Why Venture Capital Is Broken & How Bitcoin Is the Reset | Bitcoin 2026

little video thing. >> Good afternoon. Thank you for joining us for the last panel of the day, the last day of the conference. So, we're we're ready to bring it home with a strong close. And our panel today is called is VC broken? And if so, can Bitcoin be the fix? And why is this important? First of all, I mean, how many of you are really interested in venture capital? I don't know. But venture capital is about innovation. So what we're really talking about is the innovation around the Bitcoin protocol that helps create the tools and the infrastructure that encourage additional use and adoption. So we should all be very interested in the innovation space. My name is Lynn Baristo and I'm a partner in base layer advisors and I'm also a co-host of the Build with Bitcoin podcast. We cover we just published our hundth episode. We cover the stories of the founders that are creating innovation around the Bitcoin protocol and the investors that are supporting them. And so with me today, I'm going to be moderating the panel on VC with the investors who are supporting the Bitcoin innovation. And I'd like each of you to take a minute and introduce yourself, talk about how you invest around Bitcoin and what your fund focus is. Alex, please start. >> Yeah, I'm I'm Alex Fankenberg. I've been a venture capitalist now for 25 years and uh I've um moved uh focusing towards investing in the in in the the Bitcoin ecosystem, crypto infrastructure and AI and uh I'm extremely bullish on innovation because innovation keeps accelerating and keeps getting larger and larger and more and more disruptive. So I think as innovation accelerates it creates huge value and that's going to make everybody connected to that uh especially investors very successful. >> Uh hello I'm Greg Carson. I am the managing partner founder of um Humla Ventures. We're a venture capital firm um located in New York and Europe. Um I've been um in in tech and and innovations for almost 30 years. first as an entrepreneur in California, growing up near Silicon Valley, then um as a um and then as a a banker as investment banker in Wall Street, then um moving to Europe. I was uh doing finance and and venture capital in in Northern Europe for a while. Um got involved in Bitcoin maybe 2017. Um joined XBTO, which was the first Bitcoin market maker and start ran all their venture capital um interests. Um we spun our team out of them. Um I think um when we did fund two um fund two um we we humble ventures we have about 180 million under management. Um we're invested in 65 companies about half of them are crypto and bitcoin related. Um we were early investors and late investors in Darbit which sold to Coinbase last year and in the AI side in Grock which sold to Nvidia at the end of last year as well. So, we've had a a good run and we've had a lot um quite a bit of returns to our investors, maybe um I think making half our investors, multiple, many multiples and the other half have got all their money back. So, um we're very interested in the space. Um we've recently done a couple big investments in the Bitcoin ecosystem. Um we think that it's a very good time to be investing. Um and um we are um very happy to be in the venture capital industry and we don't think it's broken. >> I'm curious to learn more about why you think it's a good time, but I'll do my intro first. Um I'm Eric Yikes. I came from the private equity world. I fell down the Bitcoin rabbit hole. Realized that this is going to be one of the greatest innovations that occurs in my lifetime. Asked myself, why am I working in boring old private equity? Why am I not in Bitcoin? I wrote one of the uh early economics books on Bitcoin and that got me started in the industry. And you know I I I spent a little bit of time just thinking about the businesses, talking with founders, thinking through financial services within the industry and you know at that time it was um you know this was back around 2022 and it felt a bit premature to do Bitcoin focused VC. Um that was when you know the crypto euphoria was at all-time highs. there were tokens going all these different directions and uh and it was a very hard narrative to compete against uh a new type of security that you has liquidity for a startup that doesn't make money and um and that was a really hard thing to compete against in terms of fundraising. It was around 2023 that I said okay I think that the market is starting to discover reality a little bit better and my vision of the world might have been coming to fruition. And that's when I said, "Okay, Bitcoin focused VC might start having its day in the sun." And uh and I think the way that we view it is more like we're like a fintech fund. Um we're looking at financial technologies as well as just general uh startups that are associated with Bitcoin adoption in some sort of way. Uh our belief is that Bitcoin will continue to go up very rapidly to an incredibly large scale over time. The degree of that scale is not to be determined yet, but I think even in the worst case scenario, it's it's very high. and um and we want to own the businesses that have their unit economics that are tied to that growth. Um and I love Bitcoin. I'm passionate