Stephen: This is your host, Stephen Sargeant, Around The Coin podcast. But enough of the preamble. This is gonna be one of the best episodes of the year 'cause I get to talk cybersecurity, crypto investigation, blockchain analytics with one of the best in the business, Patrick O'Kain, who's a partner at Borderless Capital.

He was on the Anthony Pompliano podcast way back in 2019, and he was so smart about investment and you know, terrorist financing when he was working in the public sector. So we took all of those cool subjects, sprinkle in a little bit of agentic commerce and what AI agents and payments are gonna do, stablecoins.

We talk about Hypernative and Cloudburst and Cat Labs. All the company names that you know about is going to be in this episode. If you're in crypto, if you're in VC world, if you're in investigations, if you're in AI and agentic commerce, this is gonna be one of the best episodes you listen to.

I'm super excited. But don't listen to me, just go listen to the episode.

Actually, maybe we have to hold on for one second. Remember, I have to tell you about the disclaimer. Before we get started, a quick reminder, this podcast is for informational and educational purposes only. I know Patrick is a well-versed VC, but the views expressed by me or him are our own, and they do not constitute investment, financial, legal, or tax advice, nor should they be considered an endorsement or recommendation of any company, project, digital asset, or investment opportunity, especially 'cause we name-dropped a few companies in this podcast. As always, do your own research. You consult a qualified professional before making any financial or investment decisions, 'cause you ain't gonna be blaming us. Now on to the episode.

We actually have a special guest for two reasons. One, I listened to this person's podcast probably when I had just started entering the ag- industry back in 2019 on the Pomp Podcast, we have Patrick O'kain. You are now the partner of Borderless Capital, but you're a former public sector veteran when it came to intelligence and cyber threats and, you know, terrorist financing.

So why don't you do a light introduction of who you are?

Patrick: Yeah, sure. Thank you for having me, Stephen. I'm excited to be here. So my name is Patrick O'Kane. I'm a partner at Borderless Capital. in Borderless Capital, we are one of the most active core blockchain investors. We invest primarily in the infrastructure level of the, the whole ecosystem. we've been around since twenty eighteen. We have a really robust network and ecosystem. We're a registered investment advisor. I came into Borderless about two years ago to run, our venture funds and It's a really great position for me 'cause what Borderless did over the years, they invested really in the infrastructure.

So I, the way I look at Borderless is they were instrumental in what the blockchain industry looks like right now. So very heavily focused on infrastructure. And now when all of global markets seem to be going on blockchain rails, the buyers are different, the customers are different. It's much more institutional, and that's really my sweet spot.

So prior to joining Borderless, I got my start with the intelligence, agency. So I was an intelligence officer. That's how I started my career. I was focusing on counter-terrorism finance. That was between two thousand and six and roughly two thousand and twelve. And I took that, financial investigations skill set and went to the Department of Justice to focus on financial crimes investigations.

And at the time, Bitcoin had recently popped up, and the DOJ was starting to see that pop up in certain investigations. There was the Silk Road. There were a lot of different dark net marketplaces popping up. when I came into the Department of Justice, the government knew about Bitcoin and dark net marketplaces, but there was no concrete strategy on how to interact with this new technology, this new asset class.

So I helped, the agency build out those initial crypto investigative strategies and infrastructure. So really that is what led me down on the blockchain path. when I was running those investigations, you know, part of my job was thinking about this new technology and what capabilities the government needs on one side of the house.

On the other, I was act-actually running crypto and blockchain investigations. it was just a, a really interesting time and what really started to take shape in my mind while I was interacting with this, this new technology was that this is not just a story about a new venue for crime for criminals.

And that was kind of the narrative back then. But what I saw was, the early innings of a new infrastructure, a more digitally native infrastructure. And back then, I didn't really quite know or have the foresight to understand what that would be. But I am quite surprised looking back now on how the industry has grown and being able to observe the evolution of the industry and watch it mature over time and understand the complications and the necessities of this new digital world that we live in.

So after the Department of Justice, I went to KPMG, and I helped to build out KPMG's crypto asset services practice. And at the time, I think it was the only large consulting firm with a dedicated crypto team. And there we did consulting and advisory work for a lot of the larger incumbent crypto firms.

But mostly, my time was spent with your traditional financial institutions and fintechs, they needed an understanding on how this new technology worked and how they could ultimately start offering blockchain-based products to their clients. through that work that I was doing, it was really eye-opening on what institutions need for security and regulation and compliance.

So from that seat, I was able to see, okay, well, you know, on, on the government side of the house, I saw threat side of blockchain, but also this new intelligence layer, because blockchain collects a lot of unique, interesting data that can, be used and activated in other domains.

Moving into KPMG, I saw what institutions needed for real participation with blockchain. And now as a venture capitalist, it really comes full circle. So now I know the problems, I know the needs, and I can identify what companies and types of infrastructure need to be built and plugged in for all of this financial ecosystem to work in a, a very effective and in a way that preserves the integrity of these markets.

'Cause real serious money is now going on blockchain.

Stephen: Does it help? 'Cause you're coming from the public sector, what vendors they're looking at, how they purchase new technology? Does it help, you know, when you're investing in certain companies like, "Hey, this is gonna be perfect for government." Those are usually some of the larger contracts that some of these vendors are looking to source in the first place.

