MAD Society S1: Ep.9 Haseeb Qureshi - Dragonfly

Hello. By the way, you forgot to mention I am also founder of Helas and I am a well-known Salana K. So, happy to answer any questions you might have about that.

I'm here. I'm here. Well, yeah. You don't need any Mert. I'm here.

No problem. No problem. It's July 4th weekend here in the US, so there's not a whole lot going on today, so it's all good.

There's no fireworks yet. Fireworks should start tomorrow because right now it's July 3rd in the US.

Okay.

In venture? So, poker and venture don't have a very large overlap. Poker is very similar to trading because it's very fast feedback loops and very tight iterations. You know, you play a hand of poker, you immediately know did I win, did I lose, did I do the right thing. In venture, you have very, very slow feedback loops. So you back a founder and it takes years to know whether or not you made the right decision and you start to see a little bit within the first year or so of okay this company's growing. They seem to be getting some traction but then you know this the company can always blow up after series A or after series B even they can seem like they're making progress for a couple years but the founder had some fatal flaw that caused them to fumble the ball in the last play of the season. So the reality is that it's very hard to learn quickly. Did you do a good job as a VC? And there's a lot of funds that have raised money on early marks in a portfolio that turned out they didn't have any winners. You know, if you invested early into Axie Infinity or into Opensea, it might have looked like, wow, I'm an amazing investor. I've done such a great job. You know, there's a couple funds that were very early investors into FTX that they were just, you know, enormous champion of the universe. Can you believe he did the FTX seed round? and just a couple years later it ends up being like, okay, this fund is kind of a nobody now because their star portfolio blew up. So, venture is unique in that way.

The other way in which it's different from poker is that venture is a team sport. Poker is a single player game, right? You obviously play with other people, but it's you against the world. It's like PvE. Venture is not like that. In venture, you only win if your founder wins, if the rest of your firm wins, if the other partners who are doing deals at your firm win. And for that reason, it's extremely collaborative and relationship based. Whereas, if you're a poker player, you kind of don't need to care about anyone else in the world. As long as you can sit down at a poker table and play and do well, you can be an asshole, you can have zero friends, and you can still be a successful poker player. So that's another way in which it's quite different. And most VCs who are very good at what they do are very good relationship people. I don't think I'm that great of a relationship person, but I'm definitely much better than I used to be. And I'm a lot better than most of the people I know who are traders. Most traders, they don't have to be nice. They don't have to be good relationship people. They don't have to have a lot of connections. So I think for that reason the skills that lead you to being good at venture that do come from poker are the ability to think clearly about risk, the ability to control your emotions very well. Those things I find a lot of VCs actually are not very good at. They can get very emotional. They have a tough time with conflict. Those are two things that I'm very good at. But for the most part, I don't think those matter nearly as much as the other core skills of VC, to be honest.

Hitting the ball. Who is very good at hitting the ball? I'd say probably the most controversial investor in our industry, which is Kyle Samani. Obviously, he has now exited his ball hitting days. So he's like the Babe Ruth; he's retired. But he probably has the most pound-for-pound IRR and P&L on a dollar invested basis than anybody else in the industry. So if there is a GOAT in VC, it would have to be Samani. Now, that said, he is a very non-consensus person. He obviously attracts a lot of drama wherever he goes, but he's a true contrarian and the best VCs have this contrarian streak that they don't just index what other people are doing. So I'd say Samani in terms of who's good at hitting the ball.

