Hi, it's Max (@maxawebster), founder of Hivemind Ventures, a seed fund investing in L2 & L3 Bitcoin startups building the future of finance, communication, and energy. We're particularly focused on the Lightning Network and are fortunate to have partnered with many of the best companies in the space including: Lightning Labs, River, Galoy, Breez, Stacker News, Lightspark, Ibex Mercado, Pouch, Neutronpay, Bitnob, Lightning Network Plus, Satoshi Energy, and many more.
Prior to Hivemind, I invested at Version One Ventures and was on the founding team of Bright, a leading residential solar company in Mexico.
What do you see as the biggest risks overall in the space and also to individual portfolio companies? What have been your biggest challenges as an investor in this space?
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Biggest risks:
  • Arbitrary rules / regulation that makes it difficult to run nodes and use LN payments
  • That I'm investing a bit too early in the wave and that it will either be hard for current portfolio cos to sustain a long bear or that we're still investing the in webvans of LN and the instacarts will come a few years later
Biggest challenges:
  • Determining where in the adoption curve we are and how quickly it will run
  • Personal bandwidth - I love doing this and wish I had even more time to roll up my sleeves and help my portfolio cos gain global adoption
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Congratulations from 2024! This was the top comment 2 years ago.
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What kind of data points about the lightning network are most important to you as an investor?
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Usage!!
Liquidity is amazing, but I think we're at the point where we have excess liquidity. We now need users, which is why I'm so excited about both payment apps (e.g. Pouch, Neutronpay, Ibex Mercado, Bitnob) and new LN native online apps like Stacker News and Fountain.
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💯 that makes a ton of sense - thanks!
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Generic advice for Bitcoin/Lightning companies?
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Stay focused and don't worry about what you can't control (broader market, what other projects are doing, etc). With the caveat that it's always a good idea to have a lean cockroach plan where you could survive with a very small team or by yourself just in case.
Live far below your means. Always.
Prioritize taking time away from the screen to figure out your priorities. Meditation might help. Also probably a good idea to spend less time on Twitter (or any distracting site). This applies doubly for me too haha
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How do you envision the next five years of the lightning ecosystem evolution playing out? What is your most optimistic outlook for what the world could look like in five years with Lightning (and Bitcoin)?
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LN overtakes all closed payment rails (Visa, Mastercard, Swift, ACH, etc). At least 2B people can now participate in the global economy and send remittances/payments for nearly free. We'll have a huge wave of innovation as entrepreneurs develop new business models and applications based on an incredible new primitive: payments that are instant, global, and programmable. Companies like Breez are successful in creating the tools necessary for non-custodial applications to thrive so that those who wish to hold their own keys (in a very user friendly way) are able to do so. A general golden age ensues :)
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We are proud to have Max as one of our investors at IBEX
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Max, given the current VC and economic landscape, what advice can you give companies that are scaling in terms of users and TXs but will eventually have to find profitability with their offerings/clients? How do we bridge this gap while competing against the BIG legacy rails?
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At the (pre)seed stage, not much has changed. For companies scaling into their Series As and Bs, I would say have two plans. One for more aggressive growth assuming mission aligned, patient capital is available (which, for now at least, still seems to be the case). But also, it's smart to have a more conservative cockroach plan should we enter a new zone of short term pain. In the long run though, I may be naive, but I'm not too worried. Truly breakthrough ideas with organic, explosive growth will always find a way ;)
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And I'm a proud investor :) The IBEX team is amazing and working on an issue that's particularly close to my heart: LN adoption in LatAm. These guys rock!
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How do you model or measure TAM or opportunity of the Lightning Network as a whole?
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If LN can eat all closed payment networks (Visa, Mastercard, Swift, ACH, etc) then the TAM is literally all of global payments. Because fees on LN will be so much lower, however, it's possible that value capture will be much smaller for companies in this world, which is generally a very good thing for people. The key in my mind, however, is that free global micropayments are going to enable orders of magnitude more commerce. When 8B people - most of whom currently have no means of conducting commerce online - can one day participate in the global economy, then the total pie of payment volume should skyrocket. So even if you're taking a smaller slice of each payment as a company, the total pie is going to be much, much bigger.
