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Adam Struck of Struck Crypto— The Ideal Seed Stage Investor

Adam Struck of Struck Crypto— The Ideal Seed Stage Investor

Struck Crypto is all about transformational technologies that have the potential to revolutionize industries. Join its Founder, Adam Struck, in this episode where he shares how the venture capital firm is ushering in a new era by infusing innovation and value into every interaction. Get captivated by the genesis story of Struck Crypto, rooted in Adam’s fascination with decentralized currency and his expertise in venture capital and law. He reveals their ingenious Skeuomorphism strategy, and how they identify and fund Web3 counterparts using successful Web2 companies like Liquefy and Notifi. He also talks about enhancing user experience and mass adoption, the regulatory challenges and risks in the crypto space, and how Struck Crypto ensures compliance while generating long-term value for investors. Plus, Adam shares insights on some of the blockchain projects that are out and tackling problems in the space. Don’t miss out on this cutting-edge information on Web3 that will revolutionize industries.

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Struck Crypto With Adam Struck

This is Adam Struck from Struck Crypto. We are fueling the future with transformative seed investments. I’m thrilled to join you on the Edge of NFT, your go-to show for exploring the most exciting projects in the Web3 universe. Keep reading.

Stay tuned for this episode to learn how our guest keeps track of everything he needs to help grow some of the most promising startups in Web3 and beyond.

What Charizard flipping strategies made our guest’s first big box?

Finally, read about Nike’s upcoming Airphoria NFT sneaker hunt on Fortnite.

Before we go on, don’t forget that our Outer Edge LA event returned to LA from March 20th to the 23rd, 2023. You can still catch up on all the discussions, presentations, and more. Head over to Watch.OuterEdge.live, pull out your email address, and enter it. You will have access to over 60 captivating conversations and performances. Binge watchers are welcome. Netflix, watch out. We will see you inside.

This episode features Adam Struck, the trailblazing Founder of Struck Crypto, a venture capital firm ushering a new era by infusing innovation and value into every interaction. As the dynamic Founder and Managing Partner at Struck Crypto, Adam is no stranger to the entrepreneurial world. Prior to Struck, he cofounded Long Island Brand Beverages, a CPG company later acquired and listed on NASDAQ with a legal background at Kirkland & Ellis, one of the world’s leading law firms, and accolades from Forbes 30 Under 30 lists for venture capital and Business Insider’s Rising Stars in Venture Capital.

Adam has a rich tapestry of experience. Struck Crypto is the cornerstone for entrepreneurs with a vision to revolutionize the world. Focused on seed B2B investments, Struck Capital partners with audacious founders leveraging data-driven insights to craft transformative technological innovations and their commitment to providing more sweat equity per dollar invested, standing by you as the most hands-on investor on your cap table. That sounds pretty appealing. I like that. Adam, welcome to Edge of NFT.

Thank you for having me. It is great to be here.

It is one of those fun stories of co-creation in terms of how we all got here. Struck graciously participated in our closing party for Outer Edge LA. We had a great time together and have continued to build that relationship in chemistry. We did something together for LA Tech Week. We have you on the show. The full circle continues.

I’m excited to talk about that.

Your perspective, in light of the macro dynamics in our industry, is going to be helpful and grounding for our audience. Struck Crypto is all about transformational technologies that have the potential to revolutionize industries. I would love to get the genesis story of this venture and your mission, mainly for our audience. We have talked about it a little bit, but it is interesting.

I have always seen myself as an opportunistic investor. When I started to understand the world of Web3 and decentralization and what it meant, especially for me as a former immigrant in South Africa that moved to the United States because I couldn’t trust my government. I couldn’t trust my fiat-based currency that was experiencing hyperinflation. It spoke to me in the concept of having a decentralized currency that could be transferred from a P2P perspective and didn’t rely on a central authority or potentially even corrupt banks for its legitimacy.

The founding story of Satoshi and Bitcoin spoke to me. When I started thinking about, “You have Ethereum and smart contract platforms,” I realized that this form of core technology should exist. At the time, I was already running Struck Capital, which I would call our Web2 fund, mainly focused on B2B, horizontal and vertical SaaS.

