DeFi Alliance: Finding Diamonds in the Rough ft. Imran Khan
Speaker 1: Cryptocurrencies went on a wild ride today, while...
Speaker 2: Bitcoin, the digital currency created a dozen years ago as an alternative to cash, is exploding in value.
Speaker 3: What is DeFi?
Speaker 4: Decentralized finance.
Speaker 5: Some well known types of cryptocurrency you may have heard of, are Bitcoin.
Speaker 6: Ethereum.
Speaker 7: Ethereum.
Speaker 8: NFTs.
Speaker 9: Why don't we all switch to Solana?
Speaker 10: Solana, Solana, Solana. Solana, and Ethereum.
Speaker 11: It's everywhere, and right now the whole DeFi space is exploding.
Speaker 12: Welcome to The Jump Off Point, crypto edition. Today, Jump Capital crypto lead, Peter Johnson takes a deep dive into DeFi's most notorious accelerator with the founder himself, Imran Khan.
Peter Johnson: Hey everyone. This is Peter Johnson. Today we have a guest that I am incredibly excited about in Imran Khan, who's the founder of The DeFi Alliance. The DeFi Alliance is really a special group for me and Jump, because we played a key role in forming the organization about 18 months ago. The genesis of The DeFi Alliance, was when Imran approached me and some others in the Chicago crypto community with this idea to form a group that would connect DeFi projects with the leading trading firms in Chicago. We started this group with the founding members being Jump, CMT Digital, Cumberland, and Bold Capital. The DeFi Alliance started out as an industry group, to make these connections and then they added an accelerator program. We thought this approach was really valuable, because although in some ways building a DeFi project is like building a typical startup, in many ways it is completely different. The DeFi Alliance has been able to bring programming that is really tailored to this crypto native audience. Today, The DeFi Alliance is an industry group, it's an accelerator, and it's also a fund. As an industry group, there's over 400 members of the alliance, including 30 market makers, and The DeFi Alliance accelerator has accelerated five cohorts of companies, including 15 of the top 100 DeFi projects by Market Cap. Over the last year, the organization has also expanded its focus to encompass all of Web 3. 0 and not just DeFi. At Jump, we're huge supporters of The DeFi Alliance. We're investors in the organization, we're mentors to projects in the accelerator, and we work closely with The DeFi Alliance team as they scale up their organization. Going forward, we're just really excited about some of the new initiatives they're launching, including a new gaming accelerator, a founders program, to work with founders at the earliest stages and a new structure for the organization that Imran teases in this interview. Without further ado, here's the interview with Imran Khan, founder of The DeFi Alliance. Hey everyone, this is Peter Johnson. Today I am joined by Imran Khan, founder of The DeFi Alliance and watching The DeFi Alliance grow over the last 18 months has been, is pretty incredible, as you've gone from starting as an industry group, to launching the accelerator, raising a fund, and now looking at really exciting new evolution that I'm really excited about. Thank you for coming on Imran.
Imran Khan: Thank you for having me.
Peter Johnson: Let's start with you and your background and how you got into crypto.
Imran Khan: Yeah, got into crypto around 2013 after selling my startup, I actually was lucky enough to remark Anderson's oped on New York Times about his love for Bitcoin. I ended up doing a lot of research about crypto, about Bitcoin, and then ended up applying for all the jobs that I could at that time, which was a total of three. The first one I got into was Coinbase. Ended up doing a project for Adam White and ended up working on the e- commerce product. It was they had at that time, a work project before you actually get into Coinbase. In the middle of that, they ended up pivoting and it didn't work out. But I ended up working for Microsoft there for six years, spent time on the product group side, then last half of my career spent advising Microsoft ventures to helping them think about how they should be allocating crypto. Then around 2017, I ended up meeting up my co- founder Soona and we co- launched Bold Capital, which is a general crypto fund. From 2017 to 2020, I had a particular interest in DeFi. In fact, one of the biggest problems at that time was no users, lack of liquidity, lack of engagement, et cetera. Regulatory is another one, obviously that's that we're still going through. But the biggest problem, the biggest area for me was liquidity, because if we can get liquidity and even institutional adoption, then this whole flywheel for DeFi protocols could work. Over a three year period, I started working with the likes of you, Peter, at Jump, Colleen at CMT digital, DRW, Kim from DRW and many, many others in the local Chicago landscape and along with market makers all over the world and started to think about how can we help support startups moving forward. With that in mind, we co- launched ultimately what was called, what was the first iteration or beta of The DeFi Alliance of what it is today. At that time, we were informally connecting startups to the firms that were involved, but over time, we've decided that we need to formalize this into an accelerator program. Since then, we've had our genesis cohort, which included dYdX, Kyber synthetic, Zero X and many others. Since then, we've had over 80 startups that went through our program. Earlier this year we launched a fund, which I can talk a bit more about.