What it takes to hit the ball. I mean, this is the hardest thing about VC is that it's very easy to convince yourself that you're wrong. It's like, okay, well, Chris Dixon's doing this deal or Paradigm's doing this deal or, oh, this company's so hot. They're blowing up on Twitter. Everyone's talking about them. Especially in crypto where so many of these deals are done pre-product market fit where, okay, there's this new L1 that's launching. There's this, okay, Bitcoin L2s are hot. Babylon is hot, I layer is hot. These concepts that they haven't necessarily proven themselves at that stage but the idea has so much traction and is kind of flying around everywhere in people's minds and in their collective conversations. It's really hard to convince yourself that no, I'm right, I don't believe it, or I do believe it and this thing that no one's talking about that no one cares about they will care about it. That is very difficult to do. And so what it takes in terms of quieting down your mind to hit the ball, I think the answer is it's built through the discipline of your investment committee. It's part of the reason why VCs often operate in firms. They don't operate alone. When you're alone, it's very easy to get peer pressured. There are so many voices and so many external forces that are acting on you as a thinker. But when you're within the context of a firm and you've built this institutional culture of like, look, we don't take anything on faith. And even if you're getting swayed a little bit, your partner is not getting swayed. Your partner is like, well, no, no, prove it to me. If this thing is so great, if the Bitcoin L2s are so great, then show me the data. Show me the evidence. What is the argument? Let's really map it out and walk through it step by step. And if you can't do that for me, I don't believe it. That discipline is a discipline that we at Dragonfly we've built over the years in the culture that we have as a firm. But if you don't have that, that's what I think makes it really hard to be a great investor.

The most dangerous blind spot. I think there's a... if you're a crypto VC, you are a creature of crypto cycles. Everyone who's done this for long enough has experienced the ups and downs, has experienced a sense that, oh, okay, none of this stuff matters. It's all shit. It wasn't that long ago that financial nihilism was the cultural zeitgeist within crypto Twitter and people believed that none of this stuff mattered, none of it was valuable, it was all memes. Now, people, there's I wouldn't say it's financial nihilism today. It's more that like, oh, it's not that nothing matters. It's that only a few things matter and they only matter if they have revenue and these things that don't have revenue don't matter. I think if you're a crypto VC it's easy to fall into this view that there's this kind of Hegelian dialectic that things just come and they go and they come and they go and there's an infinite time series of booms and busts waiting for us. The longer you're in crypto you just get more four-year cycles and it's four-year cycles all the way down. And if you allow yourself to be lulled to sleep by this idea that it's inevitable that this is how it's going to play out, I think you can potentially make very, very bad mistakes as an investor, by just not really thinking deeply enough about what's going to change. The other thing I think people don't think enough about is that at some point crypto VC might just be over. There might just be a last vintage. And if you think about for example social media, social media was the biggest technology trend of the 2010s. Almost all the public, if you think about Google and Facebook and Microsoft with their acquisition of LinkedIn, the biggest social media networks just kept growing and growing and growing. But VC in social media was basically done by like 2009. There were almost no new social media companies that were created after 2009 except for TikTok. ByteDance was pretty much the only one that actually was able to build a real meaningful business after that time. And although the products themselves evolved, the platforms didn't evolve at all. It's basically still, Meta, WhatsApp, Instagram, blah blah blah, all that stuff existed in 2009. So it may be that crypto actually looks like that. That even though crypto continues growing, stable coins continue growing, Bitcoin continues growing, Ethereum continues growing, all these things go up into the right, but let's say maybe by the year 2030, pretty much every important company is built and the platforms are just so big that they just keep growing, but there's really very little room for new players to be able to come in and disrupt. Now, I don't know that that will happen. And if that does happen, I don't know when it will happen, but it will almost certainly happen at some point. It happens that way in almost every industry, especially when there are returns to scale and network effects as there are in crypto. But I think most crypto VCs don't think about that. And I think that's a potential blind spot is to believe that because we've been doing this, we'll just continue doing this forever. Consumer, there will always be consumer companies. There will always be new consumer companies. It's not clear there will always be new crypto companies. There may be, but there might not.

Yeah, good question. There's a lot of categories that are basically dead or they're on death's door. We do occasionally get pitches for some of these. There's still occasionally, oh, I'm doing Bitcoin layer 2 with lending or something. We do occasionally get stuff like this, but it's pretty rare now. I would say one of the categories I see a lot are these structured products on Hyperliquid where it's like this is a CLO on top of Hyperliquid and CLOs are a huge market and so Hyperliquid will have them and it'll be huge. So we still see a lot of these kind of esoteric financial products that are trying to launch on Hyperliquid or on some isolated venue. I think this will probably stop sometime soon just because these are not businesses. Having just one financial product is not a business. There's no business ever been built on selling one financial product. Especially not if you don't own the distribution. If Hyperliquid owns the distribution, then you're essentially just a reseller of your product. That's not a very compelling business model. What else might go away? There's a lot of people who are tokenizing individual assets. So, it's like I'm tokenizing gold mines or I'm tokenizing cars. It's just like this is not a business. This is maybe a product. It's good that this exists, I guess. But if you're not tokenizing something really big like treasuries or stocks and bringing them to scale and actually figuring out the distribution, these people who are trying to say, I'm going to tokenize this one asset that I own and please venture back it. Yeah, I think this stuff is going to go away if not already. Those are the things that jump out to me the most.