Does it help to kinda have a behind-the-scenes view of how the governments purchase certain technology and the needs

Patrick: blockchain.

Stephen: actually have for the technology?

Patrick: Yeah, yeah, that is massive. It's a massive benefit that we have on our team. And it's not only just an understanding of the procurement process, but it's also having the network to understand the needs of these various agencies. At Borderless, we do a lot of dual use investing, right?

So compa- dual use is kind of an umbrella term for companies that service both government clients and the private sector. So When we're exploring those investment opportunities, it's really easy for me to reach out to my network in federal law enforcement at the regulatory bodies, international law enforcement, intelligence services, identify what their needs are, what their budget looks like identify who the actual stakeholder is my p-portfolio companies need to convince to get a chance and a shot on goal there.

That is all massively helpful and a, a huge advantage that we bring here at Borderless. And the procurement process i-is definitely challenging with the government, but they're changing it. There is a very well-defined and articulated need at the top levels of the government the United States needs to bring in much more innovation.

So they are definitely changing the procurement process. There's a lot of different funding vehicles. There's all sorts of incubators and startup shops. There's grant money. The CIA has their own investment arm, that's In-Q-Tel. They're phenomenal. They've made some of the best dual use investments throughout history.

So there are a lot of new angles for young, agile, innovative startups to come in and really start to get contracts with the federal government. And it's not just your, incumbent primes, your Lockheeds, your Northrop Grummans. They're great, and they, still play a role in all of this, but The reality is, and what the officials have realized this technology is moving much too quickly to rely on just these behemoth primes to bring in the innovation.

So there's much more desire and encouragement and evolution of the procurement process to allow that to happen. Navigating the procurement process and having that network, I think is a huge, value. And really, the way we look at where blockchain stands in the macro environment right now is, it is very much a dual use technology.

In fact, the, the White House has effectively stated that in their 2026 Cyber Strategy for America, they effectively classified blockchain and the security of blockchain as a national security priority, because the implication is that all financial markets are going onto blockchain rails.

There's more volume going through stablecoins than the Visa network. That's very real. Tokenization is ramping up in a meaningful way. One of our portfolio companies, Securitize, we're one of the largest investors in Securitize, they just went public.

We were at the, closing bell ceremony the other day with Carlos, the founder and we're very proud of him and the whole Securitize team. So I bring that up because the blockchain is becoming institutional. It is the future of global finance, and that needs protected. so we do look at blockchain as a national security priority, and that will require navigating procurement processes with the government because everyone needs to participate in some form or fashion with this technology now. Regulators, law enforcement, everyone

Stephen: Are you surprised about this shift? It looks like you've made some huge bets early on, Cat Labs, Hypernative, at a time where I think, you know, when Chainalysis first came on the scene and the Financial Action Task Force is like, "You need blockchain analytics," there was a huge bump in investment, but that's kinda died down, I think, in the last five years.

There are still some outliers, like Elliptic raising 120 million. Are you surprised about this shift into national security, cybersecurity, that we haven't really seen over the last four to five years, especially since you've been in the VC spot?

Patrick: I'm not surprised that there's this transition into a national security discussion with blockchain. I kind of always implied that or directly said it in the past, and I think a lot of people thought I was being hyperbolic about it. But when you think about how valuable those rails are going to be and are right now they really need protected.

And when you add in AI and agentic commerce, we could talk about that all day long. So we've never lived in a world where the lion's share of global commerce is done autonomously, right? We've never been in that, that, that environment. And the attack surface is going to expand exponentially.

We don't quite know exactly what that's going to look at. Like, but when you think about all of these AI agents making micro transactions, that can be really easy to just blend into the background as noise. And, when you add on to the, the, the changing cost structure of modern conflict, a little bit of money goes a long way, right?

So, you know, Tomahawk missiles cost several million dollars, but Iranian drones cost price of a Toyota Camry, right? So government has to send out million-dollar missiles to intercept, the price of a Toyota Camry flying through the sky. So the cost structure is different.

So small transactions go a long way and make disproportionate impacts on the battlefield and just the, the global environment. all of the, the security and compliance infrastructure has to evolve into this reality that the, the world is evolving into. So security is always going to be a cat and mouse game, right?

Whenever there is a new technology that's great for the world, that's also great for people that wanna use it illicitly. So as our foundational technology improves on how we move money and the systems that move money, our security infrastructure has to improve commensurately with that.

Stephen: From a VC perspective, though, I guess the question is, like, is this profitable? Is there enough revenue? Is there enough market share to make compliance, in crypto profitable? I think the running joke in blockchain analytics is that these companies raise a lot of money, but they're not profitable.

I don't know how true that is or not, but what are your thoughts about like, yes, the market needs these services. Yes, there are vendors that provide these services, but is there enough juice to squeeze out for VCs to make back some of their money? And I guess Securitize is a perfect example of like, yeah, there must be if it's-- companies like that are going public.

Patrick: That's a fair question because we have seen a lot of companies raise money and launch phenomenally profitable companies without taking KYC security and compliance as seriously as, you know, maybe in some jurisdictions they should. So it really depends on kinda what you're building the client that you're selling into.

But a lot of that, building that happened over the last ten years, that set this foundation and, right? This was brand new.. Not a new technology necessarily 'cause cryptography has been around forever. But how it's utilized with blockchain and moving money around and with the advent of smart contracts, all of that is quite new, right?

