20VC: Why DAOs Will Replace Venture Capital, What Existing Incumbent Venture Firms Can Do To Survive, The Biggest Challenges Facing New DAOs Today and Whether Web3 Will Bring More or Less Income Inequality

Ian Lee is the Co-Founder of Syndicate, a web3 startup that has raised over $28M from a16z, Kleiner Perkins, IDEO, and 300+ investors. Previously, Ian was Managing Partner of IDEO CoLab Ventures, a crypto venture fund backed by IDEO focused on web3, crypto, and blockchain startups. From 2017-2021, Ian led investments and helped incubate 80+ crypto startups in the areas of DeFi, NFTs, DAOs, and more. From 2014-2017, Ian was the Head of Crypto at Citigroup and Citi Ventures globally. Listen to our prior episode on DAOs with Avichal Garg here. In Today's Episode with Ian Lee We Discuss: 1.) Ian's Entry into Tech and Crypto: Why did Ian decide early on that he did not like being a VC? What was it that changed his mind, showing him the impact investing can have? What have been the most significant but non-obvious developments in crypto? 2.) Why DAOs Will Replace Venture Capital: Why does Ian believe that DAOs will replace venture capital firms over time? How does Ian analyze the current landscape of Web3 investing and VC? Can existing firms layer on a Web3 Partner or Fund and win in the new Web3 landscape? How will the next generation of Web3 native firms be structured? 3.) DAOs 101: What really is a DAO? What is not a DAO? How are DAOs structured? How many people are invited? Who decides who is invited? How are decisions made within DAOs? How does this differ dependent on structure? What are the single biggest challenges that DAOs face today in operations? 4.) Crypto is The Future of the Internet: What does Ian mean when he says "crypto is the future of the internet"? What does this mean for the distribution of ownership and wealth in the next generation of the internet? Do DAOs and Web3 do more to harm or hurt income inequality today? What are the drivers that would lead Web3 to centralize wealth even further? Items Mentioned in Today's Episode with Ian Lee: Ian's Fave Book: The Innovator's Dilemma: The Revolutionary Book That Will Change the Way You Do Business Ian's Fave Web3 Resources: a16z's Crypto Canon, Jesse Walden's: The Ownership Economy 2022

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Welcome back to 20 VC with me, Harry Stebbings. And I'm so excited for this week on the show. We are focusing on all things DAOs and crypto. Now, last month, we had Avichal Garg at Electric Capital on the show as a primer for all things crypto and DAO investing. And I asked Avichal, who are the two best people for me to have on the show around the topic? He said Ian Lee at Syndicate and Ruchi Sangvi at South Park Commons. And so this week, we are making it happen, Crypto and NFT Week. Ian is joining me in the hot seat today. For those that do not know, Ian Lee is the co-founder of Syndicate, a Web3 startup that's raised over $28 million from Andreessen, Kleiner Perkins, IDEO, and 300 other investors. Previously, Ian was managing partner of IDEO Co-Lab Ventures, a crypto venture fund backed by IDEO,

• 0:43Harry Stebbings?

  focused on Web3, crypto, and blockchain startups. From 2017 to 2021, Ian led investments and helped incubate over 80 crypto startups. And then finally, before IDEO, Ian was the head of crypto at Citigroup and Citi Ventures globally. But before we move into the episode today, if you are a venture capitalist or corporate strategist, I want to tell you about Tegus. Tegus is the only company in the world that aggregates qualitative information on private companies from seed stage to pre-IPO. With Tegus, you can access other VCs and founders' expert call transcripts from previous rounds to help source fast-growing companies, create compelling emails to get a founder's response, and diligence companies when a round is moving fast. I use it personally, and I think it's insanely brilliant.

• 1:27Harry Stebbings?

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• 2:10Harry Stebbings?

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• 2:55Harry Stebbings?

  Since forming the first venture fund in Silicon Valley, Cooley has formed more venture funds than any other law firm in the world with 50 plus years. Working with VCs, they help VCs form and manage funds, make investments, handle the myriad of issues that arise throughout a fund's lifetime. So to learn more about the number one most active law firm representing VC-backed companies going public, head over to Cooley.com and also check out Cooleygo.com. But now it is time for the main event and I'm so excited to hand over to Ian Lee, co-founder at Syndicate.

• 3:31Speaker 01

  You have now arrived at your destination.

• 3:34Harry Stebbings?

  Ian, I'm so excited for the show. I heard so many great things. I said to Avichail after our show, who must I have on? And he was like, you gotta have Ian. Ian would be amazing. So thank you so much for joining me today, Ian.

• 3:44Speaker 02

  I'm looking forward to this. I listened to Avichail's podcast with you and I feel like about 40 to 50% of it was talking about DAS. So I was thinking to myself, this is a great setup for our conversation today.

• 3:55Harry Stebbings?

  Totally. I mean, that was just purely prepped for this. This was my ultimate goal and I thought he could be the warm-up.

• 4:01Speaker 02

  Oh, come on, man. He's a hero. He's a legend, so.

• 4:04Harry Stebbings?

