The Leaders On The Inside Track Of Web3

In the early days of Silicon Valley there were only a handful of high flying venture capital firms. Over time, following the explosive growth of early tech pioneers, among them Fairchild Semiconductor, Hewlett-Packard, Intel, and later Atari, Apple, and Oracle, hundreds of angel investors and VCs flocked to the area. Many of these prescient investors were seeking to capitalize on the inevitable commercialization of the ARPAnet as it transformed into the World Wide Web.

Of course, this hot house atmosphere would spawn the dot com era, creating massive wealth for investors, company founders, and their employees. Today, the combined market capitalization of the largest big tech companies, Facebook, Alphabet, Amazon, and Microsoft, all located in Silicon Valley is $7.5 trillion, an impressive percentage of the $93 trillion total capitalization of all publicly traded U.S. companies as of 2020.

Decades later, a similar land rush is triggering a new wave of startups, this time focused on cutting-edge blockchain technologies aimed at disrupting those Silicon Valley behemoths. With much of the necessary technical and financial infrastructure now built, investors and industry analysts are speculating that “Web3,” the next generation of the internet, is finally ready for fully decentralized, consumer-facing, user-friendly apps. Products like Audius (a decentralized Spotify), Huddle01 (a decentralized Zoom), and Drife (a decentralized Uber) hope to onboard the next billion Web3 users and may one day touch every aspect of our daily lives.

Sifting through new Web3 ventures in search of the next unicorns is the mission of Nathan Montone, founder and CEO of M31 Capital. Launched in early 2020 just before the COVID-19 pandemic heightened investors’ aversion to risk while triggering a market sell-off, M31 Capital is focused entirely on taking positions in crypto assets reshaping the tech industry.

“The internet has failed to deliver on a lot of its core promises: open protocols, peer-to-peer communication, user privacy, decentralization,” Montone states. “Web3 reasserts the importance of those properties by encoding them as the default setting and for the first time allowing users to fully capture the value they create online. The new fund supports projects building and contributing to this rapidly emerging, user-owned Internet.”

From a standing start just over a year ago, M31 Capital has already carved out an impressive reputation as a tech-savvy fund with a thesis-driven approach crucial to identifying top performers before others recognize their value. To date, M31 Capital has posted a return of +2,500% for its investors, partly due to early positions in Solana, Helium, and THORChain whose token, RUNE, gained over 18,000% at its peak. The firm not only boasts first-mover investments in big winners but has also avoided suffering any losses from a host of recent crashes including Terra UST, BlockFi, Celsius, and Voyager.

Both Montone and M31 Capital co-founder Michael Swensson view their backgrounds as ideal for navigating an institutional-grade investment fund through the choppy waters of crypto. Montone has been investing in Bitcoin since 2011 as well as angel investing and advising many of what are now the largest token projects by market cap. Meanwhile, Swensson, previously a COO at Bridgewater Associates, brings several decades of experience managing risk and operations at large institutions such as Goldman Sachs.

In explaining the fund’s bullish position on Web3 opportunities, Montone says, “Right now, users provide everything that makes the internet valuable – content, data, network effects – but they earn none of the profit. By building Web2 products like Uber, Twitter, and Spotify as user-owned platforms on blockchain rails, trillions of dollars will flow directly to individuals – content creators, musicians, and drivers. The providers of value.”

He explains that a baseline criteria for M31 Capital is identifying blockchain technologies which solve “real world problems” as illustrated in their support of projects such as Helium, a decentralized, user-owned wireless network supporting 5G, and Huddle01, a highly secure, screen sharing platform similar to Zoom.

Flush with the success of their early positions, Swensson says M31 Capital currently has roughly $50 million in non-binding commitments from top investors and is well on the way to doubling down on the size of what they’re calling the M31 Web3 Opportunity Fund.

“This is the first cycle in 10 years where price has trended down while fundamentals and revenue growth are hitting all-time highs nearly every day,” Montone affirms. “Adoption is rising, valuations are extremely low, and funding continues to pour into the space. Once the dust settles, a lot of top names in the Web3 sector will be looking at returns well in excess of ten times.”

Swensson says the timing of the new fund is particularly opportune as investor interest is on the rise again as big institutions are pouring into the sector An example of how M31 Capital positions for opportunities in crypto Swensson says, can be seen in their investments made in Ethereum in late 2020.

“Ethereum recently transitioned from the energy-intensive proof-of-work to the more environmentally friendly proof-of-wtake,” he says. “But M31 Capital has been positioning for this shift since 2020 when we started running some of the first ever validators to help support the new Ethereum chain. The best way to really understand Web3 is by actively working with the projects on-chain,” Swensson states.

It’s this deep familiarity of emerging technologies and rigorous due diligence that helps M31 Capital more accurately assess future valuations and risk factors of investment targets. Both Montone and Swensson say their new fund is dedicated to funding the building blocks of Web3.

“Decentralized, blockchain-based protocols create an Internet that is more open, fair, and user-friendly,” Montone states firmly. “It’s enormously compelling from an investment perspective because it not only rewards individuals over institutions but gives rise to a brand new economic model online which we call the ownership economy. It represents a major step forward for the global internet and one that will fundamentally reshape virtually every aspect of our lives.”