Episode 82: Why Crypto Winter is not here with Jaime Burke of Outlier Ventures

Ben Lakoff, CFA
August 29, 2022
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Jaime has seen a lot: he has been investing in Web3 / Crypto / Blockchain since 2014 - about 8 years.

Jamie sees a lot of early stage startups and knows where investor money is headed. In this episode he lays out what projects are getting the most traction these days.

We jump into some popular investment theses including: The Open Metaverse, MetaFi, NFTs as Social Media, and Experience of Web3.

This is a great conversation on where the web3 space could be going - and definitely why it’s not going to be a crypto winter - according to Jamie

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Check out for all the listening options (Spotify, Apple, etc.)

Show Notes

0:00:00  Welcome and context    

0:02:30  What is your background?    

0:05:27  Why is not crypto winter?    

0:18:35  How much impact the current bear market has on the macro  scene?    

0:27:00  What potential next catalysts can come into play?    

0:38:41  How do you see Open Metaverse playing out?    

0:47:45  What hurdles do you see coming up?    

0:53:00  Where can people find out more about you?

Show Links

Jamie on Twitter

Outlier Ventures

Outlier Base Camp

Helpful other Alt Asset Articles

Episode Transcript

[00:00:00] Ben: Welcome to the alt asset allocationpodcast, exploring alternative investment opportunities available to theeveryday investor. Here's your host Ben Lakoff.

Hello and welcome to the alt asset allocation podcast. Today'sinterview is with Jamie Burke. Jamie has been investing in web three crypto orthe blockchain ecosystem.

The name has changed over the years since 2014, that's eightyears, which is a very long time. In this time. He has seen a lot. He is thefounder at outlier ventures, and you'll hear more details in the conversation,but they're very much moving toward the why Combinator of web three, I'm amentor there and they run a really, really tight ship.

There's four cohorts running concurrently right now. Justinsane. The. The high quality founders going through there. So really greatresource for those web three founders, looking for a potential accelerator inthe web three space. Jamie sees a lot of early stage startups and knows whereinvestor money is headed and, and which might be predictive of where the space,the web three space overall could be headed.

I really enjoyed this conversation. We covered a quick updatefor the crypto ecosystem. Spoiler. It's not dead. And then we went into a lotmore detail on. Outlier ventures, investment thesis, or themes going forward,including the open metaverse Mefi NFTs is social media, the experience of webthree or UX, and much, much more.

If you enjoy this episode, please share it with someone, youknow, or give it a like review or comment on whichever platform you'reconsuming it on. I really appreciate these things. This is a great episodediscussing overall where the web three space could be going. And definitely whyit's not going to be a crypto winter, according to Jamie, enjoy Jamie.

Good to see you. Welcome to the alt asset allocation podcast.Excited to have you on today.

[00:02:09] Jamie: Thanks for having me on shame. Wemissed each other in New York to play ping pong and fluff world fluff partytogether. Just

[00:02:16] Ben: yeah. The things we say in crypto world.Right. Just that, that statement is hilarious, but I'm absolutely get it.

Yeah, sure. play ping pong at fluff world. Well, you know, oneday it'll be in the metaverse and we'll be able to do it with our VR headsets,from the comfort of our own home.

[00:02:32] Jamie: That's right. That's right.

[00:02:34] Ben: Yeah. Well, you know, I've been excitedto have you on this. And you people within the crypto space know who you are,but my audience is for alternative investors.

People kind of casually in crypto at times. So let's do a quickoverview of who you are and what you're working on before we kind of jump intothe meat a bit.

[00:02:58] Jamie: Sure. Well look, thanks for having meon Yeah, I've been in crypto, professionally without live ventures for justover eight years. So we always kind of joke it.

It was dangerously early. And during those eight years we'vetaken on lots of different forms as we've kind of evolved with the market.We've been a, a venture studio when there weren't. Really startups to investin. We were an incubator when we realized a lot of infrastructure had to bebuilt before these use cases would happen at scale.

And then for the last three and a half years, maybe four, we'vebeen an accelerator as that kind of stacks matured mature does the industry'smature. You can even. Call it an industry maybe. And we're starting to see, youknow, this, this technology, this web three stack as it's called being appliedto, to doc lots of different industries.

And of course now it's, it's sucking in talent from all overthe place, not just this little, you know, pool of natives. Increasingly, sofrom web two and yeah, so. We're now at the point where we're, if I was gonnaguess, I would say our portfolio is about 140 maybe. I say maybe just becausewe've got quite large cohorts going on at the moment.

I think there were four running in parallel with between six to10. But this year we're on track to accelerate 200 web through startups. Andthere's nothing really. That's saying we, we can't do that. I think we've had2000 applications from all around the world. Last couple of quarters and aquality of found is really improving maturity of, of startups improving.

So yeah, shorthand, I guess now you could probably consider as,as the kind of Y Combinator of web three. The only difference is we're still abit more focused on quality rather than the kind of volumes that you'd seen a YCombinator cohort. I think they go up to a hundred in a cohort. Now we don't doany, any more than 10 in a cohort, but we paralyze it and do multiple cohortsS.

