Author: Zen, PANews

In the late 1950s, a student organization at MIT called Tech Model Railroad Club (TMRC) began to formally use "hack" and "hacker" to refer to the method of solving problems and the person who engages in the process. When it was first invented, "hacker" was a completely positive and respectful title, symbolizing superb technology, bold innovation and unique style.

Regarding this hacker culture, Steven Levy summarized hacker values, including "all information is free, no trust in authority, and using computers to create beauty and art" in his book "Hackers: Heroes of the Computer Revolution" published in the 1980s. The decentralization and openness advocated by blockchain and cryptocurrency later also inherited and developed this value. Nowadays, hackathons are popular in various ecosystems of the crypto industry, where excellent hackers are found and invested in to promote the prosperity and development of the ecosystem and even the industry. Among them, Alexander Pack, the managing partner of Hack VC, is an investor who particularly loves hacker culture - this can be seen from the name of his investment institution.

It is worth mentioning that the largest programmers conference in history, Hack Summit.(), was founded eight years ago by Ed Roman, another fund manager of Hack VC. Currently, more than 130,000 engineers from more than 50 different countries have joined. Hack Summit.(), which opened at the end of March this year, also invited Ethereum founder Vitalik and SEC Commissioner Hester Peirce as guest speakers.

Recently, Alexander accepted an exclusive interview with PANews, sharing his crypto career story, investment strategy, current regulatory and new technology trends, etc.

From Dragonfly Capital to Hack VC

In 2014, 22-year-old Alexander worked at a venture capital firm in Hong Kong that focused on financial technology and began investing in cryptocurrencies for the first time. At that time, cryptocurrency was not yet an industry, there were no billion-dollar companies, and even Ethereum had not yet been launched. However, Alexander believed that cryptocurrency could eventually change the global financial system, and he had found what he wanted to do for the rest of his life. After that, Alexander joined Bain Capital in the United States as director of network investments and helped the institution launch its crypto investment business.

In 2018, Alexander founded Dragonfly Capital, a crypto venture capital fund, with Feng Bo for the first time and served as its first managing partner. The firm has now become one of the largest crypto funds in Asia. In 2020, Alexander left Dragonfly Capital and founded Hack VC. In the fall of 2021, Hack VC completed the fundraising of a $200 million cryptocurrency seed fund, with investors including Sequoia Capital, Fidelity, Marc Andreessen and Chris Dixon of a16z, etc.

Alexander said that the name of Hack VC reflects the uniqueness of the investment team: they are a group of hackers who invest in hackers and are technical experts who invest in deep technology. Hack VC focuses on early-stage investments, specializing in investing in the technological infrastructure that makes encryption mainstream, and tends to maintain a smaller and more flexible investment scale than many peer companies. "For me, my favorite thing in the world is to find a great founder with a brand new idea and invest in it from the beginning, before the product or business plan appears, usually as an incubation. It's hard to do this when you raise too much money."

Focus on the market and technology. A bear market is the best time to build excellent technology.

For nearly 10 years, Alexander has been a long-term institutional venture investor in the crypto space, which has basically run through his entire career. To date, he has invested in more than 100 companies and projects, including many unicorns in the fields of L1, L2, DeFi, and CeFi. Alexander said he was lucky, "When you stay in an industry for almost as long as it has existed, it's easier for you to grow with it." Today, many of his early friends run crypto companies, protocols, and funds worth billions of dollars, and these people are now often his investment targets, or investors (LP).

Alexander said that they try to identify new technologies that are most likely to cause major paradigm shifts in the future and invest in them as early as possible. When he started investing in L1, L2 and DeFi projects in the early days, the industry had not yet clearly defined classifications and type names. "In general, our goal is not only to invest in category leaders, but also in category creators, and to discover a new category even before it has a name." Hack VC spends most of its time in due diligence evaluating the market and technology. Alexander believes that without an outstanding team and community, nothing will be accomplished in the end. Therefore, they will eventually invest in the founders of the project and the broader community.