  He's a total hero. But I want to start, and before we dive into the meat of the show, how did you make your way into the world of investing and come to found Syndicate most recently?

• 4:11Speaker 02

  One thing I've learned about you before coming on to the show is that you're a no bullshit guy. I figured I might as well follow suit and be as authentic as possible. I'll be honest, I dabbled in venture about fifteen years ago. From that experience, I realized that I never wanted to be an investor. So it's kind of odd that about a decade ago. Why? Well, I always viewed myself as more of a builder. For example, I used to be an artist and I loved getting my hands dirty and going into the details and just the craft of like creating something from scratch and working on things with my hands on like the shop floor. I was a consultant for about a decade and my most rewarding experiences were actually ones where I was in places like Texas and Michigan

• 4:54Speaker 02

  and Ohio on the factory floors figuring out how to optimize manufacturing systems and stuff like that. So I just like loved that stuff. And when I got exposed to investing, for me was very removed, I guess, from the process of building. It was like at least one or two derivatives off from the actual work that was happening. So at the time, this was again fifteen years ago, I think I was still very young, obviously, and pretty naive. I think I intuitively understood that it was important, but I didn't quite grok the actual impact of the work that investing had. And it was only about ten years later when I actually got into it that I became much more fascinated by it and appreciative of it. But yeah, initially I did not want to become an investor.

• 5:37Speaker 02

  It was actually eight years ago when I came in primarily through the operating lens. When I joined Citigroup's venture capital arm, Citi Ventures, I was hired to work on emerging technologies as part of the venture arm and figure out how we might be able to commercialize and scale these technologies and these startups that we were investing in. It was from that angle that I got into investing. And then as I got more exposed to the actual work of investing and the impact of it, that's when I started getting more into it and ultimately became a full-time VC for a number of years. How did Syndicate come about? I got into Web three about eight years ago. At the time, it wasn't even called crypto, it was just Bitcoin back in twenty fourteen. Glossing over a lot of things here, but I was always bothered by this problem that I saw in the investing world where,

• 6:22Speaker 02

  especially in Web three, where these technologies are network native and they fundamentally want to be owned by communities, whether they're communities of users. Communities of operators or other partners. What I was bothered by was how the traditional venture capital model was actually centralizing wealth and control and ownership of these networks. I always was wondering, why isn't there a more network native or community based model to invest in these technologies and networks that want to fundamentally be community owned? One of the things that that led me to was this question around 2017. That was when ICOs happened, initial offering offerings. And as misguided as ICOs were, I think one of the things that was really profound about ICOs

• 7:04Speaker 02

  was it was a completely open and democratic model to invest in technology in ways that we've never seen before in the world and certainly on the internet. Even though I think that from a regulatory perspective, it was certainly not the right implementation or approach. What that inspired me to think about, will there eventually be a more decentralized version of venture capital? I've been pondering that question ever since 2017 for the last five years. Fast forward to Syndicate. We identified an architecture of an internet protocol that basically turned the core functions, capabilities and processes of what it means to invest into a software primitive that runs on the internet that anyone can use.

• 7:47Speaker 02

  That again, was very much inspired from that question in 2017, which was, can we take this process of investing and make it more accessible, more free, more fair and available to any community and any person on the internet around the world?

• 8:00Harry Stebbings?

  So I listened to you and in a similar vein to when I was being to Abuchel slightly, I kind of got this like trepidation and nerve. And then when, you know, we chatted before, you said a statement that did not make me nervous. It made me terrified when you told me that DAOs are the future of VC. Now I have some thoughts here because I've learned a couple of things about DAOs from Ruchi yesterday. But can you unpack DAOs are the future of VC? What did you mean by this?

• 8:24Speaker 02

  I think that if you look at venture capital over the last 20 plus years, even before DAOs, before Syndicate, before Web three and before crypto, the world of investing has been in a multi-decade transformation towards decentralization and community based. Investing. That trend is inevitable. What started out with angelists almost two decades ago, and what they did in terms of democratizing the capabilities to invest via syndicates and SPVs and things like that, which has led to this proliferation of angel investors and solo capitalists around the world, that has been happening for more than a decade. What's interesting when you look at those traditional investing markets outside of even Web three, what's happening?

• 9:06Speaker 02

  Well, there's so many angels, there's so many solo capitalists right now. What are they doing? They're starting to band together. They're forming these angel investor collectives. Why? To win deals because they need to outcompete other angels and the tens of thousands of them now. And the other thing is that the angel investing model and the solo capitalist model doesn't do a great job of supporting portfolio companies. In order to compete with traditional venture firms that have a lot more resources and areas of support and areas of like business development, hiring, marketing, etc., they're forming these interesting angel investing collectives where they're bringing together people with different skill sets to reformulate a venture capital fund in a more distributed manner. Now, everything I just told you is completely outside of the crypto

• 9:49Speaker 02

  and Web three world. DAOs as a technology construct, take that same trend to the logical extreme. The way that I think about DAOs, DAOs are a technology in Web three that enable financial capital and human capital to coordinate natively on the internet together very quickly, very cheaply, and very efficiently. If you believe that, then the end state likely of this trend that's been happening for more than two decades is likely going to lead to some sort of model and system that will be powered by Web three and DAOs technologies behind them. And that is the bet that Syndicate is making.

