GRTiQ Podcast: 55 Craig Burel

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Craig Burel (00:20):

I think fast-forward five years and The Graph is going to be a de facto component of every applications web3 technology stack.

Nick (00:59):

Welcome to the GRTiQ Podcast. Today, I’m speaking with Craig Burel, Partner at Reciprocal Ventures, a venture capital firm with deep expertise in investing in crypto and FinTech. On February 17th, Reciprocal Ventures, along with several other industry leading investment firms, including Multicoin Capital, who was recently featured on this podcast, caught the attention of the entire web3 space after announcing the launch of a $205 million fund that will invest in projects in and around The Graph ecosystem.

(01:32):

During our discussion, Craig talks about his background, including time working at Morgan Stanley, his journey into entrepreneurship, and then how he found himself working at a venture capital firm with a focus on investing in and building web3. Craig also shares the incredible background on how Reciprocal Ventures came to know about The Graph and the solution it provides, along with how Craig envisions The Graph being a de facto part of the web3 stack. I began the conversation by asking Craig about the $205 million investment fund and what he can share about the investment strategy.

Craig Burel (02:10):

It was a no-brainer for us when we were discussing the initiative with other funds we’ve coinvested with, and I think it’s a great idea. So much of the alpha that we as venture investors, I think especially in web3, exists right in our portfolios, right in front of our eyes. And I think some of the best founder intros that we get we expect to come from founders that we’ve worked with for years, have built a reputation with, where we’ve showed them exactly how much value we can add to their project over the lifetime of the project.

(02:53):

That net promoter score, when it’s passed on to new founders, it just makes the new relationship building process so seamless and easy and they get what we do, we get what they do, and we have an immediate level of trust with one another. So, for us, we saw this as a win-win because we can continue supporting an existing portfolio company. It also gives us first look at new projects that are being built on and around The Graph. And I’m actually, I’m proud to say since the announcement, we’ve already closed our first investment in our new project building on The Graph.

Nick (03:31):

So, for listeners that may not be totally familiar with the world of finance and venture capital and fund creation, this basically was what, three partners coming together, pooling funds together and then saying, “We’re going to invest this over time in projects working in The Graph.” Do I have that right?

Craig Burel (03:47):

Yeah, I think it was a few more than that. I think it was more like six or seven total partners. But yeah, that’s exactly the spirit of the arrangement. And I think we’ve all been long-term supporters of The Graph and really want to see it succeed. And I think we’re also big believers in the fact that The Graph is an ecosystem. It’s a network, it’s a protocol, but it also requires an ecosystem to be built around it. And this is a great way to do that.

Nick (04:17):

Is there a time horizon tied to this fund and the deployment of this investment?

Craig Burel (04:21):

No. For us, everything we do is long term. We’re not a hedge fund. We aren’t trading actively in the markets. Everything we do is long-dated as it would be with traditional venture. And for anyone that’s not familiar, traditional venture funds are 10-year funds with the ability to extend two years to 12 years if need be.

(04:47):

So, sometimes we actually tell founders that, just so you know, we’re a traditional venture fund, we’re a 10-year fund with two year extension. Because with the shorter times to liquidity that we’ve seen in crypto with tokens and token economics, fund lives have actually been shortened. And I think in some cases, that’s great for investors and their investors, not as great for projects who have five to 10-year time horizons to reach their full value and potential.

Nick (05:18):

Well, Craig, congratulations to you and of course the Reciprocal Ventures team along with all the other partners that participated in this fund. It’s really exciting to see so much investment going into The Graph ecosystem, and I’ll be thrilled to watch this initiative grow over time. Let’s switch gears here a little bit and go back to first principles. What can you share with us about who and what Reciprocal Ventures is?

Craig Burel (05:42):

Yeah, absolutely. So, Reciprocal, we’re an early stage venture capital firm. We’ve been focused on crypto basically from the beginning, from early 2017 when we launched Fund 1. But what’s changed over time is that we’ve really ramped up our investing in crypto pretty significantly. Where I’d say when we first started, we were focused probably 25% on crypto web3, about 75% on FinTech. And we’ve really, we’ve flipped the equation. So, now we’re deploying roughly 75% of our capital into web3 crypto and 25% into FinTech.

(06:24):

The way we see it is very much that crypto is eating FinTech right now. And a lot of the adjacent businesses are being pulled into web3 by the inertia of what’s going on there, all the development innovation. So, yeah, that’s driven us to take a hard look at where we’re deploying capital and make the shift to almost exclusively focusing on crypto and crypto tangential businesses.

