Frictionless Capital: Next-Generation Blockchain Investment

Frictionless Capital is a thesis-driven venture fund established in 2022 that has raised $20M to invest in high-performance blockchains and category-defining applications. The firm takes a concentrated approach to investing, focusing on projects that can outperform their underlying blockchain networks. Notable investments include Backpack and DFlow, with backing from institutional investors like Franklin Templeton and Foundation Capital. The fund emphasizes first principles thinking and maintains a strong focus on next-generation financial primitives, novel capital formation methods, and new coordination mechanisms through shared ownership.

A New Approach to Blockchain Investment

Frictionless Capital represents a departure from traditional venture capital approaches in the blockchain space. Founded by Logan Jastremski and Diego Perez de Ayala, the firm combines deep technical knowledge of infrastructure stacks with extensive crypto-native expertise. This unique combination allows them to evaluate projects not just on their immediate potential, but on their ability to fundamentally transform how value is created and exchanged in the digital economy.

The firm's investment thesis centers on what they term "next-generation blockchains" - networks characterized by parallel processing, low latency, high throughput, and minimal fees. More importantly, these blockchains can scale with improving hardware, leveraging increases in compute power and internet bandwidth. This focus has led them to be particularly active in the Solana ecosystem, where they see the potential for transformative applications that weren't possible on earlier blockchain platforms.

Investment Strategy and Focus Areas

Frictionless Capital takes a concentrated approach to investing, maintaining a small portfolio of high-conviction investments. This strategy allows them to be deeply involved with their portfolio companies, providing hands-on support in areas like product development, design, and go-to-market strategy. The firm typically invests in early-stage projects, looking for teams that are building fundamental infrastructure or creating entirely new categories within the blockchain space.

Their investment focus spans three key areas:

Next Generation Financial Primitives: The firm invests in protocols and applications that enable seamless and rapid trading of digital assets on high-throughput networks. They place particular emphasis on projects that optimize order flow and liquidity, looking for innovations that can improve execution for market participants. This includes investments in on-chain central limit order books (CLOBs) and platforms optimizing maker liquidity through novel aggregation methods.

Novel Methods of Capital Formation: Frictionless Capital is particularly interested in decentralized physical infrastructure networks (DePIN), especially projects serving rapidly increasing demand for "digital commodities" such as compute, bandwidth, data, and storage. They focus on networks dealing with resources that are not geographically constrained and can be traded globally.

New Methods of Human Coordination: The firm invests in projects that leverage tokens to create novel incentivization and reward frameworks. They believe that user-generated crypto assets (UGAs) will outpace professionally generated ones, similar to how user-generated content dominated the internet's evolution.

The Team Behind Frictionless Capital

Logan Jastremski and Diego Perez de Ayala bring complementary skills and experiences to Frictionless Capital. Their combined expertise spans traditional finance, blockchain technology, and startup operations. The team spent nearly two years developing their investment thesis before raising capital, demonstrating their commitment to thoughtful, long-term investment strategies.

The fund has also attracted an impressive roster of investors and advisors. These include Raj Gokal and Anatoly Yakovenko of Solana, Sergey Gorbunov and Georgios Vlachos of Axelar, Mo Shaikh and Avery Ching of Aptos, and Avalanche's Kevin Sekniqi. This network provides valuable insights and connections that benefit portfolio companies.

Portfolio Companies and Investment Approach

Frictionless Capital has made several high-conviction investments that demonstrate their thesis in action. Notable investments include:

Backpack: A leading crypto exchange and wallet platform that's revolutionizing how users interact with digital assets. The investment showcases Frictionless Capital's belief in the importance of user experience and infrastructure in driving crypto adoption.

DFlow: A platform optimizing maker liquidity on Solana by segmenting toxic order flow with a novel aggregator approach. This investment aligns with their thesis on next-generation financial primitives.

When evaluating potential investments, Frictionless Capital looks for projects that demonstrate:

• The potential to create entirely new categories rather than iterating on existing solutions
• Strong technical foundations that leverage the capabilities of high-performance blockchains
• Teams with deep domain expertise and a clear vision for their product's evolution
• Business models that benefit from network effects and can scale effectively

Research and Thought Leadership

Frictionless Capital has established itself as a thought leader in the blockchain space through its comprehensive research publications. Their analysis often challenges conventional wisdom about blockchain technology and market dynamics. Notable research pieces include:

"Playing the Right Game: Challenging Blockchain Assumptions" - This piece examines how many current blockchain assumptions may be flawed and argues for a more nuanced understanding of blockchain capabilities.

"Making the Case for Solana: Fighting the FUD" - A detailed analysis of Solana's technical capabilities and potential, published during a challenging market period.

"The Next Frontier of Blockchain Performance" - An exploration of how next-generation blockchains are pushing the boundaries of what's possible in terms of scalability and performance.

Security and Due Diligence

Frictionless Capital maintains rigorous security and due diligence processes for all investments. This includes:

• Comprehensive technical audits of potential portfolio companies
• Regular security reviews and monitoring of portfolio projects
• Active involvement in governance and security decisions
• Emphasis on sustainable and secure development practices

Future Outlook and Roadmap

Looking ahead, Frictionless Capital continues to focus on identifying and supporting projects that can fundamentally transform the blockchain landscape. Their roadmap includes:

• Expanding their research and analysis capabilities
• Developing new frameworks for evaluating blockchain projects
• Building stronger connections between traditional finance and crypto-native innovations
• Supporting the growth and development of their portfolio companies

The firm maintains a long-term perspective, focusing on projects that can create lasting value rather than following short-term market trends. This approach has positioned them well to support the next generation of blockchain innovation, particularly in the Solana ecosystem.

Getting Involved with Frictionless Capital

For founders and teams building in the blockchain space, Frictionless Capital offers more than just capital. Their hands-on approach includes:

• Strategic guidance and product development support
• Access to their network of advisors and portfolio companies
• Help with go-to-market strategy and user acquisition
• Technical expertise and infrastructure support

The firm particularly encourages founders who are taking first-principles approaches to solving fundamental problems in the blockchain space to reach out and connect.