Sam Rosenblum never imagined he would work at a crypto-focused investment firm. A Southern California native who spent a “large portion of my life outdoors in the sun, playing sports and hanging out with friends,” crypto was not technically a thing until he was in college at UCLA. Stints at the DOJ and as an analyst for a business consulting firm followed, but it was a subsequent year spent with Visa that opened his eyes to the burgeoning world of digital assets — so much so that when Coinbase began a recruiting push to pull in Rosenblum and some of his colleagues in 2014, two years after Coinbase was founded, he jumped at the opportunity.
It was a good move. Coinbase, then a 30-person company, grew fast in the five years that Rosenblum stayed until he decided to join some other Coinbase alums at the crypto fund Polychain Capital. Indeed, armed with a network of contacts from Coinbase and Polychain, Rosenblum was preparing to raise his own fund last year when former Andreessen Horowitz VC Katie Haun reached out to see if he might join her new firm instead.
Now Rosenblum, along with Chris Ahn, who previously spent four years with Index Ventures, are helping Haun invest the $1.5 billion in capital commitments that her firm — recently named Haun Ventures — garnered earlier this year. To get a better sense of how the young firm works and how it is thinking about investing into a market right now where both stocks and crypto are being dumped, we jumped on a Zoom with Rosenblum, who lives in Sun Valley, Idaho, late last week. Excerpts of that chat follow, edited for length and clarity.
TC: Let’s start by backing up a bit. Andreessen Horowitz is an investor in Polychain Capital, whose founder was the first employee of Coinbase. Katie is on the board of Coinbase. She also spent a decade as a federal prosecutor at the DOJ, where you spent your first year out of college. With all of these potential intersections, when did you two first cross paths?
SR: Katie and I first met in 2017 when she joined the Coinbase board. We didn’t keep in particularly close touch after I left Coinbase, but in November of last year, I actually set out to start my own venture fund, and so I was working on that and, course, Katie and I have quite a few friends in common, and so some of these people I had been kind of just prepping and brainstorming with in terms of how to pitch to fund before going out to fundraise. And I think Katie caught wind that I was in process of that and then reached reached out to me, told me what she was thinking about, and I ended up flying out to Menlo Park for a couple days and we jammed together and walked a bunch of laps around the Stanford dish and decided it was a good time to team up. The rest is recent history.
You were the first deal lead hired by Katie. How many employees are there at this point?
We’re now 12 people total — the deal team is currently three people — and I think we’ll probably keep the whole firm pretty lean and nimble. We’ll add a couple of more folks to the deal team over the course of this year but really not much more than that. I think you can imagine Haun Ventures as a 15- to 20-person firm at steady state.
This is probably a dumb, but to be clear, this is a traditional fund you are deploying, in that this is actual dollars that will be called down. None of these commitments were in crypto or anything like that.
The strategy is obviously very crypto forward but the structure is quite vanilla. We’re a typical venture structure. We ended up deciding to close on $1.5 billion total across two funds. One vehicle is our $500 million early-stage fund, and the other is our $1 billion acceleration fund for slightly later-stage stuff.
It’s out there that Marc Andreessen and Chris Dixon are limited partners. Are there other individuals or firms that you can mention that have backed the firm?
Most of our LPs are institutions, from sovereign wealth funds to university endowments to pension plans to hospital systems. And we also have some individual LPs — mostly just friends of Katie or myself, friends of the firm, so to speak.
In terms of backing later-stage outfits, I don’t see the typical nomenclature of “Series A” or “B” or “C” assigned to a lot of these web3 deals and projects. What constitutes later-stage, in the firm’s view?
The key distinction is just really staged in the form of: how far along the project is in its development, what sort of usage there is. The idea of stage maybe looks a little bit different than in traditional tech venture. Historically, if you’re looking at a tech venture play, you’re looking at something where a big outcome would be to have a company you invested in [become a] billion- or multibillion-dollar company, and that’s true of certain companies in the crypto space that higher up in the tech stack. But as you get lower and lower, you’re actually talking about these networks, including Layer One protocols used for a variety of things, and these networks, when you think of what is a home-run outcome, rather than thinking in the billions of dollars, you’re actually thinking in the trillions of dollars. So when we think of how to define stage for something in that category, [we’re taking into account the question of] what is the terminal size should this become a big winner? So those are some of the things that we look at.
How many different tokens have you acquired or deals have you done so far?
I would say a dozen or so deals at this point that span a variety of different deal deal structures or asset types.
Two companies you’ve funded have announced their rounds recently, including Zora, a two-year-old, L.A.- based Ethereum-based marketplace for buying, selling and curating NFTs that raised $50 million in new funding. Was that an acceleration deal or an early stage deal?
The team at Zora has been around for a couple of years, and they’ve had a couple of pretty important pivots along the way. To your point, it is one where it’s kind of funny to define what type of round it is. You can’t really give it a typical classification of Series A, Series B, whatever. It ends up just being a little bit more loosely defined. They’ve got some pretty exciting things to announce in the near future about the direction that they’re headed in, so I won’t spoil their news for them, but they are off to the races in a really cool way.
Had they raised funding previously?
Yeah, they’ve raised, and I don’t know off the top of my head what they’ve publicly said about who they’ve raised from, but it’s a great group on the cap table or investors that we work with a lot and know well.
Are those investors how you found the company?
I’ve actually known the Zora co-founders since 2018 or so. The whole co-founding team came from Coinbase.
What about Highlight, a 14-month-old Bay Area-based outfit that says it lets creators design and mint NFTs and create a community around them. What drew you to this particular company?
The Highlight team is equally impressive, coming from the web2 world — coming places from Square (now Block) and DoorDash and other well-designed web2 products and services. Ultimately what they want us to do is set out to enable people who are not already super deep crypto engineers to enable communities with web3 tools, so it’s a no-code platform for doing just that.
