Exclusive Interview with Hack VC Managing Partner Alexander LianGuaick The Hacker of Investors, The Technology Expert of Investments

In-Depth Interview with Hack VC's Managing Partner Alexander LianGuaick The Investor Hacker and Technology Expert of Investments

Author: Zen, LianGuaiNews

In the late 1950s, a student organization called the Tech Model Railroad Club (TMRC) at the Massachusetts Institute of Technology (MIT) officially started using the terms “hack” and “hacker” to refer to methods of solving problems and the people engaged in this process. At its inception, “hacker” was completely positive and respectful, symbolizing exceptional technical skills, bold innovation, and unique styles.

Steven Levy summarized the values of this hacker culture in his book “Hackers: Heroes of the Computer Revolution” published in the 1980s, including values such as “information should be free, distrust authority, use computers to create beauty and art.” The decentralization and open spirit advocated by blockchain and cryptocurrency also inherit and develop these values. Nowadays, various ecosystems in the cryptocurrency industry host hackathons to find and invest in excellent hackers, promoting the prosperity and development of the ecosystem and the industry as a whole. Among them, Alexander LianGuaick, the Managing Partner of Hack VC, is an investor who particularly loves hacker culture – as can be seen from the name of his investment firm.

It is worth mentioning that Hack Summit, the largest programmer conference in history, was founded by Ed Roman, another fund manager at Hack VC, eight years ago. It currently has over 130,000 engineers from more than 50 different countries. The Hack Summit held at the end of March this year invited Ethereum founder Vitalik and SEC commissioner Hester Peirce as keynote speakers.

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Recently, Alexander accepted an interview with LianGuaiNews, sharing his crypto career story, investment strategy, regulatory landscape, and new technology trends.

From Dragonfly Capital to Hack VC

In 2014, at the age of 22, Alexander started working at a fintech-focused venture capital firm in Hong Kong and made his first investments in cryptocurrency. At that time, cryptocurrency was not yet an industry, there were no billion-dollar companies, and even Ethereum had not been launched. However, Alexander believed that cryptocurrency had the potential to eventually change the global financial system, and that’s when he found what he wanted to do for a lifetime. Later, Alexander joined Bain Capital in the United States as Director of Internet Investments, helping the firm launch its cryptocurrency investment business.

In 2018, Alexander founded the cryptocurrency venture capital fund, Dragonfly Capital, together with Feng Bo, and became its first Managing Partner. The firm has since become one of the largest cryptocurrency funds in Asia. In 2020, Alexander left Dragonfly Capital and founded Hack VC. In the fall of 2021, Hack VC raised a $200 million cryptocurrency seed fund, with investors including Sequoia Capital, Fidelity, a16z’s Marc Andreessen and Chris Dixon.

Alexander mentioned that the name Hack VC represents the unique nature of the investment team: they are a group of hackers investing in hackers, technical experts investing in deep technology. Hack VC focuses on early-stage investments, specifically in the technology infrastructure that will mainstream crypto, and they tend to maintain a smaller and more flexible investment scale compared to many peer companies. “For me, the thing I love most in this world is finding a great founder with a brand new idea and investing from the very beginning, often as an incubation before there’s even a product or business plan. It’s hard to do that when you raise too much funding.”

Market and technology focus, bear market is the best time to build excellent technology

Over the past 10 years, Alexander has been a long-term institutional venture capitalist in the crypto field, which has been a constant throughout his career. So far, he has invested in over 100 companies and projects, including many unicorns in areas such as L1, L2, DeFi, and CeFi. Alexander considers himself lucky, saying, “When you spend nearly as much time in an industry as it has existed, you are more likely to grow alongside it.” Nowadays, many of his early friends are running crypto companies, protocols, and funds worth billions of dollars, and these people are often his investment targets or LPs (limited partners).

Alexander mentioned that they are trying to identify new technologies that are most likely to cause major paradigm shifts in the future and invest in them early. When they started investing in L1, L2, and DeFi projects early on, the industry didn’t have clear categorizations or names. “In general, our goal is not only to invest in category leaders but also in category creators, even before a new category has a name.” Hack VC spends most of their due diligence time evaluating the market and technology. Alexander believes that without an exceptional team and community, success is unlikely. Therefore, they eventually invest in the project’s founders and the broader community.

