Will Papper and Ian Lee, the two co-founders of Syndicate, join Unchained to announce the release of Syndicate’s new product: Web3 Investment Clubs, an innovation they believe could end up disrupting the web2 investment world, along with the entire venture capital industry. For example, with Web3 Investment Clubs, users will be able to turn an Ethereum wallet address into an investing DAO with just a few clicks, transfer funds without going through banks, and manage a cap-table directly on-chain. Show topics:
- what differentiates a Web3 Investment Club club from a normal investment club
- what on-chain tools Syndicate has built for Web3 Investment Clubs
- how Web3 Investment Clubs work within existing regulations
- how Ian and Will met and what inspired them to create Syndicate
- whether Syndicate plans to decentralize
- why Will and Ian believe investment DAOs will disrupt the venture capital industry
- why venture capital firms invested in Syndicate, a company built to disrupt them
- what Will learned from building Adventure Gold (AGLD), the governance token for Loot
- what plans Syndicate has for 2022
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- History of AGLD
- Will Papper’s previous Unchained appearance
- Will DAOs disrupt crypto venture capital?
Additional Unchained Content
- SyndicateDAO Is Launching Web3 Investment Clubs. Here’s Why Half Are Women-Led
Hi, all. I just wanted to share with you a blurb that Willy Woo, on-chain Bitcoin analyst and author of The Bitcoin Forecast newsletter, wrote about my book. Willy said, “Deeply researched, this book is an important body of work and must-read for the inside story of Ethereum, complete with all of its grit and drama.” If you have not yet pre-ordered your copy of the The Cryptopians, then head to bit.ly/cryptopians, that’s bit.ly/cryptopians, to pre-order your copy today. Again, the link to pre-order is bit.ly/cryptopians.
Additionally, I’ll be doing a Facebook Live/AMA tomorrow, Wednesday, January 26, the eighth anniversary of Vitalik Buterin presenting Ethereum for the first time at the North American Bitcoin Conference in Miami. The AMA will be about my book, which is about Ethereum and the 2017 ICO craze, but you can also ask questions about recent crypto news. Head to Facebook.com/UnchainedWithLauraShin to RSVP and ask questions. Again, the link for the AMA is the pinned post at Facebook.com/UnchainedWithLauraShin.
Finally, I wanted to mention that in this episode, Ian and Will mentioned an interesting fact about their new product, which was that 50 percent of the groups they’re launching with are female-led. I decided to write up an article featuring some of these groups, so please check it out on my Bulletin newsletter, which you can access at LauraShin.bulletin.com if you’re not already subscribed. Again, the link is LauraShin.bulletin.com. Now, on to the show.
Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I’m your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago, and as a senior editor at Forbes, was the first mainstream media reporter to cover cryptocurrency full-time. This is the January 25, 2022 episode of Unchained.
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Today’s guests are Ian Lee and Will Papper, co-founders of Syndicate DAO. Welcome, Ian and Will.
Good to be here.
Yeah, great to be here, Laura.
You two have an announcement that is dropping the day this podcast comes out. Tell us what your news is.
Yes. So, today we announced that we launched our first mainstream product on top of Syndicate Protocol in public beta, and that product is what we call Web3 Investment Clubs. And what it does is, it allows any group of people, typically they’re friends, groups of angel investors, or Web3 communities, to come to our protocol and easily launch a investing DAO as a Web3 Investment Club on Syndicate in a single Ethereum transaction, for just the cost of gas.
It effectively transforms any Ethereum wallet, whether it’s a multi-sig, or a MetaMask, or a Ledger, into a powerful investing DAO, and imbues that wallet with all of these really powerful capabilities to invest together as an investment club, completely on-chain, with no back end. And what that means is, it allows these clubs and groups of people, like, basically to turn a lot of these group chats that people are in already today, where they’re groups of friends, and they’re, like, buying NFTs, or maybe they’re investing in, you know, different projects in the Web3 space, or even investing in start-ups off-chain, into equities and things like that, and turn that thing into an on-chain club as easily as a group-chat.
