By Vedika Jain on Feb 10, 2022
Weekend Fund invests in projects capitalizing on behavioral, cultural and technological shifts. My teammate Ryan put out a Request for (crazy) startups in 2018 with a list of themes he was looking to fund. This included - tools for creators/makers, remote work, audio/voice, digital celebrities and more. Ryan was attracted to these themes, in part because they felt like the frontier then. Early builders had arrived, some investors were arriving, mainstream users had not.
Identifying big shifts early and investing in them has worked out well for the fund:
With our investment in Deel, we were betting on the rise of remote work.
With our investment in Superplastic, we were betting on the rise of digital celebrities like Janky and Guggimon who have built a following on today’s “TV”: Social Media.
With our investment in Voiceflow, we were betting on more of our interaction with technology shifting towards voice and “always on” audio from AirPods/smart speakers.
With our investment in Invideo, we were better on the rise of the creator economy
Web3 is a big shift. Really big. It’s bringing together:
Crypto still feels weird, confusing, unregulated, and philosophical. Most of all, it feels innovative. “Innovation happens when people are free to think, experiment and speculate” writes Matt Ridley. Web3’s “open-source” nature isn’t just about code, it’s about ideas. We’re seeing an explosion of collaboration and learning in the open, pushing ideas and web3 forward.
We think the right timing to go in on a shift is slightly early, and we’re here. We’ve gotten started: More than half of our investments since mid-2021 are in web3 projects. Many of our portfolio companies have also pivoted or expanded into the space.
Here is our list of Web3 themes we’re excited to fund.
Improving basic infrastructure for the internet is very valuable. I’ve spent my pre-investing career on it, specifically building fin-tech APIs, at Stripe and TrueLayer. I saw real businesses built faster, better and stronger on top of the infrastructure built by these companies. With Stripe, people could start online businesses without having to build payments from scratch. And they did. As infrastructure improves, you can do more with less, smaller teams build bigger things, teams with more diverse backgrounds build technology companies.
Despite its composability, it’s still really hard to build on blockchain infrastructure - for crypto companies and “crypto-enabled companies” that want to use the blockchain to enable new use-cases. The “Solidity Developer” title itself implies that you need developers that understand Solidity deeply to build in the space. With each turn of the apps-infrastructure cycle, more builders enter the space. A large portion of the next generation of web3 applications won’t be built by Solidity Developers.
We’re excited to fund companies that take us to a future where every developer is able to build on the blockchain without being an expert in a smart contract programming language.
Examples of companies building in this space:
Sub-themes we’re excited to fund:
*We’re even more excited to fund a future where anybody can build on the blockchain. One of the best things about the crypto space is how diverse the talent pool is. Web3 is bringing together the gaming, art, fashion and other scenes.
It took 10 years for crypto to grow to its current user-base of roughly 100 million. It doubled to 200M in 4 months. Crypto-enabled experiences (Axie Infinity, NBA Top Shots, etc.) are bringing in millions of mainstream users into Web 3. While Coinbase and similar exchanges have established themselves as on-ramps for non-crypto-native users, they aren’t embedded at the point of transaction. Neither are NFT marketplaces. As Ari Paul pointed out in this tweet, millions of people are engaging with NFTs without ever touching or associating that activity with BTC/ETH.
We believe that the the next billion crypto users will come through embedded infrastructure.
The brilliance of embedded infrastructure is it meets users where they already are, inside applications, at the point of access. This is lower friction for users.
We’re excited to fund embedded NFT, token and crypto infrastructure products that "hide" the complexity of crypto under good UX so that the user doesn't need to be crypto-native.