So. A lot of investment went into building this, this new financial world that we have, right? security compliance KYC was not always top priority, and things tended to work in that environment. But now what we're seeing is the customer is changing, right?

So when you think about mass adoption or expanding adoption, we have to define what that means now. Historically, that was TVL and how many retail users have downloaded the wallet, active users, things like that. I don't know what mass adoption looks like now, but it's not that. It's very much institutionally focused.

So mass adoption will be the institutions using blockchain-based products, and it will be agentic commerce millions of AI agents transacting without human intervention. So that's the new mass adoption. And the way I look at security and where that plugs in is before it was looked at as a, cost center now, that security layer is necessary for these companies to unlock the value from the new set of customers which are institutional.

So when you're thinking about security and compliance, I don't think you wanna do it for security and compliance sake. You have to do it for a real business reason. And if that business reason is the security infrastructure that your company has purchased or bought unlocks new revenue streams then yes, then security and compliance is one hundred percent a VC investable category.

In fact, defense tech has been the, most prolific VC category recently. It's outperformed every other sector, and that's kind of a rare, thing historically because of the procurement processes and how slow it was never viewed as really a strong defense tech category.

Now that's changed. It was the best performing category over the last year, and that's looking like it's going to be the same this year. There's a lot of M&A in this space. And you need a lot of trust. So another thing with everything that's happening now with AI and blockchain and the bad parts of blockchain too that have happened over the years, trust is key right now.

That people are willing to pay a premium for trust and it's one hundred percent necessary.

Stephen: And I think too, like I, you know, I'm not in VC world, but it looks like Silicon Valley has stayed far away from defense and war. You know, they had this bad stigma to it, annotation, and probably 'cause the procurement process was so hard. I think after you saw Anduril and what Palmer Luckey has done, then you saw some of the brighter minds like, "Hey, we can also do th- that using tech and using AI."

So you're Yeah, a lot more entrants in the space that have the same business and entrepreneurial chops that some of Silicon Valley's biggest software investors and software producers have created.

Patrick: It makes sense when you think about it. So the Defense Department is, I believe, the largest customer in the world. So there's a lot of money there. When you're focusing on dual use investments you're kinda hedging. That investment is somewhat hedged, right?

'Cause the, the government procurement processes they are not necessarily cyclical in the same way that the macro environment is. So there, there's a little bit of a built-in hedge with dual use capabilities. And then when you add on the improvements to the procurement process and the ability to get earlier startups in to the government procurement process much sooner than normal, it really makes sense for VC to start participating in the defense landscape.

And then with the geopolitical environment that we live in I believe that there's always going to be significant and increasing budgets for global defense spend.

Stephen: Yeah, de-definitely. I'm curious, does your thesis at Borderless Capital have to change? 'Cause we're, you know, you mentioned agentic AI and agentic commerce, but that kinda leads us back to the blockchain 'cause a lot of those agents are using stablecoins. You've invested in companies like OneMoney. You have the kinda infrastructure layer of cybersecurity with, like, Cloudburst, Cat Labs, Hypernative.

And you've also invested in companies like Blockdaemon and Circle. So, do you have to change your thesis and change the way your funds are created, or is it like, "Perfect, more AI us back to our infrastructure 'cause they're still gonna be using blockchain rails"?

Patrick: A little bit of both, we change our thesis based on the changing conditions, the changing macro environment, what the market needs, what investors want. We always keep our ear to the ground on what's happening, and we structure our funds accordingly in the way that we feel is best suited for what the market needs.

So when you think about the evolution of Borderless, we started out launching smaller thematic funds. So we would pick core segments of the ecosystem and launch vehicles to support that ecosystem's growth. We evolved that strategy to not only ecosystems, but to categories. Our first category that we focused on was DePIN.

We are one of the most active DePIN investors, and I am so bullish on the DePIN category in the future. Right now, over the past couple of years and now, those projects have taken a hit. But I think DePIN is still one of the most elegant blockchain-based solutions out there, and I think maybe a year to five years down the road, DePIN is going to come back in a very serious way, integrating with a lot of institutions and governments. And then we're thinking: What does this industry need? What are the gaps? So then we started focusing on gaps, and one of the gaps that we identified a few years ago was interoperability. We have all of these fragmented ecosystems. This liquidity is fragmented.

We need interoperability so that-- so everything can kinda seamlessly work together. So we launched the Cross-Chain Ecosystem Fund to support the evolution of all of this blockchain ecosystem working seamlessly together. Now when you look back on that, it might look like that's all over the place, but the common theme that runs through that is Borderless has always been focused on the infrastructure layer of what's being built here and really focusing on what is needed for institutional and mass adoption.

So that core thesis never changes, but how we express that thesis does. So, you know, moving forward our later funds are larger funds and more agnostic, and we go across ecosystems, across themes. We change our strategies aligned with the market, but our core thesis and theme remains relatively consistent over the path, really just focusing on the infrastructure that's needed to support financial operations at an institutional level.

Stephen: How do you balance that though? You t- you mentioned DePin took a couple of hits, but like someone could have said the same thing about stablecoins two and a half years ago, right? Like, you're investing in stablecoin companies? \-- They'll never have a market for that, and there's CBDCs, we don't need stablecoins.

