As we advance farther into the next internet age, there are countless opportunities for entrepreneurs to build transformative Web3 technology.

From the widespread embrace of crypto and NFTs to the proliferation of DAOs and the numerous innovations in blockchain-based infrastructure and storage, the new computing paradigm of Web3 is quickly becoming mainstream.

Since joining Greylock in 2020, I’ve focused on partnering with entrepreneurs building the next generation of marketplaces and service-based sectors. My previous experience at Uber, where I was part of the team that launched and scaled UberEats, fostered my passion for game-changing technology that impacts everyday life. This has paved the way for my work with Novi Connect, Instawork, and most recently, Web3 companies RabbitholePinata, and Portals.

The breadth and depth of Web3 has made the sector into my now dominant area of focus, particularly the intersection of crypto and commerce. I see many opportunities for blockchain to serve as the underlying infrastructure for a wide range of companies, just as the once-nascent technologies of Web 1.0 and 2.0 re-shaped every industry.

I recently joined Greylock head of editorial Heather Mack on the Greymatter podcast to talk in detail about what I’m seeing in the sector.

You can listen to the Greymatter podcast here.

Additionally, myself and fellow Greylock investors Sarah Guo and Mike Duboe have launched the Fungible Times podcast, which is solely devoted to the topic of Web3.


Heather Mack:
Christine, welcome to Greymatter. Thanks so much for joining us today.

Christine Kim:
Hello, it’s so great to be here, I’m excited.

Awesome. Well, let’s just start with the very most basic of basics. What is Web 3?

Web 3 is this all-encompassing term and we’re referring to the next iteration of the internet. Some people might call it the decentralized web. If I wanted to quote Decrypt, a definition might be, “Web3 is the next major iteration of the internet, which promises to wrest control from the centralized corporations that today dominate the web.” And that really is an important theme of Web3.

In a lot of ways, Web3 is a reaction to Web 2.0, this period that you could argue we’re coming out of or that we’re in currently right now. And those centralized corporations that we aim to wrest control from would be platforms like Facebook or Google or Amazon, which today have been great, amazing services, but have mostly served to aggregate data and monetize off that data.

I think there’s been a movement in users on the internet and a desire to control and own more of our data – [a desire to] control our own identities, and sort of what companies can do with that.

I’d say there’s sort of this philosophical movement. It’s interesting to think about the ideologies behind Web3, principles like decentralization, individual ownership, just distributed collective collaboration or distributed computing.

Anyway, if we were to even rewind a bit, Web 2.0 is this period that followed Web 1.0. So we’ll just kind of pause for the listeners and just kind of go through that history. Web 1.0 was this period from the ’80s to really the early 2000s. You had early players like AOL and Netscape and Yahoo, and it was early, early, really early internet days. Some might say this is the read-only version of the web. It was likely very hard to get content on the web, but this was a time when users were just starting to digest and consume content on the web that was really controlled and kind of put out and published by a few players in this space.

And that’s what we mean by read-only – you had players like AOL or Yahoo that were publishing news and covering things, maybe even taking over from our previous channels where we were consuming media like TV and radio, and we’re able to now get all this information on the internet. But we weren’t really participating in a way from consumers publishing information.

Web 2.0 is this period that follows the mid-2000s to today. I would say we’re still really in a very Web 2.0- dominated environment. Some of those companies that really dominate this space, like your Facebook, Google, and Amazon. But another way to think about this is instead of just being a read-only web experience, you now have a read-write web.

Now I’m kind of using read-write, these are some of these primitives that you’ll hear in computer science often. And by read-write, it means, “Hey, not only can we read and see what’s on the internet, but we can also publish and push content onto the internet.” And so [this is] early blogging or things like Reddit or even Facebook, where now I can put up photos and I can write blogs or I can put out content on the internet, user-generated content. YouTube is a great example of this.

We’re in this new period where I would say users are simultaneously consuming content, but then also putting out content and creating content just as much. Yet at the same time, you have this sort of pattern where you have centralized platforms and corporations that are mostly controlling, I would say, a majority of the social media experience that we have online today, or controlling a lot of the content or curating and censoring a lot of the content that we have today.

And so that brings us to Web3. So we kind of touched on some of the principles that define Web3, but if I were to follow that analogy of like read-only to read-write web, now we have a read, write, and execute web where we’re not only consuming, we’re not only creating content up there, but we’re also (on a distributed level) executing the web.

And when I say executing the web, what I really mean is on a decentralized network basis – you have many computers or many participants actually contributing to the computation that is going to be required for the internet to scale. That’s the layer that is added in this Web3 element.

So, that’s why you see the emergence of these networks like Bitcoin or Ethereum, or even decentralized exchanges like UniSwap. These are all household names of Web3. There’s many more that we’re going to get into. But a fundamental defining characteristic as well is that you have the collective community contributing to them, or you have some sort of collective network that’s contributing to the computation. And that’s definitely a new characteristic that we don’t see in Web 2.0.

You’ve been focused on transformative tech since you began your career. Uber and other on-demand startups completely changed the way we think about transportation, food delivery and other services. The companies you’ve worked with at Greylock are overhauling a variety of sectors like employment or commerce. How does Web3 fit into your focus area?

