Web3 Investment Thesis 1.0: Launchpool Web3 Techstars Accelerator

Dec 07, 2021
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By Pete Townsend, Managing Director of the Launchpool Web3 Techstars Accelerator

Hey there, I’m Pete Townsend, and I’m leading the Launchpool Web3 Techstars accelerator program here in Dublin, Ireland.  

Why am I doing this? I shared my thoughts in a ‘5 Questions’ Techstars blogpost when I took the reins, but in a nutshell, I’m scaling my passion.  

Since 2016, I’ve been helping early stage ventures in fintech and digital assets as an investor, advisor, board director, mentor and sometimes just as an evangelist (having a podcast helps with that!). It’s less of a career and more just how I choose to spend my time when I’m not with family and friends. I love mutually beneficial situations where I can share my knowledge and also learn from good people who are smarter than me. As I’m not a serial philanthropist (yet), it also helps when there’s massive financial upside.  

Conviction helps as well, and I’ve never had more conviction in my 26 years in finance than I have right now on this one thing - as a society, we are at the next frontier of money. I can feel it in my gut and in my bones, and I get chills down my spine when I connect with others with the same conviction.  We’re still early though, so now’s the time to get involved and bring people along with you, as not everyone is onboard yet. Like William Gibson said:

“The future is already here, it’s just not evenly distributed.”

Now that I have your attention, back to the program: applications will close on December 22nd. Come April, we'll be working with 10 early-stage founders and their teams building blockchain technology and tokenization protocols driving towards our decentralized future. Here are the two converging paths that form the basis of our thesis:

The path from the past:

There's a long tail coming from the past 12 years of cryptocurrency growth driving us towards the next frontier of money. The organic growth of the crypto space will lead us to a tipping point where more people are exchanging value through crypto than not, and we'll know we've reached that point when we stop talking about crypto. There's a long arc to reach this tipping point, but the pace can be quickened by the digitalization of the world's $250+ trillion of analog financial wealth through the tokenization of how individuals and businesses exchange and store value.

With this path, we're looking for early-stage projects building bridges between traditional and decentralized finance (DeFi) and accelerating this convergence.  Good examples of later-stage projects/protocols are Avalanche, Chainlink, Polygon and Celsius, and their usefulness beyond the financial sector points us down the second path.

The path back from the future:

I'm asking founders how the world will look in the year 2045. This is the year in which the book/movie Ready Player One takes place - here's the movie trailer, but the book is better. 

Without ruining the story, it's easy enough to see examples of crypto, smart contracts, DeFi, NFTs (non-fungible tokens) and blockchain in the story's virtual world, OASIS. The narrative makes these things feel more fundamental than they are today, as they're all just building blocks of 'emerging market societies in the cloud' (h/t David Grider). Payments, financial services and how we spend our free time with media, art, and gaming are all basic requirements for the coexistence of virtual reality societies and everyday life.

The primitive components of these digital worlds are already being built by decentralized networks of open economic platforms with community-led ownership, rather than centralized corporate entities. 

With this, we're looking for early-stage projects enabling these decentralized networks and protocols and incentivizing participants to join these communities and build. Good examples of later-stage projects include Sandbox, Audius, Yield Guild Games, Decentraland and Cryptovoxels.

So where do the path from the past and the path from the future converge? Let’s focus on what we look for in teams and their projects first.

TEAM FOCUS:

What’s happened In the last 12 years with crypto, blockchain, DeFi and NFTs are just some of the enablers of our decentralized future, but it’s a long story and we’re not even in the first chapter of the book yet. No individual can just will these projects into existence though, so we focus on the team.  

As we invest at a very early stage of a project’s existence, we expect to find teams with two to three members, and sometimes, just one solopreneur starting to build their team.  With these teams, we’re looking for smart people who are not just thinking about why their product solves a problem or fulfills a desire today, but also why it’s important in the year 2045.

Creativity - to think 20+ years into the future and balance that vision with what you need to do now to drive your project forward, you need to be able to think on multiple levels at the same time - that takes a lot of creativity.  In the Web3 space, that creativity needs to go into hyperdrive, as you need to be able to adapt on the fly to stay relevant, which is a lot harder to do in a space that moves in dog years vs. human years. Tell us about what you’ve created in the past and why you’re hell-bent on bringing your new project to the world.

Accessibility - there is so much complexity out there in the Web3 space, and founders have a real opportunity to differentiate their projects by making them accessible and easy to understand through focusing on the value you bring to the end user, now and in the future.

The ability to make things accessible comes from the ability to communicate, knowing your audience, and having deep first hand experience with the problem you’re solving.  Storytelling can really help to make things accessible, so tell us a few of your best ones. 

