Author: Starpower
Be a contrarian thinker! EV3 was the only VC that went all-in on DePIN in 2022, heavily investing in the energy and communication DePIN tracks, and is also an angel investor in Starpower.
In this interview, Laser invites EV3 co-founder Sal to explore the origins and future of the DePIN field in depth. They share their career journeys, market insights, and outlook for the future. This is an inspiring conversation that showcases how DePIN is reshaping traditional industries through blockchain technology.
The audio recording and translation were generated by GPT and may contain some errors, please listen to the full podcast:
Starpower Youtube: https://youtu.be/mtIU0jBgsGI
Interview Opening and Background Introduction
Laser: Hi Sal! I’m very happy to have you on this episode of the podcast to share some of your stories. I hope the audience can learn more about EV3 and you personally. We met around February or March two years ago in Denver. At that time, DePIN had just been named by Messari, and many people were not familiar with it. Now it has become very popular. First, can you introduce yourself, your background, what brought you to join EV3, and what you are doing at EV3, as well as your outlook on the current market, especially for the coming year?
Sal: Of course! First of all, thank you very much for your invitation, Laser. It has been an honor to know you and witness the growth of Starpower over these two years. Let me briefly introduce myself. My co-founder Mahesh and I co-founded a company called EV3, which stands for Escape Velocity. We have been focused on investment and construction in the DePIN field for over two years now. We were already doing this before we started naming this field. Our motivation is based on our years of experience in the crypto space, where we were responsible for investments in DeFi, Layer 1, and other ecosystem parts in some major investment firms. From late 2021 to early 2022, we realized that there were dozens of huge global industries, such as energy, wireless communication, and transportation, facing significant coordination issues.
And the research on blockchain technology offers the possibility to solve these coordination problems, but at that time, very few people considered how to apply it to real industries. Entrepreneurs were thinking about it, but investors paid little attention to this area, leading to entrepreneurs not getting funded. Thus, we founded EV3, raised a seed fund, and focused on helping new DePIN entrepreneurs start companies and realize their visions. Over these two years, we have invested in about 20 different projects covering almost every subcategory in the DePIN field.
We are also working to promote DePIN as a core of the crypto ecosystem and community because we believe it deserves that status. We hold the DePIN Summit every year and have been honored to invite you, Laser, for the past two years. Additionally, we have an analysis platform called DePIN Ninja, as well as a series of other activities to support the development of the DePIN community.
Sal's Career Journey: From Finance to DePIN
Can you talk about yourself? I think most of the audience comes from the DePIN field, and they should know about EV3. What about you personally?
Sal: Okay. I am from Venezuela and was exposed to Bitcoin early on. At that time, Venezuela was experiencing hyperinflation, and Bitcoin was going through one or two bull market fluctuations. I met my co-founder at Goldman Sachs during a university internship. We then worked together in financial institutions for two years, mainly responsible for company mergers and acquisitions, IPOs, and debt financing.
After delving into the workings of capital markets, we found that ultimately these issues can be seen as coordination problems, which we can solve more efficiently with protocols. In fact, it is not bankers and financiers who truly cracked the secrets of these problems, but software developers. So we became obsessed with venture capital and the tech ecosystem, particularly focusing on how engineers and developers can better solve these issues. Clearly, the way Goldman Sachs and other large corporations operate is unsustainable and lacks productivity. There is a lot of 'busy work' in their operations, but it does not yield real productivity or benefit billions of people worldwide.
Later, I left Goldman Sachs and joined the investment firm Ribbit Capital located in Palo Alto. They were one of the earliest institutions to invest in Bitcoin and were early investors in the Series A funding of Coinbase and Robinhood. Additionally, they invested in many global fintech companies that later became significant businesses.
In the past few years at Ribbit, I felt that DePIN gave me a similar early development state. Although I did not experience the fintech wave of 2012, the DePIN of 2022 feels very much like what the Ribbit team described about fintech in 2012. This field is still very early but clearly has the potential to take over a trillion-dollar industry globally.
I can feel that many software developers and entrepreneurs are starting to believe they can challenge these large traditional industries. They need funding support, which presents a great opportunity for an investment company focused on helping these categories of entrepreneurs. For Ribbit, the focus is on fintech; for EV3, it's DePIN. This has also been the main inspiration for us to conceive and support EV3's early years focusing on DePIN founders. That’s how we began to truly focus and support DePIN founders.