Yeah, that’s a great question because I definitely came to Greylock with eyes wide open. I came to Greylock after five years, like you said, at Uber. I was mostly working on the UberEATS Product there, and I was in engineering product lead there. And so I came to Greylock with a real love for marketplaces, with a love for consumer technology, and did a little bit of all of that.

Some of my earlier investments were in supply chain marketplaces to the future of work. I love looking at things in the healthcare and education space. Anything that touched the lives of consumers, I was super interested in.

And I would still say that dominates how I look at the space today. Looking at Web3 with a consumer perspective is really what I’m bringing to the table now.

“I think crypto (and Web3 in general) is really going to be more foundational to all of the areas that we invest in. “

Today, I think it requires this full-time focus to do crypto well. It’s hard to do it just part-time or just to dabble in it. We actually have multiple people at Greylock that are full-time focusing on it. Crypto is such a broad area, whether you look at more infrastructure, Layer 1, scalability, security, all the way to consumer applications, that’s a layer that I’m spending a lot of time in personally, DeFi, DAOs, gaming, collectibles, NFTs. Across the spectrum, there’s so many areas to look at.

And so if you think about all those verticals, let’s say you think about communication, you think about storage, social, commerce, gaming, someone that you’ve named and someone that I’ve named, there’s sort of a play at which there could be a crypto company in each of these. And when I say a crypto company in each of these verticals, it’s not that there’s going to be a token like Bitcoin and Ethereum to buy and trade on a speculative basis. But when you think about crypto as a new computational paradigm I should say, you can see how it could be the underlying infrastructure for companies and opportunities across this space.

So a good example is OpenSea or Magic Eden. These are NFT marketplaces where users can transact and sell second hand NFTs and trade them amongst each other. The Web 2.0 example of this would be eBay or even Craigslist. And so the Web3 version is like, Okay, there’s these NFT marketplaces. What is actually being sold on them is digital goods. That’s definitely a Web3 characteristic. But there’s also a lot of these companies that want to progressively decentralize over time, where they’re running on certain blockchains. OpenSea definitely is that very prominent NFT marketplace for Ethereum and Magic Eden is building for the Solana ecosystem.

But I think crypto is just like mobile, it’s just like cloud computing, or it’s just like even the early internet. So there’s all these metaphors when you think historically about all these waves of innovation. And I think today you would not be a venture capital investor and say “I’m an internet venture capitalist,” or “I’m a software venture capitalist,” or “I’m a mobile technology venture capitalist.” Just because those technologies are so broad, they really just kind of shape all of the industries that we’re excited about and want to invest in.

And so I would encourage people to think about blockchain in a very similar way. It’s a new computing paradigm and it’s going to bring about innovation in each of these categories.

Right. Okay. So 2021 was an incredible year for crypto, and Web3 overall has seen a boom in activity. Why do you think the time is now for us to lean into this?

Yeah, 2021 was a super exciting year for crypto and Web3 in general because I think this was a year where we really started to first feel broad mainstream adoption of crypto.

I think what was really characteristic about 2021 is this proliferation of use cases that felt very broad and very varied. And so if you were to compare that to previous boom and bust cycles, they were kind of dominated by one or maybe two themes. I would say early cycles, like from 2011 to 2017, are sort of dominated by periods in which Ethereum was launched or early miners or exchanges or wallets were built. Crypto needed table stakes to survive as an industry, but we’re not yet really serving outsiders to crypto in other real world use cases yet. And I would say in 2017 we had an ICO boom. A lot of coins and tokens were launching and we also had a lot of interest in DeFi, decentralized finance, which is set out to sort of rewrite our financial rails on new decentralized protocols.

And so there’s definitely been these one or two themes during these previous cycles that I would say insiders and those builders inside crypto have really sort of felt as the main thing that a lot of people’s energies were around.

And 2021, I would say, it really felt like there were many themes. It wasn’t just, say, gaming. It wasn’t just NFTs. DeFi was really a hot topic in 2021. DAOs, creators, social tokens, music. I mean there’s so many themes now where it’s really starting to feel like, “Hey, everyone’s starting to pay attention to this movement.” We’re seeing a lot of Web 2.0 brands that are trying to get into this space. Nike, Adidas. They’re all doing really interesting things in this space. A lot of people are starting to wake up to the application and its broad set of use cases I would say.

And so that I would say has been an incredible theme to watch in 2021. I have to credit projects like NBA Top Shop which is merging Web3 and this ad concept of digital scarcity and ownership with NFTs, but is using a concept like basketball collectible moments, which generally everyone can get really excited about and really felt like something that pulled in a lot of the mainstream audience. Because you know, we’ve had NFTs since 2017. CryptoKitties has been a project. Rare Pepes have been around. And these are projects that I would say that mostly appeal to the Web3 insiders.

And so, Top Shot is a great example of pulling in a mainstream sports fan audience. Or what we saw with Axie Infinity essentially, it really supercharged a whole country in the Philippines and really is responsible for distributing crypto to a huge population in the Philippines through this play-to-earn game. We can get into gaming as a theme for why we’re excited in general there, but when you think about that, it’s like, “Okay, it’s pulling in a gaming audience, it’s pulling and mobilizing a whole country, a whole population.” And I think these are examples of crypto starting to reach beyond just like one or two use cases that the community’s really excited about. And I would say this hallmark of really pulling in a ton of mainstream users.

