Investor Talks: A Chat With Smac

Investor Talks is a written interview series that offers deeper insights into some of the most fascinating thinkers and investors in our field.

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Smac is a partner at Compoundvc and host of Smactalk pod.

We’re delighted to host Smac in this week’s Investor Talks. Over the years, Smac has often poked holes in consensus beliefs in the crypto industry and more often than not, he’s been proven right. Enjoy our chat with Smac!

Can you give us a bit of your backstory, how did you get into crypto and when?

So my first introduction into crypto was through an old roommate of mine. He traded FX at one of the large investment banks and had heard guys on his desk talking about digital currencies (specifically Bitcoin). I didn’t really appreciate the elegance and importance of Bitcoin back then but I bought some because it seemed like a potentially asymmetric asset and my friend is a smart, weird-brained dude. This was February 2015, but I then largely ignored crypto at least for another year or so before coming across Ethereum, which was the light bulb moment for me. Smart contracts intellectually clicked more for me as someone who spent a bunch of years in structured credit trading – I saw so many intermediaries who added zero value clipping 25-100bps during transaction life cycles. It was obvious to me smart contracts were inevitably going to replace large chunks of financial markets and so I started spending more time trying to understand what was going on beyond Ethereum. 

I tried to quit my tradfi job a couple times because I was spending more and more time in crypto and eventually it stuck. As for how I ended up at Compound, the TLDR is that it was kind of an accident. Cold DM → bunch of conversations online and then IRL → bit of a feeling out process on both sides → looks good, send it 🤝

What is your overall thesis on the industry?

We believe the world will continue to get weirder, humans will create new problems and technology will advance to solve those new problems. Crypto will play a role in each of these phases. Importantly, while we expect financial markets to continue to expand exponentially onchain, the other translational sectors of technology that crypto will touch are just as exciting. This includes things like DePIN, Decentralized AI, DeSci, personalized health ownership & security and a bunch of other categories we frequently write about. Back in early 2023 we published a long-form piece speculating on the different roles crypto will play in the future (through 2028) and believe as much as ever in its inevitability.

What’s a belief you held that felt obvious at the time, and was ahead of mainstream thinking in crypto? 

The most obvious recent example was probably Solana. I was not necessarily unique in this belief because obviously there were actual builders in that ecosystem who acted as signal for me to develop my own conviction. But directionally I had been writing publicly about some of the reasons I felt the culture and strategic vision were different from anything else out there. There was a big drawdown in June 2023 that I thought offered asymmetric upside specific to the token. We also published a long-form thesis on the network and token back when it was trading ~$12B FDV. 

I’d say another squishier example here is a belief we’ve long held at Compound that while the distrust in institutions began with financial ones (Bitcoin birthed on the back of the GFC), it will permeate across other institutions as well – healthcare, government, infrastructure, media, etc. This is something that is quickly becoming more widely understood as the broader world gains more exposure to consumer AI products, younger generations become a more influential part of the economy and media organizations undergo rapid disruption. 

Can you recall one of your biggest wins in crypto where you felt like you got in early on something?

I’m a firm believer in gaining edge by using as many of the products and protocols out there as possible. Is it annoying when you go months at a time trying new things, dealing with the friction of crypto products and don’t find anything particularly useful or interesting during that time? Yes, of course. But this is part of participating in these types of new markets – it’s also why you see a lot of the same people uncovering the “new thing”. Most people just want to be told what to farm and who might be giving out the best airdrop. But all of my largest personal wins have been downstream of using applications or dealing with incremental friction to do something onchain – Uniswap, dYdX, the Loot mint, Arbitrum, Hyperliquid. Anytime people ask me if I think you can still “make it” onchain, the answer is definitively yes. But I do think you have to really love crypto in many ways to do this, otherwise it’s very difficult to find the motivation. The more products you use, the easier it becomes to identify ones that ~feel~ different or have some novelty. I could probably fill an entire folder of dead Racer apps on my old phone.

For the sake of transparency too, one thing I was quite wrong about was Ethena. In my mind, in a scenario where everything went well and the protocol grew and execution was great, the growth was capped because the yield would compress such that it was no longer attractive. So in some sense you had a protocol that would become a victim of its own success. I mistakenly believed that the tail risk during dislocation and vol would outweigh the benefits to users – this was clearly wrong. It is strong rehypothecating collateral.

How would you describe your investment style? Are you more of a longer term buy and hold fundamentals investor or are you more of a trader? Or something in between?

This may sound cliche or cringe but we invest in founders who are highly ambitious and want to build companies that can change the world. Despite what crypto markets might have you believe, this doesn’t happen in 1-2 years and a token launch. When we invest (often the first capital a founder takes), we expect to partner with them for 5-10+ years on the venture side and care a lot about why they have chosen this specific thing as their life’s work. Especially in today’s world there is so much optionality for how you can spend your time and what you can work on. We want to work with people who are in some ways tortured by an obsession to solve a specific problem or shift the world toward the future they believe in.