• 10:22Harry Stebbings?

  Specializing dumb questions, especially when it comes to this topic. Okay, how do you determine who's allowed into your DAO? How do you determine how many people to have in the DAO?

• 10:31Speaker 02

  This is one of the core issues of where DAOs are currently as a technology. I got into crypto in 2014, so a lot of these things take years to mature and develop. So DAOs actually started in 2016 with the original DAO, which had a pretty catastrophic vulnerability that was

• 10:50Speaker 02

  Exploited in the years after that exploit from two thousand sixteen all the way until even twenty twenty one. DAOs were not really a thing. Now, obviously, a lot of people have been exploring and experimenting with them. And we're starting to test some of these pragmatic implementations of them, which are starting to get some traction. But we're still very early. I mean, we're probably only one and a half years into experimenting with all of the different forms and form factors that DAOs can take. So some of these questions around like, how many people should be a part of DAOs? What is the optimal size of a DAO? How do you even like, I guess, set the strategy and the mandate and the purpose? These things are being experimented and tested right now, and a lot of them are not going to work out, but some of them are.

• 11:32Speaker 02

  And we are starting to see some early evidence of best practices of where DAOs are really impactful. For example, very purposeful DAOs where they have explicit mandates and very specific ones tend to do much better. So if you have like a DAO that's just kind of very generic and doesn't really have a clear purpose. Those ones have a much harder time sustaining themselves, whereas ones where they have a very explicit purpose, whether it's, for example, to buy the Constitution of the United States within a matter of weeks. Or ones where, for example, a DAO that is specifically formed to invest in more female founders in the crypto and web three space over a long period of time.

• 12:10Speaker 02

  Those ones have a lot of success because they have staying power and they have an explicit, I guess, strategy and purpose and intent around which to then define some of the lower level implementation details, like who should be a part of this? How many should be a part of this? And how should they be interacting with the DAO? These are some of the things that we're starting to see.

• 12:30Harry Stebbings?

  So for me, there's the challenge of centralized decision making and decentralized decision making. I spoke to a, I don't know what you call them, leader of a DAO yesterday, a clan leader. And they were like, well, basically, we have like the biggest founders in the world all invested in our DAO. And then they delegate decision making to four admins. And I was like, that is genius. You are so brilliant. You just came up with a venture fund structure forty years after Arthur Rockbit. I don't get like, I'm being deliberately, I don't get it. That is a fun, like, I have eighty. T L Ps and they delegate decision making to me. That's a Dow that they're limited partners. How is this different?

• 13:06Speaker 02

  I think it's totally fair. I am ruthlessly pragmatic about these technologies and what they mean for the world and the timing of them. A lot of people get very enamored by these terminologies. And this has been happening ever since the beginning of crypto with Bitcoin, where they have, in many ways, like this sort of utopian vision for what blockchains could mean or crypto could mean or N F Ts or DAOs could mean. But the reality is that change happens sequentially. It happens incrementally in society. I think as it relates specifically to DAOs, we do believe DAOs are going to lead to fundamentally new organizations that don't exist in today's world. A good example of this is like some of these DAOs that are popping up right now in Web three and on the internet.

• 13:49Speaker 02

  They look more like subreddits than they do like existing organizations or funds with entities and legal structures behind them. And I think that that should not be underestimated because in many ways, this could lead to DAOs as a, I guess, construct could lead to fundamentally new platforms, new networks, new experiences that don't exist in today's internet or today's world. In the same way that like social media is just a new thing that didn't exist 20 years before that. That said, it doesn't mean that DAOs are only for new things. It can also mean that it's a technology for transforming and expanding the definition of existing things. Like, for example, venture capital funds or corporations or other things.

• 14:30Speaker 02

  And I think that that is also a part of the narrative that gets a little bit lost when you don't have that nuance, which is that there is going to be a degree, a high degree potentially of skeuomorphism as it relates to the adoption of DAOs in the near and medium term, which means that DAOs might actually have a much bigger and nearer term impact in transforming existing legal structures and entities like venture capital funds, like corporations, like LLCs, until some of these more new to world markets and interactions like DAO finding subreddits and things like, and whatever that may lead to, end up taking off and becoming a bigger market than merely. Transitioning VC funds into DAO structures.

• 15:12Speaker 02

  I guess in summary, just to your point, this technology is not just about new markets. It's also about transforming existing ones. If you really believe some of the principles and properties of this technology, over the long run, it's likely that the new to world markets are actually going to outsize the existing ones. And that's absolutely what we think Syndicate is going to do.

• 15:31Harry Stebbings?

  When you look, you know, you've got a fascinating perspective. You've been a VC in traditional venture markets. Now, obviously with Syndicate, you see an incredible new side to the investing world. When you look at crypto and Web3 investing as a landscape today, how do you analyze it? Who wins and who loses? I thought this was a fascinating one when I asked Abhijit. How would you answer that one?