That’s a pattern that we’re really excited to see continue. We’re really excited about thinking about what is going to be the next thing that brings in the next 1 billion users under crypto, what is the thing that’s going to be built, what’s the thing that’s going to be bringing our parents, our grandparents, our brothers and sisters under crypto, those that have not fully jumped on yet. I would say we’re very excited about all this.

Yeah. And all that being said, after a really strong 2021, crypto has seen a big crash recently. So why are you still bullish on the space, and how can you convince all those other people too who are not quite convinced yet that this is something worth looking into?

Yes. So this is a great question because I think for a lot of people that are outside of the building community within crypto, the easiest thing to focus on is the price volatility of mini tokens. And that’s because for a lot of people that are participating in token from a more outside-in perspective. That’s the main way that we’re participating.

We’re seeing a lot of publications covering which projects are doing well, tokens are going up, they’re up thousands of percent year over year and month over month. And so we all know this narrative, right? Of people buying early into a project or buying early into a token, making a lot of money. And so I think we can get overly fixated on narratives like that on the price of a token, the price of Bitcoin, the price of Ethereum.

It is certainly a very helpful leading indicator in a lot of ways. We should not be ignoring what’s going on in the market right now. In a lot of ways, what’s going on in the traditional public equities markets as well as in the crypto market, or anything that is around stocks or growth projects in general is reflective of geopolitical instability or what’s going on with interest rates or what our expectation is for how the economy is going to evolve over 2022.

And so, of course these are all super important signals. But one thing I would encourage listeners to think about is this:

“The price of a token often does not correlate with the quality of the project, or the adoption of the project, or the revenue of a project.”

And so, me as an investor, when I look at projects, I will see there’s revenue, there’s a number of users that are using projects, and then of course there’s the token volatility up and down. It’s actually quite funny when you look at this because you’ll have to normalize often revenue going up and down with the token price and you’ll actually see that they can be inversely correlated a lot of times.

And so you do have, in one sense, this public sentiment,I think, that is, in a lot of ways, this very layered complex outlook on what’s going on in the market. But I actually think we, as long term investors, take a very long term view on things. And we’re not overly concerned with price at all, so we’re not overly concerned with how Bitcoin, or how Ethereum, or how the numerous tokens on various projects that we’re involved in or that we’re backing are performing on a day to day basis.

Are there examples that I can point to historically for why this would be the case? If you look at important projects that have stood the test of time, let’s say Ethereum or Coinbase are really great examples here. These were actually started during periods of winters. And in winters in crypto speak, those are periods in which the token is not doing well or there’s a big downturn. And so these are actually two projects that were started and launched during crypto winters and they’re both arguably not going anywhere. They’re both “winner circles”, critical pieces of the Web3 ecosystem today.

Bitcoin launched in 2009, there was a big run-up really early in 2011 for some of the really, really earliest people that were in crypto. And there was a big crash at the end of 2011. A lot of us were likely not involved in crypto at this point, but maybe we were starting to hear about it. What’s interesting is that over that year, Kraken, Bitstamp, these were launched in 2011. Coinbase was launched in 2012, so really the year after this massive crash. And so all three of these – Kraken, Bitstamp, and Coinbase – they were all really coming into their own space during a period of which we would call a crypto crash, which is super interesting.

If you look at the next cycle later, there was a big crash again in December. Funny that these crashes always happen in December. But there’s a crash in December of 2013. And if you look at that time, Ethereum was founded in 2013 and then launched in 2015. This was historically, if you look at the price of Bitcoin, another winter and another time in which external sentiment around how crypto was doing could be perceived as very negative, but internal builders were very heads down and focused on building.

And so, I don’t want to be dismissive of price, but we’re definitely not overly concerned with it. I would say we take a very long term approach. And it’s actually very interesting that I would say what we’ve seen historically is during winters or during these downturns, it could be an incredibly productive time to be heads down building because it’s the most quiet time to be just kind of chipping away at the product and you’re not, of course, distracted by how well the token is doing or all these projects that are launching.

I’d also say the signal is very strong if you can hire, if you’re making progress, if you can ship during that time, and if you’re a project that can endure those winters. Those are incredibly strong signals for the people that you’re trying to hire onto your project, as well as the investors that you’re trying to work with.

One of the dangers of boom cycles is that all projects are doing well, so how do you know what is a quality project as a user that’s trying to participate, or as an employee that’s trying to join one of these companies? And so I’d say there’s healthy qualities that these boom and bust cycles definitely bring. I’d say really the resounding last comment is we’re just not too overly conservative of price and we definitely think it’s healthy.

That’s very helpful context.

Greylock has been invested in Web3 for some time. The firm was investors in Coinbase as you’ve been talking about, and we’ve made several Web3 investments in the last year. Can you talk about some of those?

This is a great question because I’m really excited because Greylock has been investing in this space even prior to me joining Greylock.

So, of course we were investors in Coinbase. We were also investors in a company called Chia, which is a hard disk storage based blockchain, and a company called Handshake which is a decentralized DNS naming protocol.

When I got here, we started to really wrap up the pace of our investing and really dedicate more full-time focus. So now we have a couple partners internally at Greylock that are focused on crypto full time. We like to call ourselves Team Crypto. And this past year in 2021, we really sped up, like I said, the pace of our investing in this space.