Core Areas of DePIN and Future Development
Laser: I know you mentioned your early experiences at Ribbit. We all know Ribbit is a well-known investment company, but they missed out on Ethereum, right? It sounds like your experience at Ribbit helped shape your thinking about fintech, and then you found your niche in fintech, which is DePIN. So, I think you have your own philosophy and methodology for finding your 'North Star'. Can you share with the audience what gives you such confidence? About three years ago, when DePIN had not yet been named as a field, you were already fully focused in that direction. What made you confident this would become a hot narrative and the right direction?
Sal: I believe there are two key factors. The first is that we simply follow excellent founders. We were lucky to be involved in the Helium community early on. At that time, many who later operated or founded DePIN projects were part of the Helium community, some as miners, some possibly owning manufacturing companies.
They were exposed to the crypto space through Helium's explosive growth in 2021. As a result, we had the opportunity to meet many people. We found that many talented founders in this community, after seeing Helium's success, started thinking, 'Hey, I can apply this model to the industry I'm familiar with,' or find a way to achieve similar goals in a manner different from Helium. Especially in early and mid-2022, Helium's network grew very rapidly. This gave us a clear signal to follow these talented entrepreneurs as they are passionate about this field.
So we just followed in their footsteps; I don’t think we can take credit for this.
From the perspective of investors or investment mindset, wireless communication is one of the areas that helped me understand the potential of DePIN early on. Today, the three major fields of DePIN—wireless communication, energy, and transportation—represent three types of 'mobility': wireless communication moves information signals, energy moves electricity, and transportation moves physical objects. Wireless communication is the simplest and most aligned with DePIN infrastructure.
Wireless signals can be transmitted through any medium, such as air or water, and they have no quality limit. Therefore, if you want to build a node network, a mesh network of wireless communication is the easiest to implement.
The IoT network of Helium is a very powerful example. These LoRa devices can transmit signals over several miles, communicate with each other, and reach a consensus on which nodes are online and where they are located. This consensus is achieved through mutual exchanges and triangulation among devices.
When you scale this model to the global economy, you will find that traditional wireless communication companies face huge challenges. For example, due to land-use planning regulations, they cannot build new towers where needed, leading to insufficient network density. At the same time, users' data usage increases by 30%-40% annually, but these companies cannot charge more for it. This makes the unit economic model extremely difficult, especially when these telecom companies carry large debts. For example, due to land-use planning regulations, they cannot build new towers where needed, leading to insufficient network density. At the same time, users' data usage increases by 30%-40% annually, but these companies cannot charge more for it. This makes the unit economic model extremely difficult, especially when these telecom companies carry large debts.
Moreover, almost no users, whether on home networks or mobile networks, are satisfied with their connectivity service providers. These companies also lack the ability to quickly roll out new products or innovations. Therefore, we believe that in the field of wireless communication, decentralized networks can more rapidly expand initial networks, enabling nodes to communicate with each other, thus removing the need for centralized management layers.
This model benefits billions of users globally who are dissatisfied with existing connectivity services while addressing the business weaknesses of current connectivity providers. Therefore, we believe that if decentralized wireless communication can succeed, it will become a multi-trillion-dollar asset. This motivates us to fully engage in exploring the decentralized wireless communication field and strive to understand its operational models and development potential.
After delving into this industry, we realized that while the energy and transportation sectors seem harder to crack and may take longer, they also have similar network effects if approached correctly, rather than just relying on economies of scale from infrastructure.
So, we began to expand our investment scope to include areas like mapping, energy, logistics, and even healthcare and identity verification. We are always thinking about what the next potentially successful area in DePIN could be to support these sectors and help them scale faster.
Laser
It sounds like you have delved deeply into the details of the Helium wireless field and followed that direction, discovering that blockchain, Web3, and crypto technology can replicate this model in other areas such as energy, mapping, RTK, etc. Over the past two years, through our exchanges, I feel you are a very insightful person who enjoys deep research on specific topics and digging into this industry. So, I want to know how you balance in-depth research across so many industry subfields in DePIN and make the right decisions in each subfield?
Sal
We can say that we were lucky to enter this field very early, which allowed us to deeply explore multiple areas in 2022 and 2023 while other investors had not yet noticed these sectors.
We have an internal philosophy: investors should not try to be smarter than entrepreneurs, because entrepreneurs are closer to customers and innovation. They always see the future before investors, sometimes even six months, a year, or longer ahead. But if your mind is prepared, you can shorten that gap from six months to three months. By building close relationships with entrepreneurs, like the one we have, we can keep up with them.
