Chain Venturer: Jason Choi of Tangent

The crypto angel investors you’re looking for.

Marco Manoppo
May 04, 2024

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Happy Weekend 🙋🏻‍♂️,

Welcome to Chain Venturer, a series of intriguing conversations with crypto investors. This week, we have Jason Choi from Tangent.

Tangent differentiates itself by imposing strict constraints on its investments. The fund commits to no more than 10 companies annually, ensuring that each one receives focused attention and prompt responses from the team. Additionally, unlike traditional VC funds, Tangent operates without external investors, granting it remarkable flexibility and adaptability in its investment strategies.

If you would like to participate in a future episode, DM me here.

-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.

If your project is too early in the lifecycle, I also run a syndicate, you can check it out here.

Anyway, enjoy this week’s conversation.

KEK

Indeed
— G | Ethena (@leptokurtic_)
9:02 AM • May 3, 2024

Jason Choi of Tangent

Jason Choi is the Co-Founder of Tangent, an evergreen angel fund that supports the most influential projects and protocols in Web 3 from the seed stage all the way to the liquid market. Tangent allocates capital selectively to a handful of teams annually, aiming to revolutionize how humans transact, connect, and interact in a self-sovereign Internet.

Jason is also the founder of Blockcrunch, a platform featuring The Blockcrunch Podcast where he also serves as the host. Blockcrunch has produced a weekly podcast and research report focused on Web3 projects since 2018.

After a brief time at Bridgewater Associates, Jason began his career as an analyst at Deloitte Consulting where he assisted with their new blockchain initiatives. He was also a founding partner at Contrary, a venture fund supported by executives from Facebook, Reddit, Tesla, and Twitch.

In 2018, Jason transitioned to a full-time role in the crypto space with The Spartan Group. He initially joined as an Investment Associate, then advanced to Head of Research, and ultimately was promoted to General Partner. During his time, Spartan’s assets under management grew from $9M to roughly $500M.

Here’s my conversation with Jason Choi.

Quick takeaways:

Tangent is an evergreen angel fund that commits to no more than 10 companies annually, ensuring that each one receives focused attention.
Amongst emerging crypto sectors, Tangent is interested in financialized social layers, DePIN, and money games.
A lot of the negative perception of VCs is exacerbated by the actions of a few bad actors within the VC community who exploit their positions for unfair advantages, such as using insider knowledge to exploit their own portfolio companies.
For Jason, the key to infrastructure investment is simplicity: faster and cheaper solutions without compromising security or decentralization.
For junior investors, Jason underscores the importance of specialization in gaining a competitive edge in the fast-evolving crypto market.

The following paragraphs are not verbatim quotes. These are paraphrases of our conversations optimized for written media formats. Some context and nuances might not have been conveyed properly in the process.

The author of this issue is not responsible for any misconstrued statements made in the issue.

All 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.

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

Jason's interest in the world of crypto began during his college years, initially sparked by friends who were actively involved in different areas of the field. His curiosity grew after learning about Ethereum from a friend who was a core developer and an MBA student at Penn. These discussions deepened his fascination with the technology.

The defining moment:

The pivotal moment for Jason's full commitment to crypto came when he faced visa issues while working in New York, leading to his unexpected departure from the U.S. Losing his job and social circle compelled him to reconsider his career path. Seeing this as an opportunity, Jason decided to pivot fully into the crypto space.

He had already been running a podcast as a side project, which connected him with Kelvin, his future boss at Spartan. Kelvin was building the first long-short crypto fund in Asia, an innovative project at the time. Jason joined Spartan when the fund was relatively small, and he played a key role in its growth into a substantial institution.

Jason officially started his podcast in late 2018 to continue learning and sharing knowledge about crypto. As his understanding of the field matured, he saw an opportunity to create a platform where experts could discuss and promote their funds. The early days of the podcast featured notable guests such as Adam Draper and Chris Burniske, helping it gain traction and credibility in the crypto community.

What is Tangent?

Tangent is an evergreen angel fund co-founded by Jason and his co-founder Darryl, who was previously a principal at Defiance Capital. Both stepped down from leading roles at two of Asia's largest crypto funds to invest their own capital in Tangent. Unlike traditional VC funds, Tangent operates without external investors, granting it remarkable flexibility and adaptability in its investment strategies.

