By Keith Teare • Issue #287 • View online
This week we focus on Web 3.0 news. DAOs, Creator Coins, Square becoming Block, David Marcus leaving Meta and Mysten Labs raising a $36m first round. Nothing happening here ?
- Web 3.0 Tracker
- ARM less?
- Apple and China
- A16Z — Founders Loose in the Saddle?
- YC and 1000 Startups?
- The Rise of the Rest
- European Startups Are Booming
- Startup of the Week
- Tweet of the Week
Web 3.0 may or may not be real. It could be, like interactive TV in the 1990s, a highly funded bad idea. Or it might be, like the Beatles Get Back sessions, the place where the next thing is made and built one step at a time.
Web 3.0 describes a lot of different things and at the core is the idea of software replacing people and institutions as the essential glue between us all. An extreme example of that is a Distributed Autonomous Organization (a DAO). The promise is that a DAO is able to perform tasks, according to transparent rules, with no need for human decision making. Tomio Geron from Protocol leads the curated articles this week because he asks the ultimate question — can a DAO replace a corporate entity, thus ending centuries of corporate structure development. He goes through a list:
But can DAOs fund startups, replace crowdfunding campaigns or take the place of the trusty LLC? Advocates say that emerging tests of the model show it could bring more transparency and inclusiveness to businesses.
He also asks:
DAOs could be another way to form LLCs, but can they really replace companies? Crypto-friendly Wyoming passed a law in July allowing people to create an LLC with a DAO that has an Ethereum address. If a conflict arises in a DAO, a judge in Wyoming could rule on a dispute. But this wouldn’t work if one of the parties is outside of Wyoming, Jackson said: That aspect of the law hasn’t been tested.
It’s not either/or. Some DAOs need to register as LLCs and have done so. The LAO is a Delaware-registered LLC that is “primarily administered via an online application (a ‘DApp’) and related smart contracts,” its website says. In other words, the DAO structure provides coordination and voting, but sits on top of the LLC structurally.
However, Geron’s conclusion is less than wholehearted:
That may mean that for some time, the DAO won’t replace the LLC: Instead, it will ride on top of that structure’s established protections. Expect a growth industry in legal advice for starting your DAO LLC.
I am more optimistic that software will increasingly replace corporate structures and that value will shift from share ownership to token ownership. I agree it is a process, but taking a look at projects like LUNA and Terra UST and the anchor protocol it is already obvious that the underlying infrastructure for programmable money and effort are being built now.
Web 3.0 is already here and the early investors are funding it, joined this week by Sequoia Capital who announced its embracing of Web 3.0 by placing its first bets — in LayerZero Labs and also by turning its Youtube Investment Memo into an NFT.
In other news, The Information accused Apple of doing a $275 bn deal with China, but really it is just business as usual. Steve Case noted the growth of non-Silicon Valley seed-stage investing and Atomico released its State of Tech in Europe report. I was most intrigued by rumors that Andreessen and Horowitz are stepping back from day-to-day operations at A16Z and buying property in Las Vegas. I don’t know if I believe that…..but let’s hope the IRS does, for their sake 😉
More in this week’s video
Web 3.0 Tracker
In the Web3 vision of the internet’s future, tech giants like Facebook and Google aren’t as critical. The internet instead is a peer-to-peer experience built on what’s known as the blockchain.
There’s a buzzword that tech, crypto and venture-capital types have become infatuated with lately. Conversations are now peppered with it, and you’re not serious about the future until you add it to your Twitter bio: Web3.
It’s an umbrella term for disparate ideas all pointing in the direction of eliminating the big middlemen on the internet. In this new era, navigating the web no longer means logging onto the likes of Facebook, Google or Twitter.
Think of it this way: The nascent days of the Internet in the 1990s were Web 1.0. The web was seen as a way to democratize access to information, but there weren’t great ways of navigating it beyond going to your friend’s GeoCities page. It was pretty disorganized and overwhelming.
Then came Web 2.0 starting in the mid-2000s. Platforms like Google, Amazon, Facebook and Twitter emerged to bring order to the Internet by making it easy to connect and transact online. Critics say over time those companies amassed too much power.
Web3 is about grabbing some of the power back.
Decentralized autonomous organizations are the way that much of the crypto industry is ostensibly organized today.