Peter Johnson: What did you see? You were really early, your timing was impeccable on launching this.
Imran Khan: Yeah.
Peter Johnson: This was before DeFi Summer. What did you see that led you to start it at this time and come in and meet with me and Colleen and Kim and really get this whole thing rolling?
Imran Khan: Ultimately, when you look at the total value locked, there was a huge, obviously that's not like a great metric, but it was a good metric at the time. I started to see like tooth thing. One was, total value locked has started to move week over week, pretty dramatically. Then number two is, the types of products that were being built, were becoming a little bit more easier to use. Obviously from a market timing perspective, a user perspective, those are the right conditions for incredible growth to happen. Between those two, and then obviously with DeFi and the users that are starting to use the product and the feedback based on it, we decided this is probably the right type of institutions you just learn and get involved. From then on, I think we had compound kickoff, like DeFi Summer with its liquidity mining program. There were just multitudes of waves that came after that. But I'd say if it really came down, what it really boiled down to is just the growth of protocols. Two, is just how easy it's become to use these protocols. Then number three is ultimately, there was a void missing, which is lack of institutional support and this case, I think that's the right timing for us to get involved. It was the right time for us to get involved.
Peter Johnson: Yeah. One of the core tenants that you started The DeFi Alliance with, was connecting DeFi projects with market makers and liquidity providers.
Imran Khan: Yeah.
Peter Johnson: Why was that a core tenant that you started with?
Imran Khan: I think that's the most important part of for any DeFi product, you need to have substantial amount of liquidity in order for these products to have traction and be able to scale. Without liquidity, it's hard for you to scale the product. Then along with that, being able to build out diversified products that protocols need. That's number one. Number two is obviously once you have liquidity, then you can start liquidity mining programs, which is like a way for protocols to start bringing users onto their platform forms and to incentivize them to use these products over time. These were the early innings of why we thought liquidity or market makers are important part of this, of these protocols. Then the second is, and I was talking specifically about protocols, now number two is, now, if you think about like products like dYdX, Perpetual and others, a large part of their success is bringing market makers on to provide efficient markets to all of the different assets that they're supporting. Right? Because ultimately what they're doing is they're providing the same offerings. Market makers are obviously providing the same offerings on Bitmax and other exchanges. We think that by bringing on more of the support from the market maker side to these DeFi protocols, they can start to one, become users of the product and two, provide support so that the product can bring more users into it's ecosystem.
Peter Johnson: Then when you started The DeFi Alliance, it was originally somewhat of an informal industry group that you mentioned, that evolved pretty quickly into the accelerator, into a fund.
Imran Khan: Yeah.
Peter Johnson: What were the things that led you down that evolutionary path?
Imran Khan: Yeah, I mean, in fact, the funny... The way we thought about The DeFi Alliance was we did not want to start a fund. We weren't even thinking about starting a fund. We wanted to just help the industry and the way to help move the industry, is by just connecting people together. That was the hardest thing to do at the time. One was education, then two is connections. Right? Educating is ultimately about educating new market makers and trading firms on why they should be paying attention to DeFi and why they should get involved. In fact, there was a lot of education that we had to do in order for us to bring into our ecosystem. Obviously, the founding members, like John Cumberland and others were well versed in DeFi at that time, but there were like 95% of other market makers that were not really involved in DeFi. For us, it was about educating and bringing them onto and giving them connect to just founders. Then for founders, in fact, it's a different story, which is, they come from... They're not very familiar with the trading world. If you think about the traditional way of building startups, you use Clerky, you spin up your company, then you think about the products you want to build based on the domain expertise you bring in. In the trading world and the DeFi world, it's really about how well do you know the markets? How well do you know capital markets, the DeFi, or traditional exchanges and how settlement works and all the other interesting pieces that are in the treasure market space? How is that going to ultimately affect DeFi and what are you building within the DeFi ecosystem? There's a lot of education for DeFi startup funders as well, in regards to how they should be thinking about the space, how should they be building, forming, regulatory strategies, et cetera. We're ultimately this two- way funnel of education for a long part of our time. But then I think that changed after DeFi Summer, where people really wanted to get involved and they started to do education on their own. Then we thought about," Let's focus our time and energy on building the best program to help founders get access to liquidity market making services. Along with that, just regulatory support."
