked at myself in the mirror and asked, “Should I really be spending time sitting at a bank job or can I make more money on my own?”

(27:04):

And the answer was pretty clear and luckily at that point I made a considerable amount to not have to worry about not having a job in college and just went full-time in crypto. I didn’t drop out of college. I actually managed, it was pretty nutty. I was spending 16, 17 hour days in 2020, 2021 once I quit to, one, do well in school, and two, keep up with the insanely moving times of my favorite bull run with NFTs and meme coins and insane airdrops. It was if you spent any moment away from the screen, you were missing out on gold rush opportunities. So that was the transition point.

Nick (27:44):

So as you said, you went into working in venture and you did some consulting. How did that type of work shift your perspective on the industry? I mean, I got to imagine the trades you were making and the research you were doing on your own was informative, but then actually consulting and getting involved in venture was probably equally knowledge for you.

Max Scruffur (28:06):

Yeah, so the consulting practice was more around my idea of investing in tokens. That was an easy transition. Also being in business school, it’s very easy to talk through different ideas to founders who were more technically involved and the DeFi summer brought in a lot of tech-based founders without business experience or economic knowledge and were able to apply that with their direct technical ability was very easy. I think that the change in how I viewed web3 came when I started venture. I started working at a friend’s venture fund after the ’21 bull run for fund, was trying to gain some more applicable experience, especially if I found venture insanely interesting after taking a course in college and thought this is where I want to start. But it was a really hard industry to break into. So I went ahead and just worked for my friend.

(28:59):

He had a small fund for free called Impatient Ventures, worked with Jack Dreifuss for a while. He’s an absolutely incredible operator and smart investor. And I started doing some analysis and deep dives of some web2 based companies and looking at exit strategies across investments in equity and different financial analysis as well as long-term visions of where these products can go and found, one, success, and two, deep-seated interest in it until getting offered to come on over to lead research at WWVentures where I started in March of ’23. We’re about year and six months in at this point, and that is the direct change in how I started doing the industry.

(29:41):

And you have to just keep generating new theses as the industry is just so quickly moving. It’s definitely not as easy as just day trading assets, but having to continue to adjust your frame of reference on bull markets, liquidity, the economics of world markets and applying these into, one, how to exit your positions as a VC, and two, how to invest in a long-term constantly moving market and you just have to change your entire thought process on the space from day-to-day participant to 10 year plus investor.

Nick (30:19):

As you mentioned earlier this year you joined WWVentures, and I think I’d like to know what drew you over there, why did you make the change and what’s sort of the backstory?

Max Scruffur (30:27):

Yeah, so crypto god, John, and I were friends for a while in 2020, 2021 as well as his partner, Adam, who both of them founded WWVentures. I remember when they came out with it and raised fund one to ’22, always in deep contact. I was sharing thoughts across projects they’re investing into as well as co-investing in some of the projects that they were investing into. So we’re very familiar with one another, especially how we work and how we think about things. And Adam reached out to me in that winter of 2023 and started exploring the opportunities they were looking for someone to come on and help them deploy the 60, 70% left of fund one that they were looking to deploy before the bull market started.

(31:11):

And I knew that they had some really large LPs, good connections, and they thought about the space as web3 natives and it’s everything I would like in a company in terms of web3 investing because you have to think about things a lot differently and have different approaches. So I really liked the mindset of how they thought about ideas, the connections in community. They already had the LP basis they had and it felt like a match in heaven and went on board and started working together with them.

Nick (31:42):

So there’s a lot of different venture firms working in and around web3. If you had to sort of summarize what makes WWVentures different or unique, and you probably touched on it a little bit there, but how would you describe it?

Max Scruffur (31:55):

So WWVentures focuses on what we call social capital, and I think this is one of the most unique ways to actually raise venture. So traditional venture funds are operating in very similar manners. They have some connections across different companies. They have some developers, they have user acquisition strategies, different data, they have different ways to provide value, but it’s really just ultimately all the same. They just have different connections. What social capital is is the idea of using this next generation of influence, which transition from celebrities to content creators in a way to help with user acquisition across products. So our LP base consists of people like MrBeast, Tobias Harris, Michael Bisping, Fresh, LazarBeam. These are some of the largest content creators, gamers and athletes in the world, ranging from hundreds of thousands to hundreds of millions of followers. And we create unique and organic strategies of integrating these LPs into our portfolio companies.

