Christine Kim | Innovation and Opportunities in Web3

Hi everyone. Welcome to Grey Matter, the podcast from Greylock, where we share stories from company builders and business leaders. I'm Heather Mack, head of editorial at Greylock. Today I'm excited to be joined once again by our own Christine Kim, who is an investor here at Greylock. Christine has been on the team since 2020 and she joined following five years at Uber where she was a member of the product team that launched and scaled Uber Eats. Christine brought her experience with marketplaces and game changing consumer tech to Greylock and now she works with companies including Novi Connect, Instawork, Pinata and Portals. She's focusing deeply on Web three more specifically the intersection of crypto and consumer technology. As Christine and anyone else paying attention to the recent advancement of Web3 can tell you, we are on the precipice of the next Internet revolution. Today we're going to talk about what that means. Christine, welcome to Gray Matter. Thanks so much for joining us today.

Hello. It's so great to be here. Excited.

Awesome. Well, let's just start with the very most basic basics. What is web3?

So web3 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 Web three is the next major iteration of the Internet which promises to wrest control from the centralized corporations that today dominate the web. And that's really is an important theme of Web3. In a lot of ways, Web3 is a reaction to Web2, 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. And I think there's been a movement in users on the Internet and a desire to control and own more of our data, control and own our own identities and sort of, you know, what we can, what companies can do with that. And so I'd say there's sort of this philosophical movement. And you know, it's interesting to think about the ideologies behind Web3 principles like decentralization, individual ownership, distributed collective collaboration or distributed computing. And you know, if we were to even rewind a bit, Web two is this period that followed Web one. So Web just kind of pause for the listeners and just kind of go through that history. Web One was this period from the 80s to really the early 2000s, you had early players like AOL and Netscape and Yahoo. And you know, it was early, early really early Internet days. And so 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 is 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 the space. And that's what we mean by read only. You had players like AOL or Yahoo that was 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. Web2 is this period that follows really mid 2000s to today. I would say we're still really in a very Web two dominated environment. Kind of called out some of those companies that really dominate the 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, you know, early blogging or things like Reddit or even Facebook, where like 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. But 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 Web three. We kind of touched on some of the principles that define Web3. But if I were to follow also that analogy of like read only to read write web to now we have a read write and execute web which, where we're not only consuming, we're not only creating content out 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 know, you have many computers or many participants actually contributing to the computation that is going to be required for the Internet to scale. And so that's that kind of execute layer that's added in this Web3 element. And 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. And Web three, 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 Web2.

So you've been focused on transformative tech since you began your career. Uber and other.

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 Uber Eats product there and I was in engineering and product 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. You know, some of my earlier investments were in supply chain marketplaces to the future of work. I love, you know, looking at things in the health care education space and then, you know, 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. And looking at web3 with a consumer perspective is really what I bring to the table now. And so I think crypto and web3 in general, again this all encompassing term is really going to be more foundational to all of the areas that we invest in. And so 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. And crypto is such a broad area. Whether you look at more infrastructure, layer one, scalability, security, all, 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, some ones that you've named and some ones 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, you can see how it could be the underlying infrastructure for companies and opportunities across the space. So a good example is OpenSea or Magic Eden. These are NFT marketplaces where users can transact and sell secondhand NFTs and trade them amongst each other. The Web2 example of this would be ebay or Craigslist even. And so, you know, 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 more. You know, a lot of these companies want to progressively decentralize over time or they're running on certain blockchains. Like OpenSea definitely is a 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 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, 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.

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 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. You know, I would say early cycles, like from 2011 to 2017 were 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 and other real world use cases yet. And I would say, you know, in 2017 we had 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 is what really it felt like. There was 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. You know, we're seeing a lot of Web2 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 is been an incredible theme to watch in 2021. I have to credit projects like NBA Top Shot, which is merging Web3 and this 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 Pepe have been around. And these are projects, I would say, that mostly appeal to Web3 insiders. And so that, you know, Top Shot is a great example of pulling in a mainstream sports fan audience or what we saw with Axie Infinity essentially 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. And 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 is really excited about. And I would say this hallmark of really pulling in a ton of mainstream users, and 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 onto 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 onto crypto? Those that, that have not fully jumped on yet. I'd say we're very excited about all this.

You know, 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?