You know, there's a classic one. There's this joke in traditional venture capital that there are these basins that founders keep falling into all the time, especially when they pivot. They just tend to like the same ideas and constantly do them over and over again. Even though VCs will always tell you don't do that. So one of them is dating apps. Like anytime a founder pivots, they always consider doing a dating app. And it's almost always because founders are young and single and so they think a lot about dating. Or another one is co-founder dating is also a very common thing that founders end up thinking because they're trying to find a co-founder. And dev tools, a lot of productivity tools. Like, oh, I make a better to-do list. Someone to make a better Sauna or whatever. So there's a lot of these basins of bad ideas that people just keep coming to again and again. Crypto has these as well. I'd say the most common one is Bloomberg for crypto. So it's funny because Bloomberg for crypto was like a bad idea when I first became a VC, like 10 years ago, people were pitching me on Bloomberg for crypto and every year you always get pitches for Bloomberg for crypto and they don't really know what they mean. It's a little bit vague what Bloomberg terminal with crypto would even mean or what's supposed to be in there. But it's kind of like it's 2026. You need a crisper angle of attack than just a tagline like Bloomberg for crypto. So those are things. I don't know that's a trend so much as just a little tidbit. There's a lot of these things and they stay in the air, they never quite go away.

I think talk to less people is honestly my advice. Really. I think if you're a new VC, I think a lot of new VCs make the mistake of talking to too many people and having their opinion be the average of what a bunch of people who they know are. I think as a VC it actually really helps you to force yourself to think for yourself. And it's very easy to be like, oh yeah, I'm thinking for myself. I have my own ideas. I wrote a blog post. I write my notes after I talk to someone. But the easiest way to not think for yourself is to just talk to too many people who have strong opinions. Now, it's not to say you should talk to no one, but most VCs I know, they just are basically a pastiche of the seven people they talk to most often. And the more that you are actually by yourself and just thinking and reading and learning, the more you're going to actually have your own unique opinions. Now, they might not be right. They might not be totally accurate, but at least they're different from other people around you. And the most likely way you're going to have alpha is by actually thinking differently. So there's a risk that maybe you're wrong, but there's a risk also that maybe you're right about something else that everyone else is getting wrong. And as a VC, that's what you get paid for. You don't really get punished for being wrong. You know, if you have a portfolio of 50 deals and 15 of them are wrong, who cares? All that really matters is that you get the one thing right that everyone else got wrong. And that comes from being able to think differently. I think that takes some degree of self-awareness because even through the podcast I've had guests, I've interviewed a lot of people, so this not from today, saying this mostly for people listening.

I think it also takes a level of self-confidence. It's very easy and safe to talk to a bunch of people and be like, oh, okay, here's what I think about neobanks because I talked to five people and they think this about neobanks and so I'm going to average their opinions and then say that on my next podcast. I think it demands more of you to not do that and to really try to re-underwrite and think for yourself about what you believe about these things. And again, the cost of being wrong is not that high. So I think most people are trying to optimize for seeming smart or seeming good at the job as opposed to actually being good at the job. And that's again one of the reasons why I always say Kyle Samani is the GOAT. He is crazy, right? He clearly is just in his own world. He has very weird beliefs about a lot of things. He's gotten a lot of trends wrong and very confidently stated, 'Oh, I think XYZ is going to happen.' And he's totally off. But it's kind of like it just doesn't matter if you get the one thing right that pays for everything. Who gives a shit? VC is not the business of trying to seem unobjectionable or trying to seem like a focus group would think that you're smart and respectable. That's not how you win as a VC. You win as a VC by getting the one thing right that everyone else gets wrong.