Nick (06:51):

So, that flip in the ratio of investment is very interesting to me and it speaks to the growth potential for crypto and web3, but there’s still a lot of debate about what web3 truly is and the potential impact it could have in the world. How do you think through that when you talk with investors or maybe just friends and family what web3 is and the impact it could have?

Craig Burel (07:11):

It’s such a good question and it’s something we’ve been contemplating for going on five years now. And it’s actually funny that we’re talking about this here on this podcast because the first time I ever heard the term “web3” was from The Graph was from Yaniv Tal and Brandon Ramirez in 2018 when we first met.

(07:30):

And originally, so we have these three core thesis buckets that we invest in. We have defi primitives, chain agnostic web3 protocols, and then any application that has unique features derived from defi or web3. So, we created that web3 bucket almost because of the conversations that we had with The Graph in early mid-2018, where Yaniv and Brandon and Jannis envisioned rearchitecting the web to be antifragile. And using incentives to decentralize the backend of the service layer and deliver these services with a decentralized network of operators.

(08:17):

And that possibility, just the thought of that, really, really gripped me at the time when we first met The Graph. There were plenty of service providers who were trying to do this in a centralized way. And then there were a lot of applications and protocols in web3 that were doing what The Graph was in an ad hoc, bespoke way internally on their own dev teams or their DevOps teams.

(08:44):

So, a lot of people when they first discovered The Graph, I think wanted to push them in the direction of be a SaaS company. You could be a massive SaaS company, and it was really, to their credit, they stuck to their guns and fend it off a lot of that feedback and said, “No, we think there’s a better model. We think there’s a better way to deliver this service via a decentralized marketplace of Indexers and a protocol between them and the users on the client side.” And with that, we can gain antifragility. We can remove platform risk. We can create data composability with subgraphs. We can do all these really cool unique things.

(09:27):

So, when I think of web3, I tend to think of unbundling the cloud stack and using some of these really novel mechanisms that Yaniv and Brandon and Jannis have pioneered in order to deliver specific services from big cloud in an antifragile way that removes platform risk and creates data composability. So, those are the things that I think about with web3.

(09:55):

I think the way the market is defining it right now is that anything that settles down to a blockchain at some point is classified as web3. And I think that’s a fair. I think it’s easier for people to think about, “Well, we had Web1. We had web2 with the social layer, more flexible data structures and databases and all these applications, and we have mobile built on web2 and now we have web3. And web3 has these unique features and principles comparatively to web2.” So, I think it’s an easy dichotomy for people to understand or grasp.

Nick (10:33):

So, as someone who invests in web3 and is always looking for opportunities in this space, where do you think we are in the evolution or adoption of web3 in the world?

Craig Burel (10:44):

In terms of adoption, we’re wildly early. I think Ethereum has 500, 600,000 daily active users. Solana, I think has 300,000 daily active users, Polygon and some other Layer 2s are probably somewhere in that range as well. So, we’re still incredibly early in terms of real daily active use of the technology.

(11:15):

I think at the protocol level, there’s still a ton of wood to chop there, a lot of work to be done. We’re still talking about building out some of the foundational primitives of a web3 technology stack. It doesn’t fully exist. You can’t completely develop your application on web3 rails. There are still primitives being developed and still development that needs to be researched in order to do that.

(11:42):

I think one of the really cool things, and this almost moves the goalposts further away, is that the number of use cases and the breadth of web3 has expanded significantly with the adoption of things like new token standards with NFTs and their rise to prominence over the last year. Kind of crazy that that’s happened in just the last year, but it really has. And that’s unlocked just amazing new opportunities like the metaverse gaming on-chain with NFT and game assets, new gaming models like Play to Earn.

(12:22):

And every time one web3 primitive, like a Layer 1 or The Graph or something is used to open up a new sector or new genre of game. We’re increasing the TAM of web3 as a whole, as a movement. And again, we’re moving the goalposts back a little bit probably because it’s just going to take longer to build all of this out.

(12:46):

But what’s really interesting, and we’ve seen this with NFT, metaverse gaming, they’ve really been fantastic drivers for sticky user adoption. One thing we’ve looked at recently is for all the volatility in asset prices in directional assets. NFT activity has held up pretty well. Volumes have been pretty strong. Transactions have been pretty strong. I’m not going to speak to asset value in the NFT space. But in terms of stickiness, NFTs have really managed to keep a captive active audience, which is great long term the space.

