Ian Lee: Why DAOs Will Replace Venture Capital; Biggest Threat to Web3 | 20VC #893

1. 0:00 – 3:23

   How did you make your way into investing?

   1. NANarrator0:00

      (beeping) Three, two, one, zero. You have now arrived at your destination.

   2. HSHarry Stebbings0:08

      Ian, I'm so excited for this show. I heard so many great things. I said to Avichal after our show, "Who must I have on?" And he was like, "You gotta have Ian. Ian would be amazing." So thank you so much for joining me today, Ian.

   3. ILIan Lee0:20

      I'm looking forward to this. I, I listened to Avichal's, uh, podcast with you and I, I feel like about 40 to 50% of it was talking about DAS. So I was thinking to myself, this is, this is a great setup for our conversation today.

   4. HSHarry Stebbings0:35

      Totally. I mean, that was just purely prep for this. This was my ultimate goal and I thought he could be the warm-up. Um- (laughs)

   5. ILIan Lee0:41

      Oh, come on man. He, he's, he's, he's a, he's a hero. He's a legend, so...

   6. HSHarry Stebbings0:45

      He's a total hero. But I wanna start, and before we like dive into the meat of the show, how did you make your way into the world of investing and come to found Syndicate most recently?

   7. ILIan Lee0:53

      Okay, so one thing I've, I've learned about you before coming onto this show is that you're, you're a no bullshit guy.

   8. HSHarry Stebbings0:59

      Yeah.

   9. ILIan Lee0:59

      So I figured I, I might as well follow suit and be as authentic as possible. I'll be honest, I dabbled in venture about 15 years ago, and from that experience I realized that I never wanted to be an investor.

   10. HSHarry Stebbings1:13

       (laughs)

   11. ILIan Lee1:13

       Uh, (laughs) so, so it's kind of odd that about a decade ago-

   12. HSHarry Stebbings1:16

       Pause, pause, pause. Why?

   13. ILIan Lee1:19

       Well, I always viewed myself as more of a builder. I, I, I, like for example, I used to be an art- an artist, and I, I loved getting my hands dirty and going into the details and just the craft of like creating something from scratch, right? And, and working on things with my hands on like the shop floor. Uh, I was a consultant for about a decade, and my most rewarding experiences were actually ones where I was in places like Texas and Michigan and Ohio on the factory floors, uh, figuring out how to optimize manufacturing systems and stuff like that. So I just like loved that stuff and, um, when I got exposed to investing, it, for me, was very removed, I guess, from the process of building. It was like at least one or two derivatives off from the actual work that was happening. And so, at the time, this was, again, 15 years ago, I think I was still very young obviously and, and pretty naive, I, I think I intuitively understood that it was important, but I, I didn't quite grok like the actual, uh, impact of the work that investing had. And, and it was only about 10 years later when I actually got into it that I became much more fascinated by it and appreciative of it. But yeah, initially I did not wanna go be- become an investor. It was actually about eight years ago when I came in primarily through the operating lens when I joined Citigroup's venture capital arm, City Ventures, where I was hired to work on emerging technologies as part of the venture arm and figure out how we might be able to commercialize and scale these technologies and these startups that we were investing in. So it was, it was from that angle that I got into investing and then as I got more exposed to the actual work of investing and, and the impact of it, that's when I started getting more into it and ultimately became a full-time VC for

2. 3:23 – 6:25

   How did Syndicate come about?

   1. ILIan Lee3:23

      a number of years.

   2. HSHarry Stebbings3:23

      How did Syndicate come about?

   3. ILIan Lee3:25

      Well, this is a really long story but I mean, I got into Web3 about eight years ago. I mean, at the time it wasn't even called crypto, it was just Bitcoin, back in 2014. And I think, I'm, I'm glossing over a lot of things here, but I was always bothered by this, uh, problem that I saw in the investing world where, you know, the, especially in Web3 where these technologies are network native and they fundamentally wanna be owned by communities, whether they're communities of users, communities of operators or other, other partners. And what I was bothered by was how the traditional venture capital model was actually centralizing wealth and control and ownership of these networks. And I always was wondering, why isn't it that there is a more, why isn't there a more network native or community based model to invest in these technologies and networks that want to fundamentally be community owned? And one of the things that that led me to was this question around 2017, which was, if you were around back then, that was when ICOs happened.

   4. HSHarry Stebbings4:41

      Yeah.

   5. ILIan Lee4:41

      Initial coin offerings.

   6. HSHarry Stebbings4:42

      Yeah.

   7. ILIan Lee4:42

      And as, as faulty and, and, and as, uh, well, I guess as misguided as ICOs were, I think one of the things that was really profound about ICOs was it was a completely open and democratic model to invest in technology.

   8. HSHarry Stebbings5:03

      Sure.

   9. ILIan Lee5:04

      In ways that we've never seen before in the world and certainly on the internet. And even though I think that from a regulatory perspective it was certainly not the right implementation or approach, what that inspired me to think about was, will there eventually be a more decentralized version of venture capital? And I s- I've been pondering that question ever since 2017 for the last five years. And fast-forward to Syndicate, right? We identified an architecture of a internet protocol that basically turned the core functions, capabilities, and processes of what it means to invest into a software primitive that runs on the internet that anyone can use. And that, again, was very much inspired from that question in 2017 which was...... can we take this process of investing and make it more accessible, more free, more fair, and available to any community and any person on the internet around the world?

   10. HSHarry Stebbings6:13

       So (laughs) I listened to you and, uh, in a similar vein to when I was speaking to Avichal slightly, I kind of got this, like, trepidation and nerve. And, and then when, you know, w- we chatted before,

3. 6:25 – 9:24

   DAOs are the future of VC

   1. HSHarry Stebbings6:25

      you said a statement that did not make me nervous, it made me terrified. Um (laughs) , uh, when you told me that DAOs are the future of VC. Now, I have some thoughts here, 'cause I've learned a couple of things about DAOs from Ruchi yesterday. But, um, can you unpack DAOs are the future of VC? What did you mean by this?