How do you stay the pass and stay the course when you're really concentrated on a theme and a belief in that theme without like being like, "Oh, this is gonna sh- end up like NFTs were in 2021 and, you know, metaverse in 2021"?

Patrick: We have a really comprehensive underwriting process and you know, I think we do a good job of understanding what is real and necessary and advantageous to just global business operations in any capacity, right? So that's what we index for. And we are long-term investors, and we hold our thesis long.

Don't get me wrong, we are prudent, and we do iterate when necessary. But for some of these core categories, we have to give those time to mature. This tech is coming together from a lot of different angles and a lot of different industries and regulatory bodies, jurisdictions are all participating.

So this takes time. This is complicated we believe our thesis on DePin are strong and we're seeing them through. But we-we're, we're not afraid to iterate if we've made a wrong bet. You know, in VC, everything moves quickly. You have to be flexible.

That's the reality.

Stephen: How do you balance, like, a core thesis and saying like, "Hey, DePIN's gonna come out in two years," versus you have to attract investment as well, right? AUM is so important for VCs, and I'm assuming that a lot of the investors when it comes to the AUM side, they're also, you know, actively on Twitter and seeing what the hype's about, and they wanna be new to AI, and they wanna be in the most interesting thing so they can talk about it at dinner tables.

How do you attract that investment and also, like, convince them that, like, this is what we see happening in two to three years, even though that's not the thing making the most noise on X today?

Patrick: we've made some phenomenal investments over the years. We have a really strong LP base. and we're very close with our founders in the, the ecosystem. So we do put out a lot of content to our LPs and keep their-- you know, we help them keep their ear to the ground on the latest and greatest on what's happening in tech.

We'll give them our thesis on what we think is coming down the pipeline. the benefit to, to Borderless, and I think, you know, what, what allows us to track money and investment, is that we're very unique. We have some of the, the m-most deep ecosystem ties. partnerships with pretty much every meaningful layer one.

We've been very good at building ecosystems from day one, and that's all very important in this space, right? That's-- These networks are really hard to replicate, and they're necessary 'cause nothing being built is being built in a vacuum. It all has to operate. And when we can bring in-- when we can invest in a company and expand their reach to pretty much every different blockchain, to fintechs, to government, to glo...

And that's globally, Latin America, Asia, Europe. That's that's real reach that is hard to replicate. And I think our investors and a lot of our portfolio companies have seen that in the past.

Stephen: How do you balance that with a lot of the, you know, you have some of the core companies that blockchain analytics infrastructure when it comes to crypto compliance, but we're now seeing hundreds of entrants in the space. Everyone has, you know, a cloud code wrapper or AI agent that can now do AML from start to finish or compliance products and solutions.

How does that impact, you know, how you do your investment and your existing portfolio companies? Does that dry up some of their moat, or is that even more power to them to create a bigger moat because they're leveraging that same technology, but they also have a huge existing customer base and a better understanding of the market because they've been in it for three to four years versus just starting and, you know, relying solely on Fable?

Patrick: hit the nail on the head there. It's a fair question 'cause, you know, every deck I see has some form of AI agentic XYZ in there. And it is really easy to spin up a, a pretty, pretty comprehensive product. What isn't easy to spin up is trust, and I kind of talked about that before.

Trust you can't you can't build trust overnight with a, a great functioning product. You know, with stablecoins moving real money online agents are going to be interacting with that. That is real money and tokenization. Capital markets are pis- participating, right? So with stablecoins, you've got the money layer.

With tokenization, you have the capital markets. That is full financial infrastructure, and that needs protected. And the people that want that protected need trust in there. So the, the companies the, the security and compliance related companies that, that we've invested in before, they're really well set up.

They've built their operations. They are crucially involved in the, the blockchain ecosystem as, as it stands now. And a lot of them are iterating their products to ensure that they can provide the necessary services at every point along the, path of an AI agent payment.

So, there is going to be more competition, but the trust is a big moat that I think we're going to see more and more. And that trust comes with data and collection and all sorts of technical competencies that have matured over the years with that company. That's hard to replicate over, over, you know, with a short period of time.

So I think AI will dry up weak moats, but um, it will accelerate and expand moats for the strongest companies there.

Stephen: Tell me about the deck. So, you know, we have a lot of builders, entrepreneurs, payments companies that listen to this podcast. What's standing out to you then in a deck? If you're seeing the same deck over and over, AI power this, quantum computing that, what's something in a deck or something that someone pitches to you at a conference or event that's really standing out?

Are there key words? Maybe the, the less words they're using that are buzzwords are better. What's something that's standing out to you from some of the investors that, whether you took a chance on them or not?

Patrick: authenticity. You can tell pretty easily if somebody's bolted on AI narrative to, to the product. And that-- and look, that's fine. Every company needs to be using AI, and if they're not using AI, I don't think they're investable, right? so everyone's using AI, and that's fine.

What I look for are opportunities that haven't really been built yet. we have so much infrastructure built, some of the existing gaps and holes they're much more visible and it's easy to identify the types of companies that we feel are necessary for that next step in blockchain technology.

So authenticity in solving a real pain point really important. I'm focusing on later stage opportunities right now, so, you know, it's not just about the, the founder and the idea, it's really about core operations, the maturity of the company, the security profile of the company. If security and compliance were built-in native from day one, that's kind of what's expected right now.