Nick (13:24):

This has become somewhat of a standard question I ask in the podcast, but I like to ask it just because I think it frames for listeners a lot of the discussion around web3. And the question is, in your opinion, do you think web3 is an experiment? We’re just waiting to see what comes of it. Or is it an inevitability, an evolution away from web2?

Craig Burel (13:47):

I think if you asked me this question a year ago, I would’ve given you a very different answer than today. Today, it very much feels like an inevitability that web3 will be successful, that these protocols will get critical mass and be used if they’re designed properly and the go-to-market is executed right and the incentives align, all the parties involved.

(14:10):

There’s certainly going to be winners and losers, don’t get me wrong. But as a sector, as an industry, I believe now more than ever that web3 is inevitably going to have critical mass and adoption across industries. I think just listening to Q4 earnings calls for major conglomerates and basically any company that owns intellectual property right now, it has a metaverse or NFT initiative. Ad those are also net new participants in the ecosystem.

(14:44):

I think a year ago, and even back to two, three years ago, we’ve been hearing on earnings calls and in transcripts from the banks, from the custodians, from the exchanges, from these financial participants in traditional markets that they’re experimenting with web3, experimenting with crypto assets, figuring out how they could get involved. Most likely because their clients wanted to touch those assets. So, they’re getting a lot of questions.

(15:14):

Now, these are net new major market participants coming in and experimenting with the technology for their own top line, for their own monetization purposes. I doubt Disney has fans knocking on their door asking for Magic Kingdom in the metaverse, but I guarantee you, they’re looking at it as a way to continue to monetize their parks business 24/7, 365 with probably 90% margins. So, they’re looking at web3 as this massive opportunity to take this IP that’s either static on a shelf in the way somewhere, or it’s relying on a physical in-person experience in a park, and they’re trying to figure out how they can monetize it all the time.

(16:03):

And that’s completely novel. That’s a net new development that’s happened in the last year. And I don’t think it’ll be the last time that we hear about a net new innovative trend bringing major corporations into web3.

Nick (16:16):

Are there any mild posts you’re watching personally as you contemplate the greater adoption of web3 throughout the world? Are there certain things that you’re saying when this happens, that’s a signal that we’ve advanced? And then when this happens, another step forward?

Craig Burel (16:33):

It’s such a good question. And mind you, we look at incredibly early stage companies. We’re looking at seed in some cases, pre-seed stage companies, series A companies. I think we’re more than anything trying to figure out where the puck is going in web3 itself. And so, one of the things we watch very actively is developers, developer traction. Where are they going to build? What are they building on? What tools are they choosing? What protocols are they integrating with?

(17:08):

This, again, is another reason why it made so much sense to put together the Ecosystem Fund initiative with The Graph, because we’re doing this anyway. We’re looking at all the grantees who are receiving capital from The Graph. We do the same thing with our other portfolio companies. We do it with all the Layer 1s. And we’re monitoring that flow of funds. We’re monitoring that engineering work in real time to understand thematically, what are people working on and then what are they using to work on those experiments.

Nick (17:40):

Well, I love that answer about developer traction. It’s something that I personally am watching and I’m curious about. And a lot is made of this online, on Twitter about people in web2 at big technology firms making the move into web3, recruiting numbers going up, all of this stuff. And I just would be curious if you have a sense for how true that is. Is there a migration out of web2 and web3? Are developers reorienting their builds more towards web3? What are you seeing?

Craig Burel (18:10):

Yeah, absolutely. I think it’s undeniable that that’s happening as we speak. I can’t necessarily point you to a quantitative source to track this other than some of the analyses that have been done on GitHub repositories and commits across various chains and protocols. But I can tell you, if you go to hacker houses for the various ecosystems, we’re very involved in the Solana ecosystem. So, if you go to a Solana Hacker House, the percentage of people who have quit their job at name that FAANG company or top tier SaaS company and they’re hacking around in crypto.

(18:51):

If you go to the ETH global events, same thing. The major conferences, same thing. And it’s both engineers and business town. It’s not just one or the other. So, that’s been really inspiring over the last year. And it’s almost been overwhelming, to be honest, because I think the amount of traction in the space has been underestimated for a while, partly because of COVID and our inability to get in person and meet up.