[00:05:07] Ben: That's incredible. And I mean, investingin crypto, which is now called web three, you've seen the, the definitionschange as well, but for eight years, that's That's incredible. So I definitelywant to get into kind of where you think the, the industry's going, seeing thismany projects and seeing where capital is being allocated.

But first I wanted to start, I mean, this being recorded end ofJune. Crypto is ugly down 76%, you know, whichever coin you kind of look at orthe majors. So it's ugly. And I think you just had a piece saying the why it'snot crypto winter. I wanted to start with that because it's certainly is uglyright now and I think people would appreciate why it's not crypto winter.

[00:05:56] Jamie: Yeah, well, obviously you have toacknowledge what's going on in, in the secondary markets. So down from 3trillion to just sub one and I think the top 100 digital assets are down up to90%. And of course, A lot of that volatility has primarily happened in what arewe now, Q2. But it's been going on for some time, right?

Since you know, Q3 last year we had a 70% haircut and it was abit sideways and it went up a bit. And then of course, you know, macroenvironment, Unbelievably got worse, you know, looking at it from Avantis pointof last year. Can't possibly be worse than this year. And, and then here we arelooking at, you know, everything from nuclear arm.

Again. What's it now monkeypox so so strange macro environment,of course that's affected almost every asset class one way or the other inequities negatively big tech negatively, not as much as crypto, but butsignificantly, and you know, we are seeing layoffs. Around the board, right?The kind of larger, big tech players, the larger players in, in crypto,primarily exchanges and stuff like that.

So a lot of the. Retail money or the kind of demand within thesecondary markets dried up. And that's actually both retail and institutional,you know, there were some kind of native hedge funds in the space thatapparently were over leveraged. And so, you know, this macro environment,stress tested this like nascent.

Financial system that we've been building bottom up over thelast, you know, decade plus in crypto. And a few of its innovations, you know,namely terror and algorithmic stable coin. Then the associated Luna ecosystemcollapsed out an nowhere. And. I mean, it's no surprise that if one thing'sgonna go down, it would be an algorithmic stable coin.

It's definitely the more exotic and experimental end of themarket. Although it did, you know, it shook a lot of people. I know a lot ofpeople that were actively involved in the design of that, and, you know, theywere surprised they were surprised it happened, happened that quickly. And ofcourse we can blame extraordinary times, but at the end of the day, Stable.

Coin's supposed to be stable and that undermines trust in the overallcrypto ecosystem. Because that was seen as the safe place to kind of parkcapital away from volatility or in times of volatility. So for that to go down.And then for the, the whole lunar ecosystem to clap around, it was, was quiteshocking.

Some people have called it the Lehman moment. I don't know. Butactually, you know, if you look at the lunar ecosystem, there was, there was ahuge amount of startups building over there. It wasn't some kind of like scamcoin. It was a very, very active ecosystem. There were hundreds, if notthousands of startups that were actively building that then had to switch and,and change their plan entirely.

And the stack. So, so that was kind of really the catalyst thatreally took the sideways market into a bit of a downward spiral. As I said now,90% hack haircuts. And of course that's what everybody looks at, right. That'sthe most obvious barometer of the health of crypto. And it's the one that Mothe most people are exposed to.

It's, you know, the thing that indicates whether people feelrich or, or poor of course it's all notional wealth often, unless you, yourealize you're gain somehow. But you know, and this is true for me is, is showanyone else in crypto, if you're in crypto, You're not necessarily thinkingabout getting your money outta crypto and in, into, into fi that's notnecessarily the end goal.

But it left a lot of people exposed and it, it led to this kindof unwinding of leverage. And there's some very exotic forms of, of leveragenot necessarily more exotic than we've seen in traditional finance, but givenits NACY is quite, quite shocking. So that's the secondary market and there'sdefinitely not much new demand coming into it.

Of course, crypto like tech stock generally, like COVID stock,like meme, stock, whatever you want to call it, benefited from this. You know,helicoptering of money, this kind of period of quantities it enjoyed it and nowthat's again, drying up. It, it it's, it's suffering from that too, likeeverything else.

So what was interesting though, is the degree to which cryptowas affected by the wider macro environment? I think a lot of people felt. Ifnot a hedge, it was perhaps somehow still separate. Right. And it would, itwould be driven by, by its own kinds of momentum. And I think it's a con thatthis is demonstrated that crypto is mainstream.

Enough now that the people who hold crypto be them retailerinstitutions, their sentiment towards crypto is affected by what's happening inthe wider macro environment. So it's got its big boy pants on and, and becauseit's a permissionless 24 environment with lower levels of liquidity, it seesmore volatility play out when that sentiment's negative.

So bit of a monologue, but that's kind of, you know, the, the,the wider market, that's what everyone sees. And as you say, it's pretty.However, to this point of does that then qualify this for a crypto winter. Awinter is different to a bear market. A winter typically used in the context oftechnology was first used back in the eighties, 83, when I was about tworeferring to AI and the AI went ended going on for decades.

