Chain Venturer: Robert Sarrow of Volt Capital

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Hi folks,

For the last (this time for real, it’s the last one) episode of Chain Venturer 1.0, we have Rob Sarrow from Volt Capital.

This one is a bit nostalgic for me.

Rob and I went way back to February 2020 before the COVID-19 lockdown when both of us were working at Digital Asset Research. Back then, I was still farming the H-1B visa, but I digress — since then, he has gathered incredible experience as a crypto investor at Blockchain Capital and Delphi Digital before ending up at Volt.

I caught up with him in person again after 4 years at ETHCC last month.

Amazing how we’re now both investors and joined our firms at around the same time. Time flies.

-Marco

In case you don’t know…

I’m an investor at Primitive Ventures. We back founders who believe that crypto represents the new socioeconomic primitive that will redefine individual sovereignty and financial paradigms.

If you’re building an interesting project → DM me here.

Anyway, enjoy this week’s conversation.

the modular eco needs this

Robert Sarrow of Volt Capital

Robert (Rob) Sarrow is an investor at Volt Capital, a crypto-native venture firm founded by founders that uniquely combine technical sophistication with expertise in scaling networks to help founders build and scale their tech, ecosystems, and operations. Volt Capital's portfolio features prominent projects such as Nansen, LayerZero, Farcaster, Pixels, Lagrange, and Magic Eden.

Rob began his career as a research assistant at Stevens Institute of Technology. In 2017, he transitioned to Protiviti as a technology consultant. In 2020, Rob began working full-time in the cryptocurrency space at Digital Asset Research as a research analyst. Prior to joining Volt in January 2024, he worked at Blockchain Capital as a research scholar and at Delphi Digital as a venture associate.

Rob earned both his bachelor's and master's degrees in engineering from the Stevens Institute of Technology. He also holds the Securities Industry Essentials (SIE) certification and a Certified Practitioner license.

Here’s my conversation with Robert Sarrow. 

Quick takeaways:

• Volt is dedicated to supporting innovators who not only create new categories but also develop novel feedback mechanisms that open up unprecedented access and enhance human autonomy.

• Discussing FDV and low float, Rob explained the balance between launching with a low float to setting company expectations over time.

• For Volt, the focus is on investing in projects that offer unique value beyond basic token distribution, seeking opportunities that provide access to new markets and user bases that are typically underserved.

• Rob is optimistic about the future of DePIN, seeing it as central to generating novel feedback mechanisms and unlocking unprecedented access to crowd-sourced data.

• Rob's investment thesis integrates the concept of desire deeply, viewing crypto as a tool that accelerates the fulfillment of desires, whether they are rooted in autonomy, wealth generation, or daily utility

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

Graduating in 2017, Rob initially joined Protiviti, a consulting firm, where he handled internal audits and financial advisory—roles he found less than stimulating within the conventional corporate framework. His interest in crypto was sparked when his managing director, recognizing Rob's mismatch with the corporate world, handed him a book titled "The Blockchain Revolution" by the Tapscotts. Captivated by the book's contents, Rob dove into the crypto world, setting up accounts on platforms like Gemini and Binance alongside his more adventurous colleagues.

The defining moment: The real turning point came a year and a half into his career during a discussion about career aspirations with a colleague who had just been promoted. The colleague's sole ambition to rise to the position of managing director within internal audit struck Rob as a confirmation that he needed a more fulfilling path. This realization prompted him to spearhead an innovation program, securing funding and laying the groundwork for transitioning out of traditional consulting.

Rob's journey into crypto wasn't smooth; it was marked by numerous job rejections and unreturned cold emails, despite his active participation in conferences and events. Holding onto every rejection email, Rob felt like an outsider looking in, until he finally landed a role at Digital Asset Research. This position not only provided a significant break from his senior consultant duties at Protiviti but also cemented his place in the crypto industry, where he has been making impactful strides ever since.

Would you like to share your experience transitioning from Delphi Digital to Volt Capital?

Rob thinks one of the key moments at Digital Asset Research was realizing that he wanted to be more involved in the investing side of things. Rob often found himself clashing with the CEO and management about the company's direction, which was a valuable learning experience about aligning with client expectations and maintaining curiosity.

It was during Rob's tenure at Digital Asset Research that Rob applied for an internship at Blockchain Capital. This experience solidified Rob's interest in investing rather than working with traditional institutional clients. Unfortunately, Rob was let go from Digital Asset Research, leaving Rob somewhat adrift. Thankfully, the team at Blockchain Capital, particularly Kinjal, vouched for Rob, allowing Rob to continue interning there for another three months. This period was crucial in Rob's career.

Thanks to Alex's introduction to Tom and Yan at Delphi, Rob joined Delphi Digital at an exciting time when they were expanding their research to include a venture arm. With only a few months of internship experience at Blockchain Capital under Rob's belt, Rob became Delphi's first hire focused solely on ventures. This role involved everything from creating spreadsheets tracking company engagements to developing investment processes—it was a hands-on, all-consuming role.