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What's something you believe about Bitcoin/Lightning that few Bitcoin/Lightning investors would agree with you on?
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A few:
LN will eat all closed payment networks this decade. Probably much faster than anyone believes.
Investing in any other crypto project and/or traditional fintech is a waste of time and capital.
Bitcoin cos are cool, but LN companies will see by far the most explosive growth.
In the future, all energy contracts will be Bitcoin smart contracts settled in real time over the LN.
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Thanks for your insight on this - really great to see all of the potential in lightning
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Hi Max, thanks for doing this SN/AMA.
Wanted to find out how you go about looking for talented founders of ⚡️projects? Do you find they come to you or is there some other process you use to filter.
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I'm open to meeting founders from anywhere. TBH, I follow the space pretty closely, so I generally have a pretty good idea of what I'd like to fund next (either team and/or idea). I love, however, being blown away by a unique inbound insight that I've never considered. I'd say it's good mix of inbound and outbound for me though.
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In 10 years, which of today's Lightning Network companies will have the largest market cap?
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Probably Block.
But honestly it's very difficult to say at this point and depends on both where value is created and where it accrues. It could be the companies with the most efficient, best capitalized, best connected nodes (i.e. the new Visas). It could be the leading liquidity marketplaces (e.g. Lightning Labs, Lightning Network Plus, Amboss, etc.). It could be the breakout apps that build new user experiences with native LN payments (i.e. the new Twitters, YouTubes, Googles, etc). I'm personally investing in all of these categories.
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Bonus question: In 10 years, how many people will be making Lightning Network payments on a daily basis?
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Over 2 billion
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What one or two books, pods or articles shaped your thinking about Lightning the most? And/or who are the people you most recommend following to stay on top of what’s happening with Lightning?
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This talk from Dhruv Bansal:
People to follow: Roy, Nicolas, Elizabeth/Laolu/Ryan/Jacob/et al at Lightning Labs, Steve/Matt/et al at Spiral, and the teams of all my portfolio cos listed above + Zebedee, Voltage, and Amboss. Some amazing talent in this space :)
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In %, what is the likelihood of the bear case scenario of remaining "niche internet/underground money"?
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Perhaps I'm naive, but I think bitcoin becoming a global currency is inevitable. Short term (over the next decade), I suppose with harsh regulation/misinformation it could remain niche (20%?), but as more people understand why fiat currencies fail, bitcoin will have no competition.
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Love to see it!
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Hi Max, thanks for doing an AMA. I recently found and have really enjoyed all of your writings. I have a bunch of questions that I'll add one by one - I'd love to hear any thoughts you are willing to share on any of these (of course leaving room for all of the other questions):
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How much time do you expect it will take for projects you invest in to turn a profit?
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What's the most surprising thing you've learned investing?
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A few:
  • At the early stage, it's all about people and market. That's it.
  • Being a solo GP is a huge advantage as I can move very quickly and not waste time with overhead, bureaucracy, or trying to convince someone else of my vision
  • But being a solo GP can also be lonely and means I don't have as much bandwidth as I'd like
  • It's amazing to work with LN founders while it's still niche. At this stage, all of us are true believers and missionaries. Makes it ridiculously fun to do this job.
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If you had to make venture deals based on one criteria only what would it be?
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Founder all day every day.
To cheat, I'd say an A+ founder exploring problems in what could be a massive market.
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Besides wallets and banks, whatother types of projects do you encountet?
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Infrastructure: monitoring, liquidity, node hosting, etc.
Lightning Service Providers (routing nodes with the potential for lots of users)
Regionally focused payment apps
New Internet apps with embedded payments (e.g. Stacker News, Fountain)
And all sorts of cool new stuff - hard to keep up :)
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Does the lighting network have any competition? If not do you think it will?