And that was really defined. Negative sentiment within thetechnology community itself that kind of contagion then in impressed, that ledto a dry up in R and D funding and then kind of wider later stage funding forit to be commercialized. And, and that was pretty brutal. It was decades long,but it's also, you know, historically quite normal for, you know informationtechnologies to kind of go through these cycles.

Now I, and we did have one of those 2018 to 2020 in crypto. Ithink objectively, you could say all of those things were true. We wereinvesting back then. We were accelerating went through startups and actuallyhe, the trip was. To help them raise money without saying they're web freestartup, cuz nobody would give them any money then.

So there had to be anything other than a web free startup, eventhough in their DNA, in their business model, that's actually what, what theywere, it's what they wanted to be. But it was hard, you know, money dried upventure capital dried up and there was no secondary demand. And so it was, itwas pretty desolate.

However out that came NFTs defi these kind of innovationtriggers that led to the next cycle had defi summer in, in 2020 NFTs 21. And,and prior to that, prior to the last crypto win to 2017, was the ICA initialcoin offering all of these three things were innovation trigger. Where a newinnovation was introduced that allowed for a native form of value to be createdthat could then be recycled draws, headlines, positive PR, and then sucks in some,some new money from somewhere in a secondary market.

Now if we look at where we are today, based on those measuresof a technology cycle, well, Definitely negative sentiment within thecommunity, not all the community, but certainly the newer community, thecommunity that joined in the last 12 months, who've probably lost a lot ofmoney. And think it's all a scam and it's all over and that's it.

And, and crypto's dead or at least, you know, they, they wishit to be that that could also be true for the hedge funds that have kind oflost their, lost their shirt. In the market naturally the press picks up onthis. The, the thing about cryptos it's incredibly sensational, you know, theheadlines, the numbers, the volatility.

And so yes, there's. Negative sentiment within, at parts of thecommunity. There's definitely negative sentiment within the press. And there'sdefinitely capital dried up in the secondary market, the demand for thesethings. But the interesting thing is from the vantage point of being anaccelerator is.

There's two sides to funding, right? There's the funding whicheveryone sees in the secondary market. And then there's the venture side, whichnot many people necessarily see unless you are operating at that stage. Oryou're a startup trying to fundraise precede C maybe series a andinterestingly, this is relatively healthy, right?

So we've had $15 billion. Allocated to new funds, Q1, Q2explicitly for web three. Either partially or holy that's up from 20 12 billionover the same period last year. So more money than ever that has to be deployedto the space. I would argue. It's probably over capitalized. Like there's,there's still more good capital than there is good projects that deserve it.

We are looking at the velocity of deal making it has sloweddown because. Funds are actually doing due diligence. Now they actually havethe time to do due diligence. A lot of VCs, they, they just were sucked intohaving to write a check in 48 hours. Otherwise you miss out. Things wereoversubscribed in what are called party rounds.

Right. You know, you'd just follow one of your peers would goin and everyone would just ape in. And if you, if you didn't play that game,you didn't get exposure and it didn't matter. You know how much you hated it.If you didn't play the game, you were out, that's over. It's definitely abuyer's market. Now VCs want to do due diligence.

But doing due diligence you have for human capital constraint,right? So you've only got three, four people. This is incredibly complex, technically.Order of magnitude more complex and classic venture deal making slowed down asa consequence velocity of, you know, the, the kind of investing slowed down.

But also the interesting thing is but not by much right roundsare still closing top decile of projects. So oversubscribed it's just in the,in the remaining in 90% or so that slow down and valuations are only 25% downfrom all time high valuations. We were seeing, you know, a couple of quartersago.

So you would have to see that disappear entirely as well, frommy perspective to call it a technology winter. So the question then is. Canthis pool of venture capital bridges into the next forum where there's gonna besome new form of demand in the secondary market. And that's the big question. Acan the venture capital ask that long?

I think it probably can, but where does the new demand comefrom?

[00:16:44] Ben: Yeah. And that's the innovation that wehave to see to kind of like bring in new money and, and kind of keep this thinggoing. I do hear that a lot, the amount of sheer capital on the sidelineslooking for good deals in the space, and I was just Reading a little bit fromHoward Marx's books master the market cycle.

And he talks about like these hype cycles, right? And the thefear of missing out, you gotta don't do your due diligence. You've gotta getit, do money in to get into this deal. That totally was happening last year. Itwas just, just bananas. But with crypto, like valuations down 25% secondarylike liquid tokens down 80%.

How much do you think about macro impacting this? Because itdoes. Right. And if we enter. This world of quantitative tightening, as opposedto free and easy money. I mean, that will continue to impact the secondary,which will trickle back to the primary, like initial fundraising and kind ofsquash innovation a bit and delay that next that next cycle.

So I guess how much do you worry about macro when kind ofthinking about allocating in this space?