• 15:50Speaker 02

  When you have a technology like Web3 that is so different and so new, you need to build capabilities that are native to that technology. VC funds that don't build those capabilities, whether they are dedicated crypto funds or not, are going to not be able to maintain an edge and keep up with the pace of innovation and the, I guess, innovations that are coming out of Web3. In particular, let's look at it from the founder perspective. I'm now on both sides. When you're building a crypto startup or a Web3 startup, you need as much help as you can to be successful. When you're thinking about taking capital from various funds or VCs or investors, you think about what capabilities they have and how they can support you. Now, some of those levels of support are very traditional.

• 16:35Speaker 02

  Distribution and marketing, some of them are in the areas of hiring and just general company building. But there are new capabilities that are needed in terms of partnership to make a Web3 company successful. So, for example, some of those things relate to can this investor and can this VC firm actually help cooperate this network if and when it becomes decentralized? That's really important. There are so many horror stories from founders of Web3 companies and crypto startups where eventually they decentralize their technologies and they decentralize their networks. They gave crypto tokens of those networks to their investors. And then those VC funds, which were very traditional, they didn't have, for example, crypto custody capabilities, they couldn't stake on these networks, they couldn't run nodes on these networks.

• 17:20Speaker 02

  What did those VC funds do that were very traditional? They took all those tokens and then they immediately dumped them on the markets because they couldn't hold them. Crashing the price of that network and giving ownership of those networks into the hands of who knows who. People that were not necessarily long-term actors, they were maybe more short-term profit-seeking actors. So you think about that and the cascading effects of that. It is going to be really, really important for investors and VCs to build up these native capabilities in order for them to actively play in this economy. The other dimension of this, Web 3 blurs the lines between investors and users. When you can buy an NFT, you're actually sort of investing, quote unquote, into that project.

• 18:01Speaker 02

  Or when you're buying a governance token, you are, even if you're using the network to, for example, store information or content in a decentralized way. You're not only a user, but you're also becoming an investor in them. What does that mean? That means that if users are becoming investors, then investors are also going to have to be users. And they're going to have to be users in a native way to these networks and these technologies. And I think that in the abstract, at a high level, if you project this out again, over five to 10-year-plus timescale, the investors who are more participatory in these networks, that can actively get involved natively with these technologies, are going to be the ones that win. Now, whether or not those are traditional VCs or dedicated funds, I think there's opportunities for both.

• 18:42Speaker 02

  But you can't take the same strategies from Web 2 and then just think that because of that, you can win in Web 3. I think that that's not going to work.

• 18:51Harry Stebbings?

  Can you if you are a follower fund? I'm thinking strategically here. If you are the friend, the smaller check alongside the big lead, can I be Avachal's friend and put in much smaller ticket, provide the benefits that I do without the required whole-scale infrastructure change, which I agree with?

• 19:10Speaker 02

  Absolutely. And look, I think copy trading of Vichal and Electric Capital is probably one of the best strategies that anyone can have. So there's that. But I do think that, yes, it doesn't mean that everyone needs to be going all into Web 3. I don't think that that's necessary. As long as you are able to partner with the right people. I think if the space is right. If we're right, that Web three is just the next iteration of the Internet. It's not going to be a matter of five to 10 years that Web three is completely separate from Web two. It's just that it's the next iteration of the Internet. And with the next iteration of the Internet, you're going to need both a combination of what people think of today as Web three native capabilities and skill sets, as well as quote unquote, traditional Web two capabilities and skill sets.

• 19:55Speaker 02

  Hiring is always going to be a thing. Distribution and marketing is always going to be a thing. Those things are not going to go away, but I do think that there is a lot of edge right now and a lot of white space and openness. The opportunity to actually become the leaders of tomorrow by going all into Web three. And that's why you see a lot of investors and a lot of founders doing that, because that's where I think the future advantages, if you will, are going to be built. And that's why it's really exciting.

• 20:20Harry Stebbings?

  You said about the next iteration of the Internet there. When we spoke before, you said that crypto is the future of the Internet. Help me unpack this one. Brilliant, like tweetable quote, love it. But what did you mean by it and how do you think this one through?

• 20:33Speaker 02

  Yeah, there have been a lot of people recently, over the past number of months, talking about Web three. I mean, when I got into crypto in 2014, right, it was just Bitcoin. And this concept of Web three wasn't even like a thing until very recently. The people who originally talked about Web three, people like Kyle Simoni of MultiCoin and also Chris Dixon, probably around like 2017, 2018, that was way ahead of its time. But for people that were kind of following them and also in it, working on the technologies at the ground level, we did start to see this potential for these decentralized technologies to lead to a fundamentally different Internet architecture. And the important thing, I think, is that that architecture leads to different properties, which often leads to different business models.