Well, first I've fundraised at this point over a billion. So fundraising in the millions is a different set of lessons you have to learn than fundraising in the billions. Okay, millions. You're going to modify the question. Okay. No change. Here's what I'd say. When you're fundraising, there's one thing you realize through fundraising is that there's very different styles of fundraising and they can all be successful. One style of fundraising is really building trust and getting to know somebody on a personal level and making them invested in you and want to back you because of who you are and what you believe. I am not good at that. I am a very antisocial person. It might not seem that way but it's very much the case that I have a tough time being able to build deep relationships with a lot of the folks who are investors and allocators. I think the place where I end up being successful and there's many strategies to succeed in fundraising, there's not just one. My MO and this is also where I tend to succeed more in fundraising is more with institutions. And institutions, what they really care about more than anything else is you demonstrating extreme levels of competence and knowledge and mastery over your domain. If you're a family office, you're an individual, that's often where relationships and trust is going to matter a lot more and they kind of want to know you for a very long time and get to know who you are and how you operate and they want to be able to pick up the phone and call you, maybe even get a beer with you every once in a while. Whereas institutions, what they're looking for really is that you are the best in the business. You are the best at this of anybody that we speak to or know of and you can make the most ironclad robust argument of why you're going to win and other people are going to lose and you bring the receipts for it. That is where I tend to be strongest in that kind of fundraising. But the reality is that if you're raising for a fund, if you're raising for a lot of money, it's a team effort. You need people who are good at these different styles of fundraising to be able to attack different parts of the fundraising market. So if you're a fund, if you're a founder and you're raising, you're basically raising from VCs. Maybe some corporates, maybe some individuals, but mostly you're raising from VCs. And VCs are all pretty similar to each other. But if you're a fund and you're raising from pools of capital, those pools of capital are very different. They're not as similar to each other as VCs are to each other. So raising from an endowment versus raising from a hospital foundation versus raising from an insurance company versus raising from a public pension versus raising from a family office. These are all very different experiences and they require different skill sets, different angles of attack, different storytelling in order to get this stuff to work with each of these different groups. So fundraising is its own skill. The people who are really great at VC are good at both investing and fundraising. I've gotten better over the years, but I'm definitely not a world-class fundraiser.

That's an interesting addition to that question. At scale, what makes someone likely to succeed at scale? I think being very intellectually flexible is probably the best predictor that I've seen of somebody who's good at handling scale. The reality is being a founder. People think of being a founder as like okay there's founding skills or CEO skills or whatever, but the reality is that if you're a founder of a successful company, your job changes every two to three years. Being the founder of a three-person company versus being the founder of a 15-person company versus being a founder of a 100-person company versus being a founder of a thousand-person company. Each of these really requires a different skill. It's a little bit like being the head of your PTA to being the mayor of a small town to being the president of America. Those are actually three different jobs and they require different skill sets. Being the president of America does not mean you're going to be a good PTA member and also doesn't mean you're going to be a good small town mayor. So the founders who are very good at adapting are ones who are very curious about learning, changing their minds, letting go of old frameworks and adopting new ones. The founders who don't tend to do well with this are founders who are like, oh, I used to do this when we were seven people. Why aren't people following my instructions? Why is the product velocity slowing down? Why is there so much politics now? And they think that this is a problem that needs to get solved. Oh, the problem is there was so much waste or we have leeches in the executive team. I got to fire them all. We got to go back to basics. No, it's not to say those things are never problems. They often are. As a company scales, almost inevitably, they're going to be growing pains. But the best founders are ones who are curious about the way in which the job is supposed to change as you get to scale. And they adapt their skill sets to be more like running a thousand-person company is more like running a small town, where it requires political skills, diplomatic skills in order to run a company of that size. As opposed to running a seven-person company is really just all execution. When you're in a seven-person company, you don't need a lot of management. Everyone's rowing in the same rowboat and you don't need to talk. You just see what everyone else is doing and you row. But when you have 50 people, 100 people, a thousand people, then everything is about communication. There's nothing that you're going to do personally in a thousand-person company that's going to move the needle. Everything that you do is about moving the troops through the commands you're giving as a general and orienting those troops and inspiring those troops to be willing to go the extra mile and really put the attention to detail they need in order to create a great product. So that's why I say that's the hardest thing for most founders who get to scale is navigating those changes in their job. And not everybody can do it well.