   2. ILIan Lee6:44

      So I think that if you look at the... if you look at venture capital and investing over the last 20-plus years-

   3. HSHarry Stebbings6:54

      Mm-hmm.

   4. ILIan Lee6:55

      ... even before DAOs, before Syndicate, before Web3, and before crypto, the world of investing has been in a multi-decade transformation towards decentralization and community-based investing. I, I fundamentally believe that, and that that trend is inevitable. So what started out in many ways with AngelList, uh, almost two decades ago, and what they did in terms of democratizing the capabilities to invest via syndicates and SPVs and things like that, which has led to this proliferation of angel investors and solo capitalists around the world, right? That has been happening for more than a decade. And what's interesting when you look at those traditional investing markets, right, outside of even Web3, what's happening? Well, there's so many angels, there's so many c- solo capitalists right now, what are they doing? They're starting to band together. They're forming these angel investor collectives. Why? To win deals, because they need to out-compete other angels and the, you know, tens of thousands of them now. And the other thing is that the angel investing model and the solo capitalist model doesn't do a great job of supporting portfolio companies, right? So in order to compete with traditional venture firms that have a lot more resources and areas of support in areas of, like, business development, hiring, marketing, et cetera, they're forming these interesting angel investing collectives where they're bringing together people with different skill sets to basically, um, reformulate a venture capital fund in a more distributed manner. Now, everything I just told you is completely outside of the crypto and Web3 world. So DAOs as a technology construct take that same trend to the logical extreme. Because the way that I think about DAOs is that DAOs are a technology in Web3 that enable financial capital and human capital to coordinate natively on the internet together very quickly, very cheaply, and very efficiently. And if you believe that, then the end state likely of this trend that's been happening for more than two decades is likely gonna lead to some sort of model and system that will be powered by Web3 and DAOs technologies behind them. And-

   5. HSHarry Stebbings9:20

      Okay.

   6. ILIan Lee9:21

      ... that is the bet that Syndicate is making.

   7. HSHarry Stebbings9:23

      So again, I told

4. 9:24 – 13:01

   How do you determine who's allowed into your DAO?

   1. HSHarry Stebbings9:24

      you I'm specialized in dumb questions, especially (laughs) when it comes to this topic. Okay, how do you determine who's allowed into your DAO? How do you determine how many people to have in the DAO? I, sorry, I don't under- help me. (laughs)

   2. ILIan Lee9:38

      Well, I think this is one of the core issues of where DAOs are currently as a technology. Um, you know, as I mentioned, like, I got into crypto in 2014, and so a lot of these things take years to mature and develop. For example, um, Ethereum in 2015, a lot of people thought that that was ridiculous, right? And it took a good at least three years for people to understand the power of Ethereum and these blockchains. NFTs, many people don't realize this, but NFTs actually first came out around 2017. And it wasn't really until last year, in 2021, almost four to five years after NFTs were first introduced, that people are now understanding that NFTs have a role in technology and in business and society. So DAOs actually started in 2016 with the original DAO, which had a pretty catastrophic vulnerability that was exploited, and in the years after that exploit, from 2016 all the way until even 2021, DAOs were not really a thing. And now, obviously, a lot of people have been ex- exploring and experimenting with them, and we're starting to test some of these, I guess, pragmatic implementations of them, which are starting to get some traction, but we're still very early. I mean, we're probably only really one, at best, one and a half years into experimenting with all of the different forms and form factors that DAOs can take. And so some of these questions around, like, how many people should be a part of DAOs, what is the optimal size of a DAO, um, how do you even, like, I guess, set the strategy and the mandate and the purpose of a DAO, uh, these things are being experimented and tested right now. And a lot of them are not gonna work out, but some of them are. And we are starting to see some early evidence of best practices of where DAOs are really impactful. Uh, for example, purpose, very purposeful DAOs, where they have explicit mandates and very specific ones tend to do much better. So if you have, like, a DAO that's just kind of very generic and doesn't really...... have a clear purpose, those ones have a much harder time sustaining themselves. Whereas ones where they have a very explicit purpose, whether it's for example to buy the constitution of the United States, uh, within a matter of weeks, or, um, ones where, for example, uh, and- and these are some of the- the DAOs that are on Syndicate, like a DAO that is specifically formed to invest in more female founders in the crypto and Web3 space over a long period of time. Those ones have a lot of success because they have staying power and they have an explicit, I guess, strategy and purpose and intent around which to then define some of the lower level implementation details like who should be a part of this, how many should be a part of this, and how should they be interacting with the DAO? So these are some of the things that we're starting to see and, um, we're really excited about what that might mean, you know, when you- when you look further out like in three to five years time.

5. 13:01 – 17:10

   How are DAOs different than Venture Capital?

   1. ILIan Lee13:01

   2. HSHarry Stebbings13:01

      So for me, there's the challenge of centralized decision-making and decentralized decision-making. You know, I- I spoke to a, uh, I don't know- I don't what you call leader of a DAO yesterday, um, uh, I did a clan leader. Um, (laughs) and, uh, and they were like, "Well, you know, basically we have like the biggest founders in the world all invested in our DAO and then they delegate decision-making to four admins." And I was like, "That is genius. You are so brilliant. You just came up with a venture fund structure 40 years after Arthur Rock did." I don't get like, so I'm being deliberately... (laughs) I don't- I don't get it. That is the fun. Like I have 80 LPs and they delegate decision-making to me, that is, that's a DAO, they're limited partners, they help me in ways. How is this different?