And so, we’ll get into a lot of the details around the protocol, and the application, and you know, program that we’ve been developing with a bunch of partners over the last number of months, but what we’re really excited about is how this tool really begins to democratize investing to people that, and groups of people who may not have been able to access these tools, or afford these tools traditionally, because these tools have been very difficult, very expensive, and very, you know, slow to kind of, like, be able to use.
And we make that, you know, ten to 100x easier, and also embed into the tool, and snap into the tool, various partners and various, even tools that we built on the legal side that enable these investment clubs to maintain their investment club status legally and compliantly, so that they have the peace of mind to ensure that they’re using these investing DAOs in the right way for themselves, their DAOs, and their members.
I love that, so, I find this such a fascinating new product. So, for listeners who are listening on the podcast, that was Ian talking, just to help differentiate the voices. And I did want to ask, though, you know, just stepping back, like, investment club isn’t a common term. At least, it’s not one that I’ve really used much. So, you know, regardless of kind of, like, the Web3 component in your product, just what is an investment club, generally?
So, it’s really interesting, because investment clubs as a concept have been around for thousands of years. The earliest example of an investment club in recorded history was 1898, in Texas, during the Wild West, probably in some saloon or something like that. But the reality is, these investment clubs have existed ever since then in the real world, actually, before Web3, even before Web2. In the real world, typically what these things look like are groups of people, in oftentimes local towns.
They get together at a community center or a restaurant. They meet up, they’re oftentimes friends and community members. They’ll talk about, traditionally, oftentimes, like, different stocks that they’re looking to invest in together. They’ll make kind of purchases together, club their and pool their capital together to reduce transaction costs, you know, spread out risks, learn together, win together, basically. And what’s fascinating is that has existed in the meet space in a non-digital way, in a non-internet-native way, for hundreds of years, but it hasn’t been modernized for the internet.
And it certainly hasn’t been modernized for Web3, especially as, you know, obviously, Web3 has created all these new assets that are native to the internet, and live on the internet. And so, what we’ve done here with our first product, on top of our protocol, is modernize investment clubs for Web3, where they natively can live, well, be created, be run, and natively live on the internet, where these assets are being created and live as well.
Now, what’s interesting in addition to this, though, obviously, is we’ve built these kind of, like, Web3-native tools which is specifically, like, a DAO technology to invest natively, you know, together as a group of friends on the internet, in Web3, today on Ethereum, and other chains in the future. But in addition to that, you know, we’ve taken the time to snap in, for example, like, we teamed up with Latham Watkins to generate open-source legal agreements for Web3 Investment Clubs on Syndicate, where people can generate these legal documents automatically using our tool, sign them with their Web Wallet, to provide them with those additional kind of guarantees in the real world, legally.
And then, the second thing is, we’ve also partnered with this fintech from the Web2 world called Duo, where they’re teaming up with us so that any investing DAO in Syndicate, or any investment club on Syndicate, can get legal entities in Delaware and Wyoming. They can make state filings, they can get EINs, they can get fiat bank accounts, and they can also file taxes and issue K1s. And so, they can do everything, basically, in the real world that a traditional investment club would be able to do, but they’re now natively run in Web3, using our infrastructure.
Wow. It’s so fascinating. So, let’s walk through a hypothetical process of people forming one of the Web3 Investment Clubs. Will, do you want to take this one?
Yeah, happy to. So, typically, these investment clubs will start with either a thesis or a community. So, existing DAO communities will want to spin up a club so that they can invest together, or someone might have a certain thesis, like on-chain NFTs are the future, and will spin up a club related to that. And then, from that point, they can go to Syndicate and set up their investment club in literally 45 seconds, and with that one on-chain transaction, they have their club ready to go, and they can send the link to anyone in their community who may want to be able to deposit.
They just send it via private messages and group-chats, and they’re up and running. So, we took a Web2 process, where these investment clubs in the Web2 world were very time-consuming to set up and run, and we made it, in the Web3 world, take under a minute to set up and run, which is just a huge, huge leap forward in the accessibility of these investment clubs.