[00:17:59] Jamie: Yeah, well, I mean, the challenge isyou're probably better qualified, you know, than, than me to, to talk about thepotential impact of that. That said, of course, you know, we at outlier, we'vegot a lot of very experienced tra you know, people who understand capitalmarkets infinitely better than I do, whether it's commodities or, you know,their enter the spectrum.

And as I said, I think increasingly macro effects crypto youknow, for a long time that wasn't the case. We were kind of in our own bubbleto a degree, but of course, as I said, we, we definitely benefited from, fromthat quantit But the interesting thing is well, and, and maybe to continue thatthought, you know, Ralph pal is a good friend of mine.

I've been on his pod. He's been on my pod, you know, not solong ago. He was talking about crypto as the only macro around which wasdefinitely true, you know, at that point, hedge funds were, you know, barelyjustifying their existence in many cases, right. Now there's lots of otherforms of macro out there commodities and everything else.

That's gonna suck attention and, and, and kind of capital away.That said, you know, and I, I think kind of surprising, surprising to me thatfunds, despite these conditions are still getting LPs to invest. A lot of thoseLPs are still pension funds make quite conservative money. But they understand,they understand the web through narrative now where previously, you know,crypto was just seen as purely speculative kind of the Warren buffet, you know,view.

And I think now there's an understanding that there issomething here. I think its resiliency during periods like this are when itwins the confidence of, you know, fund managers, serious fund managers. And theone thing about crypto is it's incredibly resilient. It, it bounces back. Okay.It might take the shock a lot hard than, than you know, other assets, but italso bounces back a lot harder.

And you know, we've seen a little bit of stabilizing in themarkets now. But coming back to the point I was saying earlier about the thingthat drives bull runs in crypto favorable macro environment, for sure. Butthese kind of innovation triggers because at the end of the day, For better orfor worse, you know, crypto enables new forms of like money printing, pressesvalue printing presses, right?

So the Gutenberg's the effect of the Gutenberg printing pressapplied to money applied to. You know, assets digital commodities. And ofcourse that means there's a load of rubbish happens. But you know, law of mathenough monkeys on typewriter and you're gonna get Shakespeare. So that's why Ialways have confidence in crypto.

Right. It's. Somebody's always gonna find a way to delivervalue here. And we we've got this amazing brain trust in increasingly amazingbrain trust. Not just people who are technologists, but people coming from traiyou know, the thing that trapped a lot of brilliant talent in web two was thesestock options.

Well guess what? They're not really as valuable as they oncewere. They're not the thing that makes you go, oh, do I really want to go toweb three? That looks really risky versus my job at Facebook. You know, letalone being probably a pariah amongst your friends now that like the, the kindof the security of that job is, is no longer.

Interesting. And if you are remotely curious about the futurethis is where the innovation's happening. It is effectively one big innovationsandbox, right? So it's naturally sucking a lot of talent and. You know,whether it's a new form of digital value, that's created that I'm not aware ofyet, or whether it's a range of use cases leveraging existing innovations.

I, I think a big one will be around NFTs going beyond art,thinking about these things as digital consumables you know, that is going toallow for entirely new forms of value creation. Both applied to existingindustries and enabling entirely ones. And so if I'm looking around going well,where is GDP growth gonna come from?

I I'm, I'm looking at web three or the matter, whatever youwanna call it. That's where new economic activity's gonna happen. That's notconstrained by supply chains. It's not constrained by any kind of decoupling oryou know, re localization, re reassuring ons, ensuring of industry. It's theonly thing that can actually continue to be a form of globalism, right.

In everything. Where we are seeing, you know, increasednational sentiments or breakdown in international trades, web three. And whatwe refer to as the open metaverse is the thing that's going to continue to bethis, this global permissionless frictionless network. So my bet is that'swhere growth's gonna happen.

And if that's true then I think it's only gonna be natural,that money that's looking for value is gonna find its way there. Exactly whatthose triggers are. I don't know. I actually expect that the new money thatwill come into crypto in this next ball run will be more institutional.Because, you know, with the retail side, there's too many of the factorshappening inflation and everything else that's gonna affect what people spenddigitally.

We can already see that with subscription, you know, forNetflix or whatever else. That's also gonna extend into NFT or, and, andprobably gaming. But I think large institutions looking to park their money aregonna realize. These are the digital supply chains of the future. Most digitalassets are kind of commodities that you need to consume and use to, toparticipate in those supply chains.

And so it makes sense to, to get a bag of them.

[00:23:55] Ben: Yeah, I think that's very important tothink about and, and very, very good points. But you mentioned you weren'tquite sure what would be the next catalyst, but arguably you're probably one ofthe better people within the space being one of the first institutionalinvestors in crypto, certainly in Europe, if not.

Globally, but eight years within crypto, all of the projectsyou're seeing coming through your seed investments can seeing where smart moneyor institutional capital is allocating or placing their bets. So let's, let'stalk about some of these like potential next catalysts or kind of themes thatyou're seeing of where, you know, smart money is, is allocating their time andenergy and capital.