about it. >> Okay. The name of our panel is VC is broken. Can Bitcoin fix it? I spent 10 years in VC, early stage VC before moving on to focus my full time and attention on Bitcoin. And I I tend to think it is broken. I think there were some misaligned incentives which we'll talk about a little bit more. But I'd like to throw it to all of you. Is VC broken first of all? And yeah, so take it away. >> How do we define broken? What do we What do we mean by that? >> Uh does hard? It's definitely hard. >> Yeah. Does it still work? Does it still encourage early stage innovation? Are the odds of successful companies the same as they were maybe when VC first started in the 70s and 80s? Are I mean, we'll talk a little bit more. I want to get into incentive alignment, but is it providing the function especially relative to Bitcoin because I think we're all here wanting to know is innovation being supported around the Bitcoin ecosystem. So Eric, why don't you take first? >> You know, when I was first doing a historical analysis of venture returns and I think it was uh 2023 was the first negative year globally for VC returns in two decades. um on on a broad-based like index waiting and so it's it's having a tough time relative to you know the you know inception of the industry effectively and I I I think a lot of that comes down to the perspective that you know me coming from the private equity world it's a very different view of capital allocation right and the the power law model from you know a typical distribution model of investing and trying to target power law outcomes with a distributed portfolio and you know all the statistical analysis that's gone into looking at that type of model. I I think the question isn't is it broken it's has the uh distribution of returns changed and does that demand a different style of investing? Um and were you going to say something to that? >> I could say stuff I'm older so I I was around in the in the late 1990s and 2000s and um it feels very similar to like the the 2000 to 2004 problem that we had. I think that's probably outside your data set. Um >> because what happened is um in uh you said was two it was uh two years ago was the first negative 23 I think you said and it just turns and turns out that 20 and I didn't read his report so I'm I'm probably going to get some things wrong but 21 and 22 is the first massive massive reduction in LP in injection into VC. It was just a cliff a cliff. venture capital from 2021 to 2024 has just been like, you know, LPs and family offices not putting in in money into VC, which happened also in 200 2000 to 2003, which ended up there was this der of of weird returns in the early 2000s from forc. I think we're in a similar situation and it mostly stems not from VC being broken but from the family office allocator fund of funds massly not favoring VC. So there's no guaranteed series A series B anymore. You don't have that Silicon Valley effect where okay I got my seed and I got a good investor so I'm guaranteed my my A and my B. So it's changed the profile of VC quite a bit and probably temp you know I'm just saying it's probably temporary you know. >> Sure. But it is kind of interesting though, right? Because that begs a question of like if if further capital being allocated to fund, you know, series stage investments is what's causing the negative returns, then I that's probably more of an argument for it is broken that we need that further capital to be funding it versus the uh that it's in it. It's it's in this normal 20 year cycle >> or it's kind of like >> you know people are getting old you know like an old dude that's a patriarch in his LP in his family office like oh I don't want a 20-y year return or 10 year return like I'm going to die in like five or 10 years like >> Alex you you have worked in the early stage so what are you seeing in terms of this and also in the European >> yeah I I have two aspects from a European perspective like the the bust of the internet bubble hit Europe especially Germany where I'm from really really hard. So what happened I joined the VC industry in 2000 and what happened uh almost all the VC funds in Germany went away. There were only a handful left and there were >> smart people really successful people who said the venture capital model is broken and it and then I I we raised the fund in 2005 and 2005 was the last year that was negative venture capital returns in Europe and it turned out to be the best entry point you can imagine to start venture. So I think to >> Amazon >> and and and and from from a European perspective, the American venture capital is still booming. So you still have large rounds, you have large exits and some IPOs. So I think the venture capital industry has some challenges and one of the challenges is there's strong competition from other asset classes the public markets the the AI stocks that have have booming a lot maybe even gold and maybe to some degree also bitcoin as a competitor to the venture capital asset class. So I think what the venture capital industry should do is maybe reinvent itself like thinking about the challenges like it's a it's it's illquid for a long time uh and maybe to have new approaches using AI to speed up the investment process to understand to find