• 21:18Speaker 02

  For example, when I think about the Internet and its multiple iterations, Web one, if you want to call it that, was a decentralized Internet where there was really no native business model to it. When you had the Web two that came later, the business model and the value capture came through centralized companies, very massive centralized companies and applications that were built on top. Of the internet and that's where all of the value got captured and I think what web three does it actually enables the protocols of the internet the networks of the internet to start to create and capture value and move that business model away from centralized companies and those structures towards decentralized ones so what does that mean well if you look at the internet over the last twenty years

• 22:00Speaker 02

  the people that have benefited from that the most in terms of who's benefited from a financial perspective in terms of all of the wealth and the value that's been created from web two where is that gone it's gone to founders it's gone to investors who were lucky enough to get into those companies and it's also gone to big public market investors like these big funds or whatever that have been able to invest large amounts of capital because they already had a lot of capital into these companies a lot of what I think has been plaguing our society frankly for the last number of decades but I mean this has been happening over centuries or millennia is that wealth as a result of web two has become highly centralized

• 22:42Speaker 02

  as value has moved away from labor towards capital and people with capital and as a result the world has become more unequal what I think the big promise what I see personally in web three is that it has a chance even though technologies are fundamentally agnostic to human beings they don't give a shit about people and what people do with it so the question is how these technologies are applied for human beings and society and I think in the most ideal case web three actually stands a chance at enabling more people in the world and the users of the internet and these services built on the internet to become co-owners of that internet and of the services that are built on that internet

• 23:23Speaker 02

  so let me give you an example uber you have this company that has created tremendous value and has changed the world but most of that value has accrued to a very few number of people the founders the VCs etc and you have all these people on that network the drivers the writers etc I live in the Bay Area and a lot of these uber drivers they're sleeping in their cars on the streets of the Bay Area in San Francisco because they can't afford to commute back to where they live you have to ask Is that really where society is going? Is that really the purpose of these amazing technologies and these amazing platforms and networks that we're building here? And is that just inevitable and it's gonna just keep going like that? And society is gonna keep going in that direction? I think you have to ask the question like, is there a better model?

• 24:07Speaker 02

  The promise, I know it's very, very difficult to do this. Is there a way to create a user-owned version of Uber, Airbnb, Instagram, Facebook, TikTok, et cetera? Could those platforms and could those networks, if they were owned by the users, be more resilient, be more sustainable and be better for society? Because it's more equitable. It doesn't mean that there won't be capitalists and investors. They still have a very important role. It doesn't mean that founders won't receive appropriate share of the value that they're creating. But it could mean that the people that continue to operate these networks and contribute to these networks and use these networks might actually be able to also participate in the incredible value that's being created from them and themselves lift themselves into higher levels of prosperity in our society.

• 24:52Harry Stebbings?

  I had Mark Carney, the former governor of the Bank of England on the show. And he mentioned that when you have technology shift and platform shift in the way that we're seeing with Web three and you look back historically in the past, all technological innovation to this extent and level has led to greater income inequality, not income equality. Do you think there's a chance that could also lead to greater income inequality?

• 25:13Speaker 02

  I think it will lead to both. If I'm putting on my pessimistic cap, which is, as I mentioned, technologies don't give a shit about people, like just like social media. Social media didn't care if we used it to create more activism, to advance important social causes within a matter of decades as opposed to generations. It also didn't care if it helped proliferate misinformation and created a lack of trust among our society and people and each other. In the same way, I think Web three has that same potential. And we've been seeing that for the last decade since it's been around, which is that in particular, Web three has an amazing potential to both decentralize ownership and wealth and value. It also has an amazing potential to centralize wealth and ownership and control in really powerful ways.

• 25:58Speaker 02

  So I think the important Question is, how are human beings, how are founders, how are communities around these networks and technologies? How are they applying them and how are they building them and how are they designing them? It's really up to the builders of these technologies, it's up to the investors of these technologies and the communities around these technologies to design them in the way that they are actually intended for.

• 26:19Harry Stebbings?

  For me, the greatest opportunity is in the consumerization of the layer, which is like, you know, when you, when you try out a Coinbase account today, this is Coinbase, it's still not that fucking easy. If you are my mother, oh Jesus, I mean, that, no way. Do you agree with me in terms of the greatest opportunity being in the consumerization? Yes, you and I may get it, and you obviously a lot more than me, but fuck, this is a small segment of society.

• 26:41Speaker 02

  I completely agree in that, right now, the user base of Web three is very small and limited. As a result of that, the type of users that were seen on these networks today are primarily the people that can access it, afford it, and have the capabilities and the expertise and connections to be able to utilize these very complicated and sometimes costly pieces of technology and infrastructure. I think that in order for Web three to deliver upon the promise that I was sharing earlier, where it has the potential to impact not tens of thousands or hundreds of thousands, but potentially billions of people on the planet, those billions of people on the planet are gonna need better interfaces and user experiences and infrastructure to access it in a way that they can easily understand.

• 27:25Speaker 02

  To your point, right now, using these crypto wallets where you install it on your web browser and you have to secure your keys and you're really worried about that, I mean, it has a role in society and in Web three, but most people on the planet are not gonna be able to do that. The problem with that, for now, that's okay. Most technologies, I think, they have to start somewhere, they have to start with early adopters and things like that to get traction. But to really kind of achieve the full promise of decentralization, Web three, and what it could mean for society, they're gonna need those interfaces. And where it practically plays out from like a startup landscape and a investing landscape perspective is that most of these startups that are getting funded are things that are going after, maybe to your point, the more wealthy people in our society. They're not able to go-

• 28:10Speaker 02

  After, I think, a lot of the populations and communities in different geographies of the world, because the infrastructure doesn't exist there yet. That's why those services, those infrastructure and those interfaces are so important, because that will then unlock more builders, more opportunities, and more companies and investment into things that actually are going to help the people that need and deserve this the most.