But some critics are asking whether these groups offer a new world of crypto coordination, or just a more risky way to do things that already exist in traditional finance.
Put more simply: Do DAOs work as promised?
DAOs enable people to form organizations with no central leaders in control, run on top of a cryptocurrency, for some collective purpose. They’re often described as a way for people to avoid the hierarchical centralized systems in corporations or other large organizations.
They also offer transparency through the recording of transactions on a blockchain and are often run through rules enforced by a smart contract. They can be designed to be more loosely organized and easier to join than companies. (This also makes it easier for people to drift in and out.)
With Web3 rebrand and NFT auction, Sequoia, one of the world’s largest and most successful venture funds signals a new focus.
“Mainnet faucet. We help the daring buidl legendary DAOs from idea to token airdrops. LFG,” reads the Twitter bio of Sequoia Capital, one of the world’s largest and most successful venture funds.
Although the megafund did not respond to Blockworks’ request for comment by press time, the change is being interpreted by many as an increasing embrace of Web3. “Buidl” is a reference to the infamous “hodl” phrase used by supporters of cryptocurrencies, and DAOs are a reference to “decentralized autonomous organizations.”
Sequoia India followed suit, changing their Twitter account location to “the metaverse” on Tuesday. “Sequoia India helps shadowy super coders across India & Southeast Asia buidl legendary DAOs from discord to metaverse and beyond,” Sequoia India’s bio now says.
The potential rebrand follows reports of the fund co-leading a $100 million investment round in LayerZero Labs, a crypto firm that has yet to launch, The Information first reported on Nov. 31, citing two sources familiar with the deal.
Sequoia Capital India may also be in talks to back Polygon, an Ethereum scaling ecosystem, via token purchases worth $50 million to $150 million, according to TechCrunch on Monday, who cited three sources familiar with the matter.
The venture fund auctioned off their 2005 YouTube memo as a non-fungible token (NFT) on OpenSea for $884,776 worth of ether on Tuesday.
“The YouTube Memo NFT is a chance to own a piece of internet history, for a good cause. This 2005 seed stage investment memo is a time capsule from the advent of Web 2.0, so it seemed fitting to auction it at the precipice of Web 3.0,” Sequoia wrote of the blockchain-based digital collectible.
About four years ago, Eric Lax and Charlie Olson launched Pando Pooling, which allows people in high volatility jobs (like athletes and artists) to share the risk and the rewards by pooling their income. By creating investment vehicles in their own name, creators and artists can hedge against a sudden unpredictable loss of income, as well as decrease their dependence on platforms like Instagram, YouTube, or Twitch where they currently make most or all of their money.
JACK DORSEY IS no fan of Mark Zuckerberg. He once told Rolling Stone that at dinner at Chez Zuck, the Facebook CEO served him a goat he had killed, and the meat was cold. More recently, he made fun of Zuckerberg’s metaverse ambitions. Nonetheless, however unintentionally, today the CEO of Square finds himself making a similar move to the social media mogul who changed Facebook’s name to Meta just five weeks ago.
Square is now Block. Got it? Block.
Just as Meta retained the Facebook name for its flagship product, Block will continue using Square for its “seller” business, which includes payment systems and banking products for merchants. The new name, which takes effect today — the 12th anniversary of Square’s launch — reflects the broader scope of the company’s business, which now includes the personal payment service Cash App, the music service Tidal, and a nascent crypto-based open developer platform it calls TBD54566975.
Meta’s chat app WhatsApp has jumped into crypto integration via a new pilot program launched in the United States. The app is testing a crypto payment feature supported by the company’s wallet Novi and the stablecoin Pax Dollars (USDP), according to Novi’s Chief Stephane Kasriel and Will Cathcart, head of WhatsApp. Related Reading | Facebook […]
Facebook parent company Meta is losing its top crypto executive later this year. David Marcus who leads crypto unit Novi and previously helmed the company’s Messenger unit, announced Tuesday that he will be leaving the company later this year. Marcus joined Facebook in 2014. His departure marks another major exit from a long-time Facebook executive […]
If Nvidia cannot buy Arm — the company is probably an IPO candidate, or possibly the target of a consortium of competing buyers with a private equity company providing arms length governance.