the best deals. So I think um there's challenges and from a historical point of view these this situation is the best time to set up a fund and invest. >> So I like this and let's kind of pull on this thread where maybe it's not completely broken but it has areas it can prove maybe it's cyclical but let's bring it back to Bitcoin. So let's we're in we're Bitcoin is a whole new asset class that can underly venture capital. How do how does that factor into the way you think about fund architecture about how whether it's with your portfolio companies if they either generate Bitcoin or they have Bitcoin on their balance sheet does that change your investment lens? And also for you as fund managers when you're raising from LPS can Bitcoin play a role in that? So um take take that Alex and then we'll pass it along. Yeah, I think there's several angles where Bitcoin could like have some degree of like provide some degree of innovation for venture funds. So, for example, uh we have a portfolio company that that tokenizes G&BH shares, limited company shares that make the the startups more liquid. So, more easily transferable, less uh friction, less bureaucracy. So, you could take that a step further. uh depending on the regulatory environment, you could use the crypto infrastructure uh to to to provide more liquidity to the fund structure itself, which could shorten the cash cycle, you know, could bring new investors to the asset class because they know they're not stuck for 10 or even more years. So, so, so, so use the technology to address the challenges of having a very illquid long-term asset class. Eric, you have a new fund, relatively new fund, a couple years old. How did you factor this into it when you're setting up your fund? >> Uh, we didn't have time to really think about any of that. We we we were like, how are we going to save money on lawyers? That's how we thought about it. And um I I I think one of the perverse incentives is uh when you have uh what can change when you have liquidity within a fund structure is when with early stage investments that have a very long time horizon. um finding it can encourage you to market narratives more than create value. I think that was one of the things that we wanted to be avoidant of and how we're uh either participating in investments or you know structuring ourselves >> and Greg voice of experience. How about you? >> Uh well I think there's kind of multiple aspects to that question because Bitcoin we say like okay are you a VC in Bitcoin? What does that mean? you know, like um I don't know if it's wise to hold crypto on your balance sheet while it's still massively volatile. If you if because like as a board member, I'm obsessed with runway. You know, like the management team, do you have 12 months of runway? If you don't have 12 months of runway or or literally 24 months of runway, you need to focus on runway. You need to have more, you have to raise more money or you have to fire people or you have to um get more revenues. There's only like there's only three options if your runway is diminishing very quickly. So if you have a volatile asset is a big part of your thing that's that's a problem. But the other aspect to this is is Bitcoin an important technology. I think that's been missing a lot especially in less that period we've had and um and if you go back I was interviewed by Peter McCormack I think in 2018 and there's a whole phrase I have there where I where I said like I believe you know like I'm not a big crypto investor. We didn't do lots of ICOs and and tokens. We've invested really as as safe and equity investors with some token warrants once in a while just in case there's some upside. We were a coin. We were a darabid investor. We were a hidden road partners investor. Um we're in in we invested recently in Opnet which is launching smart contracts on Bitcoin. They launched 5 weeks ago. Totally working. There's smart contracts on Bitcoin now. You might not know that um with no layer 2. But the point is is that when I on that I said I believe that all financial all financial transactions and assets will reside on Bitcoin in the next 20 years. I think 100%. And that's a really weird contra narrative to how crypto is. Um and our fund was called the transformation of finance fund which is we we were looking at AI crypto and financial change to Wall Street. So we like stuff that is finan I would call it trade fi like trading fi as opposed to >> fintech >> right let's let's also talk another aspect that's kind of been criticized about venture capital today is how long it's taking to generate excess in traditional venture capital and does this create misalignment of incentives between the founders and the venture capitalists and why is this happening but how would you see bitcoin changing the incentive of alignment between founders and investors. If so, I'm making the assumption that it does, but if you think otherwise, uh, please take that on. Greg, why don't you start? Do you see incentives aligned, misaligned? >> I think the incentives the venture capital incentive structure I I don't know if they they agree that we're all venture capitalists who are kind of biased, but I think it's a good incentive structure. You know, the the problem is when founder