Talking Crypto Ep 79: Darren Lau
Primer: Gabriel Haines, the host of Talking Crypto, interviews Darren Lau from Not3Lau Capital, as he shares his viewpoints on a variety of topics related to crypto, including his time at Spartan Group, different categories in crypto and his advice for people who had made it.
Who is Darren Lau?
Dad is an accountant, mum is a housewife
Darryl is Darren’s twin brother and Zachary is their older brother
Knew that his interest lies more in finance when he is schooling
There are two streams in Malaysia - the science stream and the arts stream
But he has no interest in Biology so he dropped out of that and took accounting instead
People viewed them differently because everyone wanted to be in a full science stream taking biology, chemistry and physics
How Darren started on Crypto
Got in around 2017 right before the ICO bubble and right before China banned ICO
Met up with the CoinGecko team in Malaysia
Just happened that the co-founders were looking to hire full-time interns, so Darryl and Darren joined them as interns
While they were there during DeFi summer, CoinGecko always list new coins faster than even CoinMarketCap
As a result, CoinGecko gained a lot of market share
Kept an eye on DeFi when it is developing because both Darryl and he are always looking for ways to make money
Worked part-time in McDonald earning 2.5 USD/hour while studying finance at university
Wasn’t really interested in university studies at all and he barely passed it because he was just doing crypto stuff all the time
Thought that SP500 gains are too little at 5% per year
Wanted to buy Tesla stocks but couldn’t do that in Malaysia, so they heard about Synthetix and went deep into the rabbit hole from there
Wrote a book on DeFi in March 2020 but quickly became outdated because the space was moving very fast
Wanted to update his book but never really got round to doing it during that time
When yield farming, in general, appeared around the June-July period, he started posting more on Twitter to expand his outdated book and eventually grew his Twitter account from then
In August 2020, he joined the Spartan group for 9 months and left in May ln 2021
He is In charge of finding new projects in the primary and secondary market
💡 Primary market is where projects do not have a token yet. Secondary market is where projects already have tokens that are trading
Thoughts about DeFi Summer
Interesting to see all the new capital coming in
After SushiSwap, there were all kinds of food farms that popped up every day
On Twitter, people are always leaking alpha on which food farm they are farming right now, so one can get a sense of who is on top of things
From there, he learnt tricks like tracking wallets to see which are the newest farms to go into before the rest comes in
Things Darren learnt at Spartan Group
Doing Due diligence
Worked with Jason and Kelvin- both of them have strong TradFi backgrounds with strong analytical skills
Darren will have to work on DCF (discounted cash flow), do research on the revenue, the fees etc, before discussing the merits of investing
Usually, people don’t look at all these fundamentals and just ape in, so he learnt how to do due diligence before investing
Liquidity constraints
Learnt that they cannot get into a project that is less than 10 million market cap because if they wanted to exit, they are going to suffer a lot of slippages
Sizing convictions properly
Spartan’s fund is about 9 figures, so putting in 100k and making 100x will only be $1 million - an insignificant 1%
He learnt how to size positions properly so that the positions are big enough to matter
When his portfolio is less than 100k, he put 50-50 into YFI and NXM (Nexus Mutual)
For YFI, Darren and Darryl had both known Andre for a long time. Darren helped out in community management and had been using YFI product before the token launched. Always wanted to farm stablecoin because the interest rate in Malaysia is less than 3% but YFI is giving 5 to 8%
For NXM, nobody seems to know their pricing model well, but Darren had worked out a formula to understand it and thus had an edge over the rest
How Spartan Group pitches projects
Jason and Darren took turns pitching projects (long or short) based on fundamentals or catalysts and they will discuss it to make sure the thesis is solid
Each pitch is tracked internally to see how the positions turn out when benchmarked against the general market
Every month if there are positions that are not performing well, they will review it
Spartan has 2 funds - a venture fund and a hedge fund
Hedge fund take shorts and longs while venture fund looks for projects to invest from the primary market
Darren recalls a particularly memorable pitch:
Had pitched Axie Infinity because he saw a strong community behind the project with people actually earning money playing it
Delphi guys are behind the tokenomics too, so they are good in what they do
They are cash flow positive too
Pitched to Spartan (before their token is listed) that they needed another niche area not correlated to DeFi in case DeFi dies down- but Jason and Kelvin are not too bullish on gaming projects, and they think the design of the protocol doesn’t look serious, like ‘flying balls’
Leaving Spartan
Had learnt a lot from Spartan already and wanted to apply it on his own
Spartan raised 100 million venture funds, so he had to make a lot of calls (up to 40 calls a week)
Did not have time to do anything else including research, so he is missing out on these gains
Projects typically also give a small allocation and it does not make sense for a fund of Spartan’s size to have only a 100k allocation because it is insignificant