And when you were talking about setting this up, so, how is it all structured? Is it like there’s, I’m assuming, so, this web address, is it a multi-sig, and then, you know, when you were talking about the chat and everything, is that built in? Do you have, like, a chat platform so all the investment club communications are on one platform, or, like, how is all that structured?
So, we allow you to turn any wallet into an investment club, and depending on the size of the investment club and the requirements of the DAO, they’ll use different options. If they’re looking to join a really fast-moving NFT mints, they probably want to use a hardware wallet, for example. If they’re looking to make private investment into a token, they’ll probably want to use a multi-sig, if they’re dealing with larger amounts. So, clubs can choose the wallet that’s the right fit for them, and we can convert that wallet into an investing club.
Right now, the tools that they use are the tools they’re already using to organize their communities. So, we’re compatible with any tooling that they may be using, whether that’s token-gated Discords, or chat, or Snapshot for governance. In the long term, we are definitely thinking about how to build stronger communities, and we do have a community product for membership NFTs that allows people to form a community, and easily administer it. But a lot of that is coming after the core investment club launch.
And so, who can participate? Obviously, in the US, we have accredited investor roles, but from your documentation, it looks like non-accredited investors can participate, but then, you know, probably, I guess they’re limited in what they can invest in. Can you just talk a little bit about that?
Yeah. So, we’ve been, you know, doing a lot of work on this over the last number of months, because what we think is really important is that tools like what Syndicate is building, and others, for DAOs to really move forward as a technology, in particular in the case of, like, the application that we’re launching with investment clubs, they need to guide users and provide users with the right tools to protect themselves, their members, and their DAOs, right?
And so, we’ve invested a ton of time internally, as well as working with a bunch of external partners, as we mentioned, to get this really, really right. And so, with investment clubs, it’s really interesting, because, you know, there’s a web page on the SEC’s web site where you can read up about how they look at investment clubs. Investment clubs generally are not regulated by the SEC, provided that they meet certain guidelines.
For example, fewer than a hundred members, no public solicitation. There’s no investment advisor, no performance fees or carried interest, and also, everyone must participate as members of the investment club in decisions, right? And so, those sorts of things have been actually designed into the tool that we built, and also the kind of adjacent tools, like the legal document tools, and other things that we’ve snapped into it, to allow people to run their investment clubs and help them run their investment clubs as compliantly as possible.
Now, with respect to, like, what these investment clubs can invest in, that’s a really interesting thing, because that is actually determined by whether or not accredited or unaccredited people can invest in that asset that they’re, you know, purchasing or investing in. So, for example, like, an investment club is investing in a startup, and like, its equity, in an early-stage kind of venture round, or something, right?
Startups, you know, often, for those capital raises, will require that the investors are accredited, and if that thing that is investing into it is a vehicle, like, let’s say, an investment club, then that startup will often require that that investment club is an accredited vehicle, which means that that investment club and all of its members need to be accredited investors, okay?
And so, for certain types of things like that, right, there are those accreditation requirements, and that is something that the creators and members of investment clubs need to, you know, decide and follow for themselves when using these tools, and also creating investment clubs of their own, whether in the traditional world, or on Web3 using Syndicate. That said, however, there are a number of assets where people can buy that without being accredited. You know, a good example of this would be, like, Bitcoin and Ethereum, right?
I mean, people can go to Coinbase and buy that very easily. And so, investment clubs that are formed to invest in assets where you don’t have to be accredited, right, like, maybe they’re buying an NFT that they really love, like, from an artist or something, or, you know, they’re a community of people that are trying to support certain creators or certain projects in Web3, where they allow people to invest in those assets. You know, or even, like, an investment club, we see some of these on the platform today, where they’re actually not investing for profit, but they’re actually almost using it like a grant vehicle of some kind, to support, like, the development of a certain community.