One of the key challenges Tangent addresses in the crypto space is overcapitalization. Many projects raise more funds than necessary, leading to an overallocation in infrastructure projects. For instance, a $1B fund compelled to deploy within three years might end up investing disproportionately in less needy areas.

Tangent differentiates itself by imposing strict constraints on its investments. The fund commits to no more than 10 companies annually, ensuring that each one receives focused attention and prompt responses from the team. This approach contrasts with larger VC funds, which may spread their resources thin across 50 to 200 companies, often resulting in delayed responses to founders during the early critical periods when help is most needed.

Over the past year and a half, Tangent has successfully filled a significant gap in the market. The fund never struggles for allocation; instead, founders actively seek its involvement, recognizing the unique value Tangent brings. This value stems largely from Tangent's deep understanding of the unique distribution challenges in Web3 compared to Web2. The team's expertise in managing product and token strategies, engaging with market makers, and effectively communicating narratives has proven invaluable.

This consistent approach allows Tangent to provide intensive support and guidance during the first year, ideally positioning companies to thrive independently by the second year. In the past, Tangent has even quadrupled their bet in open markets after a token is listed, in addition to providing liquidity on DeFi platforms - actions that conventional VC funds may not be able to do due to strict mandates.

In what ways do you think VCs can truly add value to startups?

Jason always found it amusing that crypto Twitter has a strong aversion to VCs, but he realized this year that the root of this sentiment stems from confusion between influencer rounds and VC rounds. Influencer rounds in crypto often involve massive discounts on tokens with a short unlock period, typically three months, essentially allowing early participants to profit quickly at the expense of retail investors. In contrast, VC rounds usually involve a four-year vesting period, sometimes with a year of lock-in, aligning more closely with the long-term interests of the company.

Moreover, the negative perception of VCs is exacerbated by the actions of a few bad actors within the VC community who exploit their positions for unfair advantages, such as using insider knowledge to exploit their own portfolio companies.

However, Jason believes that the value VCs can add is often unseen by the public. While the public might only notice the most egregious actions highlighted by figures like ZachXBT, they are not privy to the everyday support a select few VCs provide. This support includes helping founders navigate crises, such as communicating effectively following a hack, advising on executive hires, and convincing top talent to leave secure roles for opportunities in emerging startups.

Beyond crisis management and recruitment, VCs can offer substantial support due to their scale. Unlike angel investors, VC funds can inject significant capital, such as $50 million into a Total Value Locked (TVL) pool to boost liquidity, a scale of investment that can be critical for protocols in decentralized finance (DeFi).

What are your thoughts on founders selling their shares or tokens in secondary transactions?

Jason believes that venture capitalists have a duty to ensure that any conflicts of interest related to secondary share sales are disclosed and that failure to do so may warrant legal action. From his perspective, founders who raise funds and then immediately liquidate their holdings are committing, at best, misrepresentation and, at worst, fraud. Such actions suggest a significant lapse in judgment on the part of the investor for backing such founders, or possibly a miscommunication.

Fortunately, as far as Jason knows, Tangent has not invested in any companies where founders have cashed out their founder allocations prematurely—within the first six to twelve months before even launching a product. However, he is aware through VC networks of recent instances where founders have sold significant stakes right after raising Series A funding, prior to product launch. This trend raises concerns about the motivations of these founders and the pressures on VCs to deploy capital, even potentially to “mercenary founders”.

A key reason Tangent operates with prop capital is to avoid the pressures of having to justify investments to limited partners (LPs). This autonomy allows Tangent to make investment decisions based on the quality and integrity of the founders rather than being forced to chase currently popular investment trends like L2 and AI.

Jason acknowledges that there are legitimate reasons for founders to sell shares, such as meeting substantial personal or family expenses. However, he draws a clear distinction between necessary liquidity and excessive profit-taking. Selling millions of dollars worth of shares early in a company’s lifecycle, particularly at Series A, raises doubts about a founder's commitment to their own project. Such behavior is a red flag for Jason, indicating a lack of conviction that makes these founders undesirable partners for Tangent.

What are your thoughts on the current state of blockchain technology, particularly in terms of competing interop solutions like Axelar and LayerZero, and the broader industry trend between modular and monolithic architectures, including developments like composable L2s?