(32:54):

So one of the best examples of this is we actually had Michael Bisping become deeply integrated into one of our portfolio company BLOCKLORDS. And what he did is he gave his licensing and IP rights over to them. He became a playable character in their game as a hero. And then co-marketed that experience to his fan base to say, “Look, you can come play as me in this BLOCKLORDS game,” and facilitated this organic user acquisition of his fan base over to BLOCKLORDS, which led to huge engagement of his fan base as well as retention across the game.

(33:28):

And we’ve done this across numerous different ways of facilitating LPs and different people in our network into these web3-oriented games, products, consumer facing applications, infrastructural ecosystems, and use this as a way to provide a very unique value add that you don’t see anywhere else and believe we’re one of the first adopters of this idea versus just there’s other VCs that are similar, they use KOLs, but they’re just about pumping the token in the price. They’re not about acquiring users for a product.

And I think we are on the very, I wouldn’t say entry point of this, but we’re starting to hit a mature peak of this is how we can do things, this is how we can expand and raise fund two, and this is how we can make social capital go from a $15 million fund into a much larger fund where we’re leading rounds and facilitating so many more direct connections of user acquisition.

Nick (34:22):

From your perspective then as head researcher at WWVentures, are there any projects or verticals that you’re paying close attention to, especially as we’re sort of in this quasi cycle? I mean I don’t know if the bear is stopped, if the bull has begun, how are you thinking throughout some of the verticals?

Max Scruffur (34:40):

Yeah, so we are really big on consumer facing applications and gaming. Those are the two basis points of incentivization. But outside of that, we’re also huge on the integration of web3 and AI. AI is facing just absolutely crazy computational demands where you have oligopoly ownership of software and resources needed to have AI innovation. And the problem with that is if you are a developer trying to build out AI models, you have to pay just huge amounts of money to get access to these resources and you’re just paying the oligopolies like Microsoft, Nvidia, all of these huge tech companies that just have all of these power. And the beauty of this intersection of AI and web3 is you’re able to create an incentivization layer of democratizing compute resources from consumers. You can use consumer M1 chips in Macs, graphics cards and computers, eventually phones to create these hives of compute resources needed to innovate in AI.

(35:50):

And without this, you just have an oligopoly experience extracting a ton of value and diminishing innovation while web3 is creating the innovation in AI. And I think this idea and build out of a market just like this is a multi-billion dollar, if not eventually trillion-dollar industry notating that AI is probably the future of how we do everything. Outside of that, also, there’s also a direct correlation of how AI can improve the user experience and user acquisition of new web2 consumers into web3 applications such as using AI agents to simplify really complex interactions with smart contracts. Shout out to one of our portfolio companies, Wayfinder, which is built out of the parallel ecosystem for building out an agent just like this and starting to use it to create this experience where user can, instead of having to bridge over assets, go from Aave to Compound to all these different complex DeFi situations, just a stake and earn yield.

(36:50):

They can just type to an agent to say, “I want to put $100 in Aave on ARB,” and the agent does it all without them having to do anything complex. And that is the beauty of how we’re going to get users over to do and get access to these financial and consumer based applications that are really difficult and just simplify it with AI agents. And I think that having this intersection of how both technologies just benefit each other in just so many direct ways creates a very infant market that can expand and become so large that people aren’t even realizing it. They realize the hype behind it. It’s very easy to see the hype, but people aren’t seeing the nuanced gold mine that’s being developed in this intersection.

Nick (37:37):

So Max, you’ve been around for a long time, you’ve seen a lot of different cycles and you’ve mentioned some of them in your experiences with those during this interview. As I said a moment ago, it’s unclear to me sort of what this cycle presently is and where we’re at in it, but I do know that most cycles are driven by top level themes. You bring up AI, you talked a little bit about gaming there. Outside of your own thesis you’re working on at WWVentures, do you have an opinion or a perspective on the themes that will drive or underpin the cycle that we’re in?