Peter Johnson: Yeah. The program has been the accelerator program, I would say, has been wildly successful. You run five cohorts now out of the top a hundred DeFi projects. 15 of them have gone through the accelerator. Just as you mentioned, a really impressive group of names like dYdX and Zero X, Kyber, et cetera. When I think of The DeFi Alliance accelerator, I often tell people it's like YC for DeFi or YC for Web 3. 0. Is that a good way to describe it?
Imran Khan: Fundamentally, what we're building is very different than what YC has built. We have huge respect for what YC has done over the past 15 years, 20 years. To a certain regard, we're building a community and this community is ultimately based on all of the key participants that want to help grow DeFi to a billion users. In fact, play to earn in other sectors that we're starting to see. We provide domain expertise and we provide the ability for part projects to be composable with others and work with others. I'll talk a bit more about that later in our interview, but you could think of us as an accelerator program, but we provide domain expertise in these areas. Whereas YC provides still very important knowledge for founders that want to build and start startups of their own. The different areas that they address is more on the product side, scaling growth, and thinking about fundamental values of what are the fundamental building blocks of a founders mental model as they're going through all of these changes, which I still think is very important today and what we provide is domain expertise in regards to," Why should you be building a community around your product? How do you build a community around your product? What does scale look like from a community perspective or protocol perspective? Smart contracts, security audits, liquidity market making services." These are very heavy topics. You could think of us as an extension to YC, where we help. In fact, we've had many YC founders that have gone through YC and have also gone through our program, that found incredible value in both. For now, I think we are an extension of what YC has done.
Peter Johnson: Are there other things that founders should know if they're thinking about the accelerator program and what they to get out of the program? What are the main things that you'd want a founder to know, if they're thinking about potentially applying to the program?
Imran Khan: I think number one is, it's hard to build in crypto. It's very hard to build in crypto and it's actually... It feels good when you have others that you could work with that are in the same it as you are. I'd say having a team of other founders that you are co- working with, and being able to relate with each other and use each other as a way to go through hurdles together is number one for me. In fact, what we started to see in our past two cohorts is the founders that are ultimately helping each other and they're starting to invest in each other as well, which I think is really interesting to show you the dynamics of what's happening in our program. We talk about composability. Composability obviously like everyone, there's really no competition. Like it's really about how well you can work with others and integrate with others. Ultimately, what are some differentiated products that you're building together? I would say, number one is the team and the community that comes through our program. Number two, number one, number two is regulatory support. I think regulatory support is going to become very important now where we are, because DeFi has turned heads in Washington. A lot of that's going to be a lot of their focus is going to be the focus is turning their heads into thinking about how DeFi startups should be thinking about it. We hired on a general council and we have a lawyer that's going to be ultimately working with all of the founders moving forward. Three is market making liquidity provisioning, obviously is the core tenant to what we do. Working with Jump and Cumberland, Wintermute, and many others. They provide incredible support for founders thinking about the types of products they should be building and how they can provision liquidity. Then I'd say number four, is ultimately our team and we're a team of nine. Half our team is from YC, have worked at YC. Really just the mental model of what founders need. What are the key ingredients to overcome challenges, building a company, scaling a company? Things like that are also very important. We think those four ingredients have worked really well for us so far.
Peter Johnson: Yeah. You guys have built just a crazy impressive team over the last few months. Certainly congrats on that. As part of that, you've also launched a new accelerator track recently.
Imran Khan: Yes.
Peter Johnson: Which is the gaming track, which is really cool. What was the genesis for starting a gaming track?
Imran Khan: Yeah.
Peter Johnson: How was that different than the programs that you have been running?