Earlier in 2021, we invested in a company called Pinata. Pinata does decentralized storage. They’re an NFT storage management service. Think of Pinata or think of decentralized storage like Dropbox or Google Drive, except it’s on a decentralized network. Storage is definitely a fundamental piece of the Web3 ecosystem. It’s part of what we think about when we think about NFTs and we think about the demand for games, storage is going to be a critical piece of infrastructure there.

We’re investors at the game level as well, so we invested in a game called ZED Run. We actually backed the studio that puts on ZED Run, they’re called Virtually Human. They’re a studio that’s going to be delivering a suite of entertainment and gaming experiences. In addition to ZED Run, which is their first concept, ZED Run is this blockchain-based horse racing game where the horses themselves are NFTS that you can breed and trade. It just makes sense that the lineage and the genotype and all the stats would be stored on a chain. That’s a really fun investment for us.

And then most recently, we just did an investment called Portals. We’ve just announced that one, so we’re so excited about that. It’s a metaverse where you can own a piece of this spatial metaverse, specifically a room. You can decorate it how you want. You can put your NFTs in there. You can even imagine how this collection of rooms get stitched together into this city or this downtown where you can go visit other people’s rooms. And so there’s this entertainment factor. We love the team there. There’s really high quality graphics.

They’re building on the Solana ecosystem as well, which we’re quite excited about more broadly. Solana is the home for so many interesting and awesome consumer applications. We really think it could play a huge role in games or metaverses. Anything that’s going to require high computational power with low cost and very high speeds, that’s something that Solana is doing really well.

Of course there are many that we have not yet announced, but like I said, I think it’s… Keep an eye on this space. We’re going to be announcing many more soon. And it’s an area that I’m excited that we’re going to be investing in even more deeply in 2022.

Lots of really cool stuff. These companies – they’re so different from the previous iterations of the web. Is our approach to investing in Web3 companies actually different?

It is and it isn’t. We’re looking for great markets, great ideas, great founders. And so I would say backing those types of entrepreneurs is something that in a lot of ways feels the same.

So when we evaluate a company or we’re evaluating a founder, I would say our process for evaluating, our process for looking at revenue, looking at business models, thinking about how this market is going to grow over time, we’re relying on those frameworks that we’ve developed over years and years of investing outside of Web3. So in a lot of ways, it’s the same.

In a lot of ways though, it’s very different because crypto companies and Web3 companies, like I said, there’s philosophies and ideologies in Web3. There’s definitely different motivations and goals that the companies have that are very different from the period of Web 2.0 companies that preceded them.

One example is this concept of collective ownership, or community ownership. A lot of projects are doing this in the form of tokenization. So they’re creating a token in which public community members can own that token. And through that token, they have governance, they have rights, and they have a say in the future direction of this company. This is maybe not unlike the rights that you get as a shareholder when you buy public stock in a company. But in a lot of ways, it’s very different because we’re really to reflect “I own stock in a certain company and I don’t really have that much to vote on or that much say in what they do.” Of course there’s different governance. Web 2.0 companies have a board of directors and different governance models there.

What Web3 is doing is really starting to experiment with some of these things. And so what we’re seeing with a lot of projects is releasing a token, allowing the community to vote on everything from what should be on our roadmap, to who should build this, how much they should get paid, etc. Even the internal operations of how companies are running themselves, they’re doing on a more collective basis.

A really good example of how these companies can look and operate quite differently is if you compare Coinbase to UniSwap. These are both on the surface, actually Web3 and crypto companies, right? Coinbase is considered a crypto company. It’s an exchange where you can buy and sell different currencies.

UniSwap is actually a very similar premise. You can buy and sell different currencies more on a peer to peer basis. They’re a decentralized exchange. UniSwap is open source. And if you were to compare how UniSwap and Coinbase is run, Coinbase is more of a traditional company. They have employees. It’s more of a top-down management. There’s a CEO, there’s a board, there’s a leadership team. UniSwap on the other hand, runs more like a committee (there’s a committee and then there is a large network of contributors that’s contributing to this open source project). And those contributors actually might get compensated just like an employee might get compensated at Coinbase, except instead of being locked in an employment contract, maybe they’re contributing to UniSwap but they’re also contributing to SushiSwap, this other decentralized exchange on the side. Maybe they’re also contributing to like a dozen other projects and they’re all getting paid in the form of grants and they can kind of flex in and flex out of these projects as they wish.

So there are a lot of similarities to what we see in the open source development community. That’s a flavor that we’re seeing in Web3.

“When we talk about tokens or governance or community ownership, those are things that Web3 companies are definitely experimenting with, and those are ways in which the attributes of these Web3 companies definitely look different.”

Other ways that they look different is companies that are just setting themselves up as DAOs. DAOs stand for decentralized autonomous organizations. It in itself is a category that we’re really interested in investing in. We’re interested in investing in DAOs themselves, as well as the infrastructure that’s needed to support these DAOs. But DAOs are almost like a new model for a corporation.

And so in a lot of ways, I would say the operations and the goals and the ethos of Web3 companies can feel very different than Web 2.0 companies. And that makes us need to show up at the table in a different way, how do we show up as investors and be ready to understand how to participate in governance, how to support these companies in their new operational structure, how to think about exchange of funding and capital for tokens instead of equity. But then, like I said in the beginning, a lot of it is the same when we’re looking at the quality of founders and the quality of projects or technology. I would say a lot of that is leaning on processes that we have refined over our years and decades of investing here at Greylock.