Max Scruffur (38:10):

Yeah, AI is definitely going to be a big one, especially notating the start of the AI boom. The other one I’m hoping is consumer-facing applications. I think you started to see a kind of big hit with the start of SocialFi with Friend.tech at the start of the cycle and now starting to see more in Polymarket. And I’m hoping that infrastructure is able to simplify enough using AI, account abstraction, and hopefully just hit this turning point where consumer-facing application build out is at the highest demand and incentivization for developers to start building out. So I’m hoping that is what drives a lot of the cycle. Outside of that economics-wise, I mean it’s hard not to talk about the ETFs Bitcoin, ETH ETFs, possible Solana ETF. You have BlackRock putting out an on-chain fund on ETH, and I think this is just setting up a perfect setup for real world assets.

(39:03):

You hear Larry Fink talk about they want to tokenize everything. And although that sounds a bit optimistic, I think it’s completely true. Everything makes sense to awe to start putting assets on chains and unlocking liquidity for them. You’re starting to see private equity funds start to put their assets on chain working with networks like Plume and Ondo is working with BlackRock in terms of starting to tokenize assets. And I think RWAs end up having just a huge moment in the sunlight here in terms of percentage gains across current RWA tokens as well as new assets being put on the chain, allowing more value accrual and more traditional finance capital to start entering on chain.

Nick (39:46):

Occasionally on crypto Twitter, and I think this is probably true for anything in the world, you’ll see people debate and argue about it, and one sort of debate that you occasionally see is this idea that venture in web3 crypto is dead. I think sometimes that comes in two flavors that maybe the money isn’t flowing in like it was historically or number two, that there’s just no longer a viable way for venture to participate in a web3 type ecosystem with the ethos and decentralization and all the concerns about equity and token lock. And so if there is an argument to be made about that, how do you assess that?

Max Scruffur (40:25):

Saying venture is dead is like saying tech is going to stop being created and neither are true. I think that in terms of venture being dead, I think spray and pray venture is dead. I don’t think you can come in here and just ape and buy everything that’s hyped just because you think that they’re going to have a ton of funding grounds and pump. I think that venture in terms of proper analysis and deep-seated thought process of long-term visions of how an ecosystem can build out is the future of investing across web3. I think you actually start to see a lot of really famous funds die out this cycle when they can’t return investments to their return ROI to their LP base.

(41:08):

I don’t want to name names, but there’s a few that come to the top of my mind that it’ll be interesting once we start seeing them fail to raise another fund or maybe they get lucky and raise this fund before investors start realizing that this spray and pray that they’re doing is not as efficient anymore. We’re starting to see a full paradigm shift of what web3 venture was, which is we can get rich by investing in anything to full analysis and breakdowns of how can we create a token model that brings new users and brings value to a token simultaneously.

Nick (41:45):

So Max, if I ask you to put on your historian lens for a minute here and speak to members of this listening audience that aren’t as experienced as you are and don’t have that background in economics, how would you characterize this cycle? And I mean in terms of how it’s different from past cycles, is it different and in what ways?

Max Scruffur (42:09):

Yeah, you have to be very careful what you buy versus in 2020, 2021, you could make money on really anything other than the constant rug pulls, which aren’t much different than today. I think at this stage it is developing a longer term thesis of where your asset seems to generate value from and how it plays a role in web2 and web3 instead of just aping points, it’s going to turn into how can I generate these long-term theses? See in 2020, 2021, you could just focus on cycle semantics, which is the cycle predominantly ends at this point end of year comparatively to other cycles. Now I don’t think you get that. I think you get a much more mini bubble cycle that lasts much longer and has many bear markets as well. I mean we’re seeing it right now. You went from mini bull in January or rather December to March, some may say all of 2023 was a bull.