   3. ILIan Lee13:50

      I think it's totally fair. Look, um, I am ruthlessly pragmatic about, uh, these- these technologies and what they mean for the world and the timing of them, right? I think that a lot of people, uh, get very enamored by these terminologies, right? And- and this has been happening for, you know, ever since the beginning of crypto with Bitcoin where they have, uh, you know, many ways like this- this sort of utopian vision for what blockchains could mean or crypto could mean or NFTs or DAOs could mean but the reality is that change happens, you know, sequentially. It- it- it happens incrementally in society and I think as it relates specifically to DAOs, um, I- we do believe that DAOs are going to lead to fundamentally new organizations that don't easily or don't exist in today's world. A good example of this is like, you know, some of these DAOs that are popping up right now in Web3 and on the internet, they look more like subreddits than they do like existing organizations or funds and with entities and- and legal structures behind them. And I think that that should not be underestimated because in many ways this could lead to DAOs as- as- as a, I guess, construct could lead to fundamentally new platforms, new networks, new experiences that don't exist in today's internet or today's world. In the same way that like social media is just a new thing that didn't exist 20 years before that, right? That said, it doesn't mean that DAOs are only for new things. It can also mean that it's a technology for transforming and expanding the definition of existing things, like for example, venture capital funds or corporations or other things. And I think that that is also a part of the narrative that gets a little bit lost when you don't have that nuance, right? Which is that there is going to be a- a degree, a high degree potentially, of skeuomorphism as it relates to the adoption of DAOs in the near and medium term, which means that DAOs might actually have a much bigger and nearer term impact in transforming existing legal structures and entities like venture capital funds, like corporations, like LLCs until some of these more new to world markets and interactions like, you know, kind of DAOifying subreddits and things like and whatever that may lead to end up taking off and becoming a bigger market than merely transitioning VC funds into DAO structures.

   4. HSHarry Stebbings16:38

      (laughs) .

   5. ILIan Lee16:38

      So- so I guess in summary, just to your point-

   6. HSHarry Stebbings16:40

      Mm.

   7. ILIan Lee16:41

      ... this technology is not just about new markets, it's also about transforming existing ones. Um, that said, if you really believe in some of the principles and properties of this technology over the long run, when we're thinking about 10 to 20 year plus time spans, it's likely that the new to world markets are actually gonna outsize the existing ones and that's absolutely what we think Syndicate is going to do.

   8. HSHarry Stebbings17:06

      Can I ask when you look, you know, you've got a fascinating perspective. You've been a

6. 17:10 – 21:36

   Winners and Losers of Crypto today

   1. HSHarry Stebbings17:10

      VC in traditional venture markets, now obviously with Syndicate you see an incredible new side to the investing world. When you look at crypto and Web3 investing as a landscape today, how do you analyze it? Who wins and who loses? I thought this was a fascinating one when I asked Avichal, like how would you answer that one?

   2. ILIan Lee17:29

      I think what Avichal- Avichal said that I definitely agree with is that when you have a technology like Web3 that is so different and so new in terms of the properties and capabilities and the interactions that it enables, you need to build capabilities that are native to that technology. Um, and so I think that like overall VC funds that don't build those capabilities, whether they are dedicated crypto funds or not, are going to not be able to maintain an edge and keep up with the pace of innovation...... and the, I guess, innovations that are coming out of Web3. In particular, let's look at it from the founder perspective, right? And I- I've sa- sat on- I'm now on both sides. When you're building a crypto startup or a Web3 startup, you need as much help as you can be successful, and when you're l- thinking about taking capital from various funds or VCs or investors, right, you think about what capabilities they have and how they can support you. Now, some of those levels of support are very traditional, like distribution and marketing. Some of them are in the areas of hiring and just general company building. But there are new capabilities that are needed in terms of partnership to make a Web3 company successful. So for example, some of those things relate to can this investor and can this VC firm actually help co-operate this network if and when it becomes decentralized? That's really important. I mean, there are so many horror stories from founders of Web3 companies and web and, and crypto startups where eventually they decentralize their technologies and they decentralize their networks. They gave crypto tokens of those networks to their investors and then those VC funds, which were very traditional, they didn't have, for example, crypto custody capabilities, they couldn't stake on these networks, they couldn't run nodes on these networks, what did those VC funds do that were very traditional? They took all those tokens and then they immediately dumped them on the markets because they couldn't hold them.

   3. HSHarry Stebbings19:47

      Sorry, can't hear you.

   4. ILIan Lee19:48

      Crashing the price of that network and, you know, giving ownership of those networks into the hands of who knows, right? Who, right? People that were not necessarily long-term actors, they were maybe more short term profit seeking actors. So, so you think about that and, and the cascading effects of that, and I think that it is gonna be really, really important for investors and VCs to build up these native capabilities in order for them to actively play in this economy. The other dimension of this in the area of Web3 is that Web3 blurs the lines between investors and users.

   5. HSHarry Stebbings20:23

      Mm-hmm.

   6. ILIan Lee20:23

      Um, because when you can buy an NFT, you're actually sort of "investing" into that project. Or when you're buying a governance token, you are, even if you're using the network to, for example, store information or content in a decentralized way or, you know, publish something onto one of those platforms, you're not only a user but you're also becoming an investor in them. And so what, what does that mean? That means that if in- that if users are becoming investors, then investors are also gonna be have, have to be users, and they're gonna have to be users in a native way to these networks and these technologies. And I think that, like, in the abstract at a high level if you, if you project this out again over five to 10 year plus time scale, the investors who are more participatory in these networks that can actively get involved natively with these technologies are gonna be the ones that win. Now, whether that not those are traditional VCs or dedicated funds, I think there's opportunities for both, but you can't take the same strategies from Web2 and then just think that because of that you can win in Web3.

   7. HSHarry Stebbings21:35

      Can

7. 21:36 – 21:55

   Can I do a follower fund with Avichal?

   1. HSHarry Stebbings21:36

      you if you-

   2. ILIan Lee21:36

      I, I think that that's not gonna work.

   3. HSHarry Stebbings21:37

      Can you if you're a follower fund? (laughs) I'm thinking strategically here. If you are the friend, the smaller check alongside the big lead, can I be Avichal's friend and put in much smaller ticket, provide the benefits that I do without the required

8. 21:55 – 30:30

   Crypto is the future of the internet

   1. HSHarry Stebbings21:55

      whole scale infrastructure change, which I agree with?