Alexander, who has experienced several bull and bear cycles, said the bull market will be driven by massive new mainstream applications of cryptocurrencies, which will be driven by improvements in infrastructure. Ultimately, this is a new technology, a new technology industry, so the speed of technological development determines everything. The good news is that a bear market is the best time to build great technology, and in many ways, the technological infrastructure is developing faster than ever before. In a bull market, everything is noisier. It is difficult to stand out among investors, it is more difficult to meet potential business partners, and even recruitment and marketing costs are more competitive.

Give up investing in crazy gambler SBF and his FTX

At present, FTX founder Sam Bankman-Fried ("SBF") has been convicted of seven counts by the jury and faces up to 115 years in prison. No one expected that SBF would fall from a once-popular "crypto genius" to a super fraudster in prison. In fact, Alexander was the first investor in SBF's hedge fund Alameda Research. Initially, they reached a high-level agreement. At that time, SBF had not yet launched FTX through Alameda and deliberately concealed this idea.

During the months that Alexander was investigating, Alameda continued to lose money rapidly. Under questioning, SBF admitted that it was incubating a cryptocurrency exchange. Alexander expressed his support for the founders of the new idea and proposed to SBF to lead the seed round of FTX. However, the subsequent due diligence work did not go smoothly. Alexander's team found it difficult to understand SBF's performance record, such as the problem of some funds being unaccounted for. In addition, they also had many disagreements with SBF on the key points of the transaction. For example, SBF insisted that Alameda and FTX were two independent companies, so the price was calculated separately, even though they were using the same employees and computers, and the funds raised by Alameda were used to pay for FTX's startup costs.

After more detailed due diligence, Alexander's team finally gave up the investment. SBF was very angry with Alexander personally and even tried to blacklist him in the industry. "It was terrible at the time, but now it seems like a blessing in disguise." Alexander also commented on this past event, "Interestingly, throughout our relationship, I have always admired SBF to some extent. I think he is one of the smartest and most strategic people I have ever met in my life. I am very sure that he will be a huge success, even if he does not have the bottom line of integrity that I look for in a founder. Of course, the super villains in the movie are also very smart and successful."

Regulatory pressure shows crypto’s systemic importance to the world

For a long time, the crypto industry has been struggling under regulatory pressure, and the collapse and scandals of industry leaders such as FTX have further intensified the regulation and legislation of the crypto industry in the United States. In this regard, Alexander believes that in some ways, this is actually a good thing, as it shows the systemic importance of cryptocurrency to the world. Unless something is important enough to change the world, the government will not bother to regulate it. He said that the Internet faced strict regulatory scrutiny in its early days, and artificial intelligence is now beginning to attract regulatory scrutiny because it has become important enough. The same is true for cryptocurrency.

“Ultimately, some regulation is good for crypto, as we’ve seen in the U.S. where untrustworthy entities like FTX are being replaced by regulated companies like Coinbase and Circle, as well as trusted incumbents like BlackRock and Fidelity.”

In addition to the impact of policy regulation, the explosive development of the AI ​​industry is also a topic that crypto practitioners like to pay attention to. The comparison between the two has more or less added a bit of coolness to the crypto market, which is in a deep bear market. Currently, artificial intelligence is the hottest industry in the entire technology field. Not only a large number of entrepreneurs have poured into it, but some investment institutions that used to focus only on the crypto field, represented by the head crypto VC Paradigm, have also begun to shift or diversify their investments to the AI ​​field. Alexander claims to be a loyal fan of artificial intelligence. In fact, he and his partners have invested in about 30 artificial intelligence companies, some of which have been successful.

"Last year's breakthrough in model quality sparked a new 'generative AI' trend that will have an incredible impact on cryptocurrencies." Alexander believes that the intersection of cryptocurrency and AI has not been fully explored, just like DeFi in 2018 or smart contract platforms in 2016, it is an interesting and indescribable new trend that will eventually become a huge, disruptive new category. Ultimately, AI may solve serious user experience problems that exist in decentralized applications today. Vice versa, AI models will use decentralized applications in areas such as DeFi and payments to make them more useful and more capable of conducting complex financial activities.