Weekend Fund

Web3 themes we’re excited to fund

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:

  • A technology shift: closed platforms as database providers → an open distributed ledger
  • An incentive shift: platform-owned → community-owned
  • A culture shift: trusted platforms making decisions → platform losing trust

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.

Accessible Blockchain Infrastructure

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:

  • Magic (WF portfolio company) is a password-less authentication and decentralized identity management platform
  • Syndica is the AWS for decentralized apps
  • Ceramic is a decentralized platform for creating, hosting, and sharing streams of data
  • The Graph makes it easy to publish open APIs, called subgraphs, making blockchain data easily accessible (before The Graph, teams had to develop and operate proprietary indexing servers)
  • Infura is a developer friendly gateway to the blockchain and provides an ethereum API, a IPFS API to get access to distributed storage and d’app analytics/management.

Sub-themes we’re excited to fund:

  • Products that help build “If this, then do that” decentralized data workflows (e.g. Instadapp)
  • Products that bridge centralized infrastructure and decentralized infrastructure
  • Wallet to wallet communication infrastructure
  • On-chain KYC APIs
  • Decentralized identity management
  • Data enrichment for de-centralized data (for e.g. making decentralized profiles richer)

*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.

Embedded Crypto Infrastructure

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:

  • MoonPay (WF portfolio co) is building embedded crypto payment infrastructure
  • Thirdweb allows developers to add their own NFTs, marketplaces and other web3 features to their projects
  • NFT Port is building the Stripe for NFTs
  • Rarify is building a product to allow embedding NFTs into any web page, app or platform with one line of code with built-in fiat or crypto payments
  • Lolli, the Honey for bitcoin, lets you earn Bitcoin where you shop

Sub-themes we’re excited to fund:

  • Projects that enable traditional companies to leverage on-chain activity and assets to offer embedded crypto experiences (e.g. in the future will neobanks use your on-chain activity for underwriting?)
  • Infrastructure that enable buying and selling NFTs and other “crypto-media” inside apps/games
  • Infrastructure to set up virtual economics, store-fronts and infrastructure inside of apps/games

Squad wealth tooling

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:

  • Presail (WF portfolio co) is a presale management platform that helps community owners/fund managers set up, allocate and distribute tokens to their investors.
  • Syndicate (WF portfolio co) is a crypto investing protocol, social network, and service. They’re building infrastructure to for on-chain investing, making it far easier for investors and communities create a DAO.
  • Investin allows anybody to start a crypto hedge fund
  • Metalink is building communication infrastructure for groups that own the same asset
  • Context.app is building an ownership based social network

Sub-themes we’ve excited to fund:

  • Tools that help investors build on-chain investing track records
  • Tools that enable “alpha” scouts/sources get carry in the investments they source for their squads
  • Tools that help community-driven fund managers better coordinate and execute on investing strategies with their communities
  • Tools that help investment managers build trust with their communities

“Invisible” DeFi

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:

  • BlockFi in one of the leaders in the “mainstream friendly” category as they’ve made it as easy as Coinbase to signup and earn a much higher yield than a traditional savings account
  • Donut is also building a DeFi-powered savings account
  • ZeFi is a single account to save, spend and earn up to DeFi yield
  • Piggy is building a Bitcoin-based bank
  • Afriex offers DeFI-powered remittances in Africa

Sub-themes we’re excited to fund:

  • “Wealthfront” style DeFi investing
  • DeFi powered spending, saving and earning accounts that allow you to do things 10x better than in “TradFi” or things that weren’t possible using trad-fi infrastructure
  • DeFi powered money transfers, FX and remittances

Web3 identity and reputation

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:

  • Buildspace is the largest on-chain workforce
  • Sismo is building an identity management solution that allows users/orgs to generate NFTs as on-chain attestations from multiple wallets.
  • Rabbithole allows you to earn on-chain credentials that demonstrate skills
  • Mem is bulding the social toolkit for the de-centralized web
  • Karma is building reputation tools for DAO contributors

Sub-themes we’ve excited to fund:

  • Identity products that use NFTs to represent identity attributes
  • Co-signing or “on-chain” endorsements
  • On-chain “credentials”, “resumes” and “LinkedIn for web3”
  • “Facebook Connect for web3” de-centralized single-sign on

Play-to-Earn Games and Infrastructure

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:

  • Sky Mavis who created of Axie Infinity is a game studio which builds both players owned economies and the underlying infrastructure
  • Sorare is a blockchain-based fantasy football game
  • Mythical Games is a game studio creating virtual economies driven by player ownership
  • Yield Guild Games brings players together in guilds to earn in blockchain based games
  • Fractal is building a marketplace for players to discover, buy and sell gaming NFTs through a primary market (initial drops by gaming companies) and a secondary market (p2p trading), and the underlying infrastructure for emergent use-cases of gaming NFTs

Sub-themes we’ve excited to fund:

  • Play-to-earn games that are actually fun (and financially rewarding)
  • Tools to help game creators their in-game economy and crypto assets

Reach out

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.