Rob's time at Delphi was transformative. Watching the company grow from about 18 employees to 150 during a bull market, and being involved in over 120 investments, opened Rob's eyes to the rapid scale and dynamics of growth within the sector. While not all investments flourished, the opportunity to develop investment theses and work closely with founders was incredibly rewarding.

Delphi's integrated approach, combining ventures, research, labs, and a creative arm, facilitated a rich, collaborative environment. Anil, Delphi's CEO, often discussed the value of the Delphi hive mind, which Rob found instrumental in fostering holistic growth and innovation within the company.

As 2023 drew to a close, a new opportunity emerged for Rob to join Volt Capital. In January 2024, Rob made the transition and began leading frontier investments at Volt, working alongside Soona, the founder and managing partner at the firm.

Can you give our readers an overview of Volt and your current investment thesis?

Volt was Established in 2018 by Soona. Volt began with an initial $10M fund, and Volt is currently deploying capital from Volt's second fund, a substantial $50M raised in 2022. The essence of Volt's mission is straightforward yet impactful: to uplift founders who envision new ways of self-organization, power sharing, and flourishing, particularly in the realms of finance, culture, and systems. 

Volt is dedicated to supporting innovators who not only create new categories but also develop novel feedback mechanisms that open up unprecedented access and enhance human autonomy. Volt maintains an opportunistic approach across quality infrastructure and consumer sectors, recognizing the cyclical relationship between them. Volt's core values are curiosity, integrity, audacity, and community. Volt has made notable investments in Farcaster, Magic, Squads, and Penumbra.

On the laboratory side, Volt Labs is particularly intriguing. Volt offers various staking services for Layer 1 protocols Volt has previously invested in and is now refining Volt's focus under Volt Labs to enhance Volt's offerings. One key initiative is the P2P conference asset, which not only complements major industry events but serves as an accelerator. Last year, P2P was held in Paris, and this year, during DevConnect in Bangkok, it will support a new cohort of teams. This accelerator program at Volt Labs, a subsidiary of Volt Capital, aims to nurture a small group of teams annually, culminating in a demo day that showcases their progress. This initiative is a part of the firm's broader strategy to integrate staking services with actionable research and development, ensuring that Volt Capital and its subsidiaries propel forward-thinking projects and foster a dynamic community around innovative solutions.

What are your thoughts on the high FDV (fully diluted valuation) and low float discussion? Do you think there needs to be a new or different way of funding for projects that are not necessarily venture scale but could still be successful as consumer products?

Rob began by acknowledging the potential shift back to traditional finance frameworks, focusing on income and revenue-driven products. He noted the ease of valuing L1 projects and the recent traction of various applications like pump.fun. The core issue Rob raised was sustainability and the ability to continually innovate and meet daily user needs, highlighting that becoming a staple app used daily worldwide is crucial.

Discussing FDV and low float, Rob explained the balance between launching with a low float to setting company expectations over time.

• He emphasized the need for structured lockups since 2018, advocating for incentivized lockups that go beyond mere trading volume metrics, which were exploited in the past by projects like Three Arrows. Instead, Rob believes performance should drive rewards and suggests regulatory structures could enforce this.

• Rob then touched on private equity vehicles, hindered by regulatory uncertainties and the ambiguous legal rights concerning asset acquisitions. He pointed out that even initiatives like EigenLayer, which involved acquiring codebases, didn't confer clear ownership, often resulting in token-based compensation rather than direct asset control.

Transitioning to high FDV, Rob sees no inherent issues, noting that there's substantial capital ready to invest. He suggested some funds might and have already evolved into asset managers covering the entire investment spectrum, from seed stage to late-stage growth investments.

• Rob discussed how the past easy gains in crypto investment are over, underscoring the necessity for projects to deliver real value. He reflected on traditional VC investments outside crypto, emphasizing the need for solid theses and conviction in backing the right teams capable of building into their valuations.

• He shared anecdotes about advising teams against accepting inflated valuations too early and working with founders to strategize growth into substantial valuations responsibly. Ultimately, Rob believes investing in the right people is key, as they make prudent decisions and build towards justifying their project's market valuations.

Are you bullish that ICO, IDO, and the like are going to come back?

Rob believes there can be diverse forms of token distribution in the future, but he remains skeptical about the necessity of Initial Coin Offerings (ICOs) for successful companies. He spoke with a team that plans to distribute tokens based on actual product usage by their customers, favoring organic engagement over broader distribution mechanisms.

Rob also pointed out the innovative approaches being adopted, like video and live streaming, to distribute tokens. He highlighted Layer3's efforts in developing their processes and attribution networks as exemplary. However, he cautioned that regulatory challenges persist and must be addressed before more innovative distribution methods can become widely accepted.

From an investment perspective, Rob does not see platforms that solely focus on token distribution as compelling investment opportunities for Volt. To him, such investments represent mere index bets, which might be better suited for private equity firms focused on crypto indices.

For Volt, the focus is on investing in projects that offer unique value beyond basic token distribution, seeking opportunities that provide access to new markets and user bases that are typically underserved. This approach is driven by a desire to foster innovation and support substantive growth in the crypto space, rather than just capitalizing on financial indices.