Surprising almost no one, the US Federal Trade Commission has moved to block Nvidia’s acquisition of Arm. We have written a lot about this deal and Arm in general, and wanted to touch on the topic in light of this news.
We will save the background on this deal for that prior piece, but a few things stand out. Arm is seen by regulators as being too important to not be neutral. No other chip company can buy the company, as no one wants to compete with this key supplier of semiconductor intellectual property (IP), and almost every major chip company is now an Arm licensee, one way or another. So what will happen to the company now?
We have to first look at Arm’s current owners, Softbank — the Japanese investment firm. Their original impetus for selling Arm dates back a few years when they were under pressure from some expensive, high-profile deal failures, WeWork being the best known example among several others. At the time, Softbank needed to raise cash or at least convince their own investors that they had the ability to do so. Fast forward to today, and Softbank is in a much better position. They seem to have benefited strongly from the technology stock market bull run over the last two years. They made some big bets on the market and these have paid off, so the company is now in a much better financial position.
So one option is for Sotbank to do nothing. Arguably, Arm needs to make some big investments to fund future R&D needs, but from the outside it certainly seems like Arm could raise sufficient funds on its own to do this.
Nonetheless, we have to think that Softbank would still like to exit. They almost made a pile of cash and having it snatched away is the kind of factor that spurs the brain to think of alternatives. The most likely outcome is an IPO of at least a minority stake of Arm. Prior to the Nvidia deal, Softbank seems to have gone far down this path. However, Softbank faced the problem that the public markets would have likely valued Arm less than what Softbank hoped (or possibly even what they paid for it) and far less than what Nvidia offered. The capital markets are in a different place today, and Arm is likely to attract a much higher valuation because semis are hot now in a way they have not been for a long time. One wrinkle for this plan is that an IPO will take some time to arrange. We would guess at least six months, possibly longer. No idea what the markets will look like then, and it leaves Arm in limbo when they should be doing all that R&D investment.
Apple and China
Cook forged the five-year agreement, which hasn’t been previously reported, during the first of a series of in-person visits he made to the country in 2016 to quash a sudden burst of regulatory actions against Apple’s business, according to internal Apple documents viewed by The Information. But the company owes much of that success to CEO Tim Cook, who laid the foundation years ago by secretly signing an agreement, estimated to be worth more than $275 billion, with Chinese officials promising Apple would do its part to develop China’s economy and technological prowess through investments, business deals and worker training.
A16Z — Founders Loose in the Saddle?
Recently, the Bay Area-based venture capitalist Ben Horowitz took part in a popular pandemic-era pastime: updating the location on his LinkedIn profile. Goodbye, California. Hello, Las Vegas.
The change is notable among the wave of personal relocations because Horowitz has been one of Silicon Valley’s biggest boosters for years. His partner, Marc Andreessen, has also purchased property in Nevada.
Their individual real estate decisions are one sign of a significant, if slow-motion, shift at their company, the prominent venture capital firm Andreessen Horowitz, or a16z. They started a16z in 2009 after selling a data center automation startup they co-founded for $1.6 billion. Over the next decade or so, the firm helped define an era in Silicon Valley’s tech and venture capital industries as they backed tiny startups that turned into multibillion-dollar businesses, with enormous economic and cultural implications. A16z has backed many of the world-beating startups of the past decade, including Airbnb, Coinbase, GitHub, Slack, and Stripe. (Bloomberg LP, which owns Bloomberg Businessweek, has invested in Andreessen Horowitz.)
The firm’s founders, while still active leaders with the ultimate responsibility for its strategy and direction, are no longer as involved in daily operations as they were in the early days, say people who have worked with the men and those around them. They’ve also begun to lower their involvement on corporate boards. Horowitz sits on 11 boards, down from 16 early last year; Andreessen’s biography lists 7 company board seats, including on Meta Platforms Inc., down from 11 three years ago. Andreessen and Horowitz declined interview requests through an a16z spokesperson, who also declined to answer questions about the firm.
Both men have told the firm’s investors their current roles are as player-coaches, according to two people familiar with the matter who requested anonymity to discuss private conversations. Transitions like this often take place in phases, according to Donna Hitscherich, director of Columbia Business School’s private equity program. “Change doesn’t happen in five years,” she says. “It’s 10 years, or generational.”
