Drew Austin is the Managing Partner of Red Beard Ventures, where he invests in Web 3.0 infrastructure and frontier technologies. He is also the former CEO & Founder of Wade & Wendy.
We talk about how Drew got into crypto and NFTs, what he looks for when buying NFTs, the Loot Project, NFTs on other chains and much more!
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NA: Firstly, thanks for joining me. I love Red Beard Ventures portfolio. I think it's one of the most exciting funds coming along.
DA: Thank you, buddy. Thank you. We got a lot of good stuff still coming out, man. It's we're dropping fire right now.
NA: They definitely are. I thought it would be great to start with how you entered the world of crypto and NFTs from your background as an entreprenuer?
DA: Sure. Yeah. Well, I started investing in Bitcoin in 2013. Actually. I remember I bought my first Bitcoin, I was in Long Island and where my family lives and I had to meet someone in a car, scan their QR code and hand them cash. We met on local bitcoins.com or something like that, and that was the first transaction I ever made with Bitcoin.
And yeah, so I've been following it ever since. I got really interested in the concept of scarce digital collectibles from the day I heard about the blockchain. I'm a collector like I collect action figures, autographs, sports, memorabilia, sports cards, art, everything. So the concept of digital collectibles just made total sense to me. So, I always paid attention to the space. And then around 2018, I found out about SuperRare and I bought my first piece of art there.
So that's what got me into NFTs and that really sent me down the path. Started buying a bunch of art. 2019 bought a bunch of pieces. And then really started expanding my NFT collection. NBA Topshot was the, was the next project that I really dove deep into. So NBA Top Shot I got in early and just built up a really big portfolio and got some great assets before, the real movement hit and, you know, it became probably the most valuable investment I've ever made.
Like legitimately, you know, it was like a 100x investment for me. Then from there, I got very deep into Zed Run. That was another big investment that I built up a stable on and really truly believe in, from a long-term investment perspective. So yeah, that was kind of my crypto approach. And then, you know, from a venture perspective, I’ve been a founder since I was 19 years old. So I've always been a CEO and a founder of different companies and most recently I just sold my last software company which was an AI recruitment process automation software platform for enterprise organizations.
We sold that company to Pandologic, which then recently sold to a publicly-traded company called Veritone. That all happened within the last three months or so, but about a year ago, I knew I was going to be moving. I was going to be like going through the process of selling the company and I knew I wanted to get into venture next.
So I started up a venture capital syndicate on AngelList. I knew a bunch of friends that were in the space, that were founders and were also balancing doing venture investments through AngelList. So I thought it was something I could handle and then from there I started the VC syndicate and it just took off.
SuperRare was our first deal. We literally are at 12 months this week, where the syndicate has now been around for about a year. We have about 1900 LPs, we did about 45 deals over $20 million deployed capital. It was really crazy first 12 months. So it was really exciting.
I didn't even realize how much it would take off. And then now we're going to move to build up a fund. That's the next step, we're gonna go from there.
NA: That's amazing. Yeah. Those numbers are incredible for a one-year-old syndicate. So congrats on that.
DA: Thank you. Thank you.
NA: For the listeners who are still quite fresh with NFTs and you've been doing it for a while now, can you give your best explanation on why NFTs matter and how they actually have value?
DA: So NFTs, I guess the number one reason why they matter is because they create scarce, transparent, assets out of content, out of digital content, and that did not exist before this. So the fact that we can now create transparency, in the amount of supply we produce of a digital asset just changes everything. Now supply and demand comes into play with every piece of content that's produced and tokenized.
So to me, that just opens up an entirely new monetization path for content and it's pretty exciting.
NA: When you're looking into some of these new NFT projects, what are the key things that you're looking for? Because there seems to be massive growth in that area. How do you pick out the gems?
DA: I kind of take a venture approach to it almost in some. So, the way I approach it is I'm very comfortable taking a speculative bet, like, hey, let me go dabble with this one, buy a couple, don't make a huge bet, but get exposure to a wide broad approach. But then once I get my hands dirty in a project and I start to get into the community and understand the vision and speak to the team and all of those kinds of things.
That's when I'll decide if I want to go deeper. So, you know, that's been pretty much the way I've approached all of these NFT projects. So like, you know, Top Shot, I started by buying a few moments, and then the more I got into the community, the more I learned about the team, the more I spoke to the team, the more I understood the vision and the more I believed in their ability to execute over the longterm.
So, you know, my approach has really been like, I primarily want to invest in projects that I think can sustain longer. If it's more of a project that I think is more of a speculative bet, and I just want to get exposure to it and learn I'm more comfortable trading in and out of those. But the ones that I feel have long-term legs and are doing things uniquely and paving the path and innovating, with great teams behind them and great creative and great tokenomics etc that's what I'm really looking for.
So, I think things like for example, Crypto Punks, to me it was a no brainer. Crypto Punks were a no-brainer because of the historical value and the legacy of what they've done as one of the earliest NFTs or one of the earliest Ethereum NFTs that really rose the ranks and led the PFP movement.