(19:21):

I think East Denver’s a great example of this where so many people ended up to just see the tech, see the community, meet each other, and the ecosystem almost wasn’t ready for it. So, I think that’s just a fantastic sign. People from my past in traditional finance from childhood and growing up and from web2 where in SaaS where I used to work are coming into web3 and droves and reaching out and asking how they can get involved. So, the more I see that, the more inspired I get and real, I feel like that transition of talent is becoming.

Nick (21:40):

So, Craig, I want to ask you a lot more about your background and how you first got involved in crypto and drawn into the space. Before we leave this topic of web3, I want to get your opinion on something that I think is often framed as a criticism of web3, and that is the participation of venture capital firms in the space. So, groups like not picking on Reciprocal Ventures, but there’s a whole list of venture capital firms participating and investing in web3.

(22:08):

And I guess the argument goes if VCs are participating, then it’s probably not decentralized or it’s centralized behind the scenes. Do you have an opinion or a way that you would typically answer a criticism like that?

Craig Burel (22:23):

Yeah, I mean, I think the way I would answer that is that we’re here for a reason. I think to start, we specialize in providing risk capital, so we’re taking extreme amounts of risk in investing in some of these highly experimental, very early stage protocols and applications. And we’re designed and equipped as a firm to take that risk.

(22:49):

Additionally, we are really here to help breathe life into this industry. So, for Reciprocal, I can’t speak for any other firms, but I know for us over the last five years, we’ve really tried to specifically engineer our value propositions as a firm towards web3 to improve the likelihood of success of every company that we invest in. And I think The Graph has actually been a great case study in how we’ve done that and how we’ve worked together as the industry has evolved to build those value adds.

(23:27):

On the decentralization front, I think best practices and network and token economic design are still being refined, but I think we are getting down to a set of best practices where investors shouldn’t own more than a certain percent of a network. And I think top founders know that and do their best to try and abide by those rules so that the institutional investors aren’t oversaturated in the network and the community owns the vast majority of the tokens.

(24:04):

That’s definitely guidance that we provide. We actually have a table of comps of 50 plus projects that we’ve tracked over the last couple years and where their token distribution was in terms of TGE versus early stage and how that’s set them up for success or failure long term in the public markets. And we use that as a tool to advise our portfolio companies, so don’t have above X percent investors. This is the target for the community. This is the target for future employees, for the foundation, so on and so forth.

(24:43):

So, I think the other note that I would make too is we’re backed by people. So, we’re an organization that has investors and at a certain point in time, we’re shepherding their assets right now and we invest their capital into these protocols. But at a certain point in time in the future, we could theoretically distribute these assets to them and further decentralize those assets amongst our own investors, creating even more decentralization of the protocol.

Nick (25:16):

Well Craig, I appreciate you answering that question. I want to now turn a little bit more towards you and ask about your background. So, what can you share with us about your professional and educational background?

Craig Burel (25:28):

So, education wise, went to college at a small liberal arts school in Pennsylvania called Lafayette College, where I got my start with entrepreneurialism and discovered my passion for startups. I actually helped cofound a startup while I was there in the mobile ticketing space. So, that was how I fell in love with entrepreneurship.

Nick (25:51):

Well, it’s an interesting personality or character type that’s drawn to entrepreneurship because so many businesses fail, the startup environment is high risk and also a lot of stress. So, how is it then that you explain you’re drawn to something that maybe most people would view as something they want to avoid?

Craig Burel (26:12):

I don’t know. I think it’s a combination of the autonomy, the energy, and the upside of entrepreneurship to, if I was going to sum it up in three words, the idea of really having the freedom and flexibility to chase something that you’re passionate about. I graduated college basically during the global financial crisis or immediately after some of the darkest days of the global financial crisis, and there weren’t too many places hiring. Being an entrepreneur really seemed like abnormally high risk endeavor at the time, I should say.

(26:48):

So, I did the safe thing and I went and joined a bank. I got a job offer from Morgan Stanley. But I wanted to do something different. I wanted to go back to building. I had that entrepreneurial itch, which so many people describe. I really felt it.

Nick (27:06):

So, after you left Morgan Stanley, it sounds like you found yourself in an entrepreneurial journey here. Where did you land?

Craig Burel (27:13):

I did. So, I went to a company called FiscalNote. At the time, it was a seed stage AI company. It had come up with a pretty innovative algorithm that could predict what was going to happen in legislation. And they wanted to experiment with that in financial markets and also in financial institutions. They really didn’t have much in terms of customer traction. So, they wanted me to join at first to help both on the product side with financial market and financial institution customers and test if there was an ideal customer profile to be developed there.

