Chain Venturer: Ash Arora of LocalGlobe

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Happy Weekend 🙋🏻‍♂️,

Welcome to Chain Venturer, a series of intriguing conversations with crypto investors. This week, we have Ash Arora from LocalGlobe.

Ash is the youngest partner at LocalGlobe, the top VC investor in EMEA and a seed fund category.

Prior to crypto, Ash began her career at Citi. She also has experience working in the CEO’s office of A-PAG (also known as FIQL - Foundation for Improving the Quality of Life), a non-profit philanthropic foundation.

She began her career in the crypto space in 2021 as the investments lead of Polygon Labs, she led a $100M Polygon Ventures’ Fund I.

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Anyway, enjoy this week’s conversation.

Bull market = tokens are useful

Ash Arora, Partner at LocalGlobe

Ash Arora is the youngest partner at LocalGlobe, a UK-based venture capital firm that focuses on seed and impact investments. 

• Dealroom.co ranks LocalGlobe as the top VC investor in EMEA and a seed fund category. 

• LocalGlobe has backed a total of 16 EMEA unicorns, with 13 of them originating from seed investments such as Zoopla, Wise, Improbable, Melio, and Tide. 

• LocalGlobe has the third highest number of unicorns globally for an early-stage VC.

Ash started her career at Citi in 2017, becoming the youngest associate on the floor at Citi in Mumbai, India. There she picked up the crypto bug and started a prop trading shop on the side. From 2019 to 2021, she worked with a non-profit foundation working with the Prime Minister’s Office with a vision of improving and investing in emerging technologies such as climate-tech, EV, health tech etc via an SPV with leading VCs. She also started one of the largest curated angel networks for web3 and web2 startups in the country.

She began her full-time career in the crypto space in 2021 as the investments lead of Polygon Labs, where she led a $100M Polygon Ventures’ Fund I which focussed on early-stage web3 startups such as Layer Zero, Yuga Labs, Chaos and Labs with global LPs such as Softbank, Tiger Global, Sequoia, Accel, Lightspeed etc. Geographies - majorly US, and Europe.

Ash serves as a mentor in various organizations, including Outlier Ventures, Techstars, and AWS. Additionally, she holds the role of advisor at Founders at the University of Cambridge, guest lecturer at Oxford and LBS and also serves as a strategic partner at WAGMI Ventures.

She pursued studies in Economics, Finance and Mathematics at Lady Shri Ram College for Women and graduated with distinction.

Here’s my conversation with Ash Arora.

Quick takeaways:

• LocalGlobe has 17 investments in Web3, three of which have become unicorns: Improbable, Sorare, and Copper.

• Ash is exploring six to seven areas for upcoming thesis publications, spanning stablecoins, B2B, EM payments, decentralized computing, cybersecurity, and AI-driven decentralized data lakehouses.

• Additionally, Ash is exploring metaverse infrastructure in Europe's luxury sector and investigating trade reconciliation and a super app model for their potential influence on the future of finance.

• Ash sees an opportune moment for exploring stablecoins, driven by a declining market cap and increased trading volumes.

• Ash is bullish about London's regulatory strength and its promising future - The UK's distinctive constitution avoids categorizing digital assets as securities or commodities, giving it a regulatory advantage.

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What was the defining moment that drew you into the world of crypto?

Ash entered the crypto space in 2017. After graduating from university she worked at Citi on the fixed-income currencies, commodities, and equities trading floor for over two years.

• Her initiation into crypto came when being the youngest on the floor, she was tasked with a bitcoin research project.

• Although Citi decided not to invest due to volatility and lack of regulation, Ash invested her Christmas bonus in Bitcoin, ETH, and other cryptocurrencies between August and November 2017.

• Within six to eight months, she started seeing returns.

• Along with her friends, Ash launched a prop trading shop focused on crypto over weekends.

• They implemented an LSTM model for crypto trading before DeFi Summer in 2018.

• However, due to regulatory uncertainties and conservative taxation laws in India, they ceased crypto trading, disclosing it as capital gains tax, and turned to angel investing.

• This venture eventually led to the creation of one of the largest curated angel networks in India.

While continuing her day job with the Prime Minister's office in India, where she focused on policy and research for emerging tech, Ash's involvement in investing, angel investing, and crypto trading seamlessly integrated. 

She was later hired as the Investments Lead at Polygon, playing a key role in fundraising, legal structuring, and team building. Joining when there were around 112 employees, Ash witnessed Polygon's significant growth to over 650 employees when she left.

What is LocalGlobe?

LocalGlobe is one of the oldest and largest VCs in Europe, originated in 1999 as a family office and was institutionalized a decade ago. LocalGlobe boasts an impressive portfolio, having been involved in the seed stages of Twitter, Figma, Robinhood, Transferwise, and Canva. Additional collaborations include smaller contributions to Revolut, Monzo, Yonder, and more. 

Local Globe is part of Phoenix Code Group. Phoenix Code Group has six funds live at any point: 

• LocalGlobe covers pre-seeds to pre-Series A.

• Latitude manages Series B to D, Solar handles pre-IPO.

• Solar (Series C and beyond, as well as investing in listed tech stocks/public markets).

• Basecamp, a fund of funds, strategically invests in global funds like a16z, Sequoia, Antler, and 500 Partners. 

• LocalGlobe also spearheaded the establishment of Zinc, a London-based impact investment VC, 

• LocalGlobe also co-founded Seedcamp, which now operates independently.