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Ok guys, I'll be signing off soon. But feel free to drop other questions here and I'll answer them later. Hasta pronto, Max
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Do you believe that we can move, at least on Bitcoin, from users being the product to users paying for services?.
Do you believe that the logic of current VC would work on lightning?, Imo that logic failed on the ico mania trying to replicate the startup approach. Rise capital, create a token, and having thousand of dollars before having anything.
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Yes, I think we can at least give users the choice and many will choose to pay directly. I don't think advertising dies entirely though as some folks will still prefer ads. But you'll have much greater flexibility when designing biz models and products. I'm particularly excited about what unexpected new experiences are unlocked by value for value payments.
I do think the logic of traditional VC works well here. A big part of my thesis is that we're at ~1997 Internet level adoption (roughly 200M users). From '97 to '07, the Internet grew from ~200M to 2B users and lots of amazing companies were built (Google, YouTube, Twitter, etc.) I think the same thing will happen here. Bitcoin and Lightning Network comprise the Internet of Money and lots of amazing companies will be built on and around that protocol stack. What we saw with the recent token craze was not VC in my mind, but more akin to funding gambling on penny stocks with the hope of cashing out before the music stops. Not my cup of tea.
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Hi Max, Mexican here- really cool that you were involved in Bright
I'm looking for some advise, thank you in advance:
I would like to build an incubator for a niche segment of the LN user base, plus help connect LN entrepreneurs with Angel Investors.
Where do I start? How do I develop the X-ray vision for initiatives and partners?
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A 🥚!
What sort of niche are you looking to focus on?
I'd personally LOVE to see more LN adoption in Mexico. Shoot me more info on what you're thinking max [at] hivemind [dot] vc
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When stacker.news sponsoring?
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Already a proud investor :)
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Was so excited that i missed its onyour list :D
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Congratulations from the future!
As of 6/14/2024, this was the top post of 6/14/2022.
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Congratulations again!
This was still the top post of 6/15/2022, as of 6/15/2024.
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Reading this in 2024. Has the LN lived up to your expectations?
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I was asked a similar question a few days ago and answered here #569305
Here's a copy/paste of the most relevant parts so it's easier to read :)
  • I'm still super bullish on LN though growth has been a bit slower than I imagined. I now see it increasingly as the glue between many different BTC neobanks (e.g. Cash App)& mints. I'm particularly bullish on ecash mints (Cashu and Fedimints) connected via the Lightning Network. @rodarmor was the first person to turn me onto this idea. Note I still do hold hope for non-custoidal LN scaling to the masses at some point
  • I'm particularly bullish on Nostr Wallet Connect (NWC) as the messaging layer for LN payments. I should have a new post on this soon
  • An area I've changed my mind on is how LN will interop with identity/data. Originally, I thought an LN pubkey would be universal identity for the Internet. And that BTC would grow in layers: BTC > LN > data. Similar to what @dhruv & @ryanthegentry discussed at the BTC Conference in 2021. I now think that Nostr will provide the pubkey identity and that the data will be transferred via Nostr with attached LN payments. Or as Dhruv explains nicely, I'm now more bullish on putting the payment inside the data rather than the data inside the payment.
Although in the long run, who knows?
Longer piece necessary, but TL;DR, I'm now bullish on a stack where:
  • Bitcoin is value
  • LN (+ ecash) is payments
  • Nostr is identity + data
Here's more on why I'm so bullish on Nostr as the identity/data layer: https://hivemind.vc/identity/
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Thanks for giving us a big picture perspective of not just LN developments, but also how they fit into the context of the BTC ecosystem!
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How do you envision lending for the average Joe wanting to buy a house or car in a hyperbitcoinized world?
Will lending be under a fractional reserve "free banking" system?
What do you think the interest rates for this collatoralized debt might be in the range of under such a world-wide system of pure free-market finance?
