Web3 Breakdowns Ep 42 - Matthew Graham: Bringing Crypto to Emerging Markets
Primer: Matthew Graham started his career as an emerging markets tech banker. He subsequently founded Sino Global Capital. In this episode of Web3 Breakdowns, he shares with host Eric Golden his expertise in emerging markets, his investment philosophy, and his thoughts on TradFi and crypto.
Investing In Non-Traditional Markets
Most of his professional career has been in emerging markets (China)
Even at an intra-country level, it takes a long time to build competency
Emerging markets are challenging and important markets
Philippines was an enormous catalyst for Axie Infinity
Stepn was heavy on Chinese users in its early months
How Did He End Up In China?
Grew up in an international family
Had a nomadic lifestyle. Had moved ~18 times by the time he was 16
Every time his father was promoted, they rotated him to the field somewhere
Loved international cultures
Saw the large opportunity in China
Had to learn Mandarin and study business culture
Starting Sino Global Capital
Was an emerging markets tech banker
Started his own shop in 2015
Pursued Bitcoin as a hobbyist for some time
When Ethereum landed, it was on his radar very early on
Pivoted to the buy side
Started in the secondary markets to build up their competency
Started by trading their own accounts
Decided to start participating in the primary market and become public facing
What Do US/European Investors Overlook When Investing?
Technology tends to percolate from marginalized groups towards the centre over time
People vastly underestimate the number of good ideas from watching people who have the opposite circumstances of Silicon Valley
Expanding Into Emerging Markets
Comparing China And India
India has one of the youngest economies in the world
China has demographics that were conducive to higher economic growth, but that has reversed now
Managing Investments In Emerging Markets
Have local experts in all these countries
Balancing Long-Term Greedy VS Stakeholder Needs
A difficult balancing act
Supports portfolio companies as long as they can instead of recycling capital as fast as they can
Investing Philosophy
Deciding Where To Invest
Focuses on the founder
Look for good brands with highly differentiated visions
Need Web3 games that are fun
Token economies need to be long-term sustainable and healthy
Recently launched Sino Games — Bought a few game studios. Their first Web3 game will be coming out soon
Vetting The Team
Does rigorous in-depth due diligence but is very decisive
Trust and character is the hardest to verify. Have to ask around
Time Spent Looking For New Deals VS Handling Existing Portfolio
Spent 50% of their time servicing portfolio companies
Does He Model His Company After Someone?
Incorporates lessons from everyone they know or read about
Recruiting New People Into The Firm
Have a tight-knit team with low turnover
Everyone started out as an intern, even if they have the qualifications and years of experience
Open-minded about who can get an internship but extremely difficult to land an offer
People have landed internships through DMs before
Explaining The Difference Between Crypto And TradFi To People
Depends on the audience
NFTs will be onboarding more people into crypto
5 years from now, people will be using crypto without realizing it’s crypto
If He Rebuilds TradFi, What Would It Look Like?
TradFi is built upon decades of old code
“I think one of the reasons that TradFi is so vulnerable is anytime you want to rebuild something for the modern age, there’s no way to do it. Realistically, it'll take billions and billions of dollars because there's decades of crap that you're on top of.”
- Matthew Graham
If he’s not bullish on crypto, he would be bullish on neobanks
Thoughts On Regulations
Started out pro-regulation
Realized that regulators are not acting in a way that makes sense to him
Concept of Innovator’s Dilemma:
Incumbent company trying to protect their cash cow/status quo and not innovating
Gets flanked by competitors who are not protecting a cash cow
Concept of the Innovator’s Dilemma can be applied to nations:
US is the incumbent
Countries like Dubai and Singapore are well positioned to take advantage of new technology
What Should Young People Focus On?
Suggests that they be in crypto
If people are talking about emerging markets, demographics are very important
Some of the younger countries are incredibly attractive if someone’s interested in emerging markets
What Is He Most Excited To See Built?
Within the next 6 months: Products and features that could bring mainstream users
On a 6 year horizon: Mainstream adoption
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