With a commitment to remaining a leader in EMEA, LocalGlobe currently holds the third-highest number of unicorns globally among early-stage VCs. Their blockchain focus began in 2013 but intensified in 2017, with 17 investments in Web3, three of which have become unicorns: Improbable, Sorare, and Copper.

• Ash joined LocalGlobe a year ago and has already made significant contributions, including co-leading an investment in Ostium, a New York-based venture in collaboration with General Catalyst. 

What sectors are you most excited about these days?

Currently, Ash is exploring six to seven areas where she has developed theses, and she plans to publish them over the next few months. These areas include different types of stablecoins, B2B, EM payments, decentralized computing, cybersecurity, and, particularly, decentralized data lakehouses with an AI overlap. The last one involves dev tooling and AI with a decentralization component for on-chain applicability. 

Additionally, Ash expresses interest in metaverse infrastructure, especially in the luxury segment, acknowledging it as a compelling space in Europe. While she hasn't delved deeply into it yet, it's an area she intends to explore further. Lastly, Ash is exploring trade reconciliation and a super app model, envisioning its potential to shape the future of finance. 

On Ash’s stablecoin thesis

Ash believes that the timing is spot on for exploring stablecoins. Firstly, the market cap for stablecoins has consistently been declining over the last 18 months, reaching its lowest point since 2021 in August this year. The dominance of stablecoins in the market has fallen to around 10%, indicating increased demand for liquidity compared to the available order book. This trend is not new and has been observed in previous bear markets, where stablecoins like USDC and USDT remain high, while others dip in the middle of the bear market before a bull market resurgence.

This suggests an opportunity for either regulated stablecoins or non-dollar-regulated stablecoins to dominate the market. The second factor contributing to the opportune moment is the surge in trading volumes in the second quarter of this year. This increase is attributed to the volatility in the crypto space, regulatory actions against platforms like Coinbase and Binance, and developments such as the Bitcoin ETF applications. The heightened trading activity underscores the demand for stablecoins as retail investors seek stability amid cryptocurrency market fluctuations.

In light of these factors, the convergence of a declining stablecoin market and increased trading volumes creates an excellent timing for exploring stablecoins. Regarding the structure, Ash discusses her openness to various models, including regulated algorithmic stablecoins. While acknowledging the caution required due to past incidents and regulatory scrutiny, she emphasizes the importance of sound mathematical models supporting these algorithmic stablecoins.

Addressing the potential success of a regulated non-US dollar stablecoin, Ash considers two aspects. The first mover advantage primarily benefits on-chain native traders, yet she acknowledges this market might not be substantial enough for mainstream adoption. The second aspect involves understanding the demand for specific currencies by certain populations. In regions like Latin America and parts of Africa, citizens have a historical preference for more stable global currencies like the dollar, euro, and GBP due to FX risks and regulatory controls.

Ash believes that a stablecoin, whether fiat-denominated, a basket of currencies, flat coin, inflation coin, or commodity collateralized, has the potential to address this demand. The key lies in implementing the right go-to-market strategy, such as encouraging institutions like hospitals in specific regions to start accepting stablecoins. This approach could establish stablecoins as a medium of exchange and a store of value, gaining significant market share in those regions.

What are you seeing these days on the current state of crypto regulation and how do you perceive it outside the US, specifically in London, the EU, and India?

A fun fact about LocalGlobe is its close collaboration with the government. LocalGlobe’s managing partner is the Non-Executive Director at DSIT (Department of Science, Innovation, and Technology), shaping regulatory environments for emerging technologies like blockchain and AI.

Ash works closely on blockchain policy, having a voice in government decisions. Being near a16z, LocalGlobe actively engages in regulatory discussions. Moving to London ahead of a16z's announcement was strategic due to the exceptional talent and regulatory understanding in the crypto community here.

The UK has a unique constitution which not extend digital assets to securities or commodities. The UK's history in defining laws for the World Wide Web gives it a regulatory edge. London has also become a global AI hub, hosting events like the recent safety summit with global representation. The tech hub in King's Cross, Shoreditch, and other central areas feels like SF. Google and Meta's major offices are near our LocalGlobe office, fostering a vibrant tech environment. London's regulatory environment is robust, making Ash bullish about its future. 

India has the Open Network for Digital Commerce (ONDC) initiative, led by an industry expert rather than a government appointee. It's a regulated, centralized, government-enabled blockchain integrating the Unified Payment Interface (UPI). Startups like Namayatri are thriving on ONDC, disrupting established players. While India remains cautious about tokens, it's making strides in fostering a regulated, tech-friendly environment.

Rapid Fire Questions

1. What's one piece of content every aspiring investment professional should read/watch

   • Venture Deals - Brad Feld and Jason Mendelson

   • Going Infinite: The Rise and Fall of a New Tycoon - Michael Lewis

2. What’s your biggest investment mistake?

   • One of the founders that Ash interacted with while at Polygon refused to take funding from Polygon after a one-on-one session with her, the reason was that she smiled at his valuation. This incident taught Ash the top seven principles she lives by.

3. What’s the most underrated use case of crypto?

   • Anything that does not include a token, decentralization and the true utility of a distributed ledger. Could be decentralized computing, distributed ledger technology, data sharing agreements etc.

4. What’s your most contrarian view in crypto right now?

   • The majority of tokens are Ponzis, and the founder doesn’t even realize it.

5. What’s the biggest risk that the crypto space is facing?

   • If there are not enough regulatory-friendly businesses that provide real-life use cases to people in the next 5-7 years crypto will have a very difficult time making a comeback in the next 10 years to scale to the level the potential it truly has.

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