Why I became an investor vs starting my own crypto company – From Co-founder at Scalar Capital and former PM at Coinbase, Linda Xie

Note from the Elpha Staff: We're resurfacing our office hour conversations with industry experts in a more digestible way on Fridays, let us know if you have any feedback in the comments. Thanks! Linda Xie (@linda) is the Co-founder and Managing Director of Scalar Capital, a crypto fund, and advisor to 0x, a protocol for decentralized exchange of Ethereum tokens. She previously worked at Coinbase as a product manager where she worked with regulators and law enforcement on compliance for digital assets. Linda has been following cryptocurrencies since 2011, and has a B.A. in Economics from the University of California, San Diego.These are the highlights of her AMA on Elpha, where women in tech talk candidly online. You can check out the entirety of the conversation.Q: What is the first crypto transaction you ever made?Linda: I think my first crypto transaction was paying a friend back for coffee because it was my way of getting them to own some bitcoin :)Q: How do you explain what you do to your grandma? I’m curious what the simplest version is of explaining the world you work in!Linda: My grandparents actually understood bitcoin because of their own experiences with transferring money. China limits how much money can be moved out of the country so I explained to them that bitcoin is a global internet money that anyone can send to anyone else in the world without limits. My job is to invest in things like bitcoin because people value this ability.Q:What inspired you to take the leap to start your own fund? What advice to you have for other woman considering taking the leap?Linda: I knew I wanted to be an investor so I could spend my time learning about exciting projects and trends in crypto. Coinbase actually inspired me to start my own fund. I never had considered starting something before but I really enjoyed the autonomy I had at Coinbase and was excited to be able to have control over my own schedule and what I wanted to work on.My advice would be to reach out to others who have already gone through something similar to what you’re about to do. I wish I had spent more time talking to people who had already started their own fund to get their advice and lessons learned. It would have saved me a lot of headache in the beginning. I also can’t emphasize enough how important it is to have a strong support network because it’s definitely going to be a rewarding, but challenging process.Q: How did you know when it was the right time to leave Coinbase to go launch your own thing? How did you decide what you wanted to work on? Why investing vs starting your own startup? How did you choose?Linda: I knew it was the right time for me to leave Coinbase to start my own thing when the company was just starting to go through a hypergrowth stage. When I first joined there were 30 people almost all who were deeply passionate about cryptocurrencies and as the company started getting larger (150 employees when I left and now over 500) it started to shift more towards a larger fin-tech company which was absolutely great to see but I knew wasn’t the right fit for me anymore since I wanted to dive deeper learning about crypto.I decided to invest full time because I wanted to spend my days researching new trends in crypto and talking to/helping out smart teams in the space. I had thought about starting my own project but I was passionate about so many different areas in crypto I didn’t want to have to choose which area to focus on for many years. I love that investing in crypto requires a broad knowledge of many different topics e.g. economics, tech, compliance, product, etc so it was exciting for me to apply what I had learned in those areas.Q: I’m an engineer and I’m starting to think about working on a crypto project. How did you identify 0x as something you wanted to support? Do you have a framework?Linda: Great to hear you’re thinking about joining a team! I actually just wrote up a tweetstorm on this topic since I get asked that question a lot.When I decide to support a crypto team I first look at why they are using blockchain technology. Not everything needs to go on the blockchain as it’s really just an inefficient and expensive database. I’m looking for things that truly need censorship resistance rather than using blockchain as a marketing play.Then I look at the business use case and whether this is something people would actually want to use. There’s a lot of interesting protocols out there but many of them don’t seem to have an addressable market. From there I evaluate the technology, team, and community. When you talk to the team make sure you also get a sense of why they joined the space and how passionate they are about what they are building. The crypto space is extremely volatile and you want to make sure the team sticks around in bear markets. I remember being at Coinbase in 2014–2015 when the price of bitcoin dropped and stagnated yet everyone remained excited about what they were building. These are the co-workers you want to surround yourself with!One unique thing about most crypto projects compared to traditional companies is that it is open source and anyone can really copy the code and fork the project so it’s important to think through how the team has a moat around them especially if there’s any rent-seeking e.g. strong community, specialized team knowledge. I’ve been recommending people to look at portfolio companies of investors they respect. Investors spend their days looking through projects and doing their due diligence so it’s helpful to leverage some of this work. I actually first heard about Coinbase through a16z’s portfolio.Q: What kind of startups do you wish to see more from the blockchain ladies — more platform/tech sides or real-world application sides?Linda: I would love to see more real-world applications. I think there’s some really exciting work being done on the platform/tech side but the entire reason I was drawn to the crypto space was how it could directly help people. We could work on improving the technology all we want but if there’s little real world applications of it then it’s not really going to be used on a large global scale. I think there’s still massive potential in creating financial applications that can be used by people who don’t have access to traditional financial services.We could work on improving the technology all we want but if there’s little real world applications of it then it’s not really going to be used on a large global scale. — Linda Xie