Self-awareness: it’s really hard for a fantastic founder to stay humble when evangelizing their project, even if your mother told you to “stay humble”. While humility is a great quality to look for, so is self-awareness (h/t Teana Baker-Taylor). You can be outwardly confident and speak with conviction, but still know what you’re good at and where you need help.

The best founders tend to surround themselves with smart people because they know their own shortcomings. Own up to them and look for help, and you’ll be surprised how much value your own network can unlock for you. We’ll want to hear from you on where you need the most help.  

PROJECT FOCUS:  

Community - in a 2008 essay, Kevin Kelly told us about 1,000 True Fans, i.e., if you can get a thousand superfans behind you, you can make a living off that. Matthew Graham from Sino Global Capital cut it even finer for us recently:

“Go get one or two superfans - people who love your product and need your product and want to tell everyone about it.  If you get even one or two, there's a pretty good chance you can get 10 or 20. If you get 10 or 20 superfans, there's a pretty good chance you can get 1,000 or 10,000 or 100,000.”

A handful of superfans is a good starting point, and then it’s critical to get your product into the hands of ten of each of their friends to learn about what works and what doesn’t. Keep building and developing towards your long-term vision while your short-term goals shift as your community grows and the world changes around you. 

Someone else may come out of left field with a product you hadn’t thought of yet that completely supercharges what you’re doing, and vice versa for them. In the old world, you needed to do some type of joint venture or M&A to enable collaboration; in this world, you can just give them your API. Blending your community together with superfans from other projects can have exponential effects, but first tell us about how you’re building your own community.

Composability - with the amount of code in the world that’s been open-sourced, the ability to quickly combine new solutions has gone through the roof. Like Chris Dixon from a16z Crypto said:

“Composability is the ability to mix and match software components like Lego bricks. Paraphrasing @naval, it means every software component only needs to be written once, and can thereafter simply be reused.”

The real differentiator is how you combine Web3 Lego blocks together in a way no one else has. In a world where everyone is building on top of each other, you’ve got to move fast to stay relevant.  All the pieces are there so that you can move at pace, but you need to know the good from the bad so you don’t waste time forcing a Lego block onto a cinder block. 

We’d like for you to tell us about how you can build on top of the Lego blocks of other projects and how you incentivize other projects to build on top of your Lego blocks.

Compounding - I love flywheels, where one part of a project’s value proposition feeds the next part, and that part feeds the next one, building a self-sustaining and momentum-fueled driver of network value. As a user moves through a cycle of your flywheel, there is an outcome from each part that incentivizes the user to go to the next part.

As your users move from one complete cycle of the flywheel to the next cycle, the value created starts to compound.  The classic example of the flywheel is the Disney Flywheel story, but Amazon, Square (now Block) and Shopify all have flywheels as well. Flywheels are anchored in doing one thing incredibly well at the core, and in Disney’s case, that one thing is storytelling. For Amazon, it’s low prices.  

Yes, this is all Web2 and not Web3, but examples of how Web2 players incentivize individuals and businesses to use their products is worth a good look for Web3 founders. In Web3, incentivization mechanisms are usually enabled by a token, and how that token incentivizes individuals and other projects to use your product is generally referred to as tokenomics. 

One of the best tokenomics primers I’ve heard so far was featured on an episode of the Unchained podcast with Laura Shin and her guests Viktor Bunin from Coinbase Cloud and Yan Liberman from Delphi Digital.  Here’s Yan’s take:

"A token is a mechanism to organize a set of individuals. If you assume that they all act in their own best interests or in a way that is most logical for them, how do you organize them and combine those interests in a positive-sum way to create value?"

We’d like to hear about how your incentivization mechanism is organizing your users, and how your token is at the core of how your project and your users create value together.  

Where the two paths converge:

Since reading Ready Player One and getting excited about seeing the Star Trek holodeck come to life, I’ve been doing the mental gymnastics to weave together this thesis into a narrative that matters to me and enables us to connect with founding teams, mentors, investors and ecosystem participants.  

I spent 20+ years in leadership roles in traditional finance, and once I read the Bitcoin and the Ethereum white papers in 2014-2015, I knew my time in traditional finance was limited. Once I knew what was possible in how financial services could be delivered across the back, middle and front office in a natively digital way, I didn’t see the point of sticking around in traditional finance any longer. That’s what spurred me to get into crypto, and I’d be a fool to let those 20 years of knowledge and experience disappear into the ether (NPI).  

So, we’re focusing this program on projects and protocols that connect this path from our past to the path of our future with a utopian version of the world in Ready Player One as my North Star, and my conviction on the massive opportunity to digitalise finance in distributed and decentralized ways as our anchor.

Here's my ask: whether you’re a founder, investor, mentor, advisor, or otherwise engaged in the Web3 community, you either have a fantastic Web3 project in the early stages of development or you are close with someone that does.  Either way, please get in touch at pete.townsend@techstars.com!

- Pete