At that point, he felt his Twitter account and his telegram group is big enough to try a small allocation for himself
Growing Twitter and Telegram channels
For Twitter, he will always try to have his own take on what is happening daily in Crypto to stay current
For the Telegram group, he is already doing something similar in the Spartan group, where he will keep a list of things to look out for so that they can all discuss what actions they can do about it
Saw that no other newsletters are doing that, so he started one
Started a Telegram newsletter since email newsletter is too common
Regarding Primary & Secondary Deals
Things Darren thinks about for primary deals
Finding founders that know what is happening and whom he is comfortable with
At this point in time, they don’t mind if the money they invested goes to zero because at least they helped out this person
Want to see these people succeed so they are willing to give them the capital to do so
Want to find projects that are doing something new rather than something similar to the rest
A lot of projects are forks and not original these days
Things Darren thinks about for secondary deals
Who the team are, who the backers are, what is the project trying to do, does it fit the narrative currently, how different is it from other competitors
Liquidity - thinking about how putting in 10k or 100k will affect the books
How fast they can get in and out with the least amount of damage possible
A lot of people are tracking wallets so he does not want to be in a position where he is too big in a position that, when he sells, he will cause a liquidation cascade
Use Nansen to track
Allocation of portfolio
Have a substantial amount in stable farms because he wants a safety net in case everything goes to zero
Has another allocation just for long term holdings with high conviction
Finally, a small 10% allocation for aping into new projects
He went to Europe for 2 months but carried a small ‘ape’ wallet to go into new projects while travelling
Trip to Europe
Met a lot of people whom he had been talking to for years
Got away from the market and took a break
Best food: Matcha creme brulee - ate it twice in a row before leaving
Worst food: Had high expectations of Italian food but when he went there, it was just lacklustre
Advice to people after they’ve made it
Everyone has a number in their head that they are trying to get, but when that number hits, they don’t know what to do
Sell everything, realise the profits and keep all in a stablecoin farm for at least a week
He split into 10 different farms to diversify the risk
Can consider insurance for those protocols too
Think about what you want to do next
Take a small % of the amount or a suitable amount you want to risk, and try to make it again
This allows you to prove to yourself that it’s not just dumb luck
Also allows you to challenge yourself after you’ve hit your target
This is the least risky approach because once you’ve made it, stablecoin farming should be able to cover all your expenses and be financially independent
Investment categories
Infrastructure plays e.g. Pocket Network, an infrastructure middleware protocol
Gaming - a lot of them are still in development, will be keeping an eye out to see how they develop as they will set the precedence for future games
Want to see a triple-A game that he can play during the bear market
DeFi - Want to see more financial services offered
Able to borrow money without going through KYC is game-changing
More people should be able to access DeFi
Not a chain maximalist and will go to wherever is good and interesting
DAOs - more normies are coming into crypto because of DAOs
These are not the normies that are degens in nature but want to change the world
NFTs - missed the whole NFT run
Missed a whole lot of NFT projects
Found the community at Loot very similar to YFI, so that’s the only NFT that he shilled
Quite excited about it but the hype had died down
Loot is one of his favourite NFT
Not3Lau Capital
The blue fat cat is called Billy
There is a Youtube channel called Bongo Cats, which are white cats playing songs
Darryl did a sticker gif similar to that but made it blue
He made the DeFi blue-chip meme, so he made the cat blue
Thereafter the cat became a mascot of Not3Lau Capital
General advice
Learn all about the project you’re most convinced about and ape into it
Keep up to date
Don’t buy into a project and forget about it because there could be a change in the narrative or the thesis had been challenged
Lots of inefficiencies in the market so finding that requires keeping up to date
Crypto is probably the best generational wealth opportunity in recent years so if you slack off and do not keep up to date, you will miss out on a lot of gains
@Cryptoyieldinfo - Darren follows him and he’s the real deal
Subscribe to The Daily Ape
Look at the market cap instead of the price helps one to see if a project is undervalued or overvalued
Have a system to track your positions and see if they are doing well or not, and review it
Reduce the number of positions you hold because there will not be enough time to focus on all of them
Look into secondary markets where the tokens are already traded, rather than the primary market where the tokens are not traded yet. But tokens in primary markets are going to be locked for a long period of time, so it might be better to have more liquidity
Put in the hard work and grind for a few years: “Would you rather work 80 hours and never have to work again or would you rather just 40 hours for 50 years?”
Being early means no one is going to dump on you
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