• 28:30Harry Stebbings?

  Is it the infrastructure that isn't there yet? Or is it the lack of ability to tell a story to a mass consumer audience? And the ability to educate in a way that is compelling and resonates?

• 28:41Speaker 02

  I think it's both. They're very intertwined. I mean, when I got into Bitcoin in 2014, I was at Citigroup. And what was most inspiring to me about it was traditional banking infrastructure is, even from just a cost perspective, unable to support billions of people on the planet. It's just not economical to be able to support lots of lots of people where infrastructure doesn't exist. My passion for Bitcoin initially actually came from that, which was, well, we could utilize some of these technologies like Bitcoin to potentially serve the 2 billion people that don't have access to big, basic financial services. Ever since then, and consistently over the years, there have been a lot of great teams, some of which are still around today. But there have been hundreds of startups that unfortunately were going after really important missions.

• 29:24Speaker 02

  And were actually telling very good narratives about how they were going to, for example, bank the unbank using Bitcoin or blockchain networks or crypto. And they're no longer around. They ran out of money. They failed. Because a lot of that was a timing thing. And a lot of the timing element of that, even though they were creating good narratives and telling important stories, it just relied on too many things that didn't exist and frankly, still don't yet exist in the world, like the applications and interfaces to onboard lots of users onto Web3 and crypto. It's both a narrative thing, being able to connect with these people, but also being able to match that with the infrastructure and products that deliver against that promise.

• 30:01Harry Stebbings?

  We were chatting before about distribution, about storytelling. I do want to touch on this. How do you think about the role and importance of distribution and storytelling for Web3? And how good we are today? Like, I think we fundamentally lost the art of telling a story, 90%.

• 30:16Speaker 02

  I think storytelling is one of those things that are Undervalued today in Web three has amazing potential, both in Web three and beyond, to inspire people or even re-inspire people as to why we're even doing this in the first place. A lot of the kind of narratives and stories out there are really around achieving greater leverage with trading, making more money. And don't get me wrong, like that is a thing. There's a huge market for that. There's a lot of money to be made there. What I would love to see, though, are more messages and narratives that start to bridge to people that maybe are skeptical about Web three, or maybe don't think that Web three is for them. I've been in this space for a very long time and have been quite disenchanted and bothered by the fact

• 30:59Speaker 02

  that a lot of women, for example, and a lot of people of color have not entered into the space. Now luckily, that's starting to change, but that has been a problem since the very beginning. And why is that? I'm bringing this up because I think that because Web three and crypto has been this kind of like counterculture trend, and it's cool to be in that club. As a result, there's been a very you versus me kind of thing, right? You're either in or you're out. You're either in Web three or you're in Web two, or you're into Bitcoin, or you're not. Don't get me wrong, that has a place, but in order for this space to bring in the type of talent, to build the things that are gonna take this technology to the mainstream and make an impact that I think it was originally founded on, it's going to need to create narratives and stories and messages

• 31:42Speaker 02

  that connect with people that are not already on the inside and saying that if you're not on the inside, you're done. It's more like, hey, think about this technology in a way that will actually empower you. It's not an exclusionary technology. It's an inclusive one. It actually has the ability to impact you and your communities and other communities in ways that previously were not possible. And I think we need more stories like that because Web three technologies have the potential to really fundamentally change society in a positive way. And in order to do that, we need to invite the rest of the world into this process. We need to speak to them and we need to inspire them. That's really, really critical because otherwise, if we don't, we're only going to get certain types of people. And as a result, those types of people are only gonna build for certain markets and build certain things.

• 32:26Speaker 02

  That, in my mind, is really constraining in terms of why this technology exists. And what it can do for our society.

• 32:31Harry Stebbings?

  What is the single biggest threat, do you think, of Web three being able to achieve the positive outcomes that you believe it can? What's the biggest threat to that?

• 32:40Speaker 02

  Well, even if there are near term threats, like, for example, regulation or extreme profit seeking or centralization of control and things like that, those are some of the things that come to mind. I believe that in time, those projects or those networks or those systems will be less resilient than the ones that are actually designed for society that solve a really important need or problem. So in time, I think that in the grand scheme of things, very optimistic that the positive things will actually win out because they're actually solving real problems. I think in the near and medium term, though, the space has been consistently plagued with profit-seeking, short-term-minded individuals or communities. That has resulted in a lot of things like people getting exploited, funds being kind of hacked and stuff like that.

• 33:25Speaker 02

  And as a result of that, that sets the industry back a number of years. For example, when I first entered in 2014, that was just after Mt. Gox. Mt. Gox, trying to do something that it kind of messed up in terms of the security model, but Mt. Gox set the Bitcoin industry and the crypto industry back at least two to three years. And I think that we consistently have those things. Sometimes it's not intentional. I don't think that was necessarily intentional. I don't think that, for example, the original hack of or the original exploit of the Dow in 2016, that was intentional. I mean, they weren't planning to do that. So not all of these things are nefarious, but there are others where it's like they're trying to rug pull people, they're trying to exploit people. And those things have an impact on the timing and progression of these technologies and this industry.