When choosing investment categories, we often change our minds. Some areas we were optimistic about initially, but later changed our minds; while some areas we were not initially interested in became very promising after deeper understanding. One point we always pay attention to is the size of the market—not only the current size but also the potential future size. I believe many people may not think of this. There are many DePIN networks that, while good networks, are not good venture capital opportunities. For instance, some global niche networks, like amateur radio (Ham Radio). This is a large radio equipment that is very inefficient, and currently, there may only be 10,000 to 15,000 enthusiasts using it worldwide. Perhaps someone will launch a DePIN project for amateur radio in the future, which could be great. But such a network is at most a $10 million to $20 million opportunity, not a trillion-dollar one. And that is what DePIN can achieve over a long enough time. Therefore, when we choose fields, we consider how large this market could be in the future and what significant things can be built on it. Wireless communication and energy are the core areas because they are the foundational layers of everything else.
Whenever new energy capacity or wireless capacity is created, the demand for them is almost limitless, and this has been the case since humans mastered these technologies. These two fields are clearly the largest markets but also the hardest to crack. The question is whether a good product can be built in these fields. For example, sensors are more difficult because there are many different types of sensors, and their data may overlap. Our internal view is that image data or video data, i.e., cameras, are the most powerful sensors. If you have enough cameras and can process the data they capture, you can almost infer the weather, precise locations, and even noise levels. Therefore, we carefully consider how useful the deployed hardware is and how many people can use it for valuable purposes. For example, wireless communication can provide internet access to people, which is very useful; batteries can store energy and release it when needed, which is almost limitless in use. In contrast, weather sensors have relatively limited use and user numbers.
Overall, we will spend time on markets that have huge future potential or are already significant today.
Investment Philosophy and Founder Selection
Laser: So you chose to focus on large markets like wireless communication and energy, and then picked suitable talent within those subfields, right? Understood. So the next question is, what are your criteria for choosing the 'right people' or 'suitable founders'?
Sal: This is a difficult question. I think we've operated for two years ourselves, and before that, we worked for other companies for several years. The feedback cycle in venture capital is long, typically taking 8 to 10 years to know if the entrepreneurs you supported can build something special. So it’s too early to say whether we are good at picking founders. However, we have some early signals indicating that our direction might be correct.
For founders, I think the most important quality is resilience. That’s also why I like working in the DePIN field. Mahesh and I often say that DePIN founders are like 'cockroaches'; they never give up, no matter how the market fluctuates, they keep building. They must be very resilient because raising funds and getting people to understand this industry has been very difficult over the past few years.
So, if a founder is very resilient, very ambitious, and doesn’t burn cash excessively, then this combination is usually very powerful. Because they can conduct many experiments, as long as the pace of improvement is fast enough and they don't fail due to running out of funds, I think these founders usually become very successful.
Resilience can overcome many issues, such as a lack of connections, insufficient management capabilities, or a lack of good networking relationships. We pay close attention to whether founders have achieved excellent results under limited resources in the past. When we see signs of 'flexibility' and 'resilience' in founders, it is often the strongest signal for us to support them, especially in the DePIN field.
This may be more difficult at the seed stage because the company usually does not exist yet. But we are always looking for some signs in the background of founders, such as whether they are particularly persistent and will never give up on what they are building; or whether they have accomplished a lot under extremely limited resources. When we see these signs, we believe they are founders worth supporting and collaborating with.
Laser
So, after you find the 'right people,' do you focus on their income, business models, and other specific details? Or do you just maintain a good relationship and regularly update on project progress?
Sal
Are you saying after we invest?
Laser
Yes
Sal
After investing, we usually maintain close cooperation with the founders, especially in planning. One of the keys to venture capital is to efficiently utilize limited resources. So, on one hand, you need to raise enough capital to experiment and realize ambitious goals, and on the other hand, you need to clarify the company's direction.
We won't get deeply involved in the day-to-day management of the CEOs of companies, and I also think we shouldn't. But we can do three things. The first is to clarify future goals and milestones. For example, if you are investing in a seed-stage company, we can help the company clearly plan the milestones it needs to achieve, such as what key tasks need to be completed from seed stage to Series A, and work backward to ensure the company is in a favorable position with some buffer to achieve them.
The second thing is to make truly long-term bets. Although to some extent, you need to pay attention to the next round of financing to ensure that funding does not break, this should not be the sole goal of the company. The real goal should be to build a unique product with a 10-year moat. We need to make decisions that strengthen this moat, rather than just pursuing short-term optimal choices.
Therefore, it is very important for founders to understand that they can make a 10-year long-term bet with investors like us, especially when other investors may give contrary advice, such as 'You must launch a token quickly' or 'You must reach a certain revenue target' and so on.
