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Happy Weekend 🙋🏻‍♂️,

Welcome to Chain Venturer, a series of intriguing conversations with crypto investors. This week, we have Lai Yuen from Fisher8 Capital.

Fisher8 Capital is a proprietary crypto fund that consists of a trading desk running systematic and discretionary strategies across global markets as well as a venture desk that backs innovative early-stage companies.

On the other side, Fisher8 Labs functions as the incubation arm of the company, partnering with founders to evolve ideas from concept to product.

Lai Yuen is an Investment Analyst at Fisher8 Capital. He’s also the founder of Cosmic Crypto Crusade, a ReFi (Regenerative Finance) NFT project inspired by real-life crypto heroes and villains. 100% of proceeds will be used to fund crypto public goods in support of Gitcoin. 

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Anyway, enjoy this week’s conversation.

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Lai Yuen of Fisher8 Capital

Lai Yuen is an Investment Analyst at Fisher8 Capital, a proprietary fund operating in the digital asset space. Fisher8 Capital consists of a trading desk running systematic and discretionary strategies across global markets as well as a venture desk that backs innovative early-stage companies.

Lai is also the founder of Cosmic Crypto Crusade, a ReFi (Regenerative Finance) NFT project inspired by real-life crypto heroes and villains. 100% of proceeds will be used to fund crypto public goods in support of Gitcoin. 

Lai holds a Bachelor of Business Administration from the National University of Singapore. During his studies, he was an active member of the NUS Fintech Society. Now, he serves as the Advisor of the society.

Here’s my conversation with Lai Yuen.

Quick takeaways:

• Fisher8 comprises two main divisions: Fisher8 Capital, the proprietary (prop) trading fund, and Fisher8 Labs, the incubation team.

• On the other side, Fisher8 Labs functions as the incubation arm of the company, partnering with founders to evolve ideas from concept to product. A notable example of Fisher8 Labs’ successful support is the project called Shuffle.

• Fisher8 prefers to invest in the early stages of a company's development, typically pre-seed to pre-Series A.

• Lai observes that the majority of the deal flow predominantly consisted of equity and token warrant structures during the bear market.

• Lai believes there's space for newer, more risk-tolerant teams to establish themselves as the leading CDP provider on new chains.

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

Lai started exploring the world of cryptocurrency before university, around 2018 or 2019, mainly doing speculative trading on Centralized Exchanges (CEXs), like many beginners in crypto. When he joined university, he chose to study finance at NUS, which helped him understand the world of economics and finance more clearly.

The defining moment: His interest in crypto took a serious turn in his first year at university. While learning about the financial struggles of third-world countries, he realized the real value and stability that cryptocurrency, especially Bitcoin, could offer. This understanding made him see crypto in a new light.

Alongside his studies, Lai was actively involved in his university's crypto club, leading it for three years. He spent this time discussing crypto topics, like Ethereum 2.0 and basic crypto transactions, with other club members, diving deeper into the subject.

Lai also looked for hands-on experience in the crypto field through his university's internship program. Feeling that his regular finance courses were becoming repetitive, he decided to do an internship that counted towards his degree. This led him to work at a crypto fund linked to a family office in his final year of university. This experience was crucial, as it gave him a taste of the professional crypto world. After graduating, he worked at the fund for a year before moving to Fisher8.

What is Fisher8 Capital?

Fisher8 comprises two main divisions: Fisher8 Capital, the proprietary (prop) trading fund, and Fisher8 Labs, the incubation team. Fisher8 Capital is the more widely recognized arm, known for its deployment of both discretionary and systematic trading strategies in liquid markets. The founder, known as Hedgedhog, has a background in trading. 

• Beyond trading, Fisher8 Capital also invests in both equity and tokens for early-stage VCs, maintaining a sector-agnostic approach.

On the other side, Fisher8 Labs functions as the incubation arm of the company, partnering with founders to evolve ideas from concept to product. The team at Fisher8 Labs is diverse and comprehensive, consisting of analysts, traders, designers, developers, and other professionals who pool their expertise to support the incubation process. A notable example of Fisher8 Labs’ successful support is the project Shuffle.

Are you primarily focused on pre-seed, seed, or Series A stages? Additionally, what are your average check sizes and which sectors are you interested in on the venture side?

Fisher8 prefers to invest in the early stages of a company's development, typically pre-seed to pre-Series A. The firm places significant emphasis on the potential of founding teams and the innovativeness of their ideas, making substantial bets on projects that demonstrate promise.

As for the ticket size of investments, Fisher8 prefers to keep this information confidential. The investment amounts vary and are tailored to the specific needs and potential of each project.