• 34:08Harry Stebbings?

  Sorry, final one before we dive into a quick fight. Do you mind the tourists? I just get so fed up of seeing everyone who's like, ah, I'm a Web three expert and all the VCs that are doing Web three dinners and Web three, Web three, Web. I'm like, oh, fuck off. I'm sorry, you've been living it for years. I get you. Fantastic. Love it. But it's everyone who's like, I've always been a fan since last Wednesday. How do you feel about that, being an OG?

• 34:32Speaker 02

  I really struggle with it, to be honest. I don't actively engage in a lot of those things. I think my approach to it is that the people that really get it and are really here for the right reasons, they will be here years from now and will eventually find each other. I've known a lot of people who were like that, as you mentioned. I'm going to all these dinners and stuff like that. And honestly, some of them turned out to be the most amazing entrepreneurs and investors in the world. So you really can't judge people, I think, too quickly, but time ends up revealing who those people are. I've been in this space for eight years. When I first got into it, I used to joke that it was like the easiest way to get fired at a bank. So it was really not popular. A lot of people told me, like, you should stop doing that. You're gonna ruin your career and stuff like that. But those people come and go.

• 35:15Speaker 02

  I've seen probably at least 10 to 15 of these cycles where it's been really hot and then it went out of favor and all of those people left. Out of the 90, 95% of people that came and went within a matter of months, there were 5 to 10% of people that actually came in for the right reasons and they're incredible. And those are the people that I've been able to stay in touch with or build relationships with and learn from. I think it's just a part of the process. It is pretty annoying when it happens, but after you've been around long enough like I have, you get used to it. You get desensitized to it. And so you just know that this is how things happen.

• 35:48Harry Stebbings?

  I want to move into a quick fire round. So I say a short statement, Ian, you give me your immediate thoughts. Does that sound okay?

• 35:54Speaker 02

  Let's do it.

• 35:54Harry Stebbings?

  So what's the favorite book and why? I do want a second one. For just like me wanting to learn about Web3, what should I read as a good primer? Where should I start?

• 36:04Speaker 02

  That's okay. I actually think that just to jump into that one, like having a beginner's mindset is what Web3 needs and has needed for some time. Because what we need, the industry needs, are people who can look at this from a first principles perspective and grow up from it. Like what is actually meaningful here and what of it is not meaningful? And let's focus on the meaningful part. As far as like my favorite book, I actually think this is kind of related. This has been my favorite book for 20 years, which is The Innovator's Dilemma by Clayton Christensen. Written in the nineties and this kind of relates to some of my past experience before web three and fintech and VC, which was I was interested in why well-funded companies that have historically been very, very successful and gotten to a very large scale and have infinite resources consistently fail.

• 36:49Speaker 02

  I was fascinated by that question. My main takeaway from that book and all of my work over the last two decades, it's because incumbents fail to realize that a technological innovation often comes with a business model innovation behind it. And they dismiss the technological innovation when it actually disguises a really disruptive business model behind it. And that is what I think web three is, is that people look at NFTs, they look at DAOs, they look at blockchains, they look at all these things. And they look at it and they they think it's ridiculous, right? They look at NFTs and they go, well, why would I want like a JPEG or whatever? Why would I buy that? And it turns people off, so they stop looking deeper. What that results in is them missing the point that there is actually a fundamentally different business model here

• 37:33Speaker 02

  that could literally disrupt the existing internet and everything on top of it. That was something that I learned from the innovator's dilemma and I think applies to literally everything that I've ever done and especially web three. Now, in relation to that, what I would recommend is that you look at some of these essays or canons that people have written that have kind of been canonical articles that have defined how at least I and many other people have thought about web three from a business and an impact perspective. A couple that immediately come to mind are Andreessen Horowitz has a crypto canon that has been out there for a long time with all of these links and resources to videos or articles that have been written over the years. That one is something that I think the entire industry points people to when they first want to get into or learn about web three.

• 38:15Speaker 02

  The other thing that is more specific to what I was mentioning about the business model is Jesse Walden wrote this article about the ownership economy as part of his new fund variant. And I think that that is actually a pretty good articulation of how the business model of web three is so different from the internet before and why it's so meaningful to society and people. That one for me is directly related to kind of why I think I bet my entire career on this technology making a huge impact. In the world.

• 38:42Harry Stebbings?

  What have you recently changed your mind on, Ian?

• 38:45Speaker 02

  I don't make up my mind very quickly. So as a result of that, the positive thing is that I don't change my mind that often. But I also take a while to make a decision on something. I guess one thing that I did pretty significant change somewhat recently was the timing related to NFTs. So when I first got involved in NFTs, which was around 2017, when it first came out with CryptoKitties and stuff like that, we were looking at that thing. We thought it was had a lot of potential, but that technology didn't really take off at that time. And about a year later, I was pretty convinced that NFTs were probably five to 10 years away from making an impact.