Imran Khan: DeFi is the... We think our thesis is the DeFi is the underpinnings for the entire crypto economy. With DeFi, you could, with DeFi being set, we think that other markets are going to start to become more mature now. Play to Earn was a natural extension of that. We, in fact, out of The DeFi Alliance fund, we invested in X affinity and they made an strategic investment in us as well, or at least the founder did. The reason for that is because we knew that at a certain point, Play to Earn is going to become an important part of how you bring on new users into your platform. But then ultimately, how do you create tokens? How do you use tokens as a way to turn on certain types of product offerings within the game? I'll talk a little bit more about, but that was the genesis of it. We thought when we launched a program about 45 days ago, we thought that was the right timing because Axi, obviously over the past six months, Axi has just taken off in terms of usage. They have millions of users that are active on their platform today. In fact, what's happening in Southeast Asia, specifically in Philippines, is that many Filipinos that earn the minimum wage in Philippines, they're earning more using playing Axi, which is really cool. What's happening is that people are leaving and they're playing Axi full time. There's this entire ecosystem that's being built on top of that, and so you have YGG and like other gaming guilds that are forming players together that can play and form these different gaming ecosystems. Then you have scholar programs that are educating new players that can come into the ecosystem and play on behalf of the Guild. This robust ecosystem is being built around this idea. Finally, we hired on Will Robinson and Will did his PhD in game design studies. He played games for seven years of his life, studied them and researched them and built them. By bringing him on, he has ultimately led our gaming program and we've announced our program yesterday. We have 12 startups that are part of that program.
Peter Johnson: Yeah, it's a great group of companies projects that are part of that. Maybe going back to The DeFi Alliance and your investment strategy. As you mentioned, you started a fund one very, very successful, highly successful fund. Then now, when you were looking at how to invest in these projects going forward, we've talked about you're taking a little bit, a different approach. An approach that's maybe more aligned with the true DeFi ethos, if you're willing to share more on that, that would be great.
Imran Khan: I'll share a few tidbits. We think that the future of investing is going to be collaborative in that. Ultimately, what we build over the past few years as a community, we have a community of founders, Web 2. 0 Web 3. 0 founders, market makers, and key stakeholders that can help Web 3. 0 become successful. We built this community out and we think that this community is ultimately the reason why we're successful, right, or the DeFi platform, DeFi lines platform is successful. We think it's time now to share ownership of that platform with everyone that's been part of this community. Look for some news in the next couple weeks about how we're thinking about decentralizing The DeFi Alliance with the potential new brand and how we're thinking about community based investing.
Peter Johnson: I think that's just enough for the teaser to get people really excited. That's good. Maybe that ties in well too, what's your long term vision for The DeFi Alliance? Where do you want this to all go?
Imran Khan: What's happening right now is individual people, community participants are becoming the most important stakeholder in all of crypto. If you look at the past six rounds, as an example, you see individuals being called out versus institutions. Right? It gives you an idea of where we're headed and where we're headed, I think is that, we talked about co- investing in people that are going to be participating more, but we think ultimately investing is going to become another pillar of every human's life. Right? At one point in our lives, I don't know, in the early 90s, it was only for those that have brokerage accounts. Right? Then Robinhood democratized that and allowed ultimately anyone to download an app and be able to invest. But I still think it's restricted, but I think what crypto and where we're headed, is that I everyone's going to invest. It's going to be part of learning. Instead of learning through reading books, you pay or you invest and you become a part of a protocol's life and you learn and you contribute and you earn tokens. I think that's where we're headed. I think based on that thesis, we believe that the way we're running DeFi Alliance is an example and how we're thinking about our accelerator program. We want every individual that's helpful for startups to be a part of our community, whether you're a successful Web 2. 0 Web 3. 0 founder, you're a security auditor, you're law firm that's heavily into crypto. These are all incredible individuals that could provide the support that founders need. Over time, I think the platform that we're creating is a two- sided marketplace. We think that with what we're building in the future, people will be incentivized to supporting these founders moving forward. I say individuals are going to have more power moving forward, because ultimately the community is the power. Then over time, I think what we want to do is facilitate these interactions between the founders and the people there on the other side.
Peter Johnson: Those people on the other side, I talk with a lot of folks and they have heard about The DeFi Alliance. They're excited about The DeFi Alliance and they ask," How can I get involved in The DeFi Alliance?" What are the ways that folks can get involved or add value to The DeFi Alliance?