I was approached by a large fund in LA. They chose to amend their LPA. They turned themselves into a fund to fund and cut me the largest check in their history. They saw me as a young next-generation manager, and they wanted to back me to get exposure to crypto and the Web3 universe. I took that momentum. I raised a little bit more capital. That is how Struck Crypto was born. We have been operating this space institutionally since 2017. I have been through a ton of deep bear and bull cycles. I have been lucky to say that we have partnered with some of the best founders in the space and watched companies go from the genesis phase all the way to escape velocity.

One of the unique parts of being a founder who’s gone through some acquisition is knowing what it takes from an original team and having the constructs to be able to bring things from start to finish. As great as it is to be an entrepreneur and go through the rollercoaster that is entrepreneurship, it is challenging to create profitable businesses that go on to have a lot of success. One of the fascinating aspects of your investment strategy involves identifying successful Web2 companies and seeking out their Web3 equivalents. You call this skeuomorphism. Can you elaborate on what this unique approach is?

The concept of skeuomorphism was born out of a product design perspective. If you are creating a new product and you understand that your users are familiar with different products, but you can take a new product and remind them of an old product, it would make it easier for them to get through that J curve and start using your product in an intuitive way.

What happened now in the crypto space is they have taken that concept to the next level. What that means is if we find companies in the Web2 space that have been successful, could we, in theory, fund their Web3 decentralized counterparts that would maybe remind users of these Web2 companies, but it would make it easier for them to solve a cold start problem and start using the product in a more intuitive manner?

For us, as an investment firm and a company that is investing in the space, we like to look at Web2 companies that have gone all the way, have a dedicated and highly engaged unit user base with stable unit economics, and we say, “Is there a Web3 counterpart that we could back that is also solving a big problem that is specific to Web3?”

A good example of that is we are investors in a company called Liquifi. Liquifi is building the Carta for Web3. We have done a lot of work with Carta. We have realized they are focused on the Web2 space. They have no blockchain developers or engineers on their team. There is a host of Web3 companies out there that are looking for not “cap table management” but also want to understand how to launch a token and engage investing schedules where they are distributing these tokens to investors to employees and to do so in a compliant manner.

They are in a situation where the odds are stacked against them. Everything is in crypto because it is all an immutable ledger. You can’t call a centralized authority and be like, “I gave you many shares. Can I get it back?” It has to be done perfectly. We felt like this was a concept we understood. Carta, as a company, has hit escape velocity, a multibillion-dollar enterprise value.

We found two incredible founders, Robin and Oliver. We said, “Why don’t we back you to create the Carta for Web3?” That is how skeuomorphism has played out from an investment perspective. We got a few others. We got a company called Notifi. That was started by Paul Kim, who was the Director of Products at Oracle. He was high up on the product team at Circle, the creators of USDC. What he has created is called Notifi, which is like the Twilio of Web3, operating under the assumption that you are a dApp or a protocol.

You got users all over the place. Some of them are on Telegram, WhatsApp, Signal, or WeChat, and more on the dApp. Specifically, they are engaging with your dApp through what are anonymous wallets. If you are trying to show engagement, you got an ecosystem proposal, and you want people to vote, how do you get them engaged all at the same time?

Twilio is this messaging plumbing infrastructure where a dApp, a DAO, or a protocol can generally send a message. It can hit their users everywhere, all at the same time across Web2 and Web3. You are starting to see that engagement. They have a lot of data and analytics around them, which, when you think about the lifetime value of your customer and how to cross-sell them or upsell them, it is important to understand where they are. That is what Notifi does. Another great example of huge companies that have hit escape velocity in Web2, whether Twilio or Carta, is finding their native Web3 equivalents and investing in them.

When you think about the lifetime value of your customer and how to cross-sell them or upsell them, it is important to understand where they are. Click To Tweet

I love that use case around hitting people everywhere because I feel like these conversations about exchanging contact information have gotten complicated because people have all their own playbooks for how they want to be in touch with people depending on what country they are in and what tools they are more comfortable with. They were like, “I only use WhatsApp to talk to my best friend. I only text with my mom.” It is random these days.