(27:55):

But additionally, to start getting the sales motion together, start picking up the phone, making cold calls, actually trying to generate some distribution for the product, and then eventually try and find a repeatable, scalable, go-to market motion. And that’s exactly what I did. So, I ended up selling to some of the largest financial institutions in the world and also to some startups, and that’s where it all started.

Nick (28:27):

Well, I’m interested in disruption and how web3 and defi disrupts conventional traditional finance. You worked at Morgan Stanley, obviously one of the biggest financial investment firms in the world. How do you think they’re thinking through and positioning against the potential inevitability of defi and web3?

Craig Burel (28:47):

I mean, I think they’re 100% thinking about it. And like I said, I think in the last year to two years, it’s gone from maybe a bit of denial or dismissal to how do we figure out how to use this technology. And I think they have innovator’s dilemma. They’re going to stay in their lane. They’re going to serve their customers how they know best. It probably looks like some kind of access through their wealth management business to Bitcoin, maybe some of the ETF or ETP products that exist out there, or maybe it’s getting access to funds through their platform, external funds.

(29:29):

But yeah, I think they’re absolutely thinking about how they’re going to get involved in it. I think at this point, they have no choice but to try and leverage the technology and try and capitalize on the trend and asset class as a whole.

Nick (29:45):

Well, as somebody who has some background working at a startup that built AI modeling on regulation and legislative actions, how have you thought through the potential impact of regulation on this space? Is it a concern you have?

Craig Burel (30:03):

Yeah, I mean, it’s always a concern. Will regulators and legislators do what’s right and what’s best for the industry and the developers and innovators? That’s always my fear. I think historically, if we take Web1 and as precedents, I think legislators and regulators did the right thing in allowing innovation and developers to build and let the technology play out. I’m just hoping that that is the case here, and that vested interests don’t sway regulators and legislators into making shortsighted decisions.

Nick (30:51):

How would you respond to somebody who hearing your answer and also reading everything that’s on Twitter and everything that’s related to regulation of the space, how would you respond to somebody that says it doesn’t really matter what regulators do? Pandora’s Box has been opened. There’s enough traction, enough interest that regulation at this point is a moot point.

Craig Burel (31:14):

Yeah, I’ve definitely heard that argument, and I think it’s a bit naive. The regulators are incredibly powerful and the US dollar is still the reserve currency of the world. I think to say that major US regulation that’s anti crypto would have no impact on crypto is that’s just not true. Sure, the regulators can’t shut down Bitcoin. The government can’t shut down Bitcoin.

(31:48):

And I hope that’s the case for many of the protocols that we’re investing in web3. Again, they’re antifragile. Let’s hope, when they’re built at scale and they’re built properly. But I do think we have to have the regulators on the right side here. They could present a meaningful headwind to growth and consumer adoption of the technology.

Nick (32:15):

So, Craig, after you joined Reciprocal Ventures, you get to work, and at some point, I imagine you all came in contact with The Graph and made some decisions about that partnership. Can you take us back in time and tell us when the first time was you came into contact with The Graph and some of those initial thoughts?

Craig Burel (32:33):

Yeah, absolutely. So, I think we first spoke with Yaniv in the spring of 2018, and it was an interesting backstory. So, we had a couple investments in web3, mostly in defi, either defi protocols or applications around the, call it mid to late 2017 timeframe. And in talking to our portfolio companies, we noticed this recurring theme, this problem that kept coming up that we ended up referring to internally as the read problem, where they had this DevOps issue where they just couldn’t get data from the Ethereum blockchain fast enough to serve it up to their user interface.

(33:22):

And it resulted in these apps and protocols transitioning dev resources away from building the actual application and protocol over to DevOps to make sure that their data parsing engine and their indexing engine for the Ethereum chain was keeping up with the chain and was serving data fast enough and saw this problem and started asking this question in all of our meetings with web3 apps and protocols, like how are you handling your DevOps? What does your DevOps process look like? What are you spending dev resources on in DevOps?

(34:06):

And it became very obvious that data indexing was a huge issue. Everyone was focused on faster blockchains the write side of the equation, W-R-I-T-E, and speeding transaction through put up, but no one was really focused on the reading problem just yet. It was all bespoke homegrown solutions that lived inside applications and protocols themselves.

