By Keith Teare • Issue #289 • View online
The Web 3 Wars broke out to the sound of loud cannon shots between Jack Dorsey, Marc Andreessen, and Elon Musk. Why do they care to disagree so much? We explain it all. Really
Mudslinging and tantrums filled the air this week before the holidays. Tis the season to be jolly they say, but not this week.
Elon Musk, Jack Dorsey, and Marc Andreessen set to it in ninja style. Dorsey accused Web 3 of being a fake. Implying that Venture Capitalists were using the name to disguise a very centralized Web2 kind of world, just using blockchain, tokens, and DAO-like software as a veil. Nothing to see here was the meaning. And a dismissal that only a true believer could deliver to a false messiah.
No sooner had that need said and the “false messiah” blocked Dorsey on Twitter. Marc Andreessen is fond of blocking people on Twitter. Personally, I don’t really have time to figure out who to block and who not. It takes a lot of attention to detail for that. But Marc, clearly a busy guy, found the time to pursue his instincts.
Dorsey of course tweeted a picture, triumphantly, as if to say, look, I was right. Andreessen is really miffed that I called out his scam.
Not to be rendered irrelevant, Elon Musk of DOGE fame did what I think was the funniest tweet, asking, “Has anybody seen web3? I can’t seem to find it” or words to that effect. It wasn’t clear and still isn’t, whether that was in support of Dorsey (web3 is fake) or Andreessen (we are investing in web 3 but it is early).
The metaverse hasn’t had this much fun for months. And many words were written and published in the 48 hours since.
But, and I am sorry to change the holiday mood here, there are serious points on both sides of the spat.
Web3, Crypto, and the Metaverse are all labels for what might come next in technology. And as with all revolutions, labels matter. Dorsey, Andreessen, and Musk are all similar to the religious sects in Monty Python’s Life of Brian. I mean this in a complementary way. They are believers in a specific narrative about what comes next. And their narratives differ in some important ways.
Dorsey believes in true decentralization. Because of that, he sees Bitcoin as symbolic of the real future. Bitcoin is not owned by any central authority, and as the network enabling it grows it does not create fiefdoms. He sees Bitcoin in the context of fiat currencies and the frailty of those currencies when it comes to storing and maintaining value. For Dorsey, the future is truly open and distributed with networks enabling tokens to deliver products and services to us all.
Now enter A16Z and its war chest. Venture Capitalists invest in people and ideas, at least at first. Andreessen understands that web 3 will be distributed, it believes that DAOs are important, it thinks people will not work for companies in the future. All of these are important elements of its investment thesis. However, the journey to that end game is a journey. Today it invests in tools, protocols, services. Many of these are not decentralized. They look and act just like centralized Web2 companies. For Dorsey that is a compromise. For Andreessen, it is a pre-condition.
Musk is just a comedian (in a good way) compared to the other two, he is having fun. Where is Web3? I haven’t seen it. DOGE is his toy to ridicule Dorsey’s pet love – Bitcoin. He seems to enjoy stirring it up. Not a lot more to see there.
My personal belief is that Dorsey and Andreessen should talk. They are not far apart. Venture investors are already seeking to fund many elements of the next stage in technology and society. They are moving from buying equity to buying tokens (sometimes both). They are devoting resources to explaining what a truly decentralized and network-driven value creation system looks like. And they are believers in Ethereum, Bitcoin, DAOs, Smart Contracts, NFTs, and other blockchain innovations.
As Dorsey acts to help Bitcoin fulfill its potential, as he surely will. And as he seeks to build software that enables human behavior without creating centralized fiefdoms, as he surely will. So too will Andreessen fund and help anything offering true value while being flexible on how to participate and own part of it.
Revolutions need healthy debate. And money and passion. This week, for me, showed that there is plenty of that. 2022 will not see this slowing but accelerating. Dorsey, Andreessen, and Musk are each of them, key innovators. They agree a lot more than they disagree. They will contribute more than they will criticize in 2022.
I did say I would take a break this week, but the events that unfolded drove me to publish. Happy holidays to all of you, and see you in early January.