Do you still see new crypto founders emerging in the US, and are they primarily focusing on infrastructure, or is the trend of moving abroad for DeFi applications true? Is this just a stereotype or a narrative pushed by offshore funds?

Rob discussed the perception of New York as a central hub for crypto development, noting its appeal as a place where one might want to spend significant time, especially in comparison to other international hubs like Dubai or Singapore. He acknowledged the tax advantages of certain locations but emphasized New York's prominence in the crypto sphere.

Regarding regulatory frameworks, Rob pointed out that structures like Cayman setups will persist until there are definitive regulatory clarifications. These structures are primarily in place due to the current regulatory environment, which offers little recourse for setting up or challenging these models. He expressed a preference for projects that demonstrate a long-term vision and highlighted that many successful projects, like Optimism, undergo extensive development phases before reaching maturity, drawing parallels to traditional businesses like Uber, which took many years to become profitable.

Rob also touched on the global nature of crypto and the flexibility it offers founders to operate internationally, underscoring that legal teams within funds are well-equipped to handle international operations. He suggested that the mobility of the crypto community is a significant advantage, allowing founders to relocate if regulatory conditions become unfavorable in their current locations.

Ultimately, Rob conveyed that while the narrative around offshore operations might be exaggerated by some offshore funds, the reality is that the crypto industry's global and permissionless nature supports a diverse array of operational models, whether within the US or abroad.

Could you briefly share with the readers why you mentioned DePIN as one of the sectors you favor? And What are your thoughts on the demand problems in DePIN?

Rob explains how Volt categorizes projects across four distinct layers: base, network, service, and application.

For DePIN, which operates at the intersection of cryptocurrency and real-world utility, Rob believes it embodies the network layer, enhancing connectivity and interoperability within ecosystems. He asserts that crypto will engage users both on-chain and off-chain, and DePIN’s role is crucial in bridging these interactions.

Rob is optimistic about the future of DePIN, seeing it as central to generating novel feedback mechanisms and unlocking unprecedented access to crowd-sourced data. This data could range widely depending on specific use cases, such as Roam Protocol’s work with Wi-Fi through open roaming standards developed in collaboration with Cisco.

Volt’s vision for DePIN also includes significant contributions to environmental tech, deep tech, and longevity tech:

• Environmental Tech: Companies focusing on air and water quality, climate change, and wildlife conservation. These sectors provide dynamic data models for AI applications, disaster recovery, and city planning.

• Deep Tech: This area includes defense-oriented technologies where data collection is increasingly accessible due to the reduced cost of drones and other sensors, allowing hobbyists and broader communities to contribute to a distributed network.

• Longevity Tech: As wealth grows within various ecosystems, there is a marked increase in the demand for health diagnostics and wearable technology like Apple Watches that monitor biomarkers around the clock. This shift is changing how health data is used and valued, especially in contexts like insurance and personal health management.

Rob highlights that while the demand for DePIN solutions is growing, the sector faces challenges in establishing sustainable demand across diverse applications. However, he believes that the evolving synergy between digital and physical worlds presents a rich landscape for innovation and practical application in DePIN technologies.

How does the concept of desire, including the desire for autonomy within DeFi protocols and other protocols, influence and integrate into your investment thesis?

Rob believes that desire is fundamental to all actions and choices, influencing what people become curious about, invest in, and think about. The goal of any application, infrastructure, service, or protocol is to identify and fulfill a specific desire among a plethora of options, thereby becoming the optimal choice for that particular need.

For instance, in the context of trading and wealth increase, the choice of a particular protocol or application hinges on how effectively it taps into core user needs—whether through branding, functionality, or other factors.

Rob emphasizes the role of data in preempting desires before they are explicitly expressed by users, allowing companies to anticipate and address needs with each interaction. This process is likened to navigating through a maze of options towards a direct path of fulfillment, driven by underlying desires.

The success of a brand, according to Rob, is determined by its ability to prioritize the fulfillment of users' desires, tailoring its offerings to integrate into users' lives seamlessly. He outlines four quadrants to think about the intersection of desires and fulfillment: off-chain desires with on-chain fulfillment, on-chain desires with off-chain fulfillment, and purely on-chain interactions. These frameworks guide how Volt assesses potential investments, focusing on solutions that bridge these quadrants to meet and anticipate user desires effectively.

Rob's investment thesis integrates the concept of desire deeply, viewing crypto as a tool that accelerates the fulfillment of desires, whether they are rooted in autonomy, wealth generation, or daily utility. Volt Capital looks for projects that not only promise to fulfill these desires but also integrate seamlessly into users' daily routines, enhancing their lives through innovative on-chain and off-chain solutions.

Rapid Fire Questions

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

   • The Innovator's Dilemma by Clayton Christensen & Marc Andreessen's Blog Archives.

2. What’s your biggest investment mistake?

   • Following the Hot Ball of Money.

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

   • Self-custody.

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

   • 99.9 % of the things being funded are shit and don't underestimate the power of incentives.

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

   • Genuine interest outside our Western bubble. 

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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.