Ethereum layer-two scaling platform Polygon raised $450 million earlier this year in its first major financing round. Now, the protocol's co-founder Sandeep Nailwal is launching another project, he told TechCrunch exclusively -- this time, in the form of Symbolic Capital, a venture capital fund built by and for web3 founders.
Nailwal, alongside Cere co-founder Kenzi Wang, has raised $50 million from investors including other venture firms, crypto exchanges, family offices and institutions, though they did not share specific names. Symbolic plans to primarily back companies building consumer-facing decentralized apps (dApps), Nailwal said, a move that seems aligned with Polygon's own goal to speed up web3 app development.
"My core mission is to bring mass adoption to web3, and that mass adoption is only going to happen via apps. It's not like I'm going to build a blockchain, and people will come and use the blockchain -- nobody uses blockchain directly. They always use it via some app," Nailwal told TechCrunch.
The fund has already made ~15 investments, including in web3 gaming studio BlinkMoon, Polygon-based metaverse Planet Mojo and esports platform Community Gaming, according to Nailwal.
As an Indian founder, Nailwal has often sought to support his home country -- he made headlines last year when Vitalik Buterin donated $1 billion worth of crypto to an Indian COVID-19 relief fund he had arranged. Through this new venture fund, Nailwal says he aims to allocate 80 to 90% of the capital to founders who, like him, hail from emerging markets.
"It's not closed for anybody who's building in Silicon Valley, of course not. But being from India, like, technically, I would be an angel investor or an advisor to 95% of all the good projects that you would see coming out of the Indian subcontinent -- they would come to me some way or the other, for help or guidance," Nailwal said.
Wang, meanwhile, is deeply familiar with the web3 ecosystem in China and Southeast Asia, giving the pair a wide view of countries across the world, Nailwal added. He views founders in emerging markets as generally more pragmatic because of the constraints they face compared to their better-resourced counterparts in Silicon Valley.
"Because they are all pushed against the wall for their survival, they need to build something that will generate some revenue, and they can survive on that," Nailwal said. He added that he took a similar approach in growing Polygon, where he said he would test out one new technology at a time and wait until it had acquired a certain number of users before experimenting with the next idea.
That background is part of why Nailwal thinks Symbolic is especially well-positioned to assist emerging market founders.
"Many of them have the capability that they are able to build businesses which eventually acquire users, but you need to help them to keep reinventing themselves and upping their bar so that once they have a proven model at a smaller scale, they keep growing at a much bigger scale and reinvent their ideas and business model," Nailwal said.
A major motivation behind launching Symbolic for Nailwal was the opportunity to more formally support companies that are already in his orbit, he said, adding that he doesn't feel he will have to spend much extra time managing the fund because it will help him realize synergies from relationships he's already building, in part through Polygon's own venture fund. He and Wang are already prolific angel investors in startups -- the pair has co-invested in more than 40 companies since they met at Binance Labs in 2019, he said.
Nailwal said that within Symbolic's focus on apps, he is particularly interested in startups that fall into the "creator economy" subsector, such as fantasy sports companies.
"In web3 fantasy, you can have NFTs, and you can put those NFTs on rent when you are not playing, so you can get some passive income, plus you can earn the tokens on the platform and become part of the platform from a very early stage," Nailwal said.
Those sorts of incentives can oftentimes be more meaningful to users in emerging markets, he added. He brought up the examples of Chinese "move-to-earn" app StepN's recent user growth and play-to-earn video game Axie Infinity's appeal as a supplemental income source for low-income workers in developing countries to illustrate his point. (Both Nailwal and Wang happen to be angel investors in Axie Infinity's parent company, Sky Mavis).
"Many of these crypto models are able to achieve better sustainable economics in those contexts where the cost of living is much lower," Nailwal explained. India's Jio 4G network is arguably the fastest in the world and reaches even deeply rural areas, he added -- a piece of infrastructure that could help web3 startups capture users across the country if they offer the right economic incentives.
Some web3 play-to-earn startups have been criticized for putting already vulnerable people at risk in the event that anything goes wrong, such as the $625 million hack that occurred Axie Infinity's Ronin bridge in March. Nailwal acknowledged this risk is "a problem," saying that he advises web3 entrepreneurs to provide as much education and disclosure to users as possible whenever a transaction takes place on their platform.
One key differentiator for Symbolic will be its internal data platform the firm has built to support its portfolio companies as well as to bolster its own diligence process, Nailwal said. The platform will aggregate and analyze data such as GitHub contributions, Discord engagement and token performance as well as employment and hiring trends, according to the firm.
Eventually, Nailwal hopes to create a "proprietary social ecosystem" around the platform which he likened to Y Combinator's network.
"We want to do [this] for the both for the portfolio companies, as well as the founders, who we believe eventually will become angel investors in many of the new projects that will come [through Symbolic]," Nailwal said.