Gavin Myers (YC 99), Co-Founder and General Partner of Prudence Holdings

Gavin Myers is Co-Founder and General Partner of Prudence Holdings, an early-stage technology investment firm with stakes in Blockchain, Compass, Healthy Nest (stealth), Hemlane, HZO, Julius, Morty, Properly, Spotify, Uber, and Voray, among others. Prudence Holdings targets initial investments in companies during the seed or Series A stage but will continue to invest significantly in their portfolio companies as they scale up.

Mr. Myers recently joined the Board of Directors at Properly, Morty, and Hemlane and continues to serve as Chairman and Co-Founder of Voray, an NYC-based startup disrupting the traditional business networking space. He is also on the Board of Directors of HZO, Blockchain (observer), and Wananchi Group (observer). Previously, Mr. Myers worked at Sun Capital Partners focused on middle market private equity as well as Credit Suisse and Goldman Sachs. He received a BA in Political Science from Yale University and an MBA in Finance from Columbia Business School.

The Politic: What’s the scoop on Prudence?

Prudence is an early stage venture firm that my partner David Fischer and I launched in 2009. Our strategy has been to invest early in seed or series A stages, provide continuous support to our portfolio companies, and then increase our capital invested as those companies grow. The goal for us it to focus on quality over quantity and to have meaningful dollars invested in companies that are succeeding.

What’s Prudence’s involvement in the crypto/blockchain space?

In terms of specific areas of focus, we seek partners who are using tech to transform their industries. While we’re generalists, we also focus on specific areas. One big area is real estate technology, and another big area is crypto.

It was an interesting path to crypto, which started in the first half of 2014. Many of the companies seeking capital that year were based on a derivative of the on-demand Uberization model: the premise that if it worked for Uber, it should work for valet parking, food delivery, car cleaning, home chefs, and all these other categories. We were feeling a bit uninspired. 

Somebody we knew mentioned Bitcoin, and that’s when we started to focus on it. It wasn’t as easy to gather info on the space as it is today. We flew over to this conference in Amsterdam, and we were early enough that we could walk up to booths manned by the founders of Coinbase, Blockchain, Xapo, and Ripple. It was a long time ago, but I got to chatting with the Blockchain team, Roger Ver, Brian Armstrong from Coinbase, and many others.

We really zeroed in on Blockchain as a company. It is currently the largest wallet in the world with 41 million wallets in over 140 countries. At the time, however, they had 1 million wallets and were working out of a two-bedroom flat in York, England. Amazingly, the company has processed over $200 billion in transaction volume through our wallets and API since then.

What’s unique about Blockchain’s architecture is that the wallet is non-custodial. When you log in to your wallet, you’re downloading an encrypted backup that is decrypted locally on your device. You’re the only person that can access your crypto. I would contrast that with holding your crypto on an exchange, such as Coinbase or Bitstamp, where employees could theoretically access your funds and where hackers set their sights. More importantly, we believe that crypto empowers individuals to be in control of their digital assets, financial or otherwise, and thus we are more excited to support companies that build that kind of enablement.

Any other crypto/blockchain investments?

For a VC fund, what was notable was that we actually bought Bitcoin itself, which was kind of unheard of at the time. Now you have these crypto-specific hedge funds that will trade crypto, but at the time, buying crypto itself was unique. We still hold Bitcoin and believe that it’s better than the other cryptocurrencies designed to be a store of value.

Then, we made a small seed investment into a great team and a great product called ChangeTip, which allowed you to leverage micropayment capabilities of the Bitcoin network to send very small amounts of money to people. ChangeTip was embedded into social media, so you would actually send these micropayments over platforms like Twitter. The company was bought by Airbnb in 2016.

Was buying Bitcoin itself a VC-type play, where you were sticking around for the growth, or were you trading it?

We just bought and held. First of all, when we made the Blockchain investment, the only currency in their wallet was Bitcoin. At the time, we were essentially making a bet on Bitcoin as well as the adoption of further crypto assets. Beyond Bitcoin, we also looked at blockchain and a lot of the great applications that people are already considering: chain of custody, identification, provenance, and so on. All sorts of blockchain applications make sense where you can cut out an intermediary. 

I continue to believe that best blockchain application is a global non-fiat currency. As you witness the surge of global populism, especially in this day and age, you have currencies inextricably linked to their countries of origin and those countries of origin inextricably linked to their leadership. You have that both at the political level and at the central bank level.

It’s funny. I’m not sure how much I agree, but the one consistent thing I’ve heard throughout my life is complaints about how governments are run. To me, Bitcoin is the first way that you can have a global macro hedge on the competence of how governments are being run and how central banks are managing economies. We’re very excited to hold it in our portfolio. Bitcoin’s not a huge position, but it’s important.

Is it really playing a role as a global macro hedge? Is the market large enough for that to work?

Again, theoretically it should be a global macro hedge. It’s going to take years for that to play out. But certainly as global volatility increases, old regimes and alliances start to fray, it does feel like a safe haven that is constructed to perform as a better alternative to gold: it’s digital, fungible, divisible, immutable and transportable. 

Let me actually frame it in another way. Ask anybody you know, “Are you diversified?” Of course, they’ll respond, “Yes. I have a 401(k), I have cash, and I have real estate.” They’ll go on to add, “Within my 401(k), I’m in large cap, mid cap, small cap, health care, finance, stocks– I’m highly diversified.”

What they should realize is that all of those investments have a single point of failure: They’re all exposed to fiat currencies and mostly the U.S. dollar. How else are you going to diversify from the U.S. dollar? Maybe you’ll want to hold some Euros, but the Euro has innate structural flaws. How about Pounds? That seemed passable and then Brexit happens. What next?

How about gold?

Choosing to hold some gold is fine, but what am I going to do with it? It’s fungible, sure, but it’s neither easily divisible nor transportable. The thesis on gold is that if there’s some sort of systemic collapse, then it will be the go-to reserve currency. Great, but how are you going to use it? You can hold generational wealth in Bitcoin on a flash drive in your pocket. That’s incredible.

Leave a Reply

Your email address will not be published. Required fields are marked *