In terms of sector focus, Fisher8 maintains a sector-agnostic approach. The firm's investment decisions are influenced not only by market trends and sector potential but also by the collective insights and preferences of its analysts. For instance, while infrastructure and DeFi might have been the sectors of interest two years ago, the current inclination might lean towards innovative AI-driven projects. This flexibility allows Fisher8 to adapt to the evolving market landscape.

Ultimately, Fisher8 is driven by a combination of factors: the strength and vision of the founding team, the uniqueness of the idea, and the project's overall potential. If these elements align, Fisher8 is prepared to support and invest in the founders and their vision.

What are your thoughts on the new stablecoin models that aim to innovate beyond traditional structures, offering yields and other features? 

Lai notes that the conversation about stablecoins is nuanced, requiring a classification into types and an understanding of the investment structures. For instance, Terra Luna's UST, which was initially not backed and then partially backed by BTC, revealed the vulnerabilities of certain backing mechanisms. The model, where LUNA burns in response to UST demand, has evolved, and such tokenomics are less common now.

On the other hand, the USDC model, fully backed by stable assets like treasuries, is leading in adoption and real-life integration. However, for crypto investors, investing in such a model is challenging unless they hold equity in the managing company, like Circle. This model's strength lies in its ability to offer a highly liquid and redeemable stablecoin without necessarily sharing the yield from the treasuries where the deposited USD is held.

In the realm of crypto-specific stablecoins, CDP (Collateralized Debt Position) stablecoins like Maker, where ETH is used as collateral to mint a stablecoin, have gained significant traction. These stablecoins are often used for yield-generating activities, which Lai doesn't view negatively, likening it to traditional saving methods where money is put into money market funds for yield.

However, Lai expresses concern about the trend of increasing risk in the stablecoin space. Innovations are pushing the risk boundaries by accepting a broader range of assets as collateral and reducing the collateral ratio. While this may seem like progress, it stacks more risk onto the underlying collateral, potentially making the entire ecosystem more fragile. The risk is that once trust is lost and TVL (Total Value Locked) diminishes, it's challenging to recover.

Discussing the potential for models like Maker to expand onto other chains, Lai doesn't see it as a winner-takes-all scenario. For instance, while a stablecoin backed by Renminbi could expand a business like Circle, the associated risks and potential for upsetting significant stakeholders might outweigh the benefits for the firm. Lai believes there's space for newer, more risk-tolerant teams to establish themselves as the leading CDP provider on new chains.

Could you share more about Shuffle and Fisher8's involvement in the project?

Lai emphasizes the importance of distinguishing between a pure web3 casino and an online casino that incorporates tokens. Shuffle and Rollbit, for instance, are classified as online casinos with a token element. The tokens in these platforms primarily serve as a reward mechanism and a means of user engagement. In contrast, truly decentralized, crypto-native casinos, like those built off the WINR Protocol, strive for trustlessness and transparency, setting them apart from platforms like Rollbit, which prioritize their online casino aspect and may lack transparency in some aspects of their operations. They are different designs optimized for different user bases.

Lai also reflects on the growing relevance of online casinos in a world where digital engagement is becoming increasingly prevalent, especially among the younger generation. The convenience and accessibility of online casinos, coupled with the ability to engage and disengage at will, make them an appealing alternative to traditional physical casinos, despite the latter's tangible allure.

Shuffle, in particular, is seen as a forward-thinking project that aims to cater to this evolving market of digital-native risk-takers. The project's focus is on creating a robust product with the best user experience, led by a competent team, targeting a market segment with potential for significant growth, particularly considering the rise of e-gaming and its associated gambling aspects.

What types of venture deal dynamics have you observed recently? Are token-only deals becoming more common, or are you still noticing a mix of equity and token warrants in recent deal flows?

Lai observes that the majority of the deal flow predominantly consisted of equity and token warrant structures during the bear market. This approach allowed more capital to circulate back into the holding company for reinvestment and staffing, contrasting with scenarios where revenue is distributed to token holders who might promptly sell the tokens, potentially destabilizing the token's value.

However, with the thawing of the crypto winter, there's a noticeable shift towards pure token deals, especially among lower-quality projects. Lai credits this trend to the eagerness of some projects to attract quick investment, often offering tokenomics that are potentially more predatory towards public market participants but appealing to VC funds seeking swift returns. These include structures with significant portions of tokens unlocking in a short period, indicative of a market moving towards quicker exits and potentially higher returns, albeit with increased risk.

Rapid Fire Questions

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

   • The Most Important Thing: Uncommon Sense for the Thoughtful Investor by Howard Marks

2. What’s your biggest investment mistake?

   • Not allocating to crypto enough.

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

   • The ability to coordinate among a large group of people.

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

   • While BTC hype is fueling interest in BTC-based DeFi (BRC 20), it is really difficult to make it feasible due to the long block times.

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

   • A combination of fragmented liquidity and excessive leverage.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.