You know, those types of investment clubs can have unaccredited people as part of those. And so, obviously, it’s like, you know, we provide, in our tool, a number of protections, and also related tools and services, or partner services from teams that we partner with to help them with that. But provided that, you know, they’ve done their diligence and figured out what they’re able to do and what they’re not able to do, yeah, this tool is available to people who are not necessarily accredited.
If the club can invest those assets, then that’s incredibly democratizing and empowering for communities that need it the most, we believe. So, we’re really excited about that.
And I did happen to notice in a Wiki that you wrote up about your investment clubs that, you know, you refer to these clubs where they’ll need to have all accredited members if they want to invest, for instance, in startup equity. And then you wrote, “We are working hard to change this, so that more people can have the same access and opportunity. So, please stay tuned for updates.” Can you give a hint as to what that’s about?
Sure, yeah. So, we, you know, are on this long-term mission to try to democratize the tools to invest to as many, you know, people as carefully, thoughtfully, and legally and compliantly as possibly, because…this gets to the mission a bit, of Syndicate, but when you look at Web3, and the power of Web3, right, it has this, the technologies in these networks are really incredible, in terms of the ability to decentralize and democratize access, these powerful kind of systems to more people around the world, and that’s fundamentally a good thing, right?
But the capabilities to invest, and the capital that invests in Web3 today, is still, you know, kind of skeuomorphic with the traditional world, right? And so, the tools and the infrastructure to invest in Web3 natively, in the network-native way, in a community-driven way, has not yet, in our opinion, gotten to the point where it’s truly network-native with Web3. And that’s what we’re trying to do, because we want, you know, more people to participate in the development of Web3, the investing in Web3, the wealth-building that results from investing in Web3.
And frankly, if Web3’s the new internet, and it’s rebuilding our world, we need more people to participate in the building of this world, because what gets invested in shapes how that world gets built, by whom, for whom, et cetera…
Right, right, but so, how are you going to, I mean, are you, like, doing lobbying with the SEC? You know what I’m saying?
No, no. So, we are working, you know, with existing regulation, right? I mean, good example is the investment club product, right? We are following by the book, like, what’s within sort of the regulation to be able to introduce a tool that is Web3-native, but also helps, you know, users of that tool maintain compliance. And maybe to get specifically to your question, right, you know, the law is very complicated when it comes to investing. There’s lots of different structures, beyond investment clubs, obviously, which are not even, you know, technically regulated by the SEC.
There’s things like 3C1 funds. There’s 506B funds. There’s 506C funds, et cetera, and even, you know, other variations within that, and what we are working through very diligently is identifying existing legal frameworks where they, similarly to investment clubs, can be modernized for Web3. And what we’re finding is that we believe it is possible to create these tools that enable these investing DAOs on Syndicate to follow existing regulations and compliance, but introduce Web3-native capabilities to them that thoughtfully enable more people to be a part of these systems. And…
…how exactly that works is really, really nuanced, but that’s what we’re trying to figure out bit by bit.
Right, right. It reminds me of how, for instance, Stacks did an ICO, but it was within the regulation a crowd-funding rule. So, it’s, like, you know, kind of fitting it into existing laws. So, you kind of touched briefly on some of these other things, but I just want to dive into them a little further. You know, you talked about how these investing DAOs or investment clubs can obtain legal entities, and I just wondered if you could talk a little bit about why it is that some of them might want to do that.
And then also, you know, you talked about how it’ll enable them to handle their taxes, which is pretty interesting. So, you could talk about those two things.
Yeah. I mean, what we’re finding is, you know, again, this user behavior around people pooling capital together with friends, often people that have known each other for a while, and live in these, like, group-chats or Discord channels, that’s been happening, especially with the rise of these NFTs and things, like, crowd-buying in Web3 has become kind of a more common user behavior and pattern. What we’re also finding, though, is two things.