Alexander has experienced several bull and bear cycles, and he believes that the bull market will be driven by the mass adoption of cryptocurrencies, which will be facilitated by improvements in infrastructure. Ultimately, this is a new technology and a new technological industry, so the pace of technological development determines everything. The good news is that the bear market is the best time to build excellent technology, and in many ways, the development speed of technology infrastructure is faster than ever. In a bull market, everything is more chaotic. It’s difficult to stand out among investors, meet potential business partners, and even recruitment and marketing costs become more competitive.

Abandoning investment in the crazy gambler SBF and his FTX

Currently, FTX founder Sam Bankman-Fried (aka “SBF”) has been found guilty by a jury of seven charges, with a maximum sentence of 115 years, which no one expected as SBF was once regarded as a “cryptocurrency genius” but has now fallen into the clutches of a super fraudster. In fact, Alexander was the first investor in SBF’s hedge fund Alameda Research, and they initially reached a high-level agreement. At that time, SBF had not yet launched FTX through Alameda and deliberately concealed this idea.

During Alexander’s investigation period, Alameda consistently experienced rapid losses. When questioned, SBF reluctantly admitted to the fact that they were incubating a cryptocurrency exchange. Alexander expressed support for the founders’ new idea and proposed leading the seed funding round for FTX. However, the subsequent due diligence did not go smoothly. Alexander’s team had difficulty understanding SBF’s performance records, such as some unclear fund flows. Additionally, they had many disagreements with SBF regarding key aspects of the trade. For example, SBF insisted that Alameda and FTX were independent companies, so the prices should be separate, even though they shared the same employees and computers, and funds raised by Alameda were used to pay for FTX’s startup costs.

After a more detailed due diligence, Alexander’s team ultimately decided not to invest. SBF became extremely angry with Alexander personally and even attempted to blacklist him in the industry. “It was terrible at the time, but looking back, it turned out to be a blessing,” commented Alexander on the incident. “Interestingly, throughout our entire relationship, I admired SBF to some extent. I think he is one of the smartest and most strategically-minded people I have ever met in my life. I am very certain that he will achieve great success, even if he doesn’t possess the integrity I look for in founders. Of course, super villains in movies are also smart and successful.”

Regulatory pressure highlights the systemic importance of cryptocurrencies to the world

For a long time, the crypto industry has faced challenges under regulatory pressures. The collapse and scandals involving top companies like FTX further exacerbated regulatory measures and legislation in the United States. Alexander believes that, in some ways, this is actually a good thing as it demonstrates the systemic importance of cryptocurrencies to the world. Unless something is of significant importance to change the world, governments wouldn’t bother regulating it. He stated that the internet faced strict regulatory scrutiny in its early days, and now, artificial intelligence is also starting to attract regulatory scrutiny because it has become important enough. The same applies to cryptocurrencies.

“Ultimately, some regulation is beneficial for cryptocurrencies, as we can see in the United States where untrustworthy entities like FTX are being replaced by regulated companies like Coinbase, Circle, and trusted existing enterprises like BlackRock and Fidelity.”

Apart from the impact of regulatory policies, the explosive development of the AI industry is also a topic of interest for cryptocurrency practitioners. The comparison between the two has somewhat added a sense of coolness to the bearish cryptocurrency market. Currently, artificial intelligence is the hottest industry in the entire technology field, attracting a large number of entrepreneurs. Some investment institutions, such as the leading cryptocurrency VC LianGuaridigm, which were previously focused solely on the cryptocurrency field, have also started to shift or diversify their investments into the AI sector. Alexander claims to be a loyal fan of artificial intelligence. In fact, he and his partners have invested in about 30 AI companies, some of which have already achieved success.

“The breakthrough in model quality last year has triggered a new trend of ‘generative artificial intelligence’, which will have an incredible impact on cryptocurrencies.” Alexander believes that the intersection of cryptocurrencies and artificial intelligence has yet to be fully explored. Just like DeFi in 2018 or smart contract platforms in 2016, this is an interesting and indescribable new trend that will ultimately become a huge, disruptive new category. Ultimately, artificial intelligence may solve the serious user experience issues in today’s decentralized applications. Conversely, artificial intelligence models will use decentralized applications in areas such as DeFi and payments, making them more useful and capable of complex financial activities.”

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