Those are the types of things I look at. And I get a sense of what my government network needs. So when I go out looking for deals it's pretty targeted right now. So much still needs to be built and that's not gonna slow down. So yeah, just my advice to founders is on their decks, just be honest, real, and articulate the problem that you're trying to solve and why you think this is gonna make money.

That's all you can do.

Stephen: When I'm listening to other podcasts like the "All-In" podcast, you know, everyone's talking about the SaaS co- SaaSpocalypse, you know, of software companies getting edged out by AI products and solutions. What are some of the concerns that you see with the companies that you're working with? Is it quantum computing that might...

You know, what is one of those things that may never happen, but if it does happen, we should kind of be aware of similar to where AI is now that's kind of etching out some of these companies that have had market share for decades?

Patrick: Venture investors in general have to really rethink what the moats are that we're trying to capture. It's, no longer pure tech, and it hasn't been for quite a while, right? And, you know, from being a blockchain investor for years, right? Tech was never something that you could underwrite as the moat because most of this was open source.

So you look for other areas of edge, and a lot of that is the data, right? Do you have proprietary data? Do you have proprietary data collection techniques? Do you do you have tech components that could be bought by a fintech? That's very relevant right now. So yeah, we-- I think we all have to reevaluate where we're trying to find the edge.

Business models are changing drastically, and I think we're going to see a lot of unique ways to make money coming down the pipeline. And I don't think anyone's really sure how that is going to look, and anyone that says they know concretely I don't think is telling the truth.

But it's something that we're focusing on, and we realize that everyone has to be agile here.

Every venture fund's mandate is different. Some firms can invest in offense of, some people can in-- firms can invest in, you know, vice type of businesses. When I'm thinking about the national security angle of blockchain, it's about safety, and it's about protecting everyone's money, right?

So, it's not about using us-using these tools for illicit or unethical purposes. It's really protecting these financial markets that a lot of us are using now and all of us will be using in the future. And that's making sure that if my funds get stolen or somebody's funds get stolen, that law enforcement has the real capability to run an investigation and get that money back.

That's all very meaningful, right? And and it's very important that you know, the, the regulation is on track there. Because the United States is in a really great position with stablecoins to u-use these stablecoins as a, a geopolitical device to proliferate the US denominated currency globally, right?

So most of the, the currency-- stablecoin currency out there is denominated by USD USD. So that's effectively the more USD-denominated stablecoins, that's effectively encouraging entities around the world to buy US debt. So it's a geopolitical tool. There's a lot of benefits to it that aren't ne-- that aren't offensive.

It is really protective. And I always go back to, this is kind of cheesy, but I go back to, to quote something to the effect of, "Good defense is the way to peace." Right? If everyone is protected. The we-- there's, the attack surface is expanding every day. And protection, global protection for citizens, for countries it's very important.

From the lowest level, from individual and home safety, all the way to sovereigns. I think security i-is just so crucial there. So when I think about the national security aspect of blockchain and blockchain security that's kind of the angle I'm and lens I'm looking at it through.

Stephen: I thought you were gonna say good defense wins championships. I thought you were gonna give us

Patrick: There's no I in team. There's no

Stephen: I'm curious, are there any companies-- I think you have a lot of well-known companies. Circle, very well-known that you've invested in. Securitize, another example. Is there a company in your portfolio, maybe a weird name that no one really knows about, and you're like, "This company does really cool things."

Nobody really knows about it. Might not be the most, you know, craziest company out of our portfolio, but it's doing really interesting things and, like, maybe it's even a personal one that you are very backing with internally, like, "Hey, we really wanna invest in these companies." Is there any companies that come to mind that are like, "Oh, this is really cool.

I think more people would be surprised if they heard what they do"?

Patrick: one of my favorite companies, uh, at Borderless is a company called Cloudburst Technologies. Uh, Evan Coleman is the CEO over there. He's a monster. He's great. Cloudburst is a threat intelligence company that is geared towards the blockchain ecosystem.

I mean, don't get me wrong, the, Cloudburst collects the most robust data set out there in my mind. When I met Evan years and years ago when I was a, a special agent at the DOJ, he was running a, a, his previous company. It was a, a threat intel company, and I brought him in , to try out the data set 'cause I was running crypto investigations, and I needed to find attribution data, and the blockchain analytic data was great, and I needed that, but there was a, this huge missing part. I, you know, I could

Could follow the flows of fund.

Stephen: it's like, okay, this

Patrick: Yeah, it's like who I-

Stephen: perfect. Now where do we go to their house to actually pick up that criminal?

Patrick: yeah, it's crazy. It's like I see this this stolen money. I can watch it go, and I see it there, but I have no idea where... So I needed that data and so I was trying to find it, and Flashpoint was one of the companies I talked to. Great company, but it didn't fully answer my question. Fast-forward, Evan launches Cloudburst, and it's the product that I needed at the time.

So as a former investigator, when I was working with, with Evan on the Series A that, that we just led, I knew that there was a real need for that product. I experienced it firsthand. what's really interesting about Cloudburst is they are collecting data from all of these sources, and they have a proprietary system that allows them to do that in a way that is very hard to replicate, and it's y- you know, years of collection and proprietary techniques.

So, so their collection i- It has a very secure moat there, and their data i- very valuable. And what they do with that is they take that, that data and have their AI engine make insights by pulling in and ingesting the blockchain data as well. So you can use that system and get a real comprehensive picture on the illicit activities on a network.

when you see the flows of funds on a blockchain network, that's the manifestation of a crime that was decided to be committed off-chain.