Examples of companies building in this space:
Sub-themes we’re excited to fund:
In web3, our wallets = our identities. Unlike our fiat identities, our crypto identities can be transacted with directly. This makes every social network also an economic network. Communication, transaction and ownership are now all deeply integrated. The essay that coined the term Squad wealth talks about how as squads grow, “so does the possibility of interdependence and resource sharing—social, emotional, financial”, and wealth generation.” We’re sharing access to investing opportunities with our online squads, we’re generating returns together. We need a new set of tools to communicate, coordinate, incentivize, generate and manage wealth generated by online networks.
New asset managers — doxxed or pseudonymous — will run investing strategies on-chain with these new capabilities (e.g. lower cost, scalable fundraising, LP liquidity) and asset classes (e.g. NFT syndicates). Investors and investing activity will be encoded into a social graph and network that enhances the UX and creates powerful network effects.
Examples of companies building in this space:
Sub-themes we’ve excited to fund:
Most DeFi projects today are purely for crypto natives that understand what they’re doing, know the risks, and can navigate this ecosystem. This is now changing. DeFi “powered” products are emerging that solve financial problems 10x better than their TradFi alternatives. Crypto’s trustless, composable, and permissionless nature means it has the potential to provide more-efficient and less-costly ways of making transactions currently handled by banks and traditional exchanges.
The crypto itself is being abstracted away from the user experience, where users may or may not be familiar that the product is crypto powered.
Examples of companies building in this space:
Sub-themes we’re excited to fund:
In web2, the lines between our online and offline identities started blurring. In web3, the lines between our “fiat” (i.e. centralized) and “crypto” (i.e. decentralized) are blurring more.
Our centralized identities gain their power from their “interoperability” as they’re widely recognized, but these are issued, managed and backed by centralized entities like nations. I think of passports are nation backed identities. Our de-centralized identities are actually ours, outside the control of the state, platforms, or centralized entities. The problem: we’re accruing identity, credibility and reputation in different wallets, pseudonymous identities and walled communities. This weakens the identity because the more “trust” is spread out, the less “trust” each identity has. The less trust each identity has, the less we are likely to transact.
An interoperable de-centralized on-chain identity will allow us to take our identities to the groups, products and communities we want. The interoperability gives the identity its power, and the decentralization it’s owner control. In this excellent post by Scott Kominers and Jad Esber, they point that “if decentralized identity were widely adopted, people would be able to carry their full selves with them as they traverse cyberspace.” We’re betting this identity is going to be an important part of our on-chain and off-chain lives - socially, professionally and financially.
Examples of companies building in this space:
Sub-themes we’ve excited to fund:
Gaming has gone through several major shifts in the last few decades: Arcade → In-Home → Online Multiplayer → Facebook freemium → Mobile freemium → Everything freemium.
The industry continues to remain on the forefront of innovation from both a technical and business model perspective. And this is why it’s crushing all other forms of media:
A big reason for this is because freemium and in-game upsells have allowed game creators to price discriminate. In comparison, everyone pays the same amount to stream a Bieber song on Spotify or see the new Bond film in theaters. In gaming, whales can spend hundreds and sometimes thousands of dollars on a single game for months or years.
Crypto-powered gaming has the potential to 10x an already massive industry as it pulls more players into the ecosystem and dramatically increases potential ARPUs. Axie Infinity is the obvious leader today with 1.8M players reported in August 2021 exceeding $2.4B in trading volume to date, valuing the company at $3B. Axie’s ARPU per DAU exceeded ~$100/year at its peak compared to most freemium which rarely break $10/year annually. Another fascinating stat reported by the Axie Infinity team: 25% of players, many of whom are in the Philippines, are unbanked.
Games are a very hit driven business but we believe the hits will be even bigger going forward. Additionally, there’s a growing need for infra to help game devs build and manage play-to-earn titles.
Examples of companies building in this space:
Sub-themes we’ve excited to fund:
If you’re building something or have a company to recommend that fits into any of the themes above, drop us an email at vedika@weekend.fund or ryan@weekend.fund. We’d love to chat.
Thanks for Ryan Hoover, Linda Xie and Jane Lippencott for reading drafts for this.
