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May 20, 2022

The Three-Body Problem: Finding the New Stable Points in Venture Capital

By

Frank Rotman

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William Edwards Deming once famously said, “It is not necessary to change. Survival isn’t mandatory.”
‍
These words are profound, humbling and important to internalize. Societies change. Economies change. Beliefs change. Industries change. Everything changes.
‍
But there’s nothing that forces any individual participant in an ecosystem to change except the desire to survive and thrive.
‍
The Three-Body Problem (downloadable below and to be presented at LendIt USA 2022 in New York City on May 26) is an attempt to put a framework around the changes that are occurring in the startup ecosystem, the LP community and how VC firms need to strategically reorient themselves if they want to survive.

View and download the presentation here

William Edwards Deming once famously said, “It is not necessary to change. Survival isn’t mandatory.”
‍
These words are profound, humbling and important to internalize. Societies change. Economies change. Beliefs change. Industries change. Everything changes.
‍
But there’s nothing that forces any individual participant in an ecosystem to change except the desire to survive and thrive.
‍
The Three-Body Problem (downloadable below and to be presented at LendIt USA 2022 in New York City on May 26) is an attempt to put a framework around the changes that are occurring in the startup ecosystem, the LP community and how VC firms need to strategically reorient themselves if they want to survive.

View and download the presentation here

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Read article

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01

Settlement Collapse

Value transfer moves from days - corresponding banking, T+1 securities - to seconds. Working capital tied up in float is released.

02

Cost Collapse

Marginal transaction cost approaches zero: fractions of a cent, versus 1-6% on card and corresponding rails.

03

Programmability

Money becomes an object that carries logic - escrow, splits, rebates, compliance - executed by code, not back offices.

Pure infrastructure with no revenue accrual

Layer-1 chains and general-purpose middleware — outside our circle of competence and typically outside our stage.

Speculative asset creation

NFT platforms, memecoins, prediction markets styled as products — mapping to none of the five functions; structurally uninvestable for us.

Three structural truths cut across all five functions.

(a)

Regulated-first wins

The 2020/21 cycle proved permissionless purity does not survive contact with real financial regulation. GENIUS, MiCA, CLARITY and the UK/Singapore regimes are producing founders who start from “how do we get licensed” and build backwards — precisely the founder profile QED has always preferred.
(b)

Incumbents upgraded, not disintermediated

JPMorgan, Citi, Bank of America and Wells Fargo are jointly building a tokenized-deposit network; Visa launched a stablecoin platform in July 2026; 140+ businesses signed an open stablecoin standard. Banks migrate — and new-generation infrastructure companies own the picks and shovels of that migration.
(c)

Emerging markets feel it first

Every function improves most where the fiat experience is worst: cross-border payments, dollar access, investment product availability, working-capital finance. Those are exactly the geographies where QED has fintech ventures’ deepest footprint. Our geographic distribution is not incidental to the tokenization thesis — it is the thesis.

Trade & working-capital finance

Finkargo( LatAm import finance) and OatFi(B2B working-capital infrastructure) sit directly on flows whose logical settlement layer is stablecoin.

Collateralized digital-asset lending

Tokenized Treasuries, equities and stablecoin holdings as instant, programmable collateral.

On-chain private credt

Maple, Centrifuge and emerging institutional protocols - credit funds migrating to programmable rails.

Why QED is advanced

Credit is QED's craft: distinguishing lending businesses from fintechs pretending to be one, charge-offs earned from charge-offs deferred. On-chain credit is a straight-line extension, not a stretch.