Stephen: On Telegram or in this groups of, you know, illicit actors that you have no purview to

Patrick: that genesis of this illicit activity i-is really important because we can't operate in an environment where our analysis of an illicit action is postmortem. It's an audit of what happened. It has to be real time, and it has to be interdicted before that, that, the, that money gets to the final destination.

Because like I said earlier, a small amount of money can disproportionately affect battlefield operations. So, having real-time intelligence is key. Not a nice-to-have. It's going to be a requirement moving into the future. And I think Cloudverse is set up in a really nice position to be plugged into that at multiple different levels of kind of the, payment flow there.

Stephen: I'm biased. We worked with them on doing some All right with them for three months. I was blown away by some of the data they were able to pull, some of the on-chain and off-chain connections they were able to make. It's almost like, you know, perfect for, you know, the public sector. I think it's tough for, like, private companies.

Like, if you're a big crypto exchange, you may not wanna see all of that activity. So it's hard to sell in to a crypto exchange that knows it exists, but they're like, "We don't have that many compliance professionals to now, you know, handle all these new, you know, connections and investigations that would start."

But I think more and more FinCEN is pushing companies to be like, "You better figure out where your attack vectors are and mitigate that, or you're gonna be in huge trouble in the next few years."

Patrick: Some of these companies might not want to do that, but they're going to have to do that. That's it's prudent, it's necessary and regulation is gonna mandate you to do that in some jurisdictions. Other jurisdictions a lot of companies can get away with that but frankly, you know, those aren't the, the types of companies that we would look at or participate with.

Because the US government is starting to put their stamp of approval on this new technology having the right security protocols and technology built into workflows is not going to be a nice-to-have.

It's going to be mandated

Stephen: Can you tell us a little bit about Borderless Capital, whether you're raising for another fund, you know, what are your thoughts, where you stand now you know, how you're looking to expand? You know, you talked about the content and you speak with clients. Is there, you know, a

Patrick: Yeah.

Stephen: person,

You know, media, like, perception that you wanna put out there to the industry as well as like, "Come here if you're a founder that likes be more hands-on or get connected with the cyber intelligence industry or infrastructure industry."

Give us a little bit more about Borderless Capital.

Patrick: Borderless Capital, really great firm, and I always go back to this. We, we have just really unique access that is very hard to replicate, and it's very beneficial to a lot of these founders and the ecosystem in general. We were founded by Arul Murugan and David Garcia.

Both are serial entrepreneurs, both are operators. So Borderless was started with operating as its ethos. we have a really big team full of smart people that have done amazing things in tech. So that network i-is just really powerful. We're very hands-on with our team for me personally, you know, I like to work with founders in a very hands-on way.

I don't like to try to be a shadow CEO or anything like that but there are problems that I can solve, right? When companies are trying to sell into institutions and into governments, I'm really good at preparing them for that, getting them in the right doors making sure that they're talking to the right people and that what they are selling is articulated to the right person on the buy side there.

And then with Borderless, broadly speaking, this is just an ecosystem that you can't replicate, and it's so important for the evolution of blockchain and agentic payments in general to have this ecosystem because all of this needs to work together in a concrete way. Nothing is built in a vacuum.

Stephen: we've seen a shift, maybe even some of your own companies, Hypernative is a great example, that's not just about, you know, the selling into government and selling in, you know, to private or enterprises. We're seeing a whole shift to, like, traditional financial institutions touching digital assets.

A lot of these more crypto native, you know, proposals are now shifting that way to, like, 1inch has changed their branding, Hypernative. saw Defense change their branding to, you know, attract more of a traditional digital asset/centralized companies to get involved. What is your thought about the shift to attract, you know, these more traditional players in the space?

Patrick: the maturation of the ecosystem is what we're witnessing, Stephen. thing.

Stephen: lot better. I just explained it for like five minutes. You gave the one line that, like, summarized it perfectly

Patrick: that's the reality. The, the new clients are the institutions, and they're big clients, but they come with really high standards on what is required for them to participate. you know, branding is part of that. You know, blockchain in general is rising up to a new type of client that, that blockchain needs to serve, and what we're witnessing is a maturation of the ecosystem.

I really don't think blockchain is getting away from its really te-- hardcore tech roots. It's really that-- all of that built what we have now and, you know, that, that's amazing. But what's happening now is this, this great technology is being shaped and molded to a client that needs to use it in a different, more controlled way, and I think that's a good thing.

Stephen: What would be your advice because lot of people in a public sector transitioning to more private sector companies like your blockchain analytics companies, like your chainalysis or TRM Labs. You're one of the few people that I know that have transitioned all the way to VC world."

And it's funny, in that podcast you had with Anthony Pompliano you were actually really well-versed on investment back then when that was a long time ago. What would you say for people that are like, "Hey, I love the strategy of it all. I might not want to be a founder, but I want to transition from the public sector or even the private sector and get into the VC Anything that you would suggest or recommend to them?

Patrick: The first thing is don't underestimate the skill set that, that you have, right? Having that, that government background having experience on the front lines with real threats, real security incidents that's real-world experience is incredibly valuable and welcomed into the blockchain ecosystem in a very meaningful way.