Imran Khan: Who we're looking for is successful Web 2. 0 Web 3. 0 founders. Obviously liquidity providers, including market makers, law firms, engineers. Then I'd say four is just miscellaneous services that could be supportive of a founder's trajectory. Those are the five and they can ultimately you apply through our website, there's an interview process. Then after the interview process, we have a committee that votes in, based on the quorum. Then after quorum, we bring them onto our platform and invite them into our platform.
Peter Johnson: That's great. This has been a great discussion, Imran. I have one, one last question for you, but before that is there anything else that I should have asked that I didn't ask?
Imran Khan: I think the landscape here for crypto is changing pretty quickly. If you think about where we were last year, we were just trying to figure out whether DeFi was going to actually work, to validating DeFi as 10 trillion dollar opportunity and then at NFTs gaming. But then I think there's going to be a lot more innovation happening on the Web 3. 0 side. I think this is a very interesting topic, because Web 3. 0 ultimately and what I mean by Web 3. 0 products is, products that you use that ultimately natively uses a few other protocols as a backend stack. An example I can give you just, is like glass protocol. Right? GLASS protocol is a decentralized video streaming platform. On the front end, it looks very similar to YouTube. Right? You go on their website, you play YouTube, or you play videos. On the back end, it's leveraging IPFS, Livepeer, a decentralized CDN and Arweave are the four along with a Solana. Those are the five infrastructures that it's using to provide the service. Now, if you look at where we are with YouTube, everything's hosted on Google Cloud, all of the infrastructure is built in house and ultimately Google has control of what could be listed and how people get, how are people are able to monetize. I think where we are headed, in regards to this, is that we're going to live in a world where I think Web 3. 0 is going to become an ever more important part of building a product. Because ultimately, I don't know if you saw what happened last week with Anthony Pompliano, but he posted a video and YouTube ended up taking it down, because it was crypto related. The question is," Who should really be in charge of taking these videos down? Should it be YouTube, Google, or should it be the people that they think that it's, against their ethos of what they should be watching?" We're starting to see and this is a new thing that, I think this is going to be the next wave. It could be early next year, which is full native Web 3. 0 products that are being built, that are going to allow the community to be the moderators of the videos that are playing that are able to monetize. Then no one can shut it down unless you get community approval. If you see what's happening in Turkey and China, a lot of videos are being fire walled or turned off, because they don't think it's applicable to their citizens, but who has a right to that? Right? I think where we're heading next, is going to be world changing products that are going to really change the dynamics of how the geopolitical or how politics are going to be organized moving forward. There's a lot to come there.
Peter Johnson: Yeah. That's a big vision.
Imran Khan: Yeah.
Peter Johnson: I agree with you. I think that that is the next wave that's coming.
Imran Khan: Yeah.
Peter Johnson: Is these full stack, Web 3. 0 type applications. Last, last question for you.
Imran Khan: Yeah, please.
Peter Johnson: It moves so fast.
Imran Khan: Yeah.
Peter Johnson: It's hard to keep up with everything. What are the top one to two resources that you use, to keep up that have inspired your thinking? What are the resources that you recommend to people?
Imran Khan: Number one is Twitter. I think Twitter is going to be the easiest and fastest way to get knowledge. Then I say, number two is participating in communities. If you're new to crypto or you want to get involved in crypto, the best thing you can do is join a discord, buy their tokens, and just learn how the protocol works. Be a part of the governance conversations, propose, submit new proposals and just learn how communities are integrated into these protocols in a way that's going to be value additive to the overall growth trajectory of protocols. I would say those are two best ways to get involved.
Peter Johnson: Absolutely. That is great. Well, this has been a pleasure as always, Imran. Congrats on all the success.
Imran Khan: Thank you.
Peter Johnson: Thanks for coming on.
Speaker 12: Thank you so much for listening to this month's episode of The Jump Off Point, an original podcast by Jump Capital. If you have an idea for the show, or know of someone who would make a great guest, please contact podcast @ jumpcap. com.
The DeFi Alliance was founded by Imran Khan in March of 2020 with a mission to help DeFi startups get connected with trading firms and eventually grow their network to one billion users by 2025. Imran joins our show to take us on The DeFi Alliance journey to share all we need to know, including what's in store for its future. He shares his background, how he got started in crypto, and what led him to bring the Chicago crypto community together to support startups. Eighteen months later, DeFi Alliance evolved its Accelerator Program to provide domain expertise to help startups build community. Listen now!