and I don't want to put it on founders, but when founders get very a lot of hubris early on and they want to get these really large what I would call like friends and family, they say friends and family round like well what's your valuation for friends and family and they say 80 million. You're like oh okay that's I don't know who your friends and family are but that is a very high valuation for a pre-revenue pre-product whatever. So the incentives is in venture capital are supposed to work very specifically is the people who come in early get a very attractive valuation because they have a very high risk of losing everything and the entrepreneur does a lot of hard work and has a lot of and has to give up a percentage of his company because he doesn't have his own capital and then each additional round is getting less and less you know percentage for their money as the valuation goes up. So as far as incentives are struct Bitcoin, I don't know if that changes it much because we still have the same problem which is an investment is very high risk. It's very hard to be in venture capital. I mean we all have now we're all experienced venture capitalists and all of us have made investments. I'm I'm guessing you guys have done this too which have become zero. You know I give them a million dollars and it's zero a couple years later like oh that was a mistake. And that's the business. You know, the venture capital model is you invest in 10 companies and one of those companies has to pay returns of all of them. So when I give you an investment as an entrepreneur, we need you to have a forecast and confidence that you're going to make 10, 20, 30 times our money. That's our model and that's going to be the model of venture capital for the future. And it's been the model for the last 20 years. If you can't make a model of that and you're only going to get me 2x, that's not something I can invest in. That's why there's tons of entrepreneurial great companies that will never attract an investment from a venture capitalist. But >> Bitcoin changes time preference. Alex, what would you say about that? I mean, has you have have as you've moved from traditional VC and the 800 companies that you founded an early stage to Bitcoin? Is your time preference different when you're thinking about investing in a Bitcoin company? I think looking at the Bitcoin cycle in from the previous what Bitcoin teaches us it goes down really quickly and and and steeply like 70 80% and then it recovers over the theory cycle and then what we've seen over the last 17 years there's huge appreciation. I think what Bitcoin teaches us as venture capitalists to really stand those those cycles like those companies that go fast to to stay optimistic uh for the portfolio and and to keep pushing the the good companies and have a long-term perspective. So, so it's not really fixing uh the incentive uh issue and the challenges, but it teaches us that we can can manage those that you know get that we can stand the challenges and and uh be long-term successful. >> I also want to we've been talking about Bitcoin companies if they're like one thing and they're not. There are everything from wallets and onboarding to mining to um you know to to communications to now agentic AI. So there's a whole range of different types of companies within the Bitcoin ecosystem. And Eric, I want to talk to you a little bit about this ecosystem gap and what you're seeing. Eric's fund, Epoch Ventures, publishes an annual report two years in a row that surveys the entire Bitcoin ecosystem and this includes Bitcoin startups and companies, but also use adoption, Bitcoin treasury companies, which generally fall outside of the treas out of the venture realm. what are you seeing in terms of the ecosystem and any gaps that might present unique opportunities for investment? >> And you can find that report at epochvc.io. Um I I I think in terms of gaps today there is uh with a lot of the financial services type businesses that we look at there's a bit of a convergence where there's a convergence what we say internally is like on a neo neo banking model that's adopting stable coins bitcoin uh has a lot of traditional fintech functionality there's some very large scale applications people use in this model today there's some smaller scale uh I I think a lot of the fragmentation in that industry comes from different goto markets. Uh like for example, one of our portfolio companies is leveraging Bitcoin over lightning payments to conduct crossber settlements specifically for Indian diaspora in the US. And when you kind of like learn a little bit more about uh the market for crossber payments, you realize that customer acquisition costs it's like a very brutal game of doing that. So if you can target a particular demographic, that's a competitive advantage. they might be able to get a pretty strong market share from the 15 million double the median income Indians that have migrated to the US. Um that's an example of like a neo bank that could emerge. What are they going to do as they capture that? They're going to sell them more financial services. So there there's a lot of companies like that converging upon this neoank model in the industry. Uh I think what everybody realizes what every fintech