Interesting. There’s a lot of different attributes of all these different companies to be intrigued by. Are there specific sectors that are more interesting to you?

Yes. There are sectors that are interesting to us for sure. There’s about three or four of us that are focused on crypto more broadly. It’s a super wide space. And so to focus on a more focused level, each of us have different layers within crypto that we like to focus on. My zone is the intersection of crypto and consumer.

And so let’s start with Greylock more broadly. I think crypto really is a wide ranging industry at this point that can include hardware, networking, scalability, new consensus, technology like zero-knowledge proofs. It can include tooling like wallets and storage, like I mentioned Pinata being a storage player or Handshake being this DNS naming protocol. It can also include this wide array of applications which we’re seeing this proliferation of all these sorts of consumer applications across finance or education or gaming or content, social media. And so I’d say Greylock really is interested across that full spectrum of all of those industries.

I, myself, am a little bit more focused on the application layer. So when I meet founders, I like to let them know that I’m focused on the intersection of consumer and crypto. So I’m really interested in themes like gaming, NFTs, collectibles. I’m really interested in anything that’s helping community run or DAOs run – so we might call that community infrastructure or DAO infrastructure. I’m really interested in social media, content in social tokens, that’s kind of like what I would put in one bucket, sort of thinking about what is going to be the next generation of Facebook, Instagram, TikTok, YouTube, and how does that look on a more decentralized internet. All of these things, I’m really interested in.

Greylock, more broadly, is looking at two things in hardware and networking, scalability for sure. We’re looking at DeFi. I have a partner, Seth, who is looking at the intersection of finance and crypto and decentralized finance, so he can come on at a future time and talk about that.

Great. And let’s dive a little deeper into each one of those. Start with gaming. What is it? What’s going on there?

Yeah, gaming is so interesting because it’s just a huge industry. A lot of listeners may not know this, but gaming is a bigger industry than movies and music combined, which is just crazy to think about, right?

With gaming, we really include the full stack of gaming. So we’re including PC gaming and console gaming, which I would consider more like core gaming or hardcore gaming when we think of our typical gamer stereotype. But it also includes mobile gaming – which is a huge segment of the gaming population – hyper-casual, mobile games, Wordle, that’s taking everyone by storm. It includes all of that.

And so gaming is one of these industries where the number of users that are considered gamers is growing rapidly. To put numbers behind it, gaming is a $150 billion industry if you include PC console and mobile. Meanwhile, the movies industry does maybe $40 to $50 billion a year, music is a $20 billion industry. Some of those, I actually think there’s explanations for why maybe music should be much larger and maybe Web3 is going to be the industry that makes music the $150 billion industry, but that is a tangent and maybe a conversation for another time.

And so for one, I would say gaming is just a huge industry and in that sense something that we’re really excited about at Greylock with investments in things like Discord and Roblox.
Because it’s such a huge industry – why that makes sense for Web3 and why it’s such an interesting focus area within crypto – is because it’s just going to be a massive on-ramp to crypto. I think it could be possibly the biggest on-ramp ever to crypto. Period. With almost 3 billion worldwide, like half of us identify in this gamer segment. Gaming could be a vector for mainstream adoption of crypto.

There’s so many themes that we’ve seen in 2021 that play into this that are really interesting to watch. And so, one, everyone is really excited about metaverses. Is metaverse here? When is it coming?

“In a way, anything that we do digitally online to represent ourselves, from Zoom calls to Roblox and Fortnite to full VR headset immersive experiences, all qualify as the metaverse.”

And the metaverse is definitely something that makes sense to have in the decentralized internet, where you can own your identity, own your space, kind of have your own space that you take care of online. And so I feel like that’s one area within gaming that’s really interesting to us.

We’re also really interested in this new concept called play-to-earn. Play-to-earn is this idea that you play games and you can earn rewards or you can level up, and your skill in the game can be transferred to actual income. I think people have been doing this already in traditional gaming. You definitely have e-sports and professional gamers. But if you’re a gamer and you’re really good at one game, it’s actually really hard for you to transfer all the points and all the skills and all the digital money that you earned in that game to another universe.

What Web3 – the interoperability of Web3 – allows us to think about is actually transferring those points and those dollars from one game to another. Or maybe instead of just transferring it from one game to another (or one network or one blockchain to another), is actually taking your ball home. That’s a little phrase I like to say which is thinking about “How do you cash out at the end of the day after spending all this money on all these games?”

We’re not really able to do that in a lot of traditional games, but with crypto, when you have things that are underpinned by a token that’s liquid and trading on an active market, you can actually say, “Hey, I want to exchange some of these points that I earned in this horse racing game, ZED Run, and actually exchange it for USD so I can actually use it to pay my bills.” And so that’s definitely something that we see.

ZED Run horses have monetary real life value in the thousands of dollars. Some of them were worth $100,000. So of course you can invest that into the game, but you can also kind of cash out.

So all these things, I would say, that’s a defining characteristic of play-to-earn, this concept that gaming in this very novel way can be used to actually sustain income and pay bills.

These are all themes – play-to-earn, metaverses, interoperability – which are more primitive concept definitions that are really interesting to think about when you think about crypto and Web3. And so the marriage of all these ideologies and Web3 plus the fact that gaming is just a huge growing highly lucrative industry, we’re really excited about how those two worlds are going to collide over time.