(43:15):

I think it was the build up to the mini bubble we saw in January to March. And then you saw mini bear, which is a bubble from April to now full of downward pressure, a lot of dilution, not a lot of ways to make money. And I think that having the thesis of you can sell cycle. So buy cycle bottom and sell cycle top is a thing of the past. And then you can buy bubble bottom and sell bubble top, but it’s going to be a much more rapidly changing environment where participants need to stay focused and actually develop long-term thesis is where they don’t care about the mini bubbles and they think they can create a long-term vision of where tokens can extreme value and gain value in a much longer term horizon.

Nick (44:01):

And I presume it would be your position as well that that’s healthy for the industry as you think about the evolution of what everybody’s working on and sort of the objective of creating real world value that this sort of normalization and this evolution of the market is a good thing.

Max Scruffur (44:17):

It definitely generates more capital flow. 2018, 2019, it was pretty bare here. Not a lot of people tweeting, industry was basically dead. You saw some people working on some things that developed into really cool and used applications by the CCVL in 2020, 2021, but it was bare bones innovation was lacking versus if you had a ton of capital and people bullish on it across traditional finance who were interested in coming and bringing new capital, then you don’t lose the incentivization of people building out innovative solutions because they aren’t worried the industry’s dead. So I think it creates a much more positive future looking possibilities of not having to lack innovation for years, rather just get innovation and incentivization to build out things throughout every month of the year.

Nick (45:07):

And then maybe just one final question on the current state of the market, and I don’t get the chance to interview a lot of people with your background, so this is an opportunity for me to ask how you and the team at WWVentures are thinking about the presidential cycle and this heated debate right now between the Democrats and Republicans and where they sort of fit in in the US on this topic of crypto. So how are you weighing all of that?

Max Scruffur (45:33):

Yeah, without picking political sides, I think that you are seeing a much more favorable and positive look from Republican candidates in terms of acquiring Bitcoin, integrating crypto into systems, and creating a political landscape that supports that integration. And you’re still looking at the delegitimization of crypto on the Democratic side. Now that’s not whether to say that Republican candidates are doing this to gain favor over a new market of growing holders as Bitcoin youth holders have skyrocketed since ETFs. And a lot of retail participants actually care about the viewpoints of crypto across their cross political campaigns and presidencies. So it’s hard to say whether this is just a psy op to gain votes or they actually care. But we’ll definitely see post-election. I don’t think that the idea of delegitimization across the Democratic side will tank the markets if a Democratic candidate wins. I also don’t think that just because of Republican candidate wins we pump to the high heavens forever.

(46:45):

I think it really depends on the actions originated once the new president is in the office and what the administration is showing during that transition as well as after it. But I do think that the whirlwinds across poll landscape have started to damper the markets as people question what’s going to happen. That’s definitely a very fluid time, and the presidential elections do dictate what’s going to happen over the next four years, especially in this industry that’s becoming and starting to become way more legitimate.

(47:17):

So if anything, it just creates an opportunity for people with long-term visions to buy cheaper. It’s really difficult for me to see that ETH went down to $2,000 so rapidly, it was anything but just a dump for… We weren’t dumping for fundamental reasons, we’re dumping because of world fears, world wars, the plot of presidential election, just so much uncertainty that it just creates buying opportunities because at the end of the day, it doesn’t really matter what candidate comes in, we’re going to see a political landscape no matter what over the next 10 years that we’ll be pro-crypto and people are going to realize the innovations are needed in creating value as well as GDP across nations.

(47:54):

Crypto is going to be a big part of that. So any candidate or any administration in cannot ignore that at some point, whether it’s now or whether it’s in four to eight years. Who really knows? But the future of crypto is bright and anytime we can get cheap prices due to uncertainty, especially now, I think the fundamentals have never been higher and the price hasn’t been reflecting it properly.

Nick (48:18):

Well, Max, another question I want to ask you, and I’d be remiss if I didn’t, is as you may know, a lot of my listeners of this podcast are enthusiastic about web3 data and particularly The Graph. I’ve had a lot of members of The Graph ecosystem and Builders in that ecosystem on the podcast. Do you have any insider opinions based on your experience as sort of the tokenomics and industry analysis you’ve done about The Graph and its role in web3?