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(Answering in '24)
I think BTC will be widely used as pristine collateral for lending. Ideally without requiring you to hand over your keys to anyone. This is a major problem that companies like Lava are exploring. Short term, I think people will post BTC and receive either stablecoins on other chains or USD in their bank accounts. Long term, I think they'll receive USD on whatever BTC/Lightning native asset standard emerges - could be eCash, Taproot Assets, or something else. I think this will eventually become commonplace for most folks globally via normal fintechs/wallets.
I also believe that we're about to see free banking on steroids with protocols like Cashu, which allows anyone to become their own mint. Some will issue BTC eCash and others will issue USD eCash while taking in BTC, which is effectively a levered long on BTC. Some of these will blow up and some will survive. All will be connected via the Lightning Network. And Nostr reputation will be important for users to decide which mints to use. It will be interesting to see free banking develop!
Not sure what interest rates will be, but it will be fascinating to see a true global, free market rate emerge.
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Funny you replied now. I just got my SN account logged in again.
I think you misunderstood my question. The products you describe are 100% backed token assets. What I'm asking about is collateralized debt, as in debt that is collateralized with the very thing being purchased like a house or a car.
I agree that things like ecash/cashu/fedimints may draw parallels, but these are not 'free banking' per-se.
By definition, free-banking is an independent business engaging in fractional reserve lending. They place the collateral on their books as an asset the same as any bitcoin their ecash may represent. So long as nobody drains their accounts at once, they are solvent.
When demand for bitcoin begins to exceed their bitcoin reserves, they either need to take a loan from another bank, get their customers to make more bitcoin deposits (remember certificates of deposit?), or they need to force their customers to liquidate (sell) their property (car or house) and pay their loan immediately in actual bitcoin.
What thinks ye? Does this lead us back to where we are today with un-backed fiat?
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Perfect timing ;)
Tbc, I actually do think the mints will lead us to free banking. If everyone in the world becomes a mint and can issue whatever token they want, then there will be a ton of experimentation with reserve ratios. I do think BTC will be the underlying collateral for most of these mints though. Eg imagine I run a small mint with 1 BTC collateral - I could issue 1BTC worth of ecash tokens, 70k USD worth of ecash tokens, or $700k USD worth of ecash tokens. All will be backed by just my 1 BTC though. I think reputation for these mints will develop over time and collateral ratio might be just one factor. As you mention, the mint’s size and/or ability to secure a line of credit in times of distress might also mater a lot. I’d be much more trusting of Tether’s mint even if the ratio isn’t 100% because of their size/ability to access capital. Perhaps other factors will emerge that are hard to predict as well!
Will this lead us back to the same fiat system in the long run? I don’t know. I’d like to think Bitcoin will make it much better. Interoperability with the Lightning Networks means that these USD tokens might just be used for payments and rarely held for more than a few minutes. Better proof of reserves, ability to switch mints, and nostr reputation should also all be major factors in favor of the average user. But who knows? Maybe the future looks like more of the past?
On the question of lending for someone buying a house, I think housing will still have some value (though much less than today) and will still be collateral for loans. BTC holders will likely use their BTC as a first option though because the markets will be so much more liquid at that point I think.
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Hi Max, big fan of your thinking around LN. Thanks for doing this AMA (though I feel late to the party having just come across it).
I am personally uncertain about where value will accrue in the Lightning ecosystem, and that indeed it may be mostly to consumers. As big monopolies become undermined and inefficiency is trimmed away consumers will benefit, while proportionally less value will be redistributed to/captured by any one company than for Web2.
As an investor, how do you size this up –– and given positive lightning dynamics are beneficial to BTC price (with potentially even greater boosts due to network effect+SoV functionality), why is betting on LN companies better than merely on BTC?
To be clear I am a firm believer in BTC+LN and agree with your assessments of both, this is a question specific to converting those convictions to investment decisions.