   2. ILIan Lee21:59

      Absolutely. And look, uh, I think copy trading Avichal and Electric Capital is probably one of the best strategies that anyone can have. (laughs) So, you know, there's that. Um, but I, I, I do think that yes, like, it, it doesn't mean that everyone needs to be, you know, going all into Web3. I, I don't think that that's necessary, right? Um, as long as you are able to partner with the right people, collaborate with the right people, and also bring something that is valuable to those, uh, people or those partners, or even the startups directly, right? I mean, it doesn't mean that, like, you know, capabilities and, um, uh, skill sets or expertise or networks in the traditional world won't still be useful. I mean, I think if, if, if the space is right, if we're right that Web3 is just the next iteration of the internet, right, it's not gonna be in a matter of five to 10 years that Web3 is completely separate from Web2. It's just that it's the next iteration of the internet. And with the next iteration of the internet, you're gonna need both a combination of what people think of today as Web3 native capabilities and, you know, skill sets, as well as "traditional" Web2 capabilities and skill sets. Hiring is always gonna be a thing. Distribution and marketing is always gonna be a thing. And so those things are not gonna go away, but I do think that there is a lot of edge right now and a lot of, uh, white space and openness, um, the opportunity to actually become, like, the leaders of tomorrow by, uh, going all into Web3, and that's why you see a lot of investors and a lot of founders doing that because, you know, that's where I think the, the future, uh, advantages, if you will, uh, are going to be built. Um, and, and that's why it's, it's really exciting.

   3. HSHarry Stebbings23:54

      You said about the next iteration of the internet there. When we spoke before, you said that crypto is the future of the internet. Ge- h- help me unpack this one. Brilliant, like, tweetable quote. Loved it. But what did you mean by it and, and how do you think this one through?

   4. ILIan Lee24:09

      Yeah. So I think if, if you look at, I mean there, there have been a lot of people recently over the past number of months talking about Web 3.0. I mean, when I, when I got into crypto in 2014, right? It was just Bitcoin and, and this concept of Web 3.0 wasn't even like a thing until very recently, I would say, like in the last year. The, the people who originally talked about Web 3.0 were people like Kyle Samani of Multi Coin and also Chris Dixon at A16Z, probably around like 2017, 2018. And (laughs) that was, I mean that was way ahead of it's time. But for people that were kind of following them and also in it, um, working on, on the technologies at the ground level, we, we did started to, we did start to see this potential for these decentralized technologies to lead to a fundamentally different internet, uh, architecture. And the, the important thing I think is that that architecture leads to different properties which often leads to different business models, for example. And so when we, when I think about the internet and its, its multiple iterations, right? Web 1.0, if you want to call it that, was a decentralized internet where the business mo- th- th- there was really no native business model to it. Um, and when you had web, the, the Web, Web 2.0 that came later, the business model and the value, the value capture, uh, basically came through centralized companies, you know, very massive centralized companies and applications that were built on top of the internet.

   5. NANarrator25:53

      Sure.

   6. ILIan Lee25:53

      Uh, and that's where, you know, all of the value got captured. And I think what Web 3.0 does is it actually enables the protocols of the internet, the networks of the internet to start to create and capture value. Um, and move that business model away from centralized companies and those structures towards decentralized ones. So, so what does that mean? Why, why is that important? Well, if, if you look at the internet over the last 20 years, right? The people that have benefited from that the most, I mean arguably are the users, right? Because it's created services and experiences that didn't exist previously. I mean, I can go on Amazon, right? And like buy something and get it within even the same day or the next day. But in terms of who's benefited from a financial perspective, uh, in terms of all of the wealth and the value that's been created from Web 2.0, where has that gone? It's gone to founders of these companies. It's gone to investors who were lucky enough to get into those companies. And it's also gone to, you know, big public market investors, um, like these big, you know, funds or whatever that have been able to invest large amounts of capital because they already had a lot of capital into these companies. And so a lot of what I think has been plaguing our society frankly for, you know, the last number of decades, but I mean this is, this has been happening over centuries or millennia, is that wealth as a result of Web 2.0 has become highly centralized. As, you know, value has moved away from labor towards capital and people with capital. And as a result, right? The world has become more e- unequal. And what I think the, the big promise, what, what I see personally in Web 3.0 is that it has a chance even though technologies are fundamentally agnostic to human beings, they don't give a shit about people and what people do with it. So, so the question is how these technologies are applied for human beings and, and society. And I think in the most ideal case, Web 3.0 actually stands a chance at enabling more people in the world and the users of the internet and these services built on the internet to become co-owners of that internet and of the services that are built on that internet. And so, so let me give you an example. Uber, right? You, you have this company that wa- that has created tremendous value and has changed the world, but most of that value has accrued to a very few number of people, right? The founders, the VCs, et cetera. And you have, uh, you know, all these people on that network, the drivers, the riders, et cetera. You know, I live in the Bay Area and a lot of these Uber drivers, they're sleeping in their cars on the streets of the Bay Area in San Francisco because they can't afford to commute back to where they live, right? And I think like you have to ask yourself like, "Is that really where society's going? Is that really the purpose of these amazing technologies and these amazing platforms and networks that pe- we're building here? And, and is, is that just inevitable and, and it's gonna just keep going like that and society's gonna, you know, keep going in that direction?" I think you have to ask the question like, "Is there a better model?" And so the, the promise, I know it's very, very difficult to do this, but I think the i- the idea would be is there a way to create a user-driven or, or user-owned version of Uber, Airbnb, Instagram, Facebook, TikTok, et cetera. And could those platforms and could those networks, if they were owned by the users, be more resilient, be more sustainable, and be better for society because it's more equitable? It doesn't mean that there won't be c- you know, capitalists and investors. They, they still have a very important role. It doesn't mean that founders won't, you know, receive a, their, their appropriate share of the value that they're creating.... but it could mean that the people that continue to operate these networks and contribute to these networks and use these networks might actually be able to also participate in the incredible value that's being created from them, and themselves lift themselves into higher levels of prosperity

9. 30:30 – 32:38

   Could crypto cause greater income inequality?

