Announcing Frictionless Fund I
Frictionless Capital is excited to announce it has raised a $20M fund to invest in high performance blockchains and category defining applications. The fund has made a number of high-conviction investments over the past year such as Backpack, DFlow, Andrena, and Kuzco and is eager to share more about our progress and approach to investing.
Our Investors
We are honored that Frictionless Fund I has garnered support from some of the world’s foremost institutions, including Franklin Templeton and Foundation Capital, fund of funds such as Hutt Capital, Avalon Capital, and Pure Crypto. The fund also received backing from Marc Andreessen and Chris Dixon of A16z, Kelvin Liu of Invesco, and general partners from esteemed crypto funds Multicoin, Framework, Coinfund, Big Brain Holdings, and AllianceDAO. We are also proud to be supported by leading crypto founders such as Raj Gokal and Anatoly Yakovenko of Solana, Sergey Gorbunov and Georgios Vlachos of of Axelar, Mo Shaikh and and Avery Ching of Aptos, and Avalanche’s Kevin Sekniqi. Other notable angel investors include Santiago Santos and Spencer Noon.
Our Strategy
At our core, we are high-conviction investors unafraid to make contrarian bets to back founders tackling the largest markets. Nearly two years ago, we crafted a comprehensive framework for evaluating blockchain scalability, highlighting that all decentralized blockchains are limited by the amount of bytes they can propagate through their respective networks. This seminal research garnered widespread attention and was cited by global asset managers Franklin Templeton and Van Eck. As one of the few crypto funds maintaining a consistently positive stance on high-throughput blockchains throughout the bear market, we earned the trust of the ecosystem and forged unique relationships with top founders. Our confidence in these ecosystems during this period was underscored in a blog post where we made the case for Solana at $13, in the wake of the FTX collapse.
We take a concentrated approach to investing, backing only a handful of companies who we believe can truly outperform. This approach combined with our small size allows us to be extremely hands-on with a select group of founders at any given time, assisting them from ideation to category defining. Drawing from our experience as former operators, we are not afraid to roll up our sleeves to help with product, design, and go-to-market strategies, with a specialization in facilitating meaningful distribution to disruptive products.
Our Focus
The Next Generation of Technology and Applications
As is the case for most technologies, progress occurs in an iterative process. For the first 10 years of its history, the crypto industry underwent a series of iterations beginning with Bitcoin. Despite innovating upon Bitcoin greatly with the introduction of smart contracts, Ethereum retained much of Bitcoin’s ethos by arbitrarily limiting the scalability and usability of the network. This gave rise to the high-throughput blockchains pioneered by Solana, which combined Ethereum’s programmable smart contracts with elevated data propagation, low latency, and the ability to execute transactions in parallel. As the infrastructure rapidly progressed from a couple of transactions per second to thousands per second, new applications and use cases were unlocked in much the same way that the transition from dial-up to broadband and fiber optic enabled richer experiences on the internet.
Today, the blockchain industry finds itself at the tail end of the infrastructure phase, with modern, high-throughput blockchains rapidly enabling emergent use cases and primitives previously not possible in the crypto industry. It is these 0-to-1 type applications and products built on next generation blockchains which will form the foundation of our early-stage exposure for Fund I.
There are several key categories which we expect to not only attain a very large market size but also continue to compound for the foreseeable future:
— Next Generation Financial Primitives: Includes protocols and applications that enable the seamless and rapid trading of digital assets on high-throughput networks, or optimize order flow and liquidity to improve execution for market participants. We expect trading volumes on high-throughput chains to increase 1,000 fold in the coming years. We place a strong emphasis on financial primitives that uniquely leverage low latency trading on a heterogenous system (single ledger) onchain or on a centralized venue such as CEX. Examples of novel means of price discovery include onchain CLOBs (Central Limit Order Books); Backpack, which is the fastest growing CEX in crypto; and DFlow, which is optimizing maker liquidity on Solana by segmenting toxic order flow with a novel aggregator to prevent liquidity providers from being adversely selected.
— Novel Methods of Capital Formation & Network Formation: Enabled by decentralized physical infrastructure networks (DePIN), particularly projects serving rapidly increasing demand for “digital commodities” such as compute, bandwidth, data, and storage. Strong emphasis is placed on DePIN networks for resources that are not geographically constrained and are fungible and tradeable in a borderless and global market, such as bandwidth or AI inference tokens for large language models (LLMs).
— New Methods of Human Coordination via Shared Ownership: Which incompasses the creation and distribution of tokens to drive novel incentivization and reward frameworks. Similar to the internet, we anticipate that the growth of user-generated crypto assets (UGAs) like tokens, will outpace professionally generated ones. We place a strong emphasis on protocols and applications which enable and facilitate the creation and distribution of digital assets and censorship resistant 24/7 trading. This capability serves as a crucial use case for crypto, acting as the coordination layer to incentivize both humans and devices.
Come Build With Us
Frictionless Capital is building for the long-term, combining technical knowledge around infrastructure stacks and deep crypto native expertise to deliver a powerful combination of product and distribution. Our deliberate choice to have a small, concentrated fund enables us to foster close, impactful relationships with our portfolio companies. We provide invaluable guidance and support to founders throughout every stage of their startup journey.
If you are a founder dedicated to truth-seeking and unwavering in your product vision, aiming to build on a global scale, we invite you to get in touch with us.