[00:24:41] Jamie: Yeah. So, I mean, I, I just wannastress that. You know, the interesting thing about being an accelerator is youactually don't need to be a genius, right? Is pattern recognition and you havethe benefit of volume. And because of the stage, it just gives you a six to 12month window on the market. Right.

Actually, if you're a really good accelerator, you are kind ofin this sweet spot. You're not too early, you're not too late. You'reaccelerating things, whether there's about to become demand, but it's not quiteyeah. That yet there yet, so it's not too competitive. And so we are alwaystrying to just jockey.

To to that spot and hopefully we're doing okay about it, but toget there, you got to speak to thousands of startups, right? So we've spoken totwo thousands just in the last two quarters, excuse me. I think. All going wellover the course of this year, we'll do a formative diligence on at least 4,000from all around the world, all kinds of quality huge spectrum of like range ofapplication.

And so. You just start doing some basic pattern recognitionthat allows you to go, okay. Well, you know, it seems to be that there's thiswave of startup that's working on roughly the same problem. From slightlydifferent angles. And you know, this is where momentum seems to be happeningboth technologically, but then also in terms of market, there seems to be adegree of market fit there.

And so, you know, that letters to, what was it? I think likefirst week of January, I get the years mixed up now with COVID. So we're 2221.I do

[00:26:26] Ben: too. Every, every time, I guess,

[00:26:29] Jamie: I think it's January 20. Yeah. January21. You know, we released a paper called the Oprah metaverse. This was. BeforeNFTs really exploded.

It was before Facebook rebranded as matter. And, you know,brought this matter, this narrative. And actually we even surprised ourselvescuz when we were doing it, we were writing at Q4 20. Based upon the insights wewere seeing from the accelerator and we thought. I mean, people aren't evenusing the term web three yet.

Should we really try and introduce a whole new term? And I'mnot saying it was. Solely that introduced the metaverse, but, you know, wecertainly helped contribute to it. And we were like, I mean, we, this is ourvision for the next decade, but maybe it's too early to talk about it and wealmost didn't do it.

And I'm really glad we did. But within that, we kind of laidout that this web three stack that we've been seeing applied primarily infinance, like. Obvious financial use cases, defi, et cetera, money payments wasbeginning to be applied into creative industries, media entertainment. It wasbeginning to converge with other technologies like AR VR.

And so for us, web three was an open source stack oftechnologies that would enable a, a more open metaverse versus kind of theFacebook meta vision for us a more closed one. And so that's still a really bigpart of our thesis. It's still what we see. Evidenced in a lot of the startupsthat we speak to, but we've begun to see an, a nuance to it, which we call Mey.

And I'm sorry, your years have probably hating me now. CauseI'm using all these stupid buzzwords, but that that's ultimately what the jobof a VC and an accelerator is right. You've gotta help kind of frame the narrative.Mefi really is we're starting to see new forms of collateral in the metaverse.

Being brought on chain. That can be borrowed and lent againstin defi. Now that sounds really niche, but actually when you consider all theforms of value, that today are digital. But that can't be used as collateral.They're not owned and controlled by the user directly. They are owned by aplatform.

They kind of rented to somebody on a platform and theycertainly couldn't go into a bank and get a short term loan against them.Right. Or let's say, you know, you are a influencer on social media. I mean,you have irregular income. You could be the platforms. Like that's not a job asfar as the bank's concerned, maybe rightfully so.

I don't know. But but for some people that is how they drive anincome and influence is A form of digital value, especially in an attentioneconomy. So, you know, enabling a gamer or somebody in the creative industries,a musician or an influencer to be able to. Realize these forms of value in adigital way that can become collateral offers, I believe a huge boost to GDPand things that can be taxed by the way, which is of course, what allgovernments are looking for right now to offset all this debt that they'veacted up.

But also will create a huge form of financial inclusion. Imean, we're talking about just in gaming alone. Billions of dollars of valuetracked in platforms. The only people that say any value from that currentlythe shareholders of those platforms. Most of those platforms, aren't payingmuch tax anyway, you know, they're offshore or whatever.

And so everybody's kind of missing out other than theshareholders of these platforms. And so enabling gamers to take control ofassets to turn 'em into collateral alone as a use case is, is gonna be huge. Sothat's kind of the, the meta narrative. But another big one we're starting tosee.

Which sadly doesn't yet have a, a buzzword. So if anybody canthink of one and please let me know is NFTs as a form of social media and likereinventing social media without the platform. So, you know, we're starting tosee a lot of innovation happen around identity. Reputation and the socialgraph, you know, social graph being how Facebook and Google effectively monetizerelationships between people and information flows.

And so a lot of people are now looking at that in the contextof web three. And so you're seeing things like self-sovereign identity. You'reseeing VC's verifiable claims did decentralized identifiers. These aren'tinnovations that necessarily need a blockchain, but we believe are starting tobe connected and applied.

To blockchains, which gives a business case for them tofunction at scale rather than just be a social. Good. And then looking at NFTswallets as effectively a social profile and, and demonstrating belonging andconnectedness to communities. Where the NFT is almost like atomized socialness,but again, that can also be a form of kind of collateral.