Based on this very limited data sample, it sounds like you’re tracking a lot of web2 operators and founders who are moving into this web3 world. Is that accurate?
We are equally open to backing founders who have worked in crypto for a decade, or maybe they’ve worked in crypto for a year. What we really care about is their commitment to what they’re building and their unique insights and intuitions around exactly why they want to build it.
There is so much whitespace in web3 that I wonder whether you think about conflicts of interest in the same way that investors have historically. I’m seeing a lot of NFT minting type companies, for example. Would you fund another?
That’s a really important question for crypto venture specifically. The general web2 landscape is one in which a founder or a startup has a very clear set of premises in terms of what they’re building on top of, things like TCP/IP, HTTP, SMTP — the dozen or so internet protocols that we all use every day.
The unique thing that [founders are] setting out to do in crypto is the inverse of that, where every single layer of the tech stack is evolving in parallel. Even the most basic elements to the crypto tech stack — the idea of decentralized consensus — there’s this constant evolution of types of decentralized consensus or consensus mechanisms.
So when you have truly every building block evolving, that tends to lend itself to founders and startups that probably will have to, if not pivot, at least take into account a lot of new information over the course of their startup community. . .
We do take the idea of conflicts seriously and we do want to make sure that we are being really good partners to our portfolio founders, so we would not want to put that in jeopardy. But certainly, what we’ve already seen is founders maybe start two different startups, starting in a similar neighborhood of an idea that end up, at times, even building at different layers of the crypto tech stack. So there’s quite a bit of flexibility in the direction things have gone.
Talking about NFTs, one of the last deals Katie did for Andreessen Horowitz before leaving the firm was the NFT music rights startup Royal, which raised $55 million led by a16z back in November. Does Haun Ventures have a stake in that company?
You’re exactly right. That was a16z-led deal, where Katie joined the board as part of that deal. Katie is still on the board of Royal for that, but it is not a Haun Ventures portfolio company at the moment.
Does that make it trickier for you to invest in another NFT music rights startup or would you potentially just jump into a later round for the same company?
It’s a good question. I think all options are still open there. Digitally managed royalties and on-chain rights are super interesting and also a really challenging category. It’s very complex space. So I would presume that there’ll be quite a few really talented founders building in that general category and probably experimenting with various different approaches in terms of the markets they’re trying to serve and how they serve them. So it’s certainly a market we will continue to take a look at.
Speaking of Katie’s board seats, she’s also on the board of OpenSea, which brings to mind a conversation I had recently with Sarah Tavel of Benchmark, who said web3 companies like OpenSea and Sorare — which Benchmark has backed — are really centralized companies that are built on a decentralized infrastructure and were never really meant to be completely decentralized entities. Agree? Disagree?
At the core of the concept of web3 is this thought of decentralization, but I think a lot of people maybe have been less thoughtful where that ends up mattering and being important. In my view, centralized platforms will and should exist for certain uses. The important thing when it comes to decentralization in the crypto tech stack is that platforms do not have the ability to to “lock in” their users.
Not to pick on anyone web2 company, but you think of some of these social networks where every action you’ve taken — every every photo you’ve uploaded, your literal social graph, your network of friends and family, is all preserved and managed by a central gatekeeper, and there’s no way to exit that information. The idea in crypto is, sure, you can have a centralized platform where you develop that content, but for something like your social graph, you can actually leave the platform and take your social graph with you because these things are all being built on an underlying open infrastructure.
The crypto collapse of the last week or two has wiped out $400 billion in market value from cryptocurrencies, including Bitcoin and Ethereum. What are your thoughts on what’s happening out there right now? It seems like a good time to have $1.5 billion at your disposal with everything on sale.
I’ve been working in this space since 2014. I joined Coinbase in a similar moment in time to where we are today, this week, in this current market cycle, where you probably have a three-years-or-so slog forward of having to be heads down and building and maybe not [seeing] the euphoria that we’ve felt over the last year or so in the space.
Crypto bear markets can be really hard on people for a lot of reasons, financially, psychologically, emotionally. But historically, the silver lining is that a lot of the best projects in crypto are born in moments like this. Going back a couple of cycles, you had Bitcoin’s rise in late 2013, followed very shortly thereafter by kind of a crash in early 2014. I think the Ethereum pre-sale was in June of 2014, and [that rise and fall] played out again in the 2017 and 2018 cycle, where we had peak euphoria followed by a crash. Then in 2018, some amazing projects like [the crypto exchange] Uniswap and [the decentralized margin trading platform] dYdX were founded right in that period. So I think quite literally in maybe the next several weeks to months, you’re probably going to have some new startups and new projects created in crypto that, three or four years from now, we will look back out and go ‘Wow, that was born out of out of this last crypto winter.’
Is Haun Ventures structured as a registered investment advisor?
We are not. We are a vanilla, exempt venture fund.
I wondered because you and Katie obviously know Coinbase very well. Some might argue that Coinbase is on sale right now. Investor Cathie Wood just spent $3 million on shares. Given that you have a lot of money at your disposal, I’m curious if you would or have taken stakes in any publicly traded companies that have gotten hammered lately — Coinbase or other.
I am personally a holder of COIN and I forget who tweeted this yesterday or the day before, but someone wrote that it seemed like a generational buying opportunity for normal people who don’t necessarily have access to amazing early-stage deals to be able to invest in Coinbase at less than two times its Series C valuation in 2018. I tend to agree with that personally. I’m a personal holder of Coinbase stock and certainly would be bullish that this week is a pretty special buying opportunity. But obviously people should have to do the research they need to do to make independent financial decisions. And as a fund, we’re really not focused on the public equity markets.