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 people that are participating in token in, from a more outside in perspective, that's the main way that we're participating. We're seeing a lot of publications cover which projects are doing well. Tokens are going up, they're up thousands of percent year over year, 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. Like 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 growth stocks or growth projects in general is, you know, has, is reflective of geopolitical instability or what's going on with, you know, interest rates or what our expectation is for how the economy is going to evolve over 2022. And so of course these are super important signals. But one thing I would encourage listeners to think about is that 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, you know, there's revenue, there's 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 actually see that they can be inversely correlated a lot of times. And so you, you do have on one sense this public sentiment. And 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, you know, the numerous tokens on various projects that we're involved in or that we're backing, how those are performing on a day to day basis. You know, other examples that I can point to historically for why this would be the case. If you look at important projects that are, have stood the test of time, let's say Ethereum or Coinbase are great examples here. These were actually started during periods of winters or, 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, you know, not going anywhere. They're both winner circle, you know, critical pieces of the Web3 ecosystem today. And so yeah, I would say Bitcoin, you know, launched in 2009, there was a big run up really early in 2011 for some of the really, really early, the 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're starting to hear about it. What's interesting is over that 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 like 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 was a crash in December 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 like the price of bitcoin, another winter and another time in which external sentiment around how crypto was doing was, could be perceived as very negative. But internal builders were very heads down focused in building. And so I think, you know, you know, I don't want to be dismissive of price. 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, you know, 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 you actually, 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 would also say the signal is very strong, right? Like 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. You know, one of the dangers of boom cycles is all projects are doing well. And 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, there's very healthy qualities that these boom and bust cycles definitely bring. And yeah, I'd say that the, really, the resounding last comment is we're just not too overly concerned with price and we definitely think it's healthy.

That's very helpful context. So 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 the space even prior to me joining Greylock. So of course we are investors in Coinbase. We are also investors in, 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. And when I got here, you know, we started to really Ramp 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've really sped up, like I said, the pace of our investing in this space. And so earlier in 2021 we invested in a company called Pinata. Pinata does decentralized storage. They're an NFT storage management service. And think of Pinata or think of decentralized storage like Dropbox or Google Drive, except it's on a decentralized network. And so 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 investor at the game level as well. So we invested in a game called Zed Running. We actually backed the studio that puts on Zed Run. They're called Virtually Human and 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 chain. That's a really fun investment for us. And then most recently we just did an investment called Portals. We 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 gets 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 and 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, many that we have not yet announced. But like I said, keep an eye on this space. We're going to Be announcing many more soon. And it's. 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. And so these companies, they're so different than the previous iterations of the web. So 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 web 3. 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 two 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, you know, 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, you know, if 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. You know, there's, of course, there's different governance. Web2 companies have board of directors and different governance models there. And so 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 should they get paid, the. Even the internal operations of how companies are running themselves, they're doing on a more collective basis. And so a really good example of, like, 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 very similar premise. You can buy and sell different currencies more on a peer to peer basis. They're a decentralized exchange and Uniswap is open source. And if you were to compare how Uniswap and Coinbase is ran, Coinbase is more of a traditional company. They have employees, it's a more of a top down management. They have, there's a CEO, there's a board, there's a leadership team. Uniswap, on the other hand, it's more of a ran 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. And so I'd say there's in a lot of ways a lot of similarities to what we see in the open source development community. That's a flavor that we're seeing in Web three. But 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, you know, 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 is almost like a new model for a corporation. And so in a lot of ways I would say the operations and the goals and like the ethos of Web3 companies can feel very different than Web2 companies. And that makes us 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. And, and 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, you know, 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 it's like 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 communities run or daos run. So we might call that community infrastructure or DAO infrastructure. I'm really interested in social media content and social tokens. That's kind of 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. And so all of those are things that we're really interested in. I would say 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. Let's start with gaming. What's going on there?

Yeah, so 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? And 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 really 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. And to put numbers behind it, gaming is a $150 billion industry if you include PC, console and mobile. Meanwhile, movies maybe does 40 to 50 billion a year. Music is a $20 billion industry. You know, 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 should, you know, 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 gamers worldwide, like half of us, you know, identify in this game or segment. Gaming could be a vector for mainstream adoption of crypto. And it's. There's so many themes that we've seen in 2021 that play into this that are really interesting to watch. And so when, you know, everyone is really excited about Metaverses. Is Metaverse here? When is it coming? And kind of the answer is in a way, anything that we do digitally online to represent ourselves, from Zoom calls to Roblox and Fortnite to like full VR headset. Immersive experiences all qualify as metaverses. And 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 would say, 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 could 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 kind of doing this already in traditional gaming. You definitely have esports and professional gamers. But you know, if you're a gamer and you're really good at one game, it's really actually 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 and the interoperability of Web3 allows us to think about is like 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, actually taking your ball home. Which is a phrase I like to say, which is thinking about like, 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, you know, actually use it to pay my bills. And so that's definitely something that we see like Zed Run horses have monetary, real life value in the thousands of dollars. Some of them are worth a hundred thousand dollars. So of course you can invest that into the game, but you can also kind of cash out. So all these things that I would say that's a defining characteristic of play to earn this concept that like 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 is, I would say more of like kind of a primitive concept definition 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 is really closely related to gaming and they're often synonymous. So I don't actually think about them too differently. NFTs is maybe even more broad than gaming though, right? So why NFTs are really interesting is they allow for digital ownership and digital scarcity. And we could go into, you know, all these definitions for like what are NFTs and how are they different. But basically think of an NFT as a way to provably own something that is unique or one of one, which is why we see a lot of use cases around art and collectibles. What 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 kind of an example of something that is like an NFT and that like my house cannot be traded for your house. Heather. Even if it's exactly the same price, even if it's on the same street. Just because there's like, there's 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 picture. So What I say NFTs are is it's like that house concept, it's like. 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. And so I would say 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 is 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. Right. Like we could. You could think about it for so many things even like logistics tracking anything where there's sort of this like 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, yeah, NFTs is a technology or a primitive concept and what we're really excited about is the applications of NFTs, the infrastructure to support those NFTs. So things like storage, which we have an investment in, but even, 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 like 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 Comedy Labs. They're working on NFT financialization, 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 might be 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. So it's an acronym dao, 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, right? 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. And so generally, let's, you know, when we look at daos, I'll kind of describe them with attributes that you tend to see is, okay, 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 of 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, you know, unify ourselves Create a dao so we can you bring this vision to life and then use a token to mission align all of us so that we're working towards the same, same North Star. And it's a way of, I would say, organizing talent, labor or community online. And so the applications of daos I think could get really interesting. We definitely see it as a new paradigm for companies. Kind of talked about earlier in the conversation, that example of Uniswap versus Coinbase. Uniswap is ran 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 like 10,000 plus contributors to the Uniswap project and there's actually many 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, what happens on the roadmap, what happens to the company, you know, should the company add this feature? Should this company support this blockchain? Should they add support for this new token? And so I would say 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 mission aligned, you know, 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. You know, some other applications that we believe are in their infancy, but I'm really excited about are things like grassroots movements or collective action. Like 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 wanted 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 things like grassroots movements and collective action. I'm very excited to think about how that could be used for public good. Or, you know, when you think about like 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, when I say it's a big theme for US is not just partnering and supporting leading daos in the space of which I would say today we're seeing social daos, social clubs. I'm a part of Friends With Benefits. I'm also a part of Club cpg Con Crypto Packaged Goods, which I love. Those are my two favorite groups. So shout out to them. 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 like more project based daos, like a uniswap. So 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. And so a good example is like 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 Gusto for HR or they're using ADT for payroll, or they're using a suite of tools to actually just kind of 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, like how do, how do daos spin up or spin down teams? How do you understand like in 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. You know, 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. So speaking of the creator economy that's really taken off in the last few.