Right. So that brings us to NFTs, which sounds like that’s kind of what you were talking about too.

Yes. NFTs are really closely related to gaming, and they’re often synonymous. I don’t actually think about them too differently. NFTs are maybe even more broad than gaming though.

Why NFTs are really interesting is because they allow for digital ownership and digital scarcity. We could go into all these definitions for what NFTs are and how they are different, but basically think of an NFT as a way to prove-ably own something that is unique or one of one, which is why we see a lot of use cases around art and collectibles.

What’s is not an NFT for example? Ethereum and Bitcoin are not NFTs because I could trade one Bitcoin for another Bitcoin, and it’s the same. A house is an example of something that is like an NFT in that my house cannot be traded for your house even if it’s exactly the same price, even if it’s on the same street, just because there’s just going to be differences, there’s going to be sentimental value. However, houses obviously are not digital. And so they help us understand this one of one scarcity, but they don’t really get us to the full NFT pictures.

So what I say NFTs are, is like that house concept. Or it’s like art in the real world. It’s the idea that this one thing cannot be replaced for another, but now we’re able to actually track that and do that online.

NFTs have a broad range of applications. We’re seeing collectibles, we’re seeing art, that’s definitely a big thing that we’ve seen this year. We’ve seen profile picture NFTs, gaming assets are NFTs. That’s why these two industries are very closely related. But I also think the applications for NFTs are super broad. We could think about it for commerce enablement. We could think about it for authentication. We could think about it for contracts, IP, rights. You could think about it for so many things, even like logistics tracking, anything where there’s sort of this unique entity event or concept that you want to track on the blockchain.

And so I’m very excited for, one, that the universe of use cases for NFTs to evolve beyond some of the early ones that we’re seeing today. But I would say more broadly, NFTs are a technology or a primitive concept. And what we’re really excited about is the applications about NFTs, the infrastructure to support those NFTs, so things like storage which we have an investment in. But even things like, how do you help creators? Let’s say, from the creative angle, the collector art angle, how do you help creators publish and mint NFTs? What are the marketplaces that you need to sell NFTs on, like your OpenSea and Magic Eden? So really, it’s the applications of NFTs and the infrastructure to support that ecosystem more broadly. We’re looking across all that space.

Another company that we invested in is Comity Labs. They’re working on NFT financialization. And so they’re really focused on NFTs that have utility. They’re starting with games as their first vertical. So they’re really thinking about how game assets are used, how they can support things like helping game asset owners earn yield, or maybe lend out their assets or rent their assets to players who just want to play and try the game. There’s a number of concepts that we could talk about here, but definitely keep an eye on that space. They’re sort of in stealth right now, building, and they’ll be coming out with some exciting stuff soon.

Very cool. And what about DAOs? Can you share a little bit more details about that?

Yes. DAOs is an acronym, D-A-O. And it stands for a decentralized autonomous organization, which is a mouthful for sure. But basically, think of DAOs as like the next generation of internet communities online. And when you think about internet communities online, we’ve already participated in a lot of them. So when we’re on Reddit or we’re on Discord, or even like we’re on Instagram, we’re already sort of in these communities online, but what DAOs do is financially align communities generally with a token.

So, generally when we look at DAOs, I kind of describe them with attributes that you tend to see like this: You have a collective of people, they all have some shared mission, and we’re going to financially align everyone with incentives by giving them all tokens. Maybe they’re all going to hold different shares proportionally of these tokens. And that also kind of reflects how involved they are in the mission or how involved they are in the project. But it’s a way of organizing amongst ourselves so we can say, “Hey, there’s five of us. We’re all really passionate about building this product that we’d love to see. And so we are going to unify ourselves, create a DAO so we can bring this vision to life and then use a token to mission align all of us so that we’re working towards the same north star.”

It’s a way of, I would say, organizing talent, labor, or community online. So the applications of DAOs could get really interesting. We definitely see it as a new paradigm for companies. I kind of talked about earlier in the conversation that example of UniSwap versus Coinbase. UniSwap is run as a DAO. In a lot of ways, it looks like a committee that’s managing a set of open source contributors. There’s some 10,000 plus contributors to the UniSwap project, and there’s actually a bit more that are owning the UniSwap token. And so anyone that theoretically owns the UniSwap token is part of the UniSwap DAO because they own a share in this project, they have a say in what happens on the roadmap, what happens to the company, should the company add this feature, should this company support this blockchain, should they add support for this new token.

“We’re really excited about DAOs as a new model for corporations. But because it’s just any collection of people online that’s financially aligned or vision aligned, I really think the applications for DAOS, just like NFTs, are super early and we’re going to be seeing many more.”

And so we’re very interested to see how that space grows.

Some other applications that we believe are in their infancy but I’m really excited about, are things like grassroots movements or collective action. If you wanted to raise funding for something, how would you do that? If you were a startup that wanted to raise funding, you could do that through a DAO. If you were wanting to purchase a home and then live in it with your community or a co-op, you could do that through a DAO.

We actually very famously saw a bunch of people online raise $43 million worth in ETH to try and buy The Constitution when it was going up for auction. So that’s an example of sort of leads like grassroots movements and collective action. I’m very excited to think about how that could be used for public good. Or when you think about climate, or you think about politics, I think DAOs could be an incredibly powerful vehicle for getting some of those things done.