The Web 3 Wars
Good morning! This Tuesday, Web3 can be anything you want it to be, the jury in the Theranos trial started deliberations, and Oracle paid big bucks for Cerner.
The Web3 Rorschach test
Jack Dorsey caused a ruckus on Twitter last night when he tweeted that “You don’t own ‘web3.’ The VCs and their LPs do.” He warned anyone in the space to “know what you’re getting into…” That, of course, got all the Web3 purists talking about how Dorsey’s a Web 2.0 founder, he doesn’t get it and Web3 will still set you free.
The whole market is a conundrum right now. Prices keep rising, profile pictures keep turning to pixelated art, Discords keep filling up and everybody in your life is going to spend the holidays telling you to stop buying physical goods and live the NFT life exclusively. But to what end? Where’s the evidence that this decentralized, unstoppable vision for the future of the internet is actually going to be all those things? Or even, you know, exist?
Some look at Web3 and see a scam; some see the future. If you’ve been on Twitter the last few days, you’ve seen how heated the debate has gotten over all things decentralized. Even the terms are complicated: Web3, crypto, blockchain and decentralization all get lumped together despite often meaning hugely different things. And the debate seems to often veer into ideology rather than technology….
Jack Dorsey and the Unlikely Revolutionaries Who Want to Reboot the Internet — The Wall Street Journal
The internet hasn’t turned out the way it was supposed to.
In its earliest incarnation, before some Wall Street Journal readers were born and the rest had fewer automatically renewing digital subscriptions, it was supposed to be distributed, user-controlled and, in a word, democratic.
Then came Big Tech and the attendant centralization, windfall profits, culture wars, misinformation campaigns, Congressional hearings, EU rulings, antitrust battles and techno-nationalism that have characterized the past decade.
What if there was another way?
What if, to take but one example, users of social networks collectively owned them, or at least could vote on how they were run and what kind of speech they allowed? And what if similar questions could be asked of just about any tech company whose primary product is software and services — whether financial, cloud computing, or even entertainment-related?
These are the questions investors, engineers and more than a few starry-eyed tech dreamers are asking themselves — among them formerTwitter Chief Executive Jack Dorsey, whose interest in these questions helps explain his sudden departure from Twitter.
The answers are taking the form of services and apps that are the first outlines of what their creators hope will someday eat the internet completely: a distributed, democratically ruled “Web 3.0” or “Web3” that will rise like a phoenix of 1990s-era Web 1.0-idealism from out of the ashes of the corporation-controlled Web 2.0 that all of us currently inhabit.
Jack Dorsey Stirs Uproar by Dismissing Web3 as a Venture Capitalists’ Plaything
Fresh off relinquishing the chief executive reins of Twitter Inc., Bitcoin enthusiast Jack Dorsey has taken to the service he co-founded to voice his displeasure with so-called Web3 technology and the involvement of venture capital firms like Andreessen Horowitz.
Web3, the still hazy term for blockchain-based, decentralized systems and tech that are meant to replace the internet as we know it, has garnered much attention and funding this year, with Andreessen Horowitz being among its loudest cheerleaders. Trading of non-fungible tokens, or NFTs, on the Ethereum and Solana blockchains has been the most visible manifestation, with many companies now investing in the development of decentralized apps as well as games for those platforms.
“You don’t own ‘web3’,” tweeted Dorsey. “The VCs and their LPs do. It will never escape their incentives.”
The world’s richest man, Elon Musk, took to Twitter on Tuesday to call out Web3, asking if anyone has seen it because he “can’t find it.” Has anyone seen web3? I can’t find it.
The post Elon Musk trolls the Web3 concept, does he have a point?appeared first on CryptoSlate.
The crypto Twitter debates continued to rage on Wednesday after Marc Andreessen, co-founder and general partner at Andreessen Horowitz, blocked Jack Dorsey. “I’m officially banned from Web3,” Dorsey said in a tweet that showed a screenshot of Andreessen’s block. Andreessen’s public rejection followed Dorsey’s sparring on Monday with Chris Dixon, who co-leads Andreessen Horowitz’s crypto team, after Dorsey said that VCs owned Web3, a decentralized, blockchain-powered version of the internet.