Bored Apes, for example, I didn't mint Bored Apes. I actually held off on that, cause I thought at first it was another knockoff of Crypto Punks because I was seeing a lot of that. And then I got in very quickly after I think the first ones I bought were like about 0.2 ETH. I got in quickly because I saw how powerful and how strong the community took to this concept of giving out commercial rights.
The fact that it was that they gave commercial rights, and they were the first ones who really kind of made that a big part of their narrative. You know, then I realized I wasn't just betting on the Bored Ape team, I was betting on the entire community to create projects and to create businesses and create initiatives that are going to build the brand of Bored Apes.
So to me, that took a life of its own. I kept my finger to the pulse and realized it was time to make a bigger bet. So, you know, at that point I bought more of the Apes. You know, for example, Gutter Cats is another project that I took early. You know, simply because I thought that they took a different approach on the supply side.
They kept their supply low, copied a lot of what they've seen in terms of what was working in terms of community development and the avatar project. And I saw the community take a real passionate approach to it as well, but with that lower supply number, you know, being 3000 instead of the normal 10,000, that a lot of these other projects were doing.
I felt that, that, that with that community and that path, and kind of really kind of filling a spot as number three in the avatar space you know, I thought that was also a nice bet to be able to make, and it has turned out well.
And then, you know, I look into other projects. I think the art blocks project has been transformative and bringing in new technology, as a new art medium I'm always looking for new art, new artists that I think are either up and coming or have already built a prominent brand. You know, there's just a ton of artists that I follow that I try to collect as much as I can and acquire the assets.
I think the next biggest thing that's going to be out there is play-to-earn, you know, I'm really looking for that gaming assets as well. I think that's going to be the next big movement.
NA: That's really interesting. Have you managed to wrap your head around the Loot Project and what's kind of about people hyped about that?
DA: Yeah, I mean, listen so it took me a while as well. I didn't jump in right away. I missed a lot of the bull run there and I think I got in, in the middle, so I'm probably around even in that project. Cause it's spiked up like crazy and now it's back down. So overall I'm probably even, I don't think I've made much on that, but like.
I thought it was interesting. So it took me a while and then one night I kind of went into a black hole, really just trying to understand it all. I started to realize that this was interesting from a couple of perspectives, it became almost like an infrastructure to build games on top of.
So by using these like shared attributes and using a shared currency people can build all sorts of games by leveraging that type of foundation. The reality is though is like, listen, it's first and maybe it holds its place through time and the fact that they came out with something new and different, I don't think a lot of people will get it.
And I think that's going to hold it from getting mass adoption until I think third-party developers or third-party creators can really build some meaningful projects out of it. And then that could take it to a whole nother stratosphere if they decide to do that.
We really quickly saw a lot of knockoffs. So like, Beanie came out with Bloot which immediately, became almost like a competition in a weird way. And I took a little stake in Bloot as well, just because I could see how people that have lots of projects and lots of initiatives can incorporate that into their world.
So that kind of made sense to me. You know, overall, I mean, this is a lot of experiments. Like I'm not going deep in either of those projects like those are scratch the surface for me, get familiar and start to understand them a little bit. There are other people that are going much deeper into those.
I'm not ready to do that yet, because I can't tell if it's just a craze and a frenzy around this new idea, but then the idea could very quickly evolve. And another version of that can really take its place pretty quickly. I don't think they've built a moat yet out of the developer community yet. I think it's pretty much a portable community at this point. So to me, I think they have something and I think they've created something groundbreaking from that idea at the foundational level. But you know, it's easy to fork. It's an open-source project and as we can see, other people are already mimicking it.
So I don't know if there's enough of moat yet. We'll see.
NA: Yeah, I hear you. It's definitely an interesting one. What are your thoughts on NFTs on other chains like Solana and Tezos and even Flow? Most of the activity is still only Ethereum but you think like, those are the ones who start to pick up soon?
DA: Yeah, I do. I think a couple of things. I think one, I think Ethereum's gas fees are astronomical and becoming a huge problem. Unless we figure out new solutions to do these NFT drops, the drops are gonna start to fail completely. People are gonna stop doing them unless we come up with a new way to mint and except cause these gas wars are just,
I mean, you just saw Seven. I don't know if you saw the Seven drops. You know, 1000 of their NFTs went to one person, gas was hitting $8,000 someone saw $12,000. I mean, luckily we're basically all playing with monopoly money, most of us who have been in the space for a while. So the whole thing is ridiculous, but like, this is not scalable.
This is going to completely inhibit adoption and it's gonna open a door for someone like Solana to come in and to be able to take some market share and to takes some headspace from people which is almost unfortunate in a way, because like I believe in Ethereum. I believe in its long-term vision and what it stands for.
And I do think that everything will ultimately tie back to Ethereum as like the store of record in terms of the truly decentralized minting blockchain. When Zed Run moved to Polygon and Matic that was what opened up the game. No one used it until they moved to Polygon.