   1. ILIan Lee30:30

      in, in our society.

   2. HSHarry Stebbings30:32

      I, I had Mark Carney, the former Governor of the Bank of England on the show and he mentioned that when you have technology shift and platform shift in the way that we're seeing with Web3 and you look back historically in the past, all technological innovation to this extent and level has led to greater income inequality, not income equality. Do you think there's a chance that it could also lead to greater income inequality?

   3. ILIan Lee30:57

      I think it will lead to both, to be honest.

   4. HSHarry Stebbings30:59

      Mm-hmm.

   5. ILIan Lee30:59

      If I'm, if I'm putting on my pessimistic pragmatic cap-

   6. HSHarry Stebbings31:04

      Yeah.

   7. ILIan Lee31:04

      ... which is, as I mentioned, technologies don't give a shit about people.

   8. HSHarry Stebbings31:08

      Right.

   9. ILIan Lee31:08

      Uh, just like social media, right? Social media didn't care if we used it to, um, create, you know, more activism to advance important social causes within a matter of decades as opposed to generations. It also didn't care if it, you know, helped proliferate misinformation and, um, created a lack of trust among our society and people and, and each other, right? So in the same way like, you know, taking social media as an example, I think Web3 has that same, uh, potential and you, you're g- and you s- we've been seeing that, right, for the last decade since it's been around, which is that Web3, like any technology, has the ability to both... Well, in particular, Web3 has an amazing potential to both decentralize, uh, ownership and, and wealth and value. It also has an amazing p- potential to centralize wealth, um, and, and ownership and control in, in really powerful ways. And so I think the important question is how are human beings, how are founders, how are communities around these networks and technologies, how are they applying them and how are they building them and how are they designing them? And so it's, it's really up to us. It's really up to the builders of these technologies, it's up to the investors of these technologies and the communities around these technologies to design them in the way that they were actually intended for, or hopefully intended

10. 32:38 – 35:40

    Greatest opportunity in crypto today

    1. ILIan Lee32:38

       for. Um-

    2. HSHarry Stebbings32:38

       For, for me, for me, the greatest opportunity is in the consumerization of the layer which is like, you know, when you, when you try out a Coinbase account today, this is Coinbase, it's still not that fucking easy. Like (laughs) it's, it's, if, if you are my mother, it, oh, Jesus, I mean, that... No way. Uh, and actually she's okay, like, so she's probably like, uh, the average person. And so I think like, uh, do you agree with me in terms of the greatest opportunity being in the consumerization? Because yes, you and I may get it, and you obviously a lot more than me, but fuck, this is a small segment of society.

    3. ILIan Lee33:13

       I think that... I completely agree in that right now the user base of Web3 is very small and limited, and as a result of that the type of users that we're seeing on these networks today are primarily the people that can access it, afford it and have the capabilities and the expertise and connections to be able to utilize these very complicated and sometimes costly, right, um, pieces of technology and infrastructure. So I think that in order for Web3 to deliver upon the promise that I was sharing earlier, where it has the potential to impact not tens of thousands or hundreds of thousands but potentially billions of people on the planet, those billions of people on the planet are gonna need better interfaces and user experiences and infrastructure to access it in a way that they can easily understand and easily use. Because, to your point, like, you know, right now using these crypto wallets where you install it on your web browser and you have to secure your keys and you're really worried about that, I mean, it has a role in society and in Web3 but most people on the planet are not gonna be able to do that. And so th- the problem with that is that, you know, for now that's okay, right? Most technologies I think, you know, they have to start somewhere, they have to start with early adopters and things like that to get traction, but to really kind of achieve the full promise of decentralization, Web3 and what it could mean for society, they're gonna n- need, need those interfaces. And, and where it practically plays out from like a startup landscape and a investing landscape perspective is that most of the fu- uh, most of the startups that are getting funded are things that are going after, maybe to your point, the more wealthy people in our society, right? They're not a- able to go after I think a lot of the populations and communities in different geographies of the world because the infrastructure doesn't exist there yet, right? The services and the interface don't exist there yet, and so that's why those services, those infrastructure, and those interfaces are so important because that will then unlock more kind of builders, more opportunities, and more companies and investment into things that actually are gonna help the people that need and deserve this the most.

    4. HSHarry Stebbings35:39

       Is it the infrastructure

11. 35:40 – 41:34

    How important is storytelling?

    1. HSHarry Stebbings35:40

       that isn't there yet or is it the lack of ability to tell a story to a mass consumer audience and the ability to educate in a way that is compelling and resonates?

    2. ILIan Lee35:51

       I think it's both, yeah.

    3. HSHarry Stebbings35:52

       Mm-hmm.

    4. ILIan Lee35:52

       They're, they're very intertwined. I mean, you know, when, when I got into Bitcoin in 2014 I was at Citigroup and what was most inspiring to me about it was that bi- traditional banking infrastructure is, even from just a cost perspective, unable to support billions of people on the planet. It's just not economical to... Uh, it's just not economic cal to be able to support, you know, lots of, lots of people where infrastructure doesn't exist. And so my, um...... my, my, my passion for Bitcoin initially actually came from that, which was, well, we could utilize some of these technologies like Bitcoin to potentially serve the two billion people that don't have access to bi- basic financial services. And, you know, ever since then and, and consistently over the years, there have been a lot of great teams, some of which they're still around today. Like, for example, Celo is, is one that I, I, I have high hopes for. But there have been, you know, m- hundreds of startups that unfortunately, uh, were going after really important missions and were actually ter- telling very good narratives about how they were going to, for example, bank the unbanked using Bitcoin or blockchain networks or crypto, and they're no longer around. They, they ran out of money, they failed. Because, in my opinion, a lot of that was a timing thing and a lot of the timing element of that, even though they were creating good narratives and telling important stories, it just relied on too many things that didn't exist and frankly still don't yet exist, um, in, in the world, like the applications and interfaces to onboard lots of users onto, you know, Web3 and crypto. So I think that, you know, it, it's both a narrative thing, um, being able to connect with these people, but also being able to match that with the infrastructure and products that deliver against that promise today.

