In an exclusive interview with Insider, “Shark Tank” investor Kevin O’Leary explained his strategy for investing in the nascent digital landscape.
O’Leary said he applies his decades of experience as an index and stock investor to his crypto and metaverse portfolio.
He also said he sees bitcoin, solana, and other cryptocurrencies as software and not as tokens.
Venture capitalist and “Shark Tank” star Kevin O’Leary — also known as Mr. Wonderful — casts a wide net for his cryptocurrency and Web3 investments, with each bet based on his decades of experience as a financial services pro and index investor.
As there are currently 11 sectors of the S&P 500, most experts typically advise putting no more than 20% in any one sector, and no more than 5% in any one stock.
O’Leary applies that strategy to his crypto portfolio and predicts crypto, blockchain, and innovative financial services will become the S&P 500’s 12th sector within a decade. Now, he holds 32 positions in the digital asset sector, including solana, bitcoin, and blockchain firm Polygon. No single position takes up more than 5% of the allotted 20%, he explained.
“Bitcoin is not a coin, it’s a software,” O’Leary told Insider. And the same goes for other tokens like ethereum, helium, and solana, he noted.
“If you believe there’s long-term economic value in software, then you can give it a 5% weighting within your operating mandate. My larger positions are ones I think look like a great economic proposition.”
Into the metaverse
This approach applies to investing more broadly in Web3, which is the concept for the next iteration of the internet that is based on blockchain technology and more decentralized.
O’Leary urges heavy diversification “because you have no idea what’s going to work.” Just one or two winners out of 10 positions can pay for all the losers, he added.
When considering whether to invest in a company, especially those in the nascent Web3 space, O’Leary first determines what problem is being solved, and whether that problem holds economic value.
“What are you doing to make something less expensive, faster, better, more transparent, auditable? All these metrics should have a weighting to them,” O’Leary said. “If you can’t see the economic value in something, in the long run it probably won’t survive.”
That goes for his investment in Polygon, which recently raised $450 million in a funding round that included participation from O’Leary as well as Sequoia Capital India, Tiger Global, and Galaxy Digital.
He is confident in backing the blockchain protocol because it’s focused on reducing gas fees for transactions, which O’Leary sees as a strong economic benefit.
Meanwhile, the venture capitalist said he hasn’t yet bought any metaverse property, as he’s waiting to see whether a curated metaverse or uncurated metaverse emerges as the leader.
More curated metaverse locations, O’Leary explained, will be highly sought after places for economic transactions and advertising for big brands. Uncurated metaverse locations, however, will likely have less attractive businesses such as virtual pawn shops or smoke shops, and lesser known brands.
When the time comes, O’Leary expects to look for a location among other companies that align with his own vision.
“I would probably put something like my wine business in the curated metaverse first, and I would advertise there and provide tokens for transactions, as long as it’s a place where I feel safe for my brand.”
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