It is tough because there are Discord and all these major messaging apps that want to keep their uses there, but it is like a dApp or a project. You are like, “I wouldn’t be able to speak to my users on my own terms.” It is your sentiments there.

I remember the good old days of whether you are calling me or not. You call the phone, or you don’t. That is all you had. Are you home? No, you are not home. Adam, you got an insightful perspective on the capitalist markets and things like that in general, going from Web2 to Web2. It would be interesting to hear some of your perspectives on the way the space is moving.

You mentioned the skeuomorphism strategy as a way to access the possibilities of Web3 through new endeavors. We also got these ideas about maybe it is time for the big brands to be getting into the Web3 space, or if we all need to be working on mass adoption. That is the thing to focus on. It is all about gaming or augmented reality. What is your general perspective of the space and the effective strategies being applied or maybe not even effective? What strategies are being applied these days? What are the trends in fads?

The concept of skeuomorphism, when you think of it more from a design perspective, is a spirit that the crypto and Web3 community needs to channel if the goal is to get to the point that we achieve “the holy grail” of mass adoption. For us, we still feel like there is a number of UI/UX issues inherent in the use of Web3 technology and self-custody that makes it difficult for your mother and grandmother to ever even touch this.

In theory, the way that crypto and Web3 are going to achieve the ability to propagate to the masses is you almost need to be in a place where if the core technology exists, it is being used in such a seamless manner that people don’t even realize it. As a firm, we are focused on what are the major gating items that are preventing people from using the technology.

We are focusing a lot on wallets because there is a new ecosystem proposal that was adopted by the Ethereum community called ERC-4337. What that is doing is solving some of the UI/UX issues inherent in non-custodial wallets that make it difficult for the average user to even understand, let alone use, with a high degree of confidence things like, “If I’m cussing my wallet and I lose my private key. Have I lost everything? How does that work?”

There is a company that we invested in called Soul Wallet that has a tremendous amount of support from the Ethereum core community, including Vitalik himself. He worked on the project and messaged about them. They are using ERC-4337 to introduce what is the concept of social recovery and guardian. For the first time, in a purely non-custodial manner where you have no changes at the protocol level, and it is extremely safe, you can now nominate a mother, a brother, or a sister to be a “guardian.” If you are in a place where you lose your private key, that can be regenerated. Your wallet can be re-accessed with another private key in a way that is completely safe.

For example, Ledger is one of the leaders in non-custodial wallet hardware. They came out with a proposal where they were like, “We can find a way to store your private keys. If you are in a position where something happens, we can help you regenerate the wallet.” All the crypto maxis freaked out because they didn’t want a centralized authority holding those private keys. That defeats the purpose of non-custodial ownership in the first place.

What ERC-4337 does with guardians and social recovery is it allows you to get that same user experience of regenerating or re-accessing the wallet in the case of losing private keys but not in a way that puts those private keys in the hands of a centralized authority. That piece of core technology innovation, from our perspective, is completely groundbreaking.

Another thing that ERC-4337 introduces is what is called Beyond Account Abstraction. You can now be in a place where you are paying for gas. If I’m using Ethereum, I can now pay for gas with an ERC-20 token, like USDC stablecoin versus Ethereum itself, which is groundbreaking. For the average person, if they want to use the Ethereum blockchain, why do they have to “pay for gas” in Ethereum? I should be able to pay for gas in whatever I want. That is revolutionary.

Bitcoin and the concept of Bitcoin came out of the 2008 financial crisis. There were owes to the 2008 financial crisis in the genesis block of Bitcoin. For some people, they are like, “This has been out there since 2008. This is not a new technology anymore.” From our perspective, it is still extremely new. There are still material UI/UX challenges that are preventing mass adoption. That is something that we pay attention to from an investment perspective.