It can have a financial value. And so I think that's gonna be areally exciting theme. And then alongside that is the experience of web three.So web three is notoriously a poor user experience. You know, a lot of peoplekind. The analog is dial up, you know, dial up internet experience, right?

You just, there's so many steps to actually get to the thingthat you want. And there's so much lag, but for most people it's just not worthit. Right. Unless you are a hardcore nerd, you're just not gonna put it withany of that. So we're seeing a lot of that complexity be abstracted. Andthere's a big focus on, you know, making web three more usable.

But then the experience of web three more immersive, and thiscomes into the metaverse narrative and the open metaverse narrative, which is.Where we can begin to have what, what we are calling de decentralized commerce.So I can have a shopping experience. It could be a, you know, one to one or oneto platform experience.

It could be a social shopping experience. It could be anin-game in world retail experience. But where the kind of requirement for thatexperience. Kind of, there's a higher requirement, right? You know, a luxuryretailer doesn't wanna reduce down you know, their Gucci handbag or whatever,to a few pixels.

They want it to be as rich as it is in real life. So how thatthen integrates into VR AR and everything else. So we're seeing thiscontinuation of convergence of these technologies, AR VR, blockchain. And thenAI as we're starting to look at autonomous representatives, extensions ofourselves. So you know, rather than me having to do everything manually on theinternet, going to Google, you know, typing the thing that I want searchthrough its results, identify the most affordable one.

Eventually we can, as we move away from platforms to potentialagent based systems where effectively I can have an agent, I own it, not theplatform, not like Alexa, which is owned by Amazon. It serves Amazon it's dataserves Amazon. But have an agent that represents me. I can have that withsurety. I.

Audit what it does on chain. I can make sense. And of thepermissions it has. And it can increasingly carry out autonomous economicactivity on my behalf on chain. Now that one's a little bit further out, but alot closer than many people would think. And so kind of like in summary withall of those things, feeling short to midterm it's very difficult to not bebullish about the space, but I'm probably biased.

Cuz I spent all day working with entrepreneurs andentrepreneurs are optimist. So we. Anything's possible, right? We're not sataround thinking around what's wrong with the world. We're thinking about like,what, what can we do? No,

[00:34:30] Ben: definitely. And, and at, at times, manytimes to a fault, right. Just being completely eternal op and the most aboutit, but that's what drives us to do the most idiotic things like being afounder and, you know, bashing your head up against the wall.

I, the UIUX I like the experience of web three is a big one. Imean, anybody that's. Been in crypto or it doesn't matter. You've been incrypto for as long as you to, to onboard somebody new from zero into likehaving something and buying an NFT or whatever it is just painful andexcruciating terrible.

So I completely very, very interesting investment thesis on alot of these, I think. These are certainly some of the main trends that willhappen. It's just a matter of timing, whether these transpire in the next sixmonths or, or four years, but eventually they'll be there. I wanted to jumpinto one just in a little bit more detail would be the, the idea of the openmetaverse.

Big fan open, transparent permissionless metaverse, but it'skind of against the big, bad Wolf at this point of, you know, Facebook, whichis meta. How do you, how do you see this kind of playing out because there'sFacebook. Meta has deep pockets, lots of access to talent. Web three is gettingthere, but not quite there, but then also like political capital and thesethings get quite political if it gets as big as we expect it to be.

So I guess, how do you see kind of the open versus closedmetaverse shaping out?

[00:36:07] Jamie: Yeah. I mean, you hit the nail on thehead. I actually think the the potential. Kind of attribute that is perhaps. Imean, it's a double edged sword. Right. But it, it is the political capital.Right? So on the one hand web two is under siege, certainly in Europe and hasbeen for some time for antisocial behavior, right?

Whether it's data privacy and data violations, you know,whether it's manipulation of users and election results, whether it's you know,all the other naughty stuff that not paying taxes or like whatever it is. So onthe, on hand, you know, In certain parts of the political spectrum, web two bigtech are, however, on the other hand, you know, they are very effective atlobbying.

And you know, they offer the opportunity because they're seat,they're centralized to be coerced and governments quite like that. Right. Andso when they're presented. Permissionless, you know, pseudo anonymous systemsthat preserve the identity and the sovereignty individual, which I can't reallycontrol versus a platform which I can coerce.

I mean, Facebook Libra is a perfect example of that. Theymanaged to kill that pretty much overnight, as soon as it was set out as anintent by Facebook. In a way that they couldn't with E theory. And so I thinkit's much more nuanced than people think, you know, and I think increasingly alot of regulators of course, want to, and understandably want to push CBDCcentral back digital currencies.

The biggest problem with crypto actually is stable points. Andagain, I could understand that, right? I mean, firstly, you know, you want youwant the kind of hemo opportunity of the dollar to, to continue to besuccessful. You also want a financial system that you can control, stabilize,whatever you think they're doing.