Max Scruffur (48:40):

Personally, I do not have a strong opinion. I think that data is a huge market, and I think going after and controlling, if not dictating the flow of data, creates multi-billion dollar companies as you’ve seen. I don’t think, for example, Facebook is in a social media company anymore. Facebook is a data company. And if you can come in a rapidly growing industry and access the world’s blockchain data and giving that to consumers as a way to use as a way to drive value, then you’re looking at the future of a Fortune 50 company. I haven’t spent much time into The Graph in terms of how the tokenomics play into that vision, but you guys are looking at a preliminary market where blockchain data is so transparent and available that if you can dictate the flow of that and turn that into a real driven market, then I don’t see why this can’t be one of the biggest companies in the world.

Nick (49:42):

Max, I only have a couple of final questions for you before I ask you the GRTiQ 10 and those are 10 questions I ask each guest of the podcast every week. They’re a lot of fun and listeners love to hear the answers. The first question is how do you stay up to date on everything? I mean, you’re clearly very well experienced. You have a deep insight on the industry and projects and tokenomics, but the web3 space is always advancing and it never sleeps. So what are some of the practices or resources that you find most valuable as you sort of stay a top of all this?

Max Scruffur (50:13):

Yeah, so I actually generate a data aggregate of news flow, huge threads across many different newsletters to other data aggregates that are public to DeFi. I’ll post a really good one, page one, C4, all of these, I’ll aggregate all this data into a sheet, do it basically bi-monthly, so twice a month, put into a sheet. Any threads that I find interesting, I read through them, try to understand the original poster’s perspective, make sure I agree with it. If I don’t, I stop reading. And then just a lot of reading and keeping up. I mean, you spend three days out of the industry and you’re already behind. Everything moves and changes so quickly.

(50:54):

I will say it’s a lot less punishing now than it is in 2020. The industry is moving a little slower, but not by much, but it’s just a ton of reading and you have to read and learn and keep understanding the new technologies that are coming out to stay ahead of the curve. EIPs come out allowing for smart contract changes on ETH. You have different huge applications coming out on Solana. You have to figure out, is this new dapp that came out on this chain, is this a fad or is this the future of SocialFi? It’s a lot of trial and error and a lot of speaking to cool people, understanding what they’re building and reading. Just a lot of attentive behavior that allows me to at least stay with the curve, if not ahead of it.

Nick (51:35):

And then the final question is sort of returning to what we talked about in the beginning, which is this interest or hobby you have in playing poker. I’m just curious how much of that mindset, and you mentioned early on game theory and your interest in that, but how much of that mindset plays a role in not only enjoying the work that you do, but also succeeding in web3?

Max Scruffur (51:58):

I think poker is a good thought exercise of understanding user behavior. When I play, I use a lot of data to mass categorize player types without getting too nerdy, just understanding what do novice players do frequently under a mass scale, and what do really good players do frequently under a mass scale and making decisions based on what just a lot of numbers say at a larger aggregate. Because when you play poker, you’re not focused on winning a hand, you’re focused on winning a spot at a high frequency. So even if the data is wrong for an individual, if it’s right over the majority, over the course of the longer term than you win, that dictates over to investment practices as you’re not trying to win every investment. That’s impossible. I can’t invest in every startup and make 10 to 100 X and be completely successful.

(52:51):

You’re investing in an idea, in an approach that consistently wins over the longer term that allows you to win the spot, allows you to win the investment, whether that’s hitting 10 failures and then hitting the next 10,000 X because you know that practice and those procedures that you put in place and that analysis that you did is so deep-seated that even with the failures that come, which is very frequent in venture, that that one or two huge returns make up for the entire ROI of a fund or the entire portfolio of an investor.

Nick (53:27):

Well, Max, as I said, now I’m going to ask you the GRTiQ 10, and these are 10 questions I ask each week. I think it helps listeners get to know you a little bit better, but I also want to introduce listeners to new things, have them try something different, or to maybe discover how to achieve more in their own life. So Max, are you ready for the GRTiQ 10?