And then, you know what I found with a lot of former government folks that have gone into private sector, that comes with a lot of leadership skills, with team-building skills, organizational skills and discipline. All of that is, really crucial to running a business.

These are complex things.

Getting a, a company from zero to one and then beyond, it is so tough. core skills really that you learn in the government and you're required to learn are crucial. And so don't underestimate that. And also don't underestimate the size of the opportunity here.

I think this entire podcast has been about, you know, kind of security investments around that. And I think that's for a reason, because that is one of the components that is so necessary right now. You know, a lot of the, market research places put out forecasts on how much value is gonna be going through agentic finance, and it's in the, you know, some are saying in the trillions.

That's very real. So security will have to evolve. So the opportunity i-is real and don't minimize your government experience. The one difference and I think the one thing that you have to be cognizant of is in government, right? You can be, you know, the best analyst, the best investigator, a-and that, that's great, and you know the mission.

But, i-in government, the mission is the mission. In business, you have to be able to find the right people to sell your product to make sure that you're addressing their mission. You have to make sure that you're solving the right pain points. Like, there, there are different skill sets outside of just knowing your stuff in blockchain and you have to navigate through that.

But really there's a, a ton of opportunity, and now that blockchain is really maturing in a meaningful way that maturity, that you kinda learn while working in the government i- is very well-suited now for the industry and the trajectory that we're on.

Stephen: One thing I-- was speaking to a lot of former law enforcement I were coming into AML and compliance roles, they realized like that brotherhood and sisterhood isn't the same as the... It's very cutthroat in some of these private companies, and I think that's something shocked them a lot.

Patrick: There's differences, right? When you're doing complex law enforcement investigations or intelligence operations and you're embedded with your team for long periods of time doing dangerous things, yeah you form these tight bonds.

And again, when you're in government, the mission is the mission, right? In, in private sector, you have-- your mission your primary mission is to-- your company needs to make money. But to do that, you have all these little micro missions that are really tough to navigate around. So i- yeah, it's it-- you don't necessarily have that camaraderie, but you find-- f- if you are making a transition, find a good team.

Take your time to find the right team. That makes or breaks your experience moving into the private sector. I'm very fortunate to, you know, since I left government, I've only worked with really tight-knit, high-powered teams. So I, you know, my experience, I'm, unfortunate to not have I, I do feel like I have that tight-knit ambitious crew around me of women and men that I can trust to drive forward our operations.

So really, you know, the team you choose to be on, that, that will make or b- or break your experience. So choose wisely.

Stephen: I'd love to end the podcast on stablecoins. A huge, you know, push in the US has changed a lot of the way stablecoins are used and regulated around the world. You've invested in some really interesting companies like One Money and Circle. Can you give us your thesis of stablecoins and how we're gonna see it evolve over the next maybe three or five years?

Patrick: Stablecoins will continue to proliferate. They'll continue to expand in volume and use cases. The biggest thesis I have on where stablecoins are going is on the autonomous finance front. I Stablecoins I believe are going to be the rails for that. You know, the X402 protocol is getting a lot of traction, and I find that very interesting.

We've been following that closely. I don't know what other infrastructure will be kind of the, the foundation, but the idea of stablecoins I think is going to be permanently built into that. when you plug in tokenization, you have payments and commerce and capital markets all on the same stack in the blo- these blockchain rails.

So I think what stablecoins are going to unlock is more composability in quote-unquote traditional financial products. And that's going to be very meaningful for a lot of the institutional financial players RIAs and brokerage firms, banks. That composability that will be unlocked when we're more at scale with tokenization stablecoins.

That's what I see.

Stephen: How do you keep up to date on what's happening? You mentioned X402, you know, pretty popular now, but I'm sure you knew about it when the standards were just forming. How do you keep your ear to the street? Is it X? Is it, like, just conversations with other colleagues and conversations with founders, so you see a lot of the new ideas coming before they even, you know, come close to hitting the market?

Patrick: I live and breathe and sleep all of this stuff to my wife's chagrin. But it comes from everywhere. We have a big, really well-connected team, so, pretty much the, the latest and greatest is getting communicated to us that way. We're always following X.

I'm talking to prospective portfolio companies, to twenty a week sometimes. So we're in a lot of conversations uh, and all of that, that intel mar-market occurrences and all of that, that stuff is coming to us in a very meaningful way. Then you have the problem of distilling

The signal through the noise.

And we're building internal proprietary AI tools and testing them out right now to see what ones we're going to operationalize just to streamline our internal ops there and how we make decisions. All of that we're always trying to improve, always trying to use the latest technology to make us the best investors we can be.

Stephen: I feel like there should be an Apollo for, like, VCs. Like, you know, the Apollo had all these great acts, but there's hundreds of acts at the Apollo that never amounted to anything. But the ones that do amount to anything, it's like, You remember that time we were at the Apollo?" The Apollo has all these great video clips of them.

I feel like the conversations with every portfolio company should be recorded in some way so you can pull them up 20 years ago. Like, when you see the early Sam Altmans and the early Jensen Wa- I feel like there should be an Apollo for VCs that, you know, their main focus is just recording every conversation with these new companies, and 20 years ago, like, the winners come back and do an interview with them.

Patrick: That'd be fascinating, I mean, we try to track metrics like that not to the degree you're talking about. But yeah, being able to track our thinking, the market's thinking as we, go through our investments.