(34:35):

So, we wanted to find a solution to that. And I think at the time, we started coming across a SaaS company here or there. Actually a lot of the companies who actually who had the technology to solve this were doing analytics on the blockchain for asset fund flows, trying to predict when whales were moving assets onto exchanges to predict how that would impact prices. So, they’re doing various analyses to predict price movements and crypto assets. And coincidentally, they happened to have the best infrastructure for indexing at the time.

(35:17):

So, we saw a lot of those analytics businesses didn’t see something that was pure play, really trying to target this area except for maybe in FIRA, which at the time just wasn’t really being taken seriously as a scalable business. It was like this small operation inside consensus that just happened to be serving up a lot of users on the Ethereum chain. So, yeah. So, I started scouring the universe for companies trying to solve this and came across Yaniv and The Graph, and that’s where we first met and knew it was a need going into the first conversation.

Nick (35:58):

So, after you have this initial aha moment with The Graph and the solution it’s providing you, I guess formalize what a partnership, how would you describe for listeners what that partnership is today?

Craig Burel (36:11):

It’s changed quite a bit over time. I think when we first invested in The Graph, it was just a couple people, maybe five people. And a lot of the conversation was around very high level like theoretical concepts, the network economics, the token economic design, and just playing with different models, try and figure out where we could draw inspiration from and what the design might look like at token launch, a lot of thinking around that.

(36:42):

Now, fast forward four years or so, we’re helping them professionalize on certain levels. I think one of the amazing things that’s blown me away about The Graph is their ability to generate a grassroots developer flywheel or network effect. I mean, it’s absolutely wild the amount of traction they’ve gotten in terms of queries and subgraphs and number of developers. It’s astounding.

(37:13):

Now, I think the next step in the equation to really see the vision through is to make sure that everything’s transitioning over to the decentralized network and make sure that the participants on the decentralized network are paying for the service and those cash flows are coming through to the Indexers.

(37:30):

So, in my mind, that’s a very straightforward problem. That’s a go-to market and monetization problem. So, it comes down to that go-to market motion and pricing. Obviously, pricing can’t be unilaterally decided or altered within the network. It’s a market equation that has to be decided and settled once the market finds equilibrium. But on the go-to-market side, that’s something we can control.

(38:00):

There are playbooks out there for as much as The Graph is not software as a service and it is not a centralized service in any way on the decentralized network. There are playbooks that we can draw inspiration from in order to transition to the decentralized network and make sure uptake and adoption play out the way we want it to.

(38:22):

And The Graph has an incredibly unique problem in web3 where attraction’s already there. It’s actually an upsell problem. It’s not a customer acquisition problem. The customers are already there. I think there’s 30 something thousand subgraphs on the hosted service. So, when you have a network of customers that size, it’s really about customer segmentation and coming up with a process to facilitate that upsell and transition super efficiently and making sure that you’re optimizing for the right things in the go-to market process.

Nick (38:59):

So, when you say go-to market and upsell, you’re obviously talking about some of these subgraphs currently being hosted on the hosted service, migrating over to the decentralized service. But you hit on an important element here, which is this market adoption. There is a lot of people already in this space reliant upon The Graph. In addition to that, what else do you think uniquely positions The Graph to succeed in web3?

Craig Burel (39:29):

I mean, it’s a great question. I think it’s some of the value propositions that I alluded to earlier in our conversation. It’s built with web3 principles in mind. So, it’s antifragile. It avoids platform risk, doesn’t have downtime. I think developers appreciate those three things alone. But additionally, because it’s built in this world where everything is constructed on open databases, we have this new feature of data composability built into The Graph where if The Graph becomes a universal data layer for web3, that transcends any one blockchain.

(40:12):

That means that any net new developer to web3 can come in and pick a subgraph and develop right away, pick another subgraph. They don’t have to go down to the smart contract logic just to get the data. They don’t have to go into the Layer 1 themselves and start chiseling away at the dataset to figure out what data they need and don’t need. It’s all there in this data layer for them to leverage in their application.

Nick (40:44):

And I suppose this is why you recently tweeted from your own Twitter account that we believe Graph Protocol is mission critical infrastructure for the build out of web3.

Craig Burel (40:55):

Yeah, absolutely. I think fast forward five years and The Graph is going to be a de facto component of every application’s web3 technology stack.

Nick (41:42):

Craig, in addition to the partnership you just described, I’d be curious to know, do you or anybody at Reciprocal Ventures participate within The Graph ecosystem in other ways in the terms of being maybe an Indexer or Curator or a Delegator?