realizes is that they would it would be a lot easier if they had a bank charter. Um, and and that's kind of like the gap in our industry that I think needs to be filled most holistically. >> I mean, I really think AI that like is a huge buzz, but it's also a huge magnet of capital. It it it sucks up all the attention, sucks up lots of capital and and it's a huge competitor to I mean the public listed AI companies, but also of course in the venture capital area. So I think an opportunity really is to think about Bitcoin connecting to AI, agentic payments and leveraging like putting AI and agentic commerce uh and agentic transactions on a new level integrating Bitcoin and it it could very well be that the AI sort of without being taught understands that Bitcoin really is the best asset class to hold long term but also to transact in the short term and maybe then hedge the risk of uh volatility by just swapping it into stable coins. So I think that's an opportunity for for both for Bitcoin and for AI and the venture capital space. >> This is one of the I think major question marks in the industry right now. Um and we're actually working with a group of Harvard undergrads on a deep research paper on this. Um we should chat a little bit more about it after, but um I I've been skeptical of the narrative of Bitcoin as much as I would love for it to be true. um recently or just in general >> uh over I mean it was kind of around like I would say 2023 was when a lot of the narratives of Bitcoin will be the chosen money of AI started to emerge um and a lot of it was based on arguments about uh these ideas that AI chooses something and it's like well yeah AI doesn't choose something uh you know infrastructure and friction is what chooses something it wasn't really until we saw this like profound viral emergence of open-source agent models emerge earlier here this year where you say the preferred medium that they would be transacting with is the most frictionless and bitcoin is much more frictionless than even stable coins and like stable coins are going to get material adoption. Um, but there's a very strong argument to be made that a form of money that doesn't require any credential is going to be the form of money that's used in an agent. >> Bitcoin, you come around that bitcoin is the agentic money. Is that what you're saying? >> Right. >> I think I think agree with that. I think uh and obviously I I mentioned earlier like gameless promotion OPNET um they built that the Opnet platform for strong contracts on Bitcoin was built with agents in mind and they have an MCP and like the development community can do that. Um we're so early the thing that people don't realize I mean I think that people realize is that agents are super powerful and it's super early. We don't we don't know where one year from now. I can't possibly imagine. >> I mean, it's going I like wake up in the morning and then and my and my my friend groups and our agent our agent chat groups are like all I just simple this new thing. It's changed everything and it's like that happens like every four days. So if you're not doing like openclaw Hermes or something like that like you're in the you're in the group that's like not using the printing press. You're like it's that it's it's that different. And I think that Bitcoin will be a very preferred transaction um technology for agents. Um, but I also am in this kind of weird like um stable coin maximalist mindset which is that there's no way the US dollar and stable coins US dollar is going away anytime in the next 10 to 20 years maybe 20 years but 10 years no and it it it fulfills all the promises of original Bitcoin without bit without the without the not being easy to to measure. But Bitcoin will ultimately be that one in my opinion. >> Exactly. The only challen >> sadly we're going to have to start winding this panel down although there's so much we could talk about about all the emerging technologies around Bitcoin and what's coming. But Greg I want you to to to take a chance. You were talking about predictions about AI and and whatever. But turning it to VC and Bitcoin you five years from now where do you see the intersection of Bitcoin and and VC being? me. Um, well, I think 5 years from now, Bitcoin as a technology will have established itself as more viable. So, right now, the only Bitcoin is a technology companies were last year in the L2 revival. Like UTXO management had all those investments and none of them worked. L2 just didn't work and is not working. And the main reason for that is the blocks aren't full. So, there's no demand for L2. Um, I think if we can I think if the technology from a few of these technology companies that are doing new technology on Bitcoin, if we can get the blocks full, then the full blocks will spur a need for innovation in Bitcoin. Um, but the real thing is is RWAS and whether or not real world assets start to move towards this space. Everybody has their theory. I just want to put out my big what I think is a hallucination in crypto, which is that speed is important. I think this is the biggest hallucination in in crypto. The only thing you need speed for is high frequency trading of which there's none in crypto really. It's just algorithmic trading and paying