So because you know, you can't have every transaction be charging you more than you can make money in a race. So right now Ethereum is completely not yet suited for scale. It's still the leader, but I do think that there's a lot of room for opportunity.
Listen, the team that built Flow, Dapper Labs, they saw firsthand with the first widely adopted NFT project in Crypto Kitties, what all the limitations were and they went and they set up to build their own blockchain. They built Flow, and I think Flow is going to be another major player, especially in consumer applications.
So, you know, Ethereum was built more for DeFi, whereas I think that Flow is really targeting more of a consumer application and collectible market. What I'm wondering is will the consumer care.
Will they care if it's on Ethereum or Flow or Solana as long as there's transparency and scarcity and the concept of the blockchain takes place. I used to think they would care, but now, because of the problems Ethereum is showing, I'm starting to see that more and more people are willing to take bets on some of the NFTs and that myself included like I have some Solana NFTs, I have some Flow NFTs. Solana and Flow are the only ones I really have right now, outside of Ethereum, but the fact that I have those and I collect them and I have them and I'm storing them. And I feel like I have an ownership feeling of them means that it's transferable.
It's not like it's not going to feel genuine if it's not Ethereum. And if that's the case, then that does open us up for some disruption and I think that's why we're seeing the Solana token go crazy right now.
NA: Yep. No, I agree with you on those points, I think gas is just ridiculous at this point. A little bit to your venture side, I'd love to hear what kind of companies you're looking at for Red Beard Ventures. It's not just NFTs and crypto, I imagine it's a lot more than that?
DA: Well, our venture capital syndicate is open to the public, if you're an accredited investor and you want to invest in startups, I think it's a great way to do it.
It's all on AngelList, I think for us, you can go to redbeard.ventures and you can check it out. It's free to register for it, it's free to back the deal, to see the deal flow, and then you can choose which investments you want to make and you get to invest in the companies at the earliest stages, which I'm a big believer in that.
I think we're all heading towards a path of becoming alternative asset investors. I think the whole world is becoming an angel investor. If you think about it, we kind of moved from the customer economy to the subscriber economy now to the shareholder economy. That's what this whole movement's about.
So that's first, I think it's a really exciting time for angel investing is that we have now, you know, the ability to get into deals that, you know, only the top VCs would ever be able to get into in the past.
80% of our deals have been blockchain-focused, 20% have been frontier technology, things like robotics and space and climate and biotech etc.
But then the other 80% of it, blockchain focus. We’ve invested in a lot of different metaverse plays because our approach right now is to stay broad on the metaverse side. We've invested in Sandbox, we've invested in Super World because of their AR component, I think there's an element of that.
I think Sandbox on their virtual real estate side of the gaming component is going to be really big. I think that we're going to see a lot of other interesting progress. We’re invested in Upland, were invested in Green Park Sports.
One, I'm really excited about that we're invested in is Wilder World, which did like an unreal engine, photo-realistic metaverse that is just absolutely stunning. So there's a lot of really interesting stuff going on there. We're invested in different NFT marketplaces, like Dapper Labs that's built NBA Top Shot.
We're investors in SuperRare, we are invested in Genies. We're invested in some you know, crypto DeFi plays as well. We're invested in some things in the DAO tech stack, like Parcel that's doing the treasury management. So yeah, it's a lot of everything that's helping us drive adoption.
You know, my belief right now is that we’re in the early days of this movement, but I'm watching the internet get rebuilt from the ground up. And it's exciting to be on the ground floor of it helping fund the companies that are building.
NA: No doubt, those sound like some great companies. What's a secret obsession of yours that not many people know about?
DA: Well, so it's funny. I used to be a huge action figure collector, nineties and eighties action figures and autographs and memorabilia, but now because of the digital collecting all my attention goes there. So, and because it takes up a lot less space and in Brooklyn, space matters.
So that's one thing. I spend every night pretty much after my kid and my wife go to sleep. I'm up from 9 PM until 3 in the morning, just exploring this whole NFT landscape and learning about it.
And that's really where I spend most of my time right now. Honestly, there's so much to understand so much to learn. To me, you really got to get your hands dirty and get involved in the community to really learn this stuff. So, if you're not obsessed with this right now, you're probably not getting it because the minute you get it you become obsessed. And it's just an obvious obsession.
NA: Yeah, no, I hear you. It took me a while to wrap my head around NFTs. But once I got it, I've been spending a lot of time between Discord, OpenSea, and Twitter. So yeah, that all we have, thanks so much for jumping on. I really appreciate your time and I enjoyed talking to you.
DA: Awesome. Thank you so much, buddy.
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Disclaimer: The Inquisitive VC is provided for informational purposes only and is not intended to provide commercial, financial or legal advice. Nothing in this article constitutes an offer of securities or regulated financial products or financial services to any person.
Drew Austin - Red Beard Ventures