    5. HSHarry Stebbings37:46

       We were chatting before about distribution, about storytelling. I do wanna touch on this. How do you think about its importance or lack of, um, and how good we are maybe today?

    6. ILIan Lee37:59

       Sorry, say that, say that question again, that last part.

    7. HSHarry Stebbings38:02

       Yeah. In terms of like how do you think about the role and importance of distribution and storytelling for Web3 and, and how good we are today? Like, I think we fundamentally lost the art of telling a story, 90%.

    8. ILIan Lee38:15

       I think storytelling is one of those things that are undervalued today in Web3 and has amazing potential both in Web3 and beyond to inspire people, re- or even re-inspire people as to why we're even doing this in the first place. So, you know, a lot of, um, the kind of narratives and stories out there are really around, for example, achieving greater leverage with trading using, um, these technologies and things like that, making more money, et cetera. And don't get me wrong, like, that is a thing. There's a huge market for that. There's a lot of money to be made there. Um, I think what I would love to see though are more messages and narratives that start to bridge to people that maybe are skeptical about Web3 or maybe don't think that Web3 is for them, right? I, I, for example, have been in, in this space for a very long time and have been quite disenchanted and bothered by the fact that, um, a lot of, uh, women, for example, and a lot of people of color have not entered into the space. Now luckily, that's starting to change, but that, that has been a problem since the very beginning. And-

    9. HSHarry Stebbings39:28

       Why, why is that?

    10. ILIan Lee39:29

        Well, I, I think I'm, I'm, I'm bringing this up because I think that because, you know, Web3 and crypto has, uh, been this kind of like counterculture, uh, trend, right? And it- and it's, it's kind of cool to be in that club, right? As a result, there's been a very like you versus me kind of thing, right? You're either in or you're out. You're either in Web3 or you're in Web2, or you're, you know, into Bitcoin or you're, you're not. Um, you're into fiat. And, uh, don't get me wrong, that has a place, but I think that in order for this place, th- the space to bring in the type of talent, to bri- to build the things that, uh, are gonna take this technology to the mainstream and make an impact that I think it was originally founded on, it's going to need to create narratives and stories and messages that connect with people that are not already on the inside and saying that if you're not on the inside, you're, you're done, right? It's more like, "Hey, look. Think about this technology in, in, in a way that will actually empower you." Um, it's not an exclusionary technology. It's an inclusive one. It actually has the ability to impact, you know, you and your communities and other communities in ways that previously were not possible. And I think we need more stories like that because, you know, Web3 technologies have the potential to really fundamentally change society in a positive way. And in order to do that and in order for those technologies to be built for and make those impacts for, you know, people all over the world, we need to invite the rest of the world into this process and we need to speak to them and we need to inspire them. And that's really, really critical because otherwise if we don't, we're only going to get certain types of people and, and as a result, those types of people are only, only gonna build for certain markets and build certain things. And that, in my mind, is really constraining in terms of, you know, why this technology exists and what it can do for our society.

12. 41:34 – 44:00

    Biggest threat to Web3

    1. ILIan Lee41:34

    2. HSHarry Stebbings41:34

       What is the single biggest threat, do you think, of Web3 being able to achieve the positive outcomes that you believe it can? What's the biggest threat to that?

    3. ILIan Lee41:44

       Well, I think I'm fairly optimistic that even if there are near-term threats like, for example, regulation or extreme profit seeking or centralization of control and things like that, those are some of the things that come to mind-

    4. HSHarry Stebbings41:59

       Yeah.

    5. ILIan Lee41:59

       ... I, I believe that in time those projects or those networks or those systems will be less resilient than the ones that are actually designed for society that solve a really important need or problem in our world. And so in time, I think that, um, in the grand scheme of things-... uh, I'm very optimistic that those things will ultimately- the positive things will actually win out because they're actually solving real problems. I think in the near medium term though, you know, we- the- the space has been consistently plagued with, you know, profit seeking, short-term mind- you know, short-term, uh, minded individuals or- or- or communities. And, um, you know, that has resulted in a lot of things like people getting exploited, um, you know, funds being kind of, uh, y- you know, hacked and stuff like that. And as a result of that, that sets the industry back a number of years. Like, for example, when I first entered in 2014, that was just after Mt. Gox. And, you know, Mt. Gox, right, was trying to do something, but it just, you know, didn't- it- it kind of messed up in terms of the security model. But Mt. Gox set the Bitcoin industry and the crypto industry back by, you know, at least two to three years. And I think that we- we have, you know, we consistently have those things. Sometimes it's not intentional. Like I don't- I don't think that wasn't int- you know, necessarily intentional. I don't think that, for example, uh, the original hack of- of- or the original exploit of the Dow in 2016, that was intentional. I mean, they- they weren't planning to do that. Um, you know, so not all of these things are nefarious but- but there are others where it's like, you know, they're trying to rug pull people, they're trying to exploit people and those things have an impact on, uh, the- the timing and progression of these technologies and- and this industry.

    6. HSHarry Stebbings43:58

       Do you mind... Sorry, final one before

13. 44:00 – 46:34

    VCs' sudden fascination with Web3

    1. HSHarry Stebbings44:00

       we dive into a quick fire. Do you mind the tourists? I- I just got so fed up of seeing everyone who's like, "Oh, I'm a Web3 expert," and all the VCs that are doing Web3 dinners and Web3, Web3, Web- I'm like, oh, fuck off (laughs) . I'm sorry. Like you've been living it for years, I get you. Fantastic. Love it. But it's everyone who's like, "I've always been a fan since last Wednesday." Um, you know, how do you feel about that being an OG?