In order to underwrite a successful founder, generally our philosophy is that we look for spikiness. So, we're investing for strengths, not for lack of weakness. Almost every great founder has weaknesses. You know, if you think of Mark Zuckerberg, at the time that he was building Facebook, obviously not a great leader, had very significant weaknesses in his ability to lead a team, but the stuff he was strong at, he was world class. Almost every founder, you know, Travis Kalanick, founder of Uber, also very famously, he had tremendous strengths, but also very significant weaknesses. I think this is a kind of a universal law of startups is that the best founders are not the all-rounders. All-rounders make for great executives when a company is at scale. You know, somebody who they're never going to quite drop the ball. They're never going to quite say the wrong thing. They're never going to make anyone mad at them. These people are good when a company is at scale. They're great executives, but they're not good for zero to one, and they're not good for navigating these phase transitions that a startup generally goes through as it grows and scales. So, we're okay with deeply flawed founders. I think you have to be in order to fund great companies. What we're not okay with is a founder who's not great at anything in particular.

off.

Uh, there's something off. I mean

Yeah. So I mean one of the most obvious things is integrity. So if this founder is not being completely honest or completely transparent, look, every company, there's always a little bit of puffery, there's always a little bit, oh, we're going to take over the world. We're going to have a cajillion, you know, we're going to do this, we're going to do that, we have a, you know, we're going to have a partnership with this person tomorrow. And you ask them, okay, but how far along are you?

Because that kind of behavior only ever accelerates. I've never seen it get better. It only ever gets worse as a company grows. So that's one that is kind of like a showstopper. If we see a pattern of dishonesty, that'll get us to say, you know what, we're good. The other thing I'd say is just consistency is, you know, very common mistake that a lot of investors make is they really like the story, they really like the founder, they really like the team, they really like the market, but things just aren't quite adding up. You know, the founder is saying that, oh, they're super eager to get this thing closed, but then they're kind of slow rolling and they're not moving very fast. Or you know the founder is very, very bullish and they have a lot of demand but they're willing to rely on all the terms and they're actually giving a pretty low valuation. Okay, so these things are not consistent, right? Like the story is not quite adding up. And very bad investors oftentimes will just ignore these. They'll be like, oh, well it's probably that I'm so great or it's probably that, oh, you know, there's just they find some innocuous explanation for why the story is not consistent. Almost anytime the story is not consistent with the behavior that you're seeing from a startup, you're missing something. And if you don't know what it is, probably it's not good for you. That's almost always the answer. If you don't know what it is, probably it's not good for you. And if you learned it, you would not want to invest. So, that I'd say it's not a specific thing, but it's a category of things that as investors, you just learn the more experienced you are that hey, hey, hey, Spidey senses are tingling. Pull the brakes. Something isn't adding up. And we don't know what it is. If you don't know what it is, probably it's not something you're going to like.

Um, so most deals you never even get that far along so that if the founder's lying, who cares because we're not, you know, we're not even going to pass or we're not even going to investigate it because we're just going to pass.

Um, the founder lying when you get into the actual meat of things, pretty rare. Um, but not so rare that you don't see it. So, it's more often, again, puffery is more common, right? Puffery of just sort of, oh yeah, you know, we're going to have a deal with Nvidia or, oh, we're going to, you know, Binance is really wanting to come in and then you go talk to Binance. You go talk to Nvidia and they're like, oh, you know, we're thinking about it.

Um, so I don't I wouldn't consider that a lie. I would consider that okay, you know, they're obviously trying to get us to buy. They're obviously excited. They like their company. Maybe they're not even calibrated. Maybe they think that they're going to come in and they just don't know because look, it's an early stage startup and these guys maybe are young and inexperienced. So, I don't generally take that as being that dispositive of I can't trust this person or they're lying to me. But somebody like actually lying about something material, I'd say very rare, but it does happen and when it does happen, it's like an absolute showstopper. Yeah,