Max Scruffur (53:44):

Yeah, let’s do it.

Nick (54:02):

What book or article has had the most impact on your life?

Max Scruffur (54:07):

Probably The Subtle Art of Not Giving a F*ck by Mark Manson. This helped me in my early college years to be more stoic and switch from entitlement framing, which is huge.

Nick (54:20):

And how about this? Is there a movie or a TV show that you recommend everybody should watch?

Max Scruffur (54:24):

Yeah, The Social Network I think I’ve watched 10 times, helped me create really this optimistic attitude around entrepreneurship.

Nick (54:34):

And if you could only listen to one music album for the rest of your life, which one do you choose?

Max Scruffur (54:39):

It’s a tough one. Maybe with Mumford & Sons Sigh No More album. Generally, I’ve came back to it in many different phases of my life. So if it can last longevity of 10 to 15 plus years, then it can last longevity of a lifetime.

Nick (54:54):

Well, what’s the best advice someone’s ever given to you?

Max Scruffur (54:57):

You are exactly what you think you are. This is my quote of the day. Your mind is more powerful than you think.

Nick (55:06):

And Max, what’s one thing you’ve learned in your life that you don’t think most other people have learned or know quite yet?

Max Scruffur (55:12):

Entitlement is the number one barrier to success and happiness. If you go into a situation with entitlement where you think you’re better or you’re expecting something, you’re generally going to prevent yourself from finding that success you’re looking for.

Nick (55:29):

And what’s the best life hack you’ve discovered for yourself?

Max Scruffur (55:32):

Yeah, this is my favorite. If you need to get something done, lower the big task in the smaller goals or very small goals in general. A really simple understanding of this is if you have to do the dishes and there’s just so many and it’s preventing you from wanting or yearning or actually doing it, you just tell yourself, “I’m just going to go unload the dishwasher instead of doing all the dishes.” And the brain is just such a magnificent organ that you grow the motivation to actually do the whole task once the entry starting point is not so daunting. So this goes into entrepreneurism. If you can break through the door of starting, maybe just creating just the brand, maybe just the logo. You get into really the deeper semantics of what was so daunting to you in the start. So one step at a time, very small task to get to a big goal.

Nick (56:18):

And Max, based on your own life experiences and observations, what’s the one habit or characteristic that you think best explains why people find success in life?

Max Scruffur (56:27):

A rational optimism. But with that, you have to have a realism-based analysis thought process. So an example is looking at portfolio companies. When I have a call, I don’t immediately think, why is this wrong? I think how can this be the next biggest thing, the next Fortune 10 company in the world? And then start to dig through all the reasons why this is prevented or the barriers that exist that prevent this irrational thought. But the optimistic perspective allows you to have a focus on all the beauty and the biggest things that can happen versus just going into something and saying, “This will fail,” because then you just always go into all the reasons why it’ll fail instead of all the good things.

Nick (57:08):

And then the final three questions are complete the sentence type questions. So the first one is, Max, the thing that most excites me about the future of AI is?

Max Scruffur (57:16):

Automated build-outs and time-saving.

Nick (57:20):

And if you’re on X, I still call it Twitter, then you should be following?

Max Scruffur (57:24):

Cobie

Nick (57:26):

And then the final question, Max, complete this sentence, I’m happiest when?

Max Scruffur (57:30):

I’m just enjoying the moment.

Nick (57:41):

Max, what a thrill to have you on the GRTiQ Podcast. I’ll put links in the show notes for listeners that want to learn more about you and read up on some of the things we talked about today. And of course, to follow your work at WWVentures. If listeners want to stay up to date on the things you are working on and some of the work that you’re doing, what’s the best way for them to stay in touch?

Max Scruffur (57:58):

Yeah, you can check me out on X or Twitter, @Scruffur. That’s S-C-R-U-F-F-U-R. You can check out the venture page, @WW_Ventures, on Twitter or X, or check us out on the website, wwventures.io. Always looking to meet new founders, meet possible investors, and continue to develop the relationships I have across the space. Happy to speak to anyone.