That being said, I’m also a huge markets nerd. I’m someone who played a competitive sport all the way through college and now that I’m old and washed up, I find competing in financial markets to be the next closest arena. I genuinely love the challenge of parsing through what seems like infinite information to pluck out the few critical bits and ignore what is largely noise. For me, the medium-to-longer term is where I’m most comfortable on the liquid side (>6mo) and where I feel I have the most edge. I’m not arrogant enough to think I can trade any market on any time horizon. Once in a while I’ll try my hand in the shorter-term trenches but I’ve largely given that up to be honest.

What is your time horizon typically for an investment (or trade) and how do you decide that?

5+ years on the venture side. I won’t beat a dead horse but this is largely a function of how long it takes to build meaningfully large companies. You could argue the time horizon should collapse as technology progresses and we’re able to do more with less, but I think crypto specifically tends to under index on empire-building and longtermism. On the liquid token side, these are generally shorter term holds, though I would say at the moment, the median expectation is at least 12mo.

How do you source your investments (or trades)? How do you develop a thesis and gain conviction?

While I think of these as two distinct things (i.e. investment vs. trade), the process isn’t all that different. We spend an immense amount of time trying to understand complicated technologies, the inflection points within them and how markets will broadly change around them. This is true for our traditional venture investing but also applies to shorter term trades – those inflection points and catalysts are just on more compressed timelines. Sourcing investments can come from a bunch of different places. We’ve been investing across our core technology areas (AI/ML, Robotics, Bio, Crypto) since 2016 and have built a lot of relationships with people across academia, research labs and the niche depths of the internet. Sometimes we source through our networks – be that friends, founders, investors, former colleagues. Other times it’s inbound from our public writing, research and thesis database. All of us also roam different weird corners of the internet and stumble upon interesting people there. My twitter DM’s are always open (though some legitimate ones go straight to spam) so people can always reach me there.

What have been your thoughts on this cycle? Has it been harder than previous ones for you - this seems to be the prevailing sentiment amongst many on CT

I think a lot of how people collectively experience the market shapes the stage they believe we’re in. It’s become clear – or rather should be – that the people who anchored to the past (i.e. BTC first, then ETH, then alts) have been absolutely cooked this cycle. I’m overgeneralizing a bit but there’s been a clear bifurcation of those who enjoyed the rise of Solana this cycle, and those who sat in Ethereum and coped. That is the dominant high-level theme in my view and something we wrote about in detail last spring:

Where things have been more challenging in my view is intra-cycle – there’s been plenty of opportunities from the Unibot days to WIF to the broader meme narrative to AI agents. Not to mention the new L1s and L2s that have launched. But I think the compression of narrative cycles has been difficult for a lot of people to navigate. There’s also a lot more fragility when it comes to aggregate conviction in the space. What I mean by that is I believe there’s a share of builders/investors/developers who are still searching for their own lightbulb moment for why crypto should matter. Each successive narrative offers an opportunity for some share of this group to latch on to this as the “aha” moment for them – this was most apparent when everyone lost their minds over agents in the back half of last year. This may sound harsh but what adds to these feverish periods in my opinion is an ignorance of what truly great founders and teams look like. We tend to throw around the term “cracked dev”, “S tier founder” and things like this a lot in crypto, but this is often hollow. To use a sports analogy, there’s a reason why we used to see young players who made the Olympic basketball team take giant leaps forward shortly after that experience. When you’re around greatness and you see what that looks like on a day-to-day basis, and you see how these people operate, you gain a new appreciation for what it takes. I suspect a lot of people peddling these short-term narratives have never seen what that looks like.

What are 3 (or more) tokens you are holding that you have high conviction in?

I’ll name a few with short qualitative TLDRs, though we may publish longer form theses on some of these in the future (similar to the Solana piece)

In alphabetical order

Bitcoin – the GOAT, though the pendulum is beginning to swing a bit too far to the “you cannot outperform BTC” side; I think there’s a decent chance this is the next “truth” that gets rethought

Hyperliquid – incredible founding team-product fit with hyper ambition and real understanding of how to build & ship fast

Metaplex – extremely well-positioned and actively shipping new & accretive products within an ecosystem we believe can be one of the few compounding long-term smart contract platforms

Solana – still silly this is ¼ the FDV of ETH imo

I also have quite a few tokens that I have high conviction in shorting 🙂, either against USD or as the short leg of a pair.

Are there any tokens you’re looking closely at but haven’t bought yet? 

Yes :)

Are you bullish/bearish on these new Alt L1/L2 ecosystems this cycle and why in one sentence? 

• Berachain

• Monad

• MegaETH

• Movement

• Eclipse

• HyperEVM – Bullish. Team +  Ambition + Attention-to-detail on product (and unwillingness to compromise on user experience). The real users + liquidity are an important bonus ofc.

What is a hobby you have that’s outside of crypto that you like to do in your spare time? 

I’m someone who needs structure so every morning I’m up ~5am and at the gym. For me it’s a huge part of how I relieve stress, relax and calm my mind down. As far as hobbies go, I try to spend as much free time as possible with my friends and family. I have a handful of really young nieces now so I’m spending more time at tea parties than real parties these days. I also play a lot of golf (my goal is always 50 GHIN rounds a year) which is probably my favorite way to spend time with close friends and also be a bit detached from technology.

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