on the crypto
Stani Kulechov was of the view that angel investments would distract him from running his company, Aave, one of the leading money markets in decentralized finance (DeFi).
The focus on Aave turned out to be well spent: a year ago, Aave only had a few million dollars in cryptocurrencies; it has since become the second largest DeFi project on Ethereum (quotation ETH), with over $ 3 billion in cryptocurrencies committed to its smart contracts. However, in the past year, Kulechov has also invested in something like three dozen projects. Clearly, his stance on angel investments has changed.
Investing in new DeFi companies
“I think everyone should do angel investing in space, especially if you can afford it,” Kulechov said in an interview. An angel investment is an investment by a private individual in favor of a newly formed company, in exchange for a portion of the company's risk capital.
Kulechov said he devotes some of his time to this type of investment strategy because he's come to see it as a defensive strategy for his company. It's like the Internet: Once enough people have started using and relying on a technology stack, it becomes nearly impossible to get it out of their hands.
“When the ecosystem gets big enough, I think it's very difficult to fight against technology,” Kulechov said. The best the banking system could hope to do, he believes, is to decide to build its own version of DeFi, but "it won't work when there are so many projects in the ecosystem and the ecosystem is constantly growing," Kulechov said.
DeFi ecosystem
The term "ecosystem" is often used, and Kulechov says it is particularly suited to DeFi. In an ecosystem, things live on each other but also support each other. Kulechov sees the same thing happening on Ethereum.
Kulechov supports several teams working on various projects, but not all. When he has to make a choice, the question he tries to answer is: how creative is this team?
He said he likes to ask them what they are trying to build in the short term and maybe even after. What he is looking for is a fertile mind that is always ready to innovate, because it is the only way to continue adding value to the ecosystem.
Kulechov's principles
Kulechov claims he doesn't have strict principles governing his investments, but he obviously likes to see people embrace DeFi values: transparency, open source and the like. One point he is keen to emphasize, however, is that he prefers to invest in the tokens generated by his project, Aave.
So rather than sending a sum of USDC to a team, they prefer to send to USDC, because in that case they already have some built-in return. Treasury management is obviously important for any team, but: “If you take interest-bearing tokens, it's actually managed,” Kulechov said. The point is to keep projects sustainable at the micro level. Which is like investing in DeFi on a macro level.