Lastly, I think this is particularly relevant to Web3 venture capital because the history of Web3 is still very short, and many people do not have much experience building companies. But in Web2 venture capital, there are some very basic operations, such as conducting annual salary benchmarking to inform founders: 'This is how your income compares to other executives in the market, so we think you should receive more options to stay motivated.' We also evaluate the compensation for COOs and CTOs and provide benchmark recommendations. This practice is common in Web2 but has not yet been widely adopted in the crypto investment community.
So, helping founders set the right compensation structures, both for themselves and for their teams, and ensuring they hire the right talent and motivate them is the last point where investors can have a huge impact on companies.
The Rise of DePIN Energy
Laser
In the past six months, according to my personal observation, energy seems to be the hottest subfield among all DePIN areas. Over the past six months, companies like Daylight, Glow, Fuse, and our Starpower have all gone through new rounds of financing, some raising considerable amounts. So, as an early investor in the energy subfield, what are your thoughts on these financings and the performance of energy DePIN in this bull market? Will energy DePIN become the next success story like Helium?
Sal
It's really great to see the development in this field. I know many people are skeptical about DePIN energy, but we were lucky to be early participants in the three companies you mentioned—Starpower, Daylight, and Glow. Now, late-stage investors are starting to see these companies are ready to effectively utilize $5 million, $10 million, or even $15 million in funding to scale their networks.
This is really exciting because I think the energy sector is a very long-term bet. These networks take a long time to mature and interface with traditional energy systems because their goals are very ambitious. So, I'm glad to see that you have secured the funding needed to continue building over the next few years. I think this is just the beginning.
I wouldn't be surprised if by 2025, funding scales up from $3 million or $5 million to $10 million, $20 million, or even $50 million. The energy industry has many directions that can be practically invested in, such as purchasing one’s own assets or driving growth through some credit tools.
Overall, I think this funding will be well utilized in product development and network expansion. By then, people will start to see decentralized wireless communication and decentralized energy become two major fields, while other DePIN categories strive to catch up and prove themselves in similar ways.
Laser
So, what factors contributed to the rise of DePIN energy? For me, especially in the U.S., it is mainly the installation of photovoltaic (PV) systems. They brought more problems to the local grid. At the same time, the development of artificial intelligence (AI) in the past two years has led to the construction of many data centers, increasing volatility on both supply and demand sides. I think that’s why DePIN energy is so popular right now. I believe DePIN energy could become a very promising field to attract significant capital from traditional sources.
Sal
Yes, I completely agree. Just like telecommunications networks, the energy grid is collapsing globally. And now, this issue is starting to affect developed countries, leading people to pay attention to it and take action. I think as we see the U.S. grid continuously failing and struggling under the pressure of AI demand and other types of demands, DePIN energy will continue to gain attention.
When power outages begin to occur, people will understand more deeply the importance of energy independence, such as the significance of installing batteries locally.
Outlook and Advice for the Industry
Laser
Okay, it seems our time is running out. Thanksgiving is also approaching, and first of all, I personally want to thank you for supporting us in our very early stages. You had already supported us even before we were established.
This is my personal thank you to you. I also appreciate your support over the past two years. Additionally, I really enjoy our conversations because I feel you are a very thoughtful person focused on long-term goals, rather than the typical Web3 investor.
Over the past two years, I have spoken with about 400 investors, especially this month, I have contacted nearly 100 investors through Alliance. But I think you are among the outstanding ones, that’s my personal feeling. So before we wrap up this podcast, do you have any final thoughts on this industry or any advice for founders? Anything you want to share?
Sal
First of all, thank you very much for your compliment, Laser. It has also been great for me to meet you and witness the development of Starpower.
Lastly, I want to say that the power of DePIN is very strong. I want to emphasize that it should always be viewed from a long-term perspective. Whether you are a founder or just an ordinary citizen, you can truly help build the infrastructure around you and improve your community. I think many people do not realize that when you install a battery, you are not only helping yourself but also helping your neighbors and the entire grid.
For example, through cryptocurrency and energy DePIN, you can clearly see what value your actions bring, and this value is paid to you through tokens.
Moreover, the more we clarify to people that by doing something they should or could do every day, they are not only helping themselves but also helping others, the faster this industry will grow and improve everyone's lives. So, that’s the last point I want to make. If you are a founder looking for funding for a DePIN project, feel free to contact me. My email is Sal@EV3.XYZ.
Laser: Okay, thank you for joining our show. That’s all for now.
Sal: Thank you!