And naturally. Stable coins in crypto. I think it's fair tosay. They need to do a better job at making their case, whether it's those thatare asset backed somehow. Okay. Like shows the assets like how much thechallenges, because anything on entre has this hyper transparency as we've seenwith is it three arrows?

The, the crypto hedge funds, right? It, it, it's very easy tobe attacked. Like if people know exactly how much it's gonna cost to attack youand, and where you're leveraged. I mean, that, that is a vulnerability. It's asystemic risk. And so there's a natural desire for capacity to kind ofobfuscate. And, and for them to manage that risk whilst they're stillrelatively small compared to, you know, a lot of financial institutions whomight want to take them down or, or, or make a profit.

But I think we can do better in, in degree of transparency,winning the confidence of regulators. At the same time, I believe in theinnovation of algorithmic. Stablecoin incredibly hard to pull off as you'vejust seen with terror. Precisely because I believe we need a stable coin isoutta the control.

Or permission of a regulator, at least one. Just as a hedgeagainst that system, a against authoritarianism. But at the same time, that'snaturally gonna be risky. And so, you know, I think the whole battle is gonnabe primarily centered around stable coins and platforms where you can stopthem, launching their own digital asset and then insert a CBDC.

It's gonna be very appealing to regulators right now,especially in places like China, where effectively, already done it. They'verolled out across 10 cents and Alibaba overnight. But also in the west, youknow, they all have the tendency to, to ter right. If they can, if they can getaway with it to control it.

And so they've kind of, it's what happens to the rest of it.Right. Things that I believe are digital commodities, we're starting to see.Battle played out or continue to be played out between the S sec and this, theCFTC, the, the, the commodities commission in the us, like who, who owns, whocontrols it, has purview on it.

I, I think that the reality is. Both will probably coexist. Ithink there is a big difference though, you know, Facebook Oculus and matterand whatever they're building now, then that's not in my mind is not thematter. It's a closed platform at ecosystem. Just like fortnight is a closedgame. It's a very good game.

It's a very popular game, but it's a game. It's not themetaverse the matter needs to be matter. It needs to. You know more, more thanone thing, more than one instance it needs to have a monopoly. It needs to beone platform with a complete monopoly, which is the DYS topic view of themetaverse or it needs to be a system that is matter to all versus hence themetaverse.

And so. I think that all these things are interesting inisolation, but they don't equate to, to the metaverse. And so using thatdefinition, the closest thing we've got to the metaverse is crypto. It is theonly economic system that is by design, bigger than any one platform thatallows transferability and economic interoperability.

Across platforms and therefore in my mind has the mostlikelihood to realize the vision of the meta this, but to interact with it, youhave to adopt some of its DNA. And so you can see Facebook meta. Trying tofigure that out right now with Instagram, they're gonna roll out NFTs. Whatflavor of NFTs we don't know.

But if you want the benefit of the liquidity that comes fromopening up and connecting to a bigger economic system then you have to makecompromises and that's usually around the relationship between a platform andthe individual. So I see these things kind of coexisting the only way Facebook.

Or any large, big tech company has the opportunity to be partof the metaverses either by adopting crypto or by creating some slightlyperverse. Permissioned ecosystem with other big tech acted by a CBDC, which,which is a high degree of probability actually. Right? Exactly. And that, andthat's gonna be, you know, it's gonna be secure.

They can revoke a transaction. It's gonna be easy to Libra too.They'll pitch. The whole safe thing to use is be very appealing to the averageuser. Not everybody, not everybody values sovereignty yet until it's too late.

[00:42:54] Ben: until it's too late until you need to. Imean, the most people, it doesn't matter.

Everything works until it doesn't right. I, I, yeah. I mean, I,I, I think that could definitely end up seeing some sort of battle like thatwith most crypto people. I mean, I agree with many of your thesis, the way thatyou're thinking I'm curious, what, what blind spots do we potentially havebelieving in these things or what, like insurmountable hurdle, notinsurmountable, but very, very difficult hurdle that will need to comeovercome.

Could you see kind, kind of popping up?

[00:43:32] Jamie: Yeah. Well, look, I mean, I will be,I'll be honest and say, I, I have my concerns about web three, I think, to not.It would be dangerous. Right. I would be doing a disservice to the startupsthat I work with. It would be a disservice to, I've got a nine year olddaughter and I look at the way that the web is now and it looks pretty awful.

But I also remember, you know, back in the Arab of spring andwe thought social media was gonna change the world for the better. Andactually, you know, arguably on the one hand it's Enabled everybody to be apublisher. And it's kind of created perhaps a more truer, total view of theworld, but actually it's distorted.

What is truth? You know, it's like very hard to know who totrust on the internet anymore. And so I think it's natural given the complexityof web three, that we can sleepwalk into making some fundamental design error.Look at Tim burns Lee now I mean, even mark Andreeson of a 16 Z Brandon bravebrowser, these were the people that created the web.

As we know it sometimes overnight, you know, they made aninnovation, rolled it out and okay, this now becomes a cookie standard thatdefines the business model for web. They're all trying to fix the mistakes thatthey made with their investment now in web three, either as investors or asfounders.