Today’s conflict is another sign of discord among some of crypto’s biggest supporters and could signal an industry at a significant crossroads. Both Dorsey and Andreessen have helped broaden adoption of digital currencies, but now it seems like they’re on warring teams.
You’ve been hearing a lot about crypto and are wondering where to get started. Or maybe if you’re like us, you’ve spent your days, evenings, weekends and holidays getting up to speed. The crypto…
At Lightspeed, we believe the next cycle will bring mainstream adoption of blockchain as companies across consumer and enterprise adopt a web3 framework. As we look ahead to 2022, there are a number of areas we’ve developed strong theses in and are excited to closely follow:
- As infrastructure software investors for the past 20+ years, we are also excited about the rise of web3 infrastructure, including new developer platforms, security, and insurance providers. Ethereum scalability is one of these core infrastructure areas with the rise of L2s, and we are excited to actively invest in this space.
- We believe that the next generation of NFTs will be dominated by utility and gaming NFTs that provide functional value, NFTs that return something of value like tokens or revenue. This could include anything from character NFTs for online games (avatars) that let you earn tokens when you play with them to the NFT of a digital billboard that produces daily ad revenue to the NFT of a revenue-generating real estate asset.
- We believe the next billion users will be onboarded in the next 5 years, and some of the best use cases are in gaming and social networks. To that end, we have invested in both in web2 for the last decade–Epic Games, Snap, Sharechat, and Splitgate to name a few. Gaming and social will likely look different in many ways in Web3.
- We believe that web3 is a cultural and social phenomenon and applications in music, art, learning, sports, influencers and other areas will be crucial to its mass adoption.
Having been online since the dawn of the modern web, I’ve seen all the iterations, from sea changes to Web interfaces and browsers to the HTML building blocks that created it. In the original Web 3.0 vision, first explained by legendary New York Times columnist John Markoff in 2006, it was to build something called a “semantic web,” where instead of piles of discrete data, we’d have a global system of machine-readable data.
The market for stablecoins experienced breakneck growth in 2021, with the supply for dollar-backed cryptocurrencies surging by 388%, according to data compiled by The Block Research. As indicated by The Block Research’s 2022 Digital Asset Outlook report, the aggregate supply of stablecoins has increased from $29 billion at the start of 2021 to more than $140 billion.
The company showed that people would flock to an audio-only social media app. Can it fend off the imitators?
Last December, Chris Barnett bought his first iPhone at the insistence of his friends. They told him he needed to get on Clubhouse, an invitation-only audio app that was available only on iPhones.
He was known in his circle for hosting a fantasy basketball league, and they wanted him to join the basketball discussions they were having on Clubhouse. Once he signed up on his new phone, Mr. Barnett gained a modest following and started a discussion club about the National Basketball Association that grew to more than 4,000 members.
“We had instant success,” Mr. Barnett recalled. “People came in, they stayed.”
But today, if listeners want to hear Mr. Barnett break down a recent game, they’ll have to find him on Twitter. In August, he started hosting a basketball show every weekday on Spaces, Twitter’s audio chat feature that mimics Clubhouse. He also organized a network of other content creators to promote their sports and culture discussions.
Mr. Barnett isn’t the only audio creator who slipped away from Clubhouse and joined another platform as a slew of copycat chat apps debuted this year, challenging Clubhouse and wooing its users.
The app was pegged as the future of social media. After a lukewarm end to 2021, it faces an uphill battle to turn a profit
At moments in early 2021, Silicon Valley was awash with talk that live audio discussion app Clubhouse would be the future of social media. After gaining some traction towards the end of last year, it exploded in 2021 as the fastest-growing social media app in history. It aimed to popularise audio rather than text or pictures as the next big social medium as people looked for ways to communicate in lockdowns, and drew comparisons to Snap or TikTok. But as the end of the year approaches, Clubhouse’s bubble appears to have burst, as the mania around the app subsided, downloads fell dramatically and the company faced an onslaught of competing products from larger technology groups, such as Meta and Twitter. Its fast-talking chief executive, Paul Davison, remains adamant that the lull is just part of the typical peak-and-trough lifecycle of a social start-up, and that copycat features from deep-pocketed rivals have not impacted the company “in any real way”. Indeed, Davison is confident that making money is not a pressing concern, despite relying on repeat investors such as venture capital group Andreessen Horowitz to raise about $310m over several funding rounds. At its most recent funding round in June, the company was valued at $4bn. “In the future, as we launch more services that allow creators to monetise, I imagine we’ll take some fees there to fund the business,” he said in an interview with the Financial Times. “But we haven’t figured out all of the specifics of that.”