YC and 1000 Startups?
YC President Geoff Ralston says he isn’t worried about the competition.
The first time Y Combinator President Geoff Ralston brought up the prospect that YC might one day enroll 1,000 companies in a single batch, I thought it might have been a blustery passing thought.
“If we want to fund 1,000 companies a batch, could we?” Ralston wondered aloud in a Zoom chat with me the other day. “Well, yeah. If we can hire another 10 or more folks — who have the same passion for startups that we do and want to spend a lot of time reading applications and working with startups and and creating those transformative experiences.”
YC has wrestled for basically its entire history as to how much it could expand its twice-a-year batches without weakening the quality of its network. I remember YC co-founder Paul Graham walking me through the tradeoffs when I first came to Silicon Valley.
I worried on Ralston’s behalf, wouldn’t that dilute Y Combinator’s brand? Wouldn’t it hurt YC’s signaling power?
“It’s only true if in doing so we fund a lower quality of founder and company,” Ralston told me. “Look, the fact is, we still fund a small percentage of the total number of startups every year.”
In June 2005, Y Combinator launched its first 11-company batch1, which included Reddit. This year, the summer batch included more than 400 companies. Across the United States, more than 10,000 startups raised venture capital funding last year. And YC is thinking globally.
Ralston steered us back to the number 1,000 — this time with more certain phrasing: “So I think that when YC does have a batch of 1,000 companies that we’ll find the same percentages of success.”
The Rise of the Rest
Venture capital-funded startups are moving away from Silicon Valley, AOL Co-founder explains — Yahoo Money
AOL Co-founder and Revolution CEO Steve Case appears on Yahoo Finance Live to discuss where the innovative economy is heading as venture capital firms look to fund startups in cities outside of Silicon Valley.
European Startups Are Booming
Pleo Picks Up $200M At A $4.7B Valuation To Build The Next Generation Of Business Expense Management
The company has raised $200 million, money that Jeppe Rindom, Pleo’s co-founder and CEO, said it will be using in areas like M&A, picking up the pace on expanding to new countries, bringing more functionality into its core product, and generally expanding its presence as a key enabler of “the future of work” — a massive theme at the moment in the world of business, given the changes so many were compelled to make in the wake of the Covid-19 pandemic. Danish startup Pleo, a developer of expense management tools aimed at SMBs to let them issue company cards and better manage how employees spend money, has picked up a large tranche of funding to help it double down on its business at a time of strong growth.
From frontier tech to crypto and enterprise SaaS, European founders can build successful companies from Europe. Europe is firmly positioned as a global tech player in 2021, with a record $100B of capital invested, 98 new unicorns, and the strongest ever startup pipeline, now on par with the US.
Britain is leading the way in an investment boom in Europe’s technology industry, with more than $100 billion of venture capital deployed this year, three times the level of that in 2020, according to a report. The total number of technology companies that have reached “unicorn” status in Europe — a
The festive period is here and that means a few things. Sprouts are back in season, embarrassing music tastes get laid bare by Spotify Wrapped — and Atomico’s State of European Tech report is out.
On the good side it’s been a bumper year in the region. Private funding is triple last year’s record levels, and unicorns are springing up faster than ever before. Europe is cementing itself as a global B2B startups powerhouse and crypto is finally taking off.
On the not-so-good side, women-founded startups received their lowest share of the spoils in five years — and there’s major work to be done to diversify where all that money goes to.
For those of you that don’t have a whole afternoon to take a leisurely spool through the report, here’s everything you need to know about startups, investors and money in European tech in 2021.
Funding levels and megarounds
1/ European funding hits €100bn
Funding into European tech has increased… a lot. Projections suggest that total investment for 2021 will hit more than $120bn, nearly three times as much as was raised last year.
The meteoric rise is down in part to the pace of investment picking up; the first three quarters of 2021 were record breaking in terms of capital invested, as the region saw interest from global VCs ramp up and megarounds become the norm.
The amount of capital pumped into $250m+ rounds grew by about 900% in the first nine months of 2021 to $40.1bn, as the deal count shot up from 11 in 2020 to 57.
Startup of the Week
San Francisco-based Incode Technologies raised a $220 million Series B funding round, giving the company a $1.25 billion valuation — less than seven months after its $25 million Series A round.