Years, 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 acknowledged, the creator economy has been just a term or an industry in general that has been growing. And we are just, you know, collectively understanding the importance of this, of this shift in general. And so taking web3 out of the picture, 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 like creative content or creative skills, even musicians. 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 to fives and actually shifting more of their income generation to these creative revenue generation opportunities. You know, there's some 50 million creators if you actually kind of take this broad definition of like 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, you know, 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 hosting 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, that they are putting out there. So 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 like 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. And so 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. And so what would it mean if creators got a say? And like every single time the Instagram algorithm was changed, every single time the Instagram changed the buttons that are on the bottom that may, you know, upvote or downvote, 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 a, 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 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 decide to sell that. And so as this content gets exchanged through hands, maybe creators would get a royalty for every single second hand sale that happens. So as my article or as my photo that I put up exchanges hand, maybe I get like a 2% royalty every time that gets sold. There's no real financial or economic structure that exists like that in Web two. And so what Web three economics stand to do is sort of displace the intermediaries. Maybe in like 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 Web three you're going to have a leaner middleman. 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, you know, all of the value that they ultimately generate from putting their content out there.

Right. And 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 can we offer this emerging industry?

That's a great question because it's something I think about often. I think, you know, 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 say, when we talk about central casting founders, we're talking about someone that went to Stanford or mit, then maybe they went to yc. They're a YC backed founder and they're building in a specific sector that everyone knows or they worked for a very well known, you know, 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, you know, 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 a really a global industry. And so I'm meeting people from all over, all 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 and Europe. Crypto I think is awesome. 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. And so I find that one of the most like humbling parts of working in this space, the degree to which I'm needing to redefine my concept of like what does a high quality founder or a high quality project or resume look like? It really makes me kind of pause 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 underdeliver or we're always promising. You know, there's a VC meme of 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 is wired, like we're sort of, you know, can't be reached or 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 like 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. And so one might ask why you would need venture capitalists around the table. And so, yeah, 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. And so 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, you know, 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, like chatting with each other all day long. And so we're really, you know, as a jamming on ideas together, helping them make their first hires. All of those things that we've been doing with, with a lot of our companies. But with Web3 specifically, I think we're also trying to help bring some of the expertise that we've built over investing in Web2 over many decades. And so a kind of full circle to the question that we asked right in the very beginning. If you believe that crypto is 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 Web2world is going to apply in Web3. And so when we think about customer acquisition, we think about growth strategy, infrastructure, scalability, whatever it is, like all the lessons and war stories that we have from web2days is really going to apply to web3. So I think if you're a founder building in the space, it's good to be one 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 Web2world, of course, with this expertise and this lens of what we're excited about with Web3. And I think 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 of Web3 as well.

Excellent. 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 bye.

That concludes this episode of Gray Matter. If you liked what you hear and want to find more interviews on entrepreneurship, Please subscribe at SoundCloud, Spotify, YouTube, or wherever you get your podcasts. You can also find all Gray Matter content at our website greylock.com and you can follow us on Twitter reylockvc. I'm Heather Mack and thanks for listening.