Venture Capital 2021 — It’s a Wrap
How Tiger Global, SoftBank Vision Fund And Insight Partners Changed The Venture Landscape In 2021 — Crunchbase News
Tiger Global Management, SoftBank Vision Fund and Insight Partners aren’t traditional venture capital investors, but the three growth equity firms invested in startups at an unprecedented rate in 2021, competing directly with many of Silicon Valley’s biggest names and racking up a huge number of portfolio companies in the process.
The three firms have invested rapidly in startups this year, even compared to accelerators — let alone venture firms — Crunchbase data shows.
Take Tiger Global. The New York-based firm made 335 investments this year, making it the third most active investor. Only Y Combinator, the startup accelerator that runs summer and winter batches and counts upwards of 300 companies in each batch in 2021, and Techstars, an accelerator, invested at a greater pace.
DST Global: The Quiet Conqueror
If the quiet world has a conqueror, it is DST Global. After bursting onto the scene thanks to a 2009 investment in Facebook, the fund has evaded attention, especially in recent years. Such an understated presence belies both its size and track record. One source suggests that DST manages somewhere in the realm of $50 billion, making it larger than stalwarts like Sequoia and Insight Venture Partners. At the very least, it is certainly in their league.
That’s not only the case when looking at assets under management; DST has a portfolio that would make almost any investor envious. Over twelve years, it has secured positions in Facebook, Twitter, Airbnb, Snap, WhatsApp, Spotify, Alibaba, Robinhood, Flipkart, DoorDash, Klarna, Bytedance, Slack, Wish, DraftKings, Meituan, Nubank, Gojek, Rappi, Flexport, Revolut, and many, many others. In the hits-driven world of venture capital, DST is the one firm that seems to never miss. It has done so while managing to stay almost entirely under the radar.
In today’s piece, we’ll unpack DST’s playbook. In the process, we’ll journey across continents and back in time, touching on:
- Yuri Milner’s path to the top. Before founding DST, Milner was a physicist, a would-be corporate raider, a Mary Meeker adherent, and a macaroni magnate.
- How Mail.ru built Russia’s internet. Though it started as a side-project, Mail.ru grew into one of its home country’s most consequential internet businesses. Its history is intertwined with DST’s.
- Snagging Facebook. Why would Mark Zuckerberg want to meet with an unknown Russian entrepreneur? Milner had to fly to America and give his pitch at Starbucks to make a deal happen.
- Being early and right. DST has a proven ability to correctly call internet trends. The fund was early to understand online monetization and has successfully caught multiple technological waves.
- The generosity of Jan Koum. Look on Crunchbase, and you’ll see no indication that DST invested in WhatsApp. But it happened.
Where DST heads next. Looking at DST’s geographical distribution and some of its recent deals, we can get a sense of where the fund sees opportunity today.
As if launching Airbnb, Stripe, and Dropbox weren’t enough, the famous accelerator has had an outsize — and mixed — impact on all of us.
THIS MONTH A successful entertainment-business newsletter written by an influential reporter joined forces with publishing legend Janice Min to form a news startup. Buried in the story was a fascinating detail: The cofounders had signed up to go through the three-month Y Combinator accelerator program.
If you haven’t been paying attention, this news might have startled you. Why would a magazine diva join a horde of hoodied nerds, giving up 7 percent of her company for the $125,000 stake that YC offers its startups? But after almost 17 years and 3,200 companies, Y Combinator has evolved into something far beyond a boot camp for tech bros.
In its most recent batch, YC selected 401 companies out of a pool of more than 16,000 applicants to receive its imprimatur along with coaching from veteran founders on building products, formulating business plans, and raising funds. On August 31 and September 1, 377 of them pitched their companies — remotely, of course — to the investment community in the semiannual ritual called Demo Day. Each company’s founders had one minute to explain themselves: just enough time to plant a seed in a potential funder’s mind.