for a hot dog at the you know at the at the stand. You need a and that can be solved with Visa card or with one confirmation. Um so this idea that you know we need Salana to be fast and we need Ethereum to be fast and we need all these L1s to be fast is just hypothesis. We've we've been operating with 60-day 60-day settlement and 30-day settlement and 3-day settlement for 100 years in finance. And you know, you don't need your house to close in 30 seconds, >> Alex. >> House can close in a month. >> Turning it over to you. 5 years from now, where do you see the intersection of VC and Bitcoin? And will Bitcoin change VC? >> There's no there's no um panel after us, by the way. So, we can just kind of keep eating. >> We can, you know, >> I had that thought, too. >> I would like to add an Uh uh one one one thing that I like most about Bitcoin is the community, the people around it. And I think one aspect that that could be uh from a VC world um could be connected better is like the Bitcoiners as LPS. So, as we know, Bitcoiners don't like to give up their Bitcoin to make an investment in in a fund. But I think there's ways to um know keep the Bitcoin and generate dollars that could flow into venture capital funds, you know, through like uh like basically loans that that were would be secured by by the Bitcoin. And and I think the the Bitcoin community could be a great LP base for venture funds and and also a great innovation base and a great network for venture capital funds. And I think it's going to be and I totally agree with the other panelists. I think that the Bitcoin technology is the foundation of uh many many innovations being generated in the next year. So connecting to the Bitcoin communities and integrating them into the venture funds. And that's a great point because I think we've had I mean the the amount of funding that goes into Bitcoin VC is much less than the amount that has gone into crypto and also in traditional tech. Eric, you started a a a Bitcoin VC fund. This is a newer fund. Where do you see how how does that hurdle rate change over time? And you obviously believe in this, but where do you see this five years from now? >> Will Bitcoin companies outperform Bitcoin? >> Right. Right. So there it's kind of two sides of the same coin on the question where if you have the economics of your business and the adoption rates of growth tied to the capital appreciation of Bitcoin over a period then you know that's that's what we're arguing is that we're moving with that hurdle rate over time. Um and and I think that you know to your point on the LP base or to your point on portfolio company investments uh whatever it is it's Bitcoin's going up a lot more and whatever is tied to that is good whether it be your investors whether it be your portfolio companies etc. And like that's that's that's a that's something you can get pretty confident in. Um and I I think like the way that I see the world in the next five years of how that's going to be happening is that you know as we see this prolific digitization of finance as people start to transact with cryptographic signatures instead of you know prior accountbased structures on different standards uh as that proliferates throughout the world and becomes a major standard of the future. um bitco bitcoin is going to infect the reserves of all of it. People are going to realize that the scarcest asset in the world and the reason that it's been the best performing asset in the world in recent history uh is because of that scarcity and the fundamental properties that it has. So as it starts to infect the reserves of everything uh you know we we see it today happening as uh like a bridge mechanism with traditional finance when we look at what Michael Sailor's stretch product has done um that is meeting capital where it is today on the rails and where it is today. Uh that exact same economic model is just something that's going to exist everywhere within digital finance. It's something where stable coins are going to be paying a similar rate of interest. Uh people aren't there yet today. The capital's not there today. It's where Michael Sailor is doing it. But tomorrow it's going to be everywhere and Bitcoin is going to be what's backing it. So you might think you're using a stable coin that pays a really high rate of interest, but it's really just a Bitcoin reserve. It's kind of like when you have to force feed your dog with a sweet treat to make it take its medicine. That's what these structures are for people that would be better off just owning Bitcoin over the long term. >> Well, thank you so much for your time and attention. Please give it up for our panelists who are some of the initial investors in Bitcoin companies and consider supporting Bitcoin VC. I just want to do one final thing. Thank you so much to the organizers of the Bitcoin conference. We really appreciate you having us on stage and and appreciate the great organization of the conference today. Thank you. >> Thank you. >> Thank you. Every year this community comes together to celebrate, to debate, to build what comes next. And every year the stage gets bigger. Sound money center stage. So where do you go to celebrate the next chapter in Bitcoin history? You come home. Nashville July 2027. Thank