    2. ILIan Lee44:28

       I mean, I- I- I- I really struggle with it to be honest.

    3. HSHarry Stebbings44:32

       Yeah.

    4. ILIan Lee44:32

       Um, I- I don't actively engage in a lot of those things. I think that my approach to it is that the people that really get it and are really here for the right reasons, they will be here, uh, years from- from now, right? And- and we'll- we'll eventually find each other. So- so here's the thing, like I've known a lot of people who were like that as you- as you mentioned. I mean, you know, they're like, "I- I'm going all these dinners," and stuff like that. And honestly some of them turned out to be the most amazing entrepreneurs and investors in the world.

    5. HSHarry Stebbings45:08

       (laughs) .

    6. ILIan Lee45:08

       So- so you really can't judge people, I- I think, uh, too quickly. But I think time ends up, uh, revealing, um, who those people are, right? And- and so, you know, I've been in this space for eight years. Uh, when it- when I'd first gotten into it, I used to joke that it was like the easiest way to get fired at a bank, so what- it was really not popular. Um, a lot of people told me, like, "You should stop doing that. You're gonna, you know, ruin your career," and stuff like that. Um, but I think that like, you know, those people come and go. Like I've- I've seen probably at least 10 to 15 of these cycles where, you know, it's been really hot and then it went out of favor and all of those people left. But out of the 90- 95% of people that came and went within a matter of months, there were 5 to 10% of people that actually came in for the right reasons and they're incredible, you know? And those are the people that, um, you know, I've been able to stay in touch with or build relationships with and- and learn from, uh, along the way. So, I think- I think it's just a part of the process. It is pretty annoying, you know, when it happens. Um, but, you know, after you've been around long enough like I have, uh, you get used to it. You get desensitized to it. And so you just know that this is- this is how things happen.

    7. HSHarry Stebbings46:27

       I- I wanna (laughs) move into a quick fire round. So I say a short statement, Ian, you give me your immediate thoughts. Does that sound okay?

    8. ILIan Lee46:33

       Let's do it.

    9. HSHarry Stebbings46:33

       So

14. 46:34 – 50:35

    Favourite book

    1. HSHarry Stebbings46:34

       what's the favorite book and why? And I- I do want a second one. For just, like, me wanting to learn about Web3, what should I read as a good primer? I'm- honestly, I'm really quite basic. So where should I start?

    2. ILIan Lee46:51

       That's okay. I- I actually think that, just to jump into that one, like having a beginner's mindset is what Web3 needs and has needed for some time. Because what we need, the industry needs, are people who can look at this from a first principal's perspective-

    3. HSHarry Stebbings47:06

       Yeah.

    4. ILIan Lee47:07

       ... and grok from it like what is actually meaningful here and what of it is not meaningful? And let's focus on the meaningful parts. So I am really excited that you're interested in learning and really excited actually that a lot more people are interested in learning about Web3, more so than they ever have been. So as far as, like, my favorite book, I- I actually think this is kind of related. Um, this has been my favorite book for 20 years which is The Innovator's Dilemma by Clayton Christensen, written in the '90s. And, you know, this- this kind of relates to some of my past experience, uh, before Web3 and fintech and- and VC, which was I was consistently... I was interested in why well-funded companies that have historically been very, very successful and gotten to a very large scale and have infinite resources consistently fail. I was fascinated by that question. And my main takeaway from that book and all of my work over the last two decades is that it's because incumbents fail to realize that n- a technological innovation often comes with a business model innovation behind it and they get- they dismiss the technological innovation when it actually disguises a really disruptive business model behind it. And that is what I think Web3 is, is that...... people look at NFTs, they look at Dows, they look at blockchains, they look at all these things and they look at it and they, they think it's ridiculous, right? They look at NFTs and they go, "Well, why would I want like a JPEG or whatever," you know? Um, "Why would I buy that?" And it, it turns people off. And so they stop looking deeper. And what that results in is them missing the point that there is actually a fundamentally different business model here that could literally disrupt the existing internet and everything on top of it. And that was something that I learned from the innovator's dilemma and I think applies to literally everything that I've ever done and especially Web3.0. Now, in, i- i- with rel- in, um, in relation to that, what I would recommend is that you look at some of these, I guess, essays or canons that people have written that have kind of been canonical articles that have defined how at least I and many other people have thought about Web3.0 from a business and an impact perspective. So a couple that immediately come to mind are, you know, Andreessen Horowitz has a crypto canon that has been out there for a long time with all of these links and resources to videos or articles that have been written over the years. That one is something that I think the entire industry, like, you know, points people to when they first want to get into or learn about Web3.0. The other thing that is more specific to what I was mentioning about the business model is Jesse Walden, uh, wrote this article about the ownership economy-

    5. NANarrator50:05

       Hmm.

    6. ILIan Lee50:05

       ... as part of his new fund variant and I think that that is actually a, a pretty good articulation of how the business model of Web3.0 is so different from the internet before and why it's so meaningful, uh, to society and people. And, um, that one for me is, is, is directly related to kind of why I, I, I think I've, I've bet my entire career on this technology making a huge impact in the world.

    7. NANarrator50:34

       What have you recently

15. 50:35 – 53:17

    What have you recently changed your mind on?

    1. NANarrator50:35

       changed your mind on, Ian?

    2. ILIan Lee50:38

       So I don't make up my mind very quickly.

    3. NANarrator50:41

       (laughs)

    4. ILIan Lee50:42

       So, uh, as a result of that, the, the, the positive thing is that I don't change my mind that often, um, but I also take a, a while to, to make a decision on something. I guess one thing that, uh, I did pr- pretty significant change somewhat recently was the timing related to NFTs. So when I first got involved in NFTs, which was around 2017 when it first came out with CryptoKitties and stuff like that, you know, we were looking at that thing and, um, we thought it was, had a lot of potential, but, you know, that, that technology didn't really take off at that time. And, and about a year later, I was pretty convinced that NFTs were probably five to 10 years away from making an impact.

    5. NANarrator51:33

       Hmm.