The other thing I will mention is that a lot of the readers out there are aware of all the regulatory risks that are happening now. Unfortunately, regulation is always slow to catch up to core technology innovation. You have a heavy-handed approach to crypto regulation in the form of the SEC suing Coinbase and Binance. It creates a lot of fear in the ecosystem, even from an investment perspective, because you are like, “Is this a utility token? Is it security? What are the laws? How do I mitigate my risk? How do I mitigate the risk by investors?”

Unfortunately, regulation is always slow to catch up to core technology innovation. Click To Tweet

From our perspective, that is why we love investing in companies like Liquifi. That makes it easier not to be the lowest-hanging fruit. In times of a gray area, be as regulatory compliant as you possibly can be. We are a registered investment advisor. We hold ourselves to the highest standards of compliance. That is why we have been able to navigate these bull and bear markets and have been around for a long time.

We fundamentally understand what meritocracy should look and feel like. We know how to generate an outlook for our investors in a legitimate way. When something feels or looks too good to be true, we shy away from it. For a lot of the crypto adopters going forward, they are going to have that mindset. That is healthy long term.

There is a lot you packed in there that is important. I appreciate your perspective on where we are at. From there, it would be natural to talk about the future and what that next-generation ecosystem looks like. Some underlying infrastructures, like Soul Wallet, could be part of it. Maybe the next-generation ecosystem isn’t quite a mass adoption but at some degree of adoption beyond what we have now. What are the key features or trends to look for? On that note, I spoke with someone doing an interesting ad tech project with a major league soccer game. Is that the type of thing we are talking about here? Does the word Web3 and NFT disappear?

When Reddit started playing around with NFTs, all of a sudden, there was a ton of action in a short period of time. They shied away from the term NFT because, for whatever reason, there is a lot of negative sentiment associated with nonfungible tokens in terms of what that term means. One of our portfolio companies is Mythical Games. They raised $150 million from entries in 2022 at over $1 billion valuation. We put $1 million into their seed round. We were their only investor in the seed round. I was their first board member.

What has been interesting for me is understanding what the gaming use case can be as that beachhead that can result in the mass adoption of Web3. When I spoke with the Mythical team, what they pointed out is you got these massive games like Fortnite that are these large virtual worlds or “metaverses.” You got people with this “in-game currency” that care a lot about their virtual status.

Because of that, they are buying what they would call skins, but they are buying these “limited edition skins.” When they are playing their virtual characters around this virtual world, they want to say, “Look at my cool limited edition shoe or the cool costume that I’m wearing and the cool weapon I’m using.” What you realize is gamers and gaming as a beachhead has a massive amount of users and traction that intuitively understand a lot of the virtual ethos inherent in crypto and Web3 generally.

From an investment perspective, but also as a user myself, we see gaming as a major opportunity to proliferate and bring Web3 to the masses. If you speak to the founding team at Mythical, what they will say is, “We want an immutable ledger. We want to correlate these skins to NFTs. We want to create these secondary marketplaces. We want to have a future of work concept where people can start generating material income from these in-game purchases and selling them to other users. We want to do it in such a way where nobody has any idea that this is power by the blockchain and no one is calling it a nonfungible token.”

NFT | Struck Crypto

Struck Crypto: From an investment perspective, we see gaming as a major opportunity to proliferate and bring Web3 to the masses.

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That is the critical component here. In our opinion, there are massive markets that exist that their first thinking principles are already virtual to begin with, which makes a lot of sense for virtual currency, virtual goods, virtual things, or nonfungible virtual limited edition things that are on an immutable ledger. It makes a ton of sense.

The issue is, from our perspective, there has been a horrific experience. Transaction hashes and non-custodial wallets. That makes it difficult. If you ask me what I think is the next phase, it is going to be a situation where not only are ledgers completely interoperable, but you have these large audiences of virtual first thinkers that are using blockchain and cryptocurrency but doing it in such a way without knowing it. That is what is critical right now.

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Ready as I will ever be.

You saw that movie Air, I assume.

As a firm, we sold some crypto.

What is your most prized possession?

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Yes.

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