Jason believes that the discourse around blockchain infrastructure often becomes overly intellectualized, despite being driven by individuals with high intellect. He questions the rationale of those investing in infrastructure, emphasizing that developers and end users—who ultimately rely on this infrastructure for applications—are primarily concerned with speed and cost-efficiency. The simple truth is that users gravitate towards solutions that are faster and cheaper, as no one, except perhaps Bitcoin maximalists, prefers slower and more expensive options.

Jason maintains a practical approach, focusing not on the philosophical debates between modular and monolithic infrastructures but on what genuinely matters to end users. His perspective is that most users don’t concern themselves with the underlying architecture, such as whether something like Uniswap is built on a modular or monolithic framework. They are more interested in functionality and performance beyond a threshold level of decentralization and permissionlessness.

For Jason, the key to infrastructure investment is simplicity: faster and cheaper solutions without compromising security or decentralization, avoiding setups that are as vulnerable as "three nodes on some guy’s laptop." Despite this straightforward approach, he acknowledges the complexity within these criteria, suggesting that being open-minded is beneficial.

Previously, at Spartan, Jason was part of investments in LazyLedger, now known as Celestia, not because of a committed belief in modular architectures, but because of the team’s smart, unique perspective. At that time, Spartan was also advising Solana, which presented a different, potentially disruptive thesis. This experience reinforced his strategy to allow founders to present their vision of the future, rather than adhering strictly to any particular infrastructure philosophy like exclusively supporting DA layers or modular blockchains.

Which sectors are you particularly interested in for the rest of the year?

Jason has identified several intriguing sectors that Tangent is monitoring closely for the remainder of the year.

Firstly, the concept of a financialized social layer, highlighted by platforms like friend.tech, has captured his interest. Although Tangent is not invested in friend.tech, Jason's enthusiasm for the project stems from its innovative approach to integrating social functionalities with financial elements, a trend particularly prevalent in Asia where platforms like WeChat lead in consumer power apps.

Tangent has recently invested in a project still in stealth mode, which intriguingly combines streaming with speculation. This investment aligns with insights from a recent Multicoin blog post suggesting that the future of social apps will likely integrate streaming and speculative elements, diverging significantly from traditional models like Twitter.

In the DePIN sector, Jason notes the relatively small market cap compared to other crypto verticals and is exploring which subcategories genuinely benefit from decentralization. For instance, decentralized wireless networks represent a structurally cost-effective use of decentralized networks, with projects like Helium serving as a notable example. Jason is also enthusiastic about Prodia, which addresses the GPU chip supply shortage from the demand side versus over-incentivizing the supply side like most networks.

The third area of focus for Tangent is what Jason refers to as "money games," an evolution of the DeFi thesis. He acknowledges that many foundational DeFi applications like Uniswap and various lending protocols have matured, capturing the low-hanging fruit of the sector. Tangent's current interest lies in using these DeFi primitives to construct more complex financial legos. A prime example is Ethena, a project Tangent supported early on that now manages a decentralized bond with significant capital involvement. Despite criticisms regarding its decentralization level—relying on centralized exchanges for liquidity—Jason views decentralization as a spectrum and appreciates Ethena's integration of crypto-native elements, setting it apart from traditional finance (TradFi).

As an experienced investor who has been through three market cycles, what’s your advice on managing time and focus during a bull market?

Jason emphasizes that the crypto space is characterized by long periods of inactivity followed by bursts of intense activity, often all within a single month. For new investors looking to make their mark, simply being involved in crypto is no longer enough to stand out, as it might have been back in 2018 when the field was less crowded. Today, differentiation is key, and Jason advises against positioning oneself as a generalist in an area teeming with them.

Instead, he suggests that junior investors, whether they're venture capitalists or involved in liquid markets, should carve out a niche to enhance their deal flow and discover alpha. He recommends that venture investors, in particular, should focus on a specific vertical within the industry. By deeply investing in that area and building a comprehensive network, they can significantly increase their influence and expertise.

Jason's advice underscores the importance of specialization in gaining a competitive edge in the fast-evolving crypto market.

Rapid Fire Questions

What's one piece of content every aspiring investment professional should read/watch?
- Blockcrunch podcast 🙂.
What’s your biggest investment mistake?
- Putting some of my collateral on FTX and not pulling it fully when I had the chance.
What’s the most underrated use case of crypto?
- Fan engagement.
What’s your most contrarian view in crypto right now?
- AO is massively overlooked.
What’s the biggest risk that the crypto space is facing?
- Overallocation into infra and losing the window to get killer apps going.

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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.