One other thing that we’re really excited about in this space, which I would say is a big theme for us, is not just partnering and supporting leading DAOs in the space – today we’re seeing social DAOs, social clubs. I’m a part of Friends with Benefits. I’m also a part of Club CPG, Crypto Packaged Goods, which I love. Those are my two favorite groups, so shout out to them. But I would say there’s social DAOs, there’s collector DAOs, DAOs that are like collecting art or collecting assets, and sort of like our investment DAOs. And we’re also seeing, like I said, DAOs that are more project-based DAOs like a UniSwap.

Again, we’re not only excited to partner and collaborate with and participate in these DAOs, but we’re also interested in the tooling that these DAOs need to actually operate. A good example is if you think about a company that you’ve worked at, there’s a set of tools that this company is likely using to get their work done. They’re using Workday for HR or they’re using ADT for payroll, or they’re using a suite of tools to actually just internally hire and operationalize and build. Because DAOs don’t actually employ people on a similar framework, what are they going to do to understand these things? How do DAOs spin up or spin down teams? How do you understand the database of everyone that’s contributing all the roles and all the skills that they have? How do you actually pay contributors? And maybe even paying contributors in tokens, right? Not in USD like on a two-week payroll type pay stub process.

So I think DAOs are going to need all of these tools. We’re seeing a lot of these emerge, things like voting, payroll governance. But I think as DAOs grow in their use cases, the tools that are going to need for these DAOs to thrive are also going to grow.

We’re seeing DAOs kind of hack together things like Telegram and Discord for their communication. Could there be a better medium for understanding who’s in this DAO and communicating across them? I think we’re excited to see how that space evolves at both the DAO level and the DAO infrastructure level.

Very cool. And as you’re saying that, it makes me think of all these different ways that people are going to be running their organizations, running their own jobs. I’m speaking of the creator economy that’s really taken off in the past few years.

Absolutely. I think the creator economy was an area that I was looking at quite deeply even before specializing more in Web3. And I would say, like you acknowledge, the creator economy has been just a term or an industry in general that has been growing and we are just collectively understanding the importance of this shift in general.

Taking Web3 out of the picture, the creator economy really refers to an industry and a movement that allows individuals and creators to monetize their creative talents. I take a very broad encompassing definition of what a creator is, not just a digital content creator on Instagram. I also consider people that are publishing courses or classes or writing. Any form of creative content or creative skills, even musicians, I would say they all kind of fit under this broad term of creators.

VCs, in a lot of ways, are creators. We’re constantly putting content out about our thinking in the space, blogging or tweeting. And so, “creator” economy really just refers to this huge ecosystem and it refers to a growing population of creators that are actually monetizing and less and less working for corporate 9:00 to 5:00 and actually shifting more of their income generation to these creative revenue generation opportunities. There’s some 50 million creators if you actually kind of take this broad definition of people selling on Etsy to people writing on Substack, to people creating movies on YouTube. And so it’s a huge and growing population.

And so now to insert Web3 – and why the intersection of creators and Web3 is really interesting – is, again, this concept around ownership and individual ownership over your content or over your own work. And so with previous generations of companies that have dominated the creator space, I’ll name a couple like YouTube, Twitch, or Instagram or TikTok, really these platforms own the rights to the content that you’re publishing on them. Now, these content platforms serve a great purpose. They aggregate demand so that you can attract an audience, right? “I’m going to put my video up on YouTube instead of posting it on my own website because that’s where people are going to be able to discover my videos and my content.”

And so they definitely serve a great purpose, but in some ways they also don’t give creators a lot of control over the content that they are putting out there. I don’t really own the content that I’m putting up on YouTube. YouTube has the rights to play that, distribute it and show that wherever they want. Same with things like TikTok or Instagram, they control and own the feed and the algorithm that’s going to determine who my content gets shown to, who it doesn’t get shown to, how high I rank.

“There’s really a lot of exciting energy around creators and Web3 because I think creators, as a growing population, are demanding more and more ownership and rights in this industry.”

What would it mean if creators got a say in like every single time the Instagram algorithm was changed? Every single time Instagram changed the buttons that are on the bottom, that may up vote or down vote whether if you’re a reels creator versus a photo creator.

All these nuanced changes that centralized companies are making deeply affect the livelihood of creators. And so when creators have more of a say in how that product is actually going to develop or work, they also have more ownership over the content that they create. I think it’s going to be a more beneficial economy for creators that are all involved in this industry.

I’d say another thing that’s really interesting for this is that creators stand to benefit from the economics that Web3 sets up. So with Web3, there is a concept of owning the piece of the content, right, because the video or the photo that you put up could be an NFT. Someone could actually want to own that. Then maybe they’d decide to sell that. And so, as this content gets exchanged through hands, maybe creators would get a royalty for every single secondhand sale that happens. So as my article or as my photo that I put up exchanges hand, maybe I’d get a 2% royalty every time that gets sold.

There’s no real financial or economic structure that exists like that in Web 2.0. And so what Web3 economics stands to do is sort of displace the intermediaries. Maybe in the music industry, the example would be like a record label studio where they stand to benefit from all the royalties or all the streaming benefits, whereas creators get a smaller slice of that pie. In Web3, you’re going to have a leaner middle man. You’re basically going to have technology that’s facilitating this. And you’re going to be able to maybe think about displacing some of those intermediaries so creators can stand to financially benefit from all of the value that they ultimately generate from putting their content out there.

