From: thepipeline_xyz
Frictionless Capital, led by managing partner Logan, is a venture capital fund primarily focused on investing in new blockchain infrastructure, particularly high-throughput blockchains [00:02:19]. The fund aims to support technologies that can enable the widespread adoption of crypto, moving from millions to ultimately hundreds of millions and even billions of users [00:06:00].
Core Thesis: Scaling the Industry
Logan’s journey into establishing Frictionless Capital was shaped by his experiences, including spearheading the Supercharging network at Tesla [00:01:17]. His personal involvement with Ethereum since 2017 revealed the limitations of its architecture, especially the high gas fees experienced during the 2021 bull market [00:01:33]. This led him to seek alternative ecosystems focused purely on scaling the industry [00:01:51].
The core of Frictionless Capital’s thesis revolves around the belief that new infrastructure is essential for onboarding the majority of the world to crypto, requiring low transaction fees, high throughput, and enabling unique applications [00:01:59].
Logan draws a parallel between the evolution of the internet and blockchains:
- Transitioning from 56k modems to broadband internet enabled more interesting applications [00:11:54].
- Similarly, moving from low-throughput blockchains (like Ethereum’s 12-25 transactions per second [00:30:27]) to high-throughput ones (thousands or tens of thousands of transactions per second [00:30:38]) will unlock a new world of possibilities, enabling applications like order books that are difficult on slower chains [00:30:31].
- This shift is analogous to the transition from dial-up to broadband, leading to applications like YouTube, which rely on faster connections [00:30:08].
Contrarian Stance and Conviction
Frictionless Capital was founded in early 2023 [00:06:24] and initially held a “deeply unpopular” thesis [00:04:20]. A key example was their early conviction in Solana, which at the time was widely considered “dead” and an “FTX chain” following the FTX implosion, trading at around $13 [00:04:50].
Logan and his team were among the early believers in Solana’s unique position as a high-throughput blockchain, recognizing its architecture with large data propagation, big blocks, and parallel processing as a future requirement for the industry [00:05:02]. Their conviction stemmed from approaching the space from first principles, which, while challenging, allows them to dissect arguments and identify core issues [00:10:15]. This methodology was honed during Logan’s time at Tesla, where products like the Cybertruck were architected by challenging industry assumptions [00:11:01].
The fund recently closed, aided by Solana’s historic run towards the end of 2023, and is now focused on full-time deployment [00:06:35].
Investment Philosophy and Due Diligence
Frictionless Capital prioritizes technical understanding in its investment process [00:17:20]. Logan prefers to engage with technical co-founders to understand the engineering tradeoffs they are making, recognizing that no single solution is maximally efficient in all outcomes [00:17:40]. The goal is to balance different technical viewpoints and relate them back to how they affect users and the product [00:18:23].
The team looks for:
- Unique technical approaches: They have biases towards high-throughput solutions based on their prior research [00:19:05].
- Openness to feedback: They highly value founders who can highlight flaws in their logic, viewing it as invaluable information that aids learning [00:19:09].
- “Crypto-only” applications: Projects that leverage blockchain’s unique capabilities [00:19:59].
Examples of areas they are exploring:
- MEV and Payment for Order Flow: They recently backed Dlow, which is building payment for order flow, seen as complementary to Jito and the next iteration of MEV structure [00:20:16].
- Decentralized Physical Infrastructure Networks (DePIN): This category is considered very interesting for new capital formation, drawing parallels to ICOs in 2017 and liquidity mining in DeFi Summer [00:21:35]. Logan believes DePIN could enable the first application with 10 million monthly active on-chain wallets, citing Helium as an example expanding into cell phone plans [00:37:25].
Their early conviction in Monad stemmed from its vision to parallelize the EVM, making it high-throughput [00:22:40]. Coupled with the team’s caliber, this made Monad an obvious investment [00:22:46].
The Importance of the EVM and Future Applications
Frictionless Capital views Monad as a “baby” of Solana and Ethereum, combining parallel processing and high throughput with EVM compatibility [00:32:33]. Logan believes that if he could rewrite history for Ethereum, he would design it with the parallel processing and high-throughput architecture Monad is pursuing [00:32:43].
The fund is excited about this transition to high-throughput EVMs because it allows the porting of vast amounts of existing EVM infrastructure and applications into an environment that supports modern hardware best practices like parallel processing and fee isolations [00:13:51]. This integrated technology stack simplifies the user experience by eliminating the need for bridging between L2s and frees engineers to focus on product development rather than infrastructure concerns [00:34:22].
Logan anticipates a “Golden Era of crypto products” [00:28:29]. Specific application areas of interest include:
- DeFi 2.0: Natively taking advantage of order books and high-throughput capabilities [00:35:54].
- DePIN: As mentioned, potentially enabling mass adoption by serving real-world products on crypto rails, often without users even knowing it’s built on a blockchain [00:37:17].
- Social Applications: While early, continued experimentation on high-throughput blockchains for social platforms like Farcaster is of interest [00:38:11].
The mantra of “only possible on Solana” resonates with Logan, and he believes Monad will supplement this with “only possible on Solana and Monad” [00:39:13]. The ultimate goal is to create the largest design landscape for building cool applications [00:39:51]. Logan believes these high-throughput blockchains are the key to unlocking viral apps that will kick off the consumer age of crypto [00:40:27].
Logan’s Advice for Investors and Builders
Logan emphasizes the importance of conviction, self-belief, and continuous learning:
- Embrace being wrong: He states that “everybody’s wrong and your goal is to be less wrong” [00:24:24].
- Seek out smart people: Engage with smart individuals and actively look for flaws in your own thinking, as this makes you better [00:24:43].
- Synthesize information: Learn from various technical leads and individuals in the industry, each with different points of view, to synthesize your own sophisticated understanding [00:25:34].
- Question popularity: “Do you want to make money or do you want to be right?” and “Do you want to be popular or do you want to make money?” [00:42:00]. The things that make money are not always popular, and early, correct insights are often differentiated points of view [00:42:11].
- Do your homework: This enables you to hold a differentiated perspective and stay the course, even when it’s unpopular [00:42:50].
- Believe in yourself: Logan recounts how many popular venture capital funds initially rejected him before he started Frictionless Capital, only to later invest in his fund [00:43:30].
He also stresses the importance of physical and mental well-being, advising people to “go outside get sun” and “working out” to maintain health, especially during bull markets, as it directly impacts one’s ability to trade or make money [00:41:31].