And I can see us doing exactly the same thing with web threenow if we're not really intentional about what we're doing, I think whilst Iprimarily I'm focused on the sovereignty of the individual. I also acknowledgeI'm not a hardcore libertarian, so I don't think you can abstract theindividual out of their social context.

So I think we need to be thinking about. The individual andcollectivism, which by the way, is what excites me about web three, cuz on theone hand it enables a sovereignty of individual. But through things like Dowsallows for a form of fluid collectivism, if you can have both of those things,you could effectively reconcile, you know, one of the most fundamentalpolitical, social, economic tensions of, you know, last century or so, so.

So there's potential there, but at the moment, the focus is allabout the individual abstracted away from the physical place that they live.Not everybody's gonna be a digital nomad, not everybody's gonna jet off toDubai because the place that they live in sucks, and this, the social system'scollapsing.

Right. You're gonna leave behind a load of mal tens.Discontents, you know, we can't, we can't just pretend that they don't exist.Right. So, so that's a concern. And then I think the kind of third one is whichagain is linked to the individual it's anonymity to its extreme form. And basedon this zealous.

Focus of privacy. So I like privacy. I understand in many trustlessenvironments it can be a matter of life or death. But at the same time again,I've got a daughter I am concerned. How she navigates the internet, you know,in her adolescence. And it's broken at the moment. And I think taking it to theextreme that everybody can have high degrees of anonymity.

Like you, you see what happens without a reputation systembehind that. You end up with like anarchy, right? You know, people there's morebullying, there's more trolling. It's just not a pleasant. Way to experiencethe internet. It's not a pleasant way to socialize. And so I have some concernsaround that too, you know, so these are all things I think can be solved if weare intentional as a industry.

And we're not zealous about, you know, we're not kind of beingmaximalists about sovereignty. We're not being maximalists about, you know,some of these principles and we don't try to just be. Abstract ourselves andour industry away from society. I think we have to, we've got a socialobligation to think these things through before it's too late.

And then when you spend another two decades trying to fix itagain, you know, it's, wouldn't make sense.

[00:48:00] Ben: Oh, I love it. And Jamie, I could, Icould talk to you for hours about this, but just in the entrance of, of time,I'll, I'll have to cut it otherwise. Again, this is fascinating, fascinating,but great to have an inside look on kind of where the industry could be going.

And certainly why it's not going to be a crypto winter. Fairmarket maybe perhaps, well, definitely I guess by terminology alone, but thereis a light at the end of the tunnel and a lot of fascinating things that a lotof and more and more, very, very smart people, passionate people are workingon. So just to kind of close this off, where can my listeners find out moreabout you outlier ventures?

Where would you like to send them?

[00:48:42] Jamie: So firstly, thanks. I, your great chat.Thanks for giving me the latitude to go a little bit over the place. Hopefully.I didn't didn't didn't go too much off piece. You can find me at Jamie 2 47 onTwitter. That's the, the place that I'm most active and outlier ventures isoutlier

If you are a startup entering web three or already activelybuilding web three and thinking about how you're gonna. Fundraise capitalize,take your project to market. You can go to out live ventures dot slash basecamp. We're perpetually like we're, we're constantly recruiting. We don'tswitch recruitment off, even though we run, you know, seasons of, of programs.

So apply. It's never too early. We'll always try and give youfeedback to help you kind of come back reapply. If you don't get in the firsttime. We only accept sub 5% of all applications at any one time. And you know,if you are a mentor or an investor looking to invest in the space, again,connect with us, you'll see various signposts on the website.

As an accelerator, that's effectively our job. We've got ahundred plus full-time staff, but even with that, we can't possibly have allthe competencies you need for where through start. So we, we lean and rely upona really strong mentor network and I'd highly recommend. It's a great place foryou to learn as much as it is for you to teach through exposure to the space.

And yeah, you know, if your investor looking to allocate froman angel family office all the way up to VC we'd love to kind of syndicate dealflow to you and help you develop your thesis for the space.

[00:50:09] Ben: Dam it's been awesome. I'll, I'll makesure and link all of those things in the show notes and great conversationreally enjoyed it.

Thanks Samuel. Thank you, sir. There you have it. Thank you forlistening. I really appreciate your support show notes, transcript links, andmore can be found on our [email protected]. If you'd be so kind,please share this with anyone you think might be interested. Or get some valuefrom this conversation.

If you have any questions or comments, please reach out. I'malways happy to hear them. Lastly, if you're on YouTube, please like the videoor subscribe to the channel. If you're listening to the audio version of this,please subscribe to the podcast and, or leave a review. This really helps morepeople find the podcast.

And I really appreciate it. Thanks again, and hope you have afantastic day. Happy investing.

Ben Lakoff is an entrepreneur and finance professional. He has developed strong global finance experience through 10 years of international assignments in the US, Brazil, Afghanistan, Southeast Asia, Czech Republic and through the award of his Chartered Financial Analyst (CFA) certification.