• 39:23Speaker 02

  And I think I got the timing of that off in a big way because in 2020 and 2021, basically, NFTs started changing in terms of how they were applied. What they could then be applied to were internet native assets that formed these kind of internet communities, almost like subreddits and created culture, created belonging and shared identity in ways that I think I had underestimated. I think that as a result of that, I missed the timing and impact of that, how quickly that technology would take off. And I think as a result of that breakthrough, if you will, last year, it's now accelerated a lot of possibilities. Well, at least to NFTs that I thought were more like 10 years away. Good example of this is that I think that like NFT powered commerce in Web three,

• 40:08Speaker 02

  NFT powered digital media and various social media platforms that I knew or believed were going to happen in 10 years. I think are now possible in the next two to three years, even one to three years. And so as a VC or as an investor, you should be looking at those things because I think like the next versions of NFT powered Spotify or Amazon or YouTube or TikTok, they're going to be invested and built in the next year or two. And that to me is transformational. We're going to see potential hundred billion trillion dollar outcomes in the next 10 years.

• 40:41Harry Stebbings?

  Penultimate one, what's been the hardest thing about building Syndicate?

• 40:45Speaker 02

  We have a lot of support and I think one of the things that I learned from being an investor in Web three over the the last 10 years is that you can't do this alone. It's too difficult. That's why we've been trying to get as much help as we can from our investors, from our users and our partners. If you've been following how we've been building Syndicate, our seed round was basically this pretty big party round of like nine funds and 18 angels. We then did a hundred person community raise with a hundred operators and founders in Web three and some in Web two. Our series A, which was led by Andreessen Horowitz, it also had like 150 people and other funds involved in it. Monster party round that honestly like has made our cap table a nightmare.

• 41:30Speaker 02

  And then more recently, we announced that 50 companies, DAOs even, and partners and customers invested in us like Uniswap and OpenSea and Ledger and Carta and even and Circle and things like that. And the reason for that is actually because we know to do what we're trying to do is really difficult. We are going to build the things that we need to build and do that well. But in order to achieve the impact, you know, what we were talking about earlier, we rely on a lot of other infrastructure in order to make this happen at scale. The hardest part to answer your question is getting the help that you need and being able to ask for the help that you need. It's a really humbling experience to know that like when you're building internet infrastructure and protocols, you can't do it yourself.

• 42:11Speaker 02

  In the same way, like maybe a traditional Web two company where you could just centralize everything on your own and and become this like monopolistic thing. You can't do that in Web three. And so you have to almost just cede control and see and and cede and accept the fact that you're just a part of a bigger movement, a part of a bigger system and revolution. And you have to find win win outcomes that actually bring other people to co-develop, co-build and co-operate this thing. That is not yours, actually. That is the communities.

• 42:41Harry Stebbings?

  How long until a DAO invests a billion dollars? That's what Avishaw just messaged me.

• 42:46Speaker 02

  I think that there actually is one called BitDAO that has over a billion dollars in assets under management. So probably that one could be the first to deploy a billion dollars of capital. Will we see that at scale? Probably, actually. What will those be, though? I think it'll be a Mix. I think some VC funds will structure themselves as DAOs and we're working with, you know, some of those to progress towards that long-term vision. And so is that a DAO or not? Or is that just a fund? But like, the point is that people will use this technology, i.e. DAOs, whether a traditional organization or a completely non-traditional one where it's like more like a subreddit on the internet to invest more and more capital at scale. That might take five to 10 years, to be completely honest. I mean, a billion dollars is a lot of money.

• 43:30Speaker 02

  That activity is already happening today on platforms or networks like Syndicate, just at smaller levels. I think if you read the tea leaves, right, and you sort of project out, like, what's going to happen here, it's pretty easy to see that these pathways are already being created to the point where this will scale to a billion dollars or more.

• 43:47Harry Stebbings?

  Ian, listen, I've loved this. I can't thank you enough for putting out with my brilliantly naive and immature questions, and this has been such a pleasure to do, man.

• 43:55Speaker 02

  Well, I'm just trying to invite you into the web three industry here. I am both joking, but I legitimately mean it, that web three needs people like you and more people like you who come in with an open but beginner's mind and can really challenge some of the core assumptions from a first principles perspective to help us figure out what this technology actually should become. Can't wait to invite you into this and go to more crypto dinners with you if you, if you really want.

• 44:24Harry Stebbings?

  What can I say? We ain't going to no crypto dinners, but that was a lot of fun, Ian. I loved it and I so appreciate you being so welcoming of me into the web three crypto community. So huge thanks for that. If you'd like to see more from us behind the scenes, of course you can on twenty vc.com. I always love to see you there. But before we leave you today, if you are a venture capitalist or corporate strategist, I want to tell you about Tegus. Tegus is the only company in the world that aggregates qualitative information on private companies from seed stage to pre-IPO. With Tegus, you can access other VCs and founders' expert call transcripts from previous rounds to help source fast-growing companies, create compelling emails to get a founder's response, and diligence companies when a round is moving fast. I use it personally and I

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• 46:31Harry Stebbings?

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