Their ideas reflected YC’s implicit view that for every problem in the world, there is a startup solution, though some solutions may sound familiar. There was a ghost kitchen in the Philippines. A “Stripe for former Soviet Union countries.” A “Vanguard for India.” One founder promised to boost the income of dental practices by using deep learning to identify cavities. Another founder claimed, “We’re building a better search engine than Google!”
Europe has minted nearly four times as many unicorns this year as it did last year, according to Dealroom figures, as major global investors pile in and megarounds become the norm.
Among the 78 companies new to the unicorn club this year, speedy grocery startup Gorillas made the valuation in just nine months. Others, like fintech Saltpay, battery tech company BritishVolt and crypto startup Sorare hit the mark 22 months after setting up shop.
But behind every unicorn are deal-hungry VCs vying to cash in on the next big tech success story. So which ones are the best at spotting companies on the $1bn trajectory?
Using data pulled from Dealroom on December 15, we found out which investors saw the most portfolio companies turn into unicorns in 2021.* Here are the top 10.
Direct startup investments contributed for 47% of the private market portfolio of these family offices, while 32% went into venture capital and private equity funds and 11% to venture debt funds
Over 40 percent of family offices in India have doubled their allocation to private markets in the past five years, with allocations to startups and venture capital (VC) funds now comprising 18 percent of the overall pie, according to a new report by LetsVenture subsidiary trica in partnership with AZB & Partners and EY.
It said this is in comparison to a 36 percent allocation to listed equities, 20 percent allocation to fixed income and about 15 percent allocation to other alternative investments.
More than 83 percent of family offices have over 10 percent allocation to private markets from their overall asset distribution.
The report was created by data aggregated from an online survey completed by 103 family offices and ultra high net worth individuals (UHNIs)in India as well as interviews with multiple investors between July and October 2021. This was further supplemented with its proprietary research and intelligence derived from EY and AZB & Partners, the company said.
In a growing indication of larger cheque writers eyeing a direct participation in a startup’s cap table, the report said direct startup investments contributed for 47 percent of their private market portfolio, while 32 percent went into venture capital and private equity funds and 11 percent to venture debt funds.
Investment in UK technology accounted for more than one third of the £76bn invested in European tech this year.
This year £26bn was invested in UK tech, up 2.3x from last year’s figures of £11.5bn — 35 per cent of all the money invested in tech across Europe, according to the Government’s Digital Economy Council.
The £26bn raised by UK start-ups and scale-ups was nearly double the figure raised in Germany (£13.5bn) and is more than three times that raised by France companies (£8.6bn), said Dealroom, which compiled the figures.
Twenty-nine new unicorns (companies valued at $1bn plus) were created this year in Britian, including e-commerce platform Depop, car selling platform Motorway, and challenger bank Starling Bank. This takes the UK’s total unicorn figure to 116, which means a quarter of the UK’s unicorns were created in 2021 alone.
The UK has more unicorns than France (31) and Germany (56) combined.
Startup of the Week
2021 has been a remarkable year for start-ups in Africa. As of 20 Dec., we have tracked more than 800 deals ($100k & over) worth a combined $4.27 billion. The number of $1m+ deals has grown +73% YoY, and the total deal value was multiplied by x2.5…
No matter what happens in the last 10 days of December, it is clear — and it has been so for a while — that 2021 has been a remarkable year for start-ups in Africa. As of 20 December, we have tracked more than 800 deals ($100k & over) worth a combined $4.27 billion. If we look specifically at $1m+ deals (so we can compare with our data from 2019 and 2020), the number of deals has grown +73% YoY, and the total deal value was multiplied by x2.5. As a comparison, between 2019 and 2020, the growth had “only” been +49% YoY and +25% YoY respectively. $100m+ ‘mega deals’ have shown tremendous growth in particular: from 3 in 2019 and 2 in 2020, 2021 registered 12 such deals for a total raised of $1.9 billion, more than the total amount raised in 2020 across the ecosystem through all deals $1m+. In short: no matter how you cut the data, 2021 was all about growth!