Craig Burel (41:55):

Yeah, we do actually. And that’s a really big part of our value proposition as a firm. I think I might have mentioned that over the last five years, we’ve really tried to engineer our value ads based on feedback from our portfolio companies. The Graph back in 2018 was one of our first web3 protocols in the portfolio and a big part of the relationship that we built with The Graph that was based on us running infrastructure actively in the network. And we find that pretty much every protocol in that web3 bucket wants the same thing.

(42:32):

So, that’s something that we do. We actively run a top 10 Indexer in The Graph Network. We also delegate, not necessarily to our own Indexer, but to other Indexers in the network just to help decentralize the stake and make sure that it’s not all concentrated on one Indexer. And then from a personal perspective, I have dabbled in some curation work over when curation first launched, but I found that I was maybe taking too much time away from my day job researching, researching some graphs. So, now I delegate my own stake and it sits there and I don’t touch it. But yeah, we do run an Indexer ourselves and we also delegate.

Nick (43:19):

And what’s the name of that Indexer?

Craig Burel (43:19):

It’s called figment-prime-2. And I’d be happy to link to it in the show notes as well, if that’s helpful.

Nick (43:25):

Craig, on January 21st, you created a Twitter thread. It was 24 post long. So, this really great thread on The Graph and you take readers through some of the things you’ve talked about today about originally coming across the read problem. In addition to that, you talked about how important The Graph is for web3 and some of the other elements that we’ve touched on here. I’d just be curious. I read through it, I loved it. Why did you post that thread?

Craig Burel (43:52):

Well, it’s funny having worked with The Graph and full disclosure, full transparency, we are investors in The Graph and we still hold and own GRT. But we’ve been investors in The Graph for years, and I’ve written about The Graph at length for our investors, for our internal memos. And I had this draft of internal memo that I shaped up for external distribution in my drafts folder for the better part of the last year.

(44:23):

And over that time, threads have become more popular. I think it’s been just way better to have these concise type forms of communication. So, I did my best to try and distill this 10-page blog post that I had written down into 24 tweets in a thread just to share a little bit about the grand vision that I think we see possible for The Graph, why we made our initial investment, why we continue to be supportive, and then also a little bit about how The Graph works and why it’s so novel and why it’s different from web2 companies that are trying to deliver what they consider to be a comparable service.

Nick (45:10):

After having written so much about The Graph and studied a lot about the protocol, the ecosystem, and the core dev partnerships, what is it then that most excites you or makes you most optimistic about the future of The Graph?

Craig Burel (45:23):

I think it’s the universal applicability of The Graph. So often you look at a company and it has this market that it’s going after and it’s very segmented to a specific persona, a specific customer profile. And by the time you whittle down the number of people or the number of businesses that it could be used by, you end up with maybe a billion, $2 billion market, something like that. And that’s pretty standard when you’re going after a venture business, a venture investible opportunity.

(45:55):

With The Graph, I think it’s just orders of magnitude larger than that. It really does have the potential to become this universal data layer above every Layer 1 that ends up being heavily utilized. And when you put it in that context, I mean just think there’s an incredible long-term opportunity for the vision of The Graph.

Nick (46:17):

So, I want to ask you a question about this incredible perspective you have by virtue of your role at Reciprocal Ventures, and I really appreciate you taking us through your perspective and opinions about The Graph. What else maybe at the macro level are you watching or excited about in the web3 crypto space more generally or broadly?

Craig Burel (46:37):

Yeah, so just to reiterate, we look at three core investment theses. We invest in defi primitives, chain agnostic web3 protocols, which is where we bucket The Graph, and then we look at the application layer and we get really excited about any application that has unique features or capabilities that are enabled by web3. So, you couldn’t necessarily get those things in web2. Those are the three areas that we’re constantly monitoring.

(47:08):

I tend to personally, we have a team of a couple people. Now, we have Ali, we have David, who have their own specialties. I tend to love that web3 bucket, and I do a lot of research and a lot of meetings there. Right now, I’m thinking about the question of how far up the stack does decentralization go and do we have a completely decentralized web3 stack from front end all the way down to the Layer 1. And it’s a question I’ve been asking myself for five years since I got into the space, and I still don’t have a perfect answer, but I do know that a lot of these protocols are progressively decentralizing over time, like The Graph.