Right. Speaking of shaking up the order of things, really, I mean this Web3 crypto, the people who make it up, the entrepreneurs, investors, it’s a lot different than the historical startup community. It’s a lot of individuals, a lot of non-traditional investors. It’s not necessarily everyone who went to business school together and everyone worked at the same company together. And from this perspective, Greylock and other Silicon Valley fixtures are kind of like the outsiders. So how do we fit in? What could we offer this emerging industry?

That’s a great question because it’s something I think about often. I think to take a step back, one of my favorite things about investing in Web3 and in crypto is the diversity of founders and builders that I’m getting to meet in the space. A funny term I learned as I kind of worked in venture is central casting. And when we talk about central casting founders, we’re talking about someone that went to Stanford or MIT, then maybe they went to their YC backed founder and their building in a specific sector that everyone knows or they worked for a very well-known large tech company. And so they have certain things on their resume and there’s certain things that they’ve accomplished that makes them, I would say, central casting or makes them more or less a very high quality founder with a lot of signals that we would look for.

Now, I’d say those are still great signals for high quality, very high achieving individuals. But what’s amazing about crypto is this sense that it’s really a global industry. And so I’m meeting people from all over different countries, all different backgrounds. It’s a mess for my calendar because I’m meeting people from all different time zones. But it’s amazing because I’m meeting founders in Latin America, in India, in Europe. Crypto is awesome because it really sort of levels the playing field of anyone who is participating.

I also am meeting different founders from all different backgrounds. Some studied computer science in college, went the route that I was kind of describing, that central casting route. Others fell into crypto because they were just early enthusiasts about the technology. And they’re coming from all different backgrounds, from policy, from sales, from marketing, even really outside of Silicon Valley and outside of tech.

I find that one of the most humbling parts of working in this space: the degree to which I’m needing to redefine my concept of what a high quality founder or a high quality project or resume looks like. It really makes me kind of pause in and think about the technology, the root, the market a lot more deeply because I don’t have those signals to rely on as easily. And I think it’s awesome because I’m getting to meet a lot more diverse perspectives.

In terms of how we can fit into this ecosystem, I definitely recognize that VC is just one way that founders have access to capital. And so it actually really ups the stakes for what we provide as value. I think VCs often get the knock that they over promise and under deliver, or we’re always promising. There’s a VC meme like, “How can I be helpful?” We’re always sort of asking that. And then we actually don’t really show up. Once the money’s wired, we can’t be reached, or are not that helpful in the end.

And so I actually think this is a really good test for a lot of venture capital firms because it really ups the bar for how they contribute and how they add value, because it’s no longer about the capital. The capital can actually be accessed through so many other avenues. And I’d actually say the capital has become commoditized. They can get it from traditional venture capital. They could also just release a token and raise funds through their community. So there’s so many ways in which they can start their project, so one might ask why you would need venture capitalists around the table. I would say it’s healthy because it makes us really step up to the bat to deliver in an industry where, I would say, a lot of founders are skeptical of what value VCs contribute.

When I think about Greylock in general, we have a number of things that we like to help our companies with. We definitely are the first call when it comes to hires, when it comes to customer introductions, when it comes to helping with your product strategy. We’re sitting down with companies on a weekly or a daily basis.

With crypto, it’s awesome because we’re just like in the Telegram group, chatting every single day, sharing concepts, links, articles, chatting with each other all day long. And so we’re really, I would say,” jamming” on ideas together, helping them make their first hires, all of those things that we’ve been doing with a lot of our companies.

But with Web3 specifically, we’re also trying to help bring some of the expertise that we’ve built over investing in Web 2.0 over many decades. And so this is kind of full circle to the question that we asked in the very beginning: if you believe that crypto’s going to be foundational to all areas in technology whether that’s healthcare, marketplaces commerce, then it is healthy and it would be logical that that expertise from building great businesses in the Web 2.0 world is going to apply in Web3. [For example], when we think about customer acquisition, when we think about growth strategy, infrastructure, scalability, whatever it is, all the lessons and war stories that we have from Web 2.0 days are really going to apply to Web3.

I think if you are a founder building in this space, it’s good to be thinking about these questions, like, “What does a traditional VC firm offer me?” And I would say what we offer is bridging this experience that we have in the Web 2.0 world, of course, with this expertise and this lens of what we’re excited about with Web3.

And then, too, the other thing that I would recommend for founders is just I’d encourage them to really think about having a diverse set of voice perspectives around the table.

So you likely want to have crypto native investors or funds that are very deep in tokenomics or regulatory or some of the hairy problems that are very specific to crypto. But I think you also want VC firms that are going to be well versed in marketplaces and other industries and verticals. And so I’d say Greylock’s particular expertise and strength is that we have a super well established track record with marketplaces and networks, social media, in general recognizing rare talent at extremely early stages. And I think these are all things that are crucial for founders in Web3 as well.

Excellent, Well, sounds like there’s so much to dig into. This is a really exciting time and I really appreciate you being here with us today to explain everything.

Yes. It’s the most thrilling time to be building or investing in this space, so I’m so excited.

And if you’re a founder that’s building in this space, I would love to chat.

Thank you, Heather, for having me on. Until next time.

Thank you. Bye.


Christine Kim

Christine invests in the next generation of vertical software companies and marketplaces.

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