    6. ILIan Lee51:33

       And I think, uh, I got the timing of that off, uh, in a big way because in 2020 and 2021, basically NFTs started, uh, changing in terms of how they were applied and what they could then be applied to were internet native assets, um, that formed these kind of internet communities, almost like subreddits and created culture, created, uh, belonging and shared identity in ways that I think I had underestimated. And so I think that as a result of that, I missed kind of the timing and impact of that and the speed with which h- how quickly that technology would take off. And I think as a result of like that breakthrough, if you will, last year, it's now accelerated a lot of possibilities as it related to, well, at least to NFTs that I thought were more like 10 years away. So good example of this is that I think that like NFT powered commerce in Web3.0, NFT powered digital media and, and various kind of social media platforms that I knew or believed were gonna happen in 10 years or so, I think are now possible in the next two to three years or one, even one to three years. And so as a VC or as an investor, you should be looking at those things because I think like the, the next versions of like NFT powered Spotify or Amazon or YouTube or TikTok, they're gonna be invested and built like in the next year or two. And that to me is transformational where, you know, where we're gonna see potential, you know, 100 billion, trillion dollar outcomes in the next 10 years.

    7. NANarrator53:16

       Question for you, penultimate

16. 53:17 – 56:03

    Hardest thing about building Syndicate

    1. NANarrator53:17

       one, what's been the fucking hardest thing about building Syndicate?

    2. ILIan Lee53:23

       Well, I think that, look, we, we have a lot of support and I, I think one of the things that I learned from being an investor in, in Web3.0 over the, the last 10 years is that you can't do this alone. Um, it's just too, it's too difficult. And so that's why we've been, um, from day one trying to get as much help as we can from our investors, from our users and our partners. And so if you've been following kind of how we've been building Syndicate, our seed round was basically this pretty big party round of like nine funds and 18 angels. We then did 100 person community raise with 100 operators and founders in Web3.0 and some in Web2.0. Our series A, which was led by, you know, Andreessen Horowitz, it also had like 150 people and other funds involved in it. Um, it was like this monster party round that, uh, honestly like has made our cap table a nightmare, a nightmare. And then more recently, you know, just actually on Tuesday, we announced that 50 companies and DAOs even and partners and customers invested in us, like Uniswap and OpenSea and Ledger and Carta and even-... um, and Circle and things like that. And the reason for that is actually because we know that to do what we're trying to do is really difficult, right? I mean, we, we are gonna build the things that we need to build and, and do that well but in order to achieve the impact, you know, what we were talking about earlier, we rely on a lot of other infrastructure in order to make this happen at scale. So, I think the hardest part, to answer your question, is getting the help that you need and being able to ask for the help that you need. Um, it's a really humbling experience to know that, like, when you're building internet infrastructure and protocols, um, you can't do it yourself. You know? In the same way like maybe a traditional Web 2.0 company where you could just centralize everything on your own and, and become this, like, monopolistic thing, you can't do that in Web 3.0. And so you have to almost just cede control and s- and, and cede and accept the fact that, you know, you're, you're just a part of a bigger movement. You're a big- a part of a bigger system and revolution and you have to find win-win outcomes that actually bring other people to co-develop, co-build, and co-operate this thing, um-

    3. HSHarry Stebbings55:58

       T-

    4. ILIan Lee55:58

       ... that is not yours actually. That it's-

    5. HSHarry Stebbings56:00

       T-

    6. ILIan Lee56:00

       ... that is the community's.

    7. HSHarry Stebbings56:01

       Tell me one from Avachal,

17. 56:03 – 58:34

    How long until a DAO invests $1 billion?

    1. HSHarry Stebbings56:03

       "How long till a DAO invests a billion dollars?"

    2. ILIan Lee56:06

       I- I'm sorry, say that again.

    3. HSHarry Stebbings56:07

       How long until a DAO invests a billion dollars? That's what Avachal just messaged me. (laughs)

    4. ILIan Lee56:14

       I think that there actually is, uh, one called BitDAO that has over a billion dollars in assets under management. (laughs) So, so probably that one could be the first to deploy a billion dollars of capital. Um, I mean, w- wha- I mean, I, I really mean that actually. Uh, will we see that at scale? Um, so will we see not one BitDAO but dozens or thousands or tens of thousands in the future? Probably, actually. Um, what will those be though? Uh, I think it'll be a mix. I think some VC funds will structure themselves as DAOs, um, and we're working with, you know, some of those, uh, to, to sort of progress towards that long-term vision. And so, um, will that ... Is that a DAO or not or is that just a fund? I mean, who cares? Um, but like, the, the point is that people will use this technology, i.e. DAOs, whether a traditional organization or a completely nontraditional one where it's like more like a subreddit on the internet to invest more and more capital. And, and I think that, you know, uh, at scale that might take five to 10 years to be completely honest. I mean, a billion dollars is a lot of money. But, um, that activity is already happening today on platforms or networks like Syndicate, just, you know, at smaller levels.

    5. HSHarry Stebbings57:35

       (laughs)

    6. ILIan Lee57:35

       And, uh, I think if you, if you read the tea leaves, right, and you sort of project out like what's gonna happen here, it's pretty easy to see that these, these pathways are already being created to the point where this will scale to a billion dollars or more in the future.

    7. HSHarry Stebbings57:50

       Ian, listen, I love this. I can't thank you enough for putting up with my brilliantly, uh, naive and, uh, immature questions. And this has been such a pleasure to do, man.

    8. ILIan Lee57:59

       Well, I, I'm just trying to invite you into the Web 3.0 industry here. Uh, I, I, I, I am both joking but I legitimately mean it, that Web 3.0 needs people like you and more people like you who come in with an open but beginner's mind and can really challenge some of the core assumptions from a first principles perspective to help us figure out what this technology actually should become. So, can't wait to, uh, you know, invite you into this and, uh, go to more crypto dinners with you if you ... (laughs) if you really want.

Episode duration: 58:34