Stani Kulechov previously believed angel investments would distract him from running his company Aave, one of the top decentralized finance (DeFi) money markets.
The attention on Aave turned out to be well spent: last year around this time, Aave only had a few million dollars worth of crypto; Since then, it has grown to become the second largest DeFi project on Ethereum, with over $ 3 billion worth of crypto for its smart contracts.
Despite this, Kulechov also invested in about three dozen projects last year. Obviously, his attitude towards angel investing has changed.
“I think everyone should invest angels in the space, especially if you’ve won,” Kulechov told CoinDesk in an interview.
Kulechov justifies devoting some of his time to investing angels because he sees it as a defensive move for his company. It’s like the internet: once enough people start using a tech stack and relying on it, it becomes almost impossible to pull it out of their hands again.
“If the ecosystem is big enough, I think it’s very difficult to fight the technology at this point,” said Kulechov.
In his opinion, the best the banking system can hope for is a decision to make its own version of DeFi. “That won’t work, however, when you have so many projects in the ecosystem and the ecosystem is constantly growing,” Kulechov said.
Dark forest
The term “ecosystem” is widely used, but Kulechov claims that it is uniquely apt in DeFi.
In an ecosystem, things live from one another, but also support one another. Species evolve in a specific context and everything is relative. Kulechov sees the same thing on Ethereum.
“An ecosystem means that you share things with each other. You share, you consume, and you deliver, and you do all of these three things together, ”he said.
Take Yearn Finance, for example. It takes advantage of the compositional ability by building other smart contracts into its smart contracts. In turn, it pumps a lot of additional liquidity into these protocols through its own various interfaces. It also consumes the revenue that comes from the supporters it delivers. It’s a virtuous cycle.
“We have smart contracts and we have compositional skills,” said Kulechov, “but we also have an element of human compositional skills.”
Kulechov supports many teams, but not all. The question he’s trying to answer is: how creative is this team? He said he likes to ask them what they want to build next and then maybe after. He has to see a fertile spirit that is always ready to develop innovations, because only then can he continue to create added value.
Picks
CoinDesk sees Kulechov’s name constantly in press releases about new startups. For example, we reported his support from Lido, Maple, Slingshot, Swivel, and PoolTogether.
Aave itself raised a new $ 25 million last October before the new version was released in December.
However, when asked to share some of his investments, he named three specific ones that he has made on small, new teams that have not yet received much attention.
Pods finance. A derivative product that works without an oracle.
Kulechov said he liked pods because it was a team of very young people from Brazil who traveled to hackathons to develop early versions of their product.
Certora. A smart contract security consultancy specializing in formal verification.
“It’s kind of a traditional business model,” said Kulechov. Certora stands out in the crypto space because it is a group of security researchers who simply offer a service for a fee with no token or DAO in sight.
Shell protocol. An emerging automated market maker (AMM) for stablecoins with the goal of making money for the internet.
“What was interesting to me was the whole story of how they moved to Hawaii,” said Kulechov. The team has a “Hawaii House” on the beach that is listed as a perk for new hires. New employees don’t have to live there, but are encouraged to hang out for at least a while.
Kulechov said he was pleased to see some DEX (Decentralized Exchange) aggregators routing orders over this relatively small protocol that has a big mission to reinvent money. That means: “You don’t make any noise,” said Kulechov.
Principles
Kulechov claims he doesn’t have strict investment principles, but obviously he likes it when people adopt the DeFi values: transparency, open source, and the like.
One point he likes to emphasize, however, is that he prefers to invest in the tokens generated by his own Aave project. Instead of sending a team a few USDCs, they’d rather send them a USDC because they’ll already have some income built in.
Treasury management is important to any team, of course, but “If you take interest-bearing tokens, it is actually managed,” said Kulechov.
It’s about keeping projects sustainable at the micro level. The same goes for DeFi at the macro level.
“I spend my whole day at DeFi,” said Kulechov, noting that most of his hours are focused on Aave. The rest, however, often goes to angel investments. “I think everyone should do that,” he said.
