Do Web3 Companies Need Web3 VCs?
Or is everybody's coin still green?
Decentralization, when it means lowering the economic costs and other types of friction of participating in and regulating a marketplace, is a good idea. When it means shifting power away from the center and pushing it out to the users of applications that’s a very good way not wind up with more Facebooks, Googles and Apples controlling everything.
All of this makes the promise of Web3 super exciting. As founders rush to build the infrastructure of tomorrow, they often seek out money from those that have self-identified as “Web3 VCs”—the promoters and thought leaders of this new paradigm.
Unfortunately, this does two things.
1) It means that the people whose job it is to hold you accountable have already drank the Kool Aid, which is an excellent way to get yourself caught up in a big house of cards.
2) It lets everyone who isn’t a “Web3 VC” off the hook when it comes to understanding how new protocols are going to change the way we build applications. There are VCs who are completely ignoring the whole space, hoping Web3 turns out to be an imploding bubble.
It may implode from an investment perspective—in fact, that is quite likely and may have already started to happen.
That doesn’t mean something interesting isn’t being built. Take the Dot Com Bubble. The late 90’s frenzy was followed by an implosion, but it left us with Google, Amazon, Netflix, and Paypal, among others—and it laid the groundwork for the Facebooks and Airbnbs. Those companies were funded by the investors who participated in the prior crash, not the ones that ignored the internet entirely.
The best boards are ones that bring a diversity of perspectives to the table—and this is especially true for Web3 companies who are in the middle of a frenzied and turbulent market. I’d argue that having folks around the table who were early to all the cryptocurrencies, who are whitelisted for every drop, and who can argue the finer points of Solana vs Ethereum is certainly useful—but so is someone who can vet the character and mindset of your new hires. You’ll need someone who can help you keep calm and focused when networks are down and prices are crashing.
You’ll need someone who can call you out on your bullshit—constructively, of course.
Someone who has been through thousands of board meetings and counseled hundreds of founders can be an extremely valuable asset even if they can’t code—much in the same way that the backers of a women’s brand started by female founders doesn’t have to be female, nor does the backer of the hottest app for teens have to also be a teen.
If anything, understanding something you’re not a participant in is a sign of empathy—which is generally lacking across tech.
Not to mention that tech is already enough of an insider game—and signs are that Web3 is making it even worse.
Scott Galloway summed it up well:
“The top 9% of accounts hold 80% of the $41B market value of NFTs on the Ethereum blockchain. The practice of “whitelisting” keeps the bulk of NFT profits within a tight circle of insiders. Bitcoin is even more centralized: The top 2% of accounts own 95% of the $800 billion supply of Bitcoin, and 0.1% of Bitcoin miners are responsible for half of all mining output. If it were a country, Bitcoin would have the greatest inequality in the world.”
Plus, there’s not one single female member of the Forbes Cryptobillionaires list.
While the protocols might be decentralized, the power structures aren’t. Finding outsiders to work with you on these companies will result in important questions like, “Hey, if our goal is to democratize finance, should insiders really be keeping this much of the initial float?”
Something tells me the “Top Web3 VCs” aren’t asking that question currently.
Find yourself some good humans to work with—people that ask hard questions, not easy ones. They’ll help you end up as one of the few that make it through the storm.