Crypto is a ‘fad’ says one of Robinhood’s earliest investors. There’s a better way to make money on it than altcoins.

Wesley Chan.

  • As crypto hit a $3 trillion market cap, everyone from retail investors to major banks is chasing it.
  • But top VC Wesley Chan told Insider he didn’t think coins would retain their value.
  • He said the real money would be made from crypto infrastructure.

There’s no reason “coins named after dogs” should be worth billions of dollars, Wesley Chan, a top venture capitalist told Insider. Chan was referring to dogecoin, which started as a joke, and shiba inu, which started as a meme. Both are now popular investments.

The Google Ventures veteran – who has backed 20 unicorns, including Robinhood, and now runs his own firm, Felicis Ventures – said crypto coins were too speculative for serious investment.

“You have to be careful to differentiate the fad from the actual benefit of whatever is being invented. In crypto, there’s a coin, which I think is a fad,” he said. He added that it’s the tech that allows crypto and blockchain to flourish where the real money would be made.

“It’s the old adage: Instead of investing in the gold rush in gold, the ones that made all the money were the ones that made the pickaxes and shovels,” he said.

In crypto’s case, it’s the companies that are building or supplying the underlying blockchain infrastructure or creating other tools around crypto that could be “the phoenix that rises out of the ashes and becomes the big winner,” Chan said.

Chan, whose years of successful investing landed him at No. 16 on Insider’s Seed 100 list of the best seed VCs, gave the example of a previous “fad,” as he described it: mobile.

While other investors were chasing mobile apps such as Zynga, Chan backed mobile developer tools such as Parse, which was bought by Facebook in 2013, about two years after it launched, after raising about $7 million. That was a fast, big return for its investors.

Chan said Robinhood was another example. He wrote one of the first checks for it back when it was called CashCat. The founders even brought in their cats into the Google Ventures office with them to pitch.

“Everyone on my team thought I was investing in a Tumblr blog for drug-dealer cats,” Chan said. They teased him so much that on his last day working for GV, they decorated his office with posters of cats on piles of money from a blog called cashcats.biz.

But Chan saw the true benefit of the app, which wasn’t about mobile stock trading. It was about “a data infrastructure they could sell to hedge funds” and others, he said. (It’s a system known as payment for order flow.) Robinhood took off after it changed its name, and Blake Byers, a GV partner who supported the deal, later called Chan and said: “Remember that CashCat biz we invested in? Yeah, it’s Robinhood now.”

The lesson, Chan said, is to invest in companies run by “people who have an understanding of what’s valuable rather than chasing fads.”

“I’m not a get-rich-quick guy,” Chan added, and that’s why “I keep repeating my unicorn successes for 12 years.”