I think that's a really good exercise to have, and we do that. In fact, I just put out one of our fund's scorecards on the thesis. I'll send it off to you later after this call. But effectively, we, we do review our theses. When we're launching a fund or a strategy or an initiative, or if we just have a theory, we track that.

And you know, after a period of time, we'll go back and and give us a score and see how we did what we got right and what we got wrong. I think we've been, you know, trending pretty well with, our predictions. Let's, hope that keeps up. But the industry is just moving so, so fast.

You always have to iterate on where you're focusing. And if you're not you have a real chance of being left behind 'cause everything's moving at hyper speed right now.

Stephen: Is there any fear of putting out content about your thesises, about your concepts because of other VCs or competitors, or you-- do you kind of take the A16Z approach? You put out everything, execution is the biggest difference no matter what.

Patrick: Look, execution is the difference. We're a VC shop. I have my thesis. I think it's you know, w- at Borderless we, we think they're great. If somebody else can run that thesis, great. It's gonna support the ecosystem. We're not worried about this. it brings the whole industry up if everyone's sharing our thinking and what we feel is important is, and is necessary.

And frankly the blockchain VC ecosystem is expanding to non-blockchain now as well, and I always thought that was going to happen. I think, you know, moving forward there's not going to be a crypto VC or a blockchain VC because this is just tech, right? This is technology.

Stephen: And, you know,

Patrick: It-

Stephen: hardware software

Patrick: Right. Right. And, And that's what it's going to be.

So I think, you know, now that we're out of this, zero to one build phase of what is this new thing this is now just technology now. I think we're gonna see a lot of more traditional tech investors, because blockchain is an infrastructure that a lot of different industries are using, right?

That's all it is, and it's great, and it can make a lot of money. but that's what we're seeing. And the crypto VCs are actually... it's not so competitive. We all work very closely together. We share deal flow, ideas. and I think the idea is really because all of this has to work in step. There's no point in, in fighting because all of us are working together to build a great financial ecosystem that's secure for everyone to use.

Stephen: There anything that you're seeing trend-wise? Like, you know, obviously you have your ear to the street. Is there anything you're seeing, like kinda nerdy, like whether it's Padel or biohacking or Neuralink or, you know, even a- playing, you know, running your own AI modules off a Mac Mini? Is there any, like, unique things that you're seeing like, "Oh, saw a couple founders doing that"?

' Cause it seems like what the nerds do now is what is mainstream in, you know, three to five years.

Patrick: This might not be nerdy, but I find it fascinating is what's happening on... at the intersection of science and AI. The pharmaceutical companies leveraging these frontier models for drug discovery. Now Claude's going to be doing that, so now they're competitors. . There was a service provider, and now they're competitors. So I think with that, we're gonna see a lot of really unique health-related science-related discoveries and improvements and growth there. So that's really exciting to me.

And then you know, kind of more emerging tech that I'm most closely following is really autonomous payments, commerce, finance. Really understanding that whole stack what is necessary, what's not being built, what I can find that needs built. Working on understanding what government agencies are saying about this.

So that's kind of where I'm spending most of my time on the emerging tech front.

Stephen: Are you worried about that? Obviously, you handle a lot of cases to do with terrorist financing. You realize you don't need a ton of money in order to, you know, enforce some of these despicable acts all around the world. Are you worried about these autonomous mini payments going all around the world with, you know, very little supervision?

Patrick: Yeah. I don't know if I'm worried about it. I have a lot of trust in the, the technology that's being built. It is definitely a concern and a risk, and that's why people are building products to address that risk. that's part of what scares me. It's really just the speed at which things can happen now, right?

With Fable five being pulled off for export controls amazing AI models that can really hack these critical systems are going to get released, and that is scary, and I really hope that our tech can keep up at the pace with with which the, the adversaries are building.

So that, that's scary. I- I'm paying attention to quantum. I think that, you know, having functional quantum computer is probably much sooner on the horizon than some people say. But I think the threat there is real now. That's not a future threat. It's the harvest now, decrypt later.

That is a threat now. So adversaries are actively collecting and storing encrypted messages at scale for decades, and they're just holding them until the, the technology is there to, to decrypt. So the, the... That threat is real now.

I like to see when certain technologies are being mandated by the government because that, that says there's almost like a a permanent RFP for some of those businesses.

G- So, you can identify compliance departments, security departments, and governments are going to be spending money on.

Do you have to, like, pitch? 'Cause we saw the government with Anthropic and, you know, certain companies got access to Fable 5 to check certain things and security risk and other companies don't. Is there a fight to make that shortlist of companies that get to use the AI technology?

If you know how I could get access to that, I'd love to. I don't think anyone at Borderless was given access to that. But I would love to play with some of those more frontier models. I think that'd be very exciting.

Stephen: Patrick, this has been an amazing conversation. Where's the best place for people to find you? Where are you more active? X, Reddit maybe, LinkedIn?

Patrick: Now Li- LinkedIn is probably the best and I'll try to be responsive on that. But yeah, please if anyone's building in, the intersection of the points where we're investing and what we talked about, I would love to talk to you. And then you can al- also go to borderlesscapital.io.

That's our website. We have a contact form. Feel free to reach out. But yeah, Stephen, this has been great. Thank you so much

Stephen: So fun. Thank you, Patrick

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