(47:59):

And I think as token economic and incentive models are refined, it seems like it’s becoming more possible to have a fully decentralized web3 stack. So, I’m thinking about certain next order layers in the web3 stack, like front end hosting, decentralized content delivery. When I talk to applications that have the most users in crypto, those are two of the things that are top of mind for them. We saw the frontend attack that happened with BadgerDAO. And I think traditionally, we haven’t had very content rich user experiences in web3. Not a lot of video yet, not a lot of moving imagery or sharing, but that’s coming. It’s going to happen.

(48:52):

We recently invested in Ceramic to enable more flexible data streams and file sharing experiences in applications. And I think that’s going to open up the floodgates of the types of applications are built. And that content eventually will hit constraints in terms of serving that up to user interfaces. And certain geographies around the world that’ll have to be faster, or developers will have to rely on CloudFlare and Akamai, so traditional web2 players in that market to distribute content more effectively.

(49:31):

So, those are two big things I’m personally thinking about, actively meeting with companies in those two areas, really want to make an investment in both of those categories.

Nick (49:44):

One of the challenges of your role, and maybe anybody else who’s interested in web3 and crypto is staying up to date on everything. There’s so much change and the industry never sleeps. Do you have any hacks or rules of thumb that you follow to stay up to speed on things that might benefit listeners who are interested in doing the same?

Craig Burel (50:04):

Yeah, I mean, it’s getting more difficult. I think my advice to anyone who’s trying to get up the curve in crypto, I think crypto Twitter is the best resource in the world, like bar none. And when we hire new hires at Reciprocal who are either not on the crypto investment team or not on the investment team, but they want or need to know more about crypto, the first thing I tell them to do is go create a Twitter account. Follow a bunch of people, follow a bunch of influencers, and just start getting involved in the conversation. Or even just lurk, lurk and learn. Not the worst thing, but it’s the best. It honestly is the best resource out there.

(50:48):

And I think there’s some great publishers of information as well, like The Block, Messari, Decrypt, all high quality content that you can generally trust. Blockworks is another one. And they have a lot of podcasts. They have a lot of regular daily news as well to get you into the information flow.

(51:07):

The other thing I’d recommend too is getting into discords of good projects. And if you really want to learn how the technology works, that’s probably the best place.

Nick (51:18):

So, Craig, I have one more question for you before I let you go. And I want to thank you for being so gracious with your time. But if we go back and look at the last five years of your life when you transitioned from conventional finance at Morgan Stanley, then to an entrepreneur startup environment and now into the crypto space, as you look back, what’s the most important lesson or insight that you’ve had that you think you could share with others as they try to navigate and maybe learn from the experience you’ve had over the last five years?

Craig Burel (51:48):

Man, that’s such a good question. It’s so difficult to sum up in one cogent response. What I’ll say is be hungry, but also be patient. And that’s actually something that I’ve more recently learned at Reciprocal and as I’ve helped. Because right now, I’m still a builder, but we’re building a venture firm. It’s very different. I mentioned feedback loops earlier, how when you’re an entrepreneur, you have these daily and weekly feedback loops. Obviously, the growth trajectory happens across a very long-term time horizon, but you have these constant feedback loops that help you iterate and do your job better.

(52:32):

In venture investing, the feedback loops are much longer. It might be a couple years before you really even know if you’re doing your job well. And that has really taught me patience, patience that I definitely didn’t have when I was an entrepreneur. So, I think being insatiably curious is another just great skill to master. You learn one thing and you want to just keep pulling on that thread to learn the next five things about that thing.

(53:04):

I think no matter what you’re doing, whether you’re a product manager, customer success person, or an investor, that’s just always going to be helpful in getting ahead and aggregating more knowledge. Especially important in a space like crypto where the universe of web3 is expanding so quickly and the amount of information that exists about web3 is expanding so quickly.

(53:31):

I had the luxury of starting in web3 in 2016, 2017 when they’re relative to today, there really wasn’t that much going on. I remember reading a couple white papers and subscribing to Coin Desk and I’m like, “Man, I got this.” I’m like, I’m immediately more knowledgeable than everyone in this corner of Manhattan. And now it’s just, there’s so much information out there, you have to be tenacious in your pursuit of knowledge to keep up with it.

Nick (54:04):

Well, Craig, I appreciate your time today and for this great overview and introduction, not only of Reciprocal Ventures, but a lot of the things that you’ve observed in The Graph, and I appreciate you taking the time to explain it all. If listeners want to learn more about you and some of the work you’re doing at Reciprocal Ventures, what’s the best way to do it?

Craig Burel (54:22):

I’d say Twitter is probably the best place to find me, just @craigburel, CRAIGBUREL.