Like, what they’re doing right now is they’re kind of, you know, just throwing into a multi-sig, or a wallet that someone’s running. There’s no kind of, like, tooling on top of that that makes that, you know, easier, more powerful, like, for example, with investing DAOs on Syndicate. They have this really, you know, robust dashboard that shows and visualizes assets in real time, like NFTs, tokens, and even startups that they invest in. So, it becomes this, like, portfolio-management system on top of a wallet.
So, they’re oftentimes just doing this kind of manually, and they’re also tracking all this stuff on a spreadsheet, like a Google Sheet, right? And it’s very manual, you know, it’s very kind of, like, labor-intensive. Lots of times, there’s, like, errors, or just inconsistencies, because data isn’t updated, right? And so, basically, Syndicate, in a certain way, like, offloads, like, all of that onto the Smart contract in our application. And on top of that, right, which is not what a lot of DAOs, these group-chats, are thinking about.
But you know, the ones that get more serious, and they want to follow things by the book, and not worry about certain things, like do I need to pay taxes, and how do I do that, like, easily and compliantly, right, that’s where this fintech partnership with Duo comes in, where they can help DAOs on Syndicate do all of that really easily and affordably, annually. So, they just kind of get those services, you know, they just provide the information, file the taxes, get the K1s, which all members need, of an investment club, to be able to file that with their taxes every year.
And you know, it gives them that peace of mind, which we’re finding a lot of these investment clubs actually do want, and we think might be one of the key limiters for adoption of investing DAOs or investment clubs in Web3, because people are just kind of worried, and don’t want to deal with all this stuff that they don’t know.
Yeah, I feel like at the end of every year, or the beginning of every year, there are jokes in crypto about all the crazy things people did with their money the previous year, and how their accountants are going to have a headache. So, the investment club members will get a token. What is that going to be used for?
Yeah. So, the token itself, broadly speaking, represents the cap table of the investment club. So, it represents the ownership’s, like, share, similar to Balaji’s mirrortables/mirrorshares that he described in a recent post. That on-chain cap table we’ve had has existed since the beginning of Syndicate, and we’ve been working on that product for the past year.
Yeah, and just define the mirrortables and mirrorshares for people who didn’t read his post.
Yes, happy to. So, cap tables are traditionally managed via centralized services, and you’re dependent entirely on that centralized service to define who owns what, and that’s a single source of failure. So, if there’s any inconsistency in the data, any difference in what was promised versus what was given, it’s, you’re dependent entirely on that centralized service to make it right, or not. And there’s many cases where things go wrong, for example, for startup employees.
There are so many cases of people being promised, for example, one equity price, and then, you know, paying a much higher price, just due to some nuances of how the stock grants worked, and being out, like, many, many thousands of dollars of differences. And that’s because it’s a centralized service that’s not available to all members, and not transparent to all members. But by moving the cap table, essentially the ownership stakes, on-chain, that is now, not only can all members verify their stakes, it can also be guaranteed in the Smart contract that, for example, distributions of profits will be given out according to the ownership shares on-chain.
Not only is this more trustworthy, this is also far easier to manage. We talk with groups where they sometimes spend multiple days just sending wire transfers, because every single wire transfer they send, they have to go through the bank’s verification process. So, they’ll have to do it 80 or 90 times, separate phone calls with the bank, oftentimes, like, 10 to 15 minutes per phone call. With Syndicate, because we’ve already moved the ownership stakes on-chain, when it comes time to give out profits, you just say, the profits are being given out according to the ownership stakes, and everyone can claim it in the Smart contract.
So, we take a process that can literally take days to coordinate, for tracking deposits in and distributions out, and make it fully automated, and fully removing that centralized party that you had to trust, saving managers a ton of time, and giving members a lot of confidence in the fact that they will receive what they’ve been promised.
And then, before you go on, back to the tokens, I did want to ask, so, you’re calling them mirrortables and mirrorshares. But is that because you still are managing them originally in some kind of off-chain service that, you know, is run by a centralized company, or is it all just being run in the Smart contract, and you’re just using the word mirrortable and mirrorshares, even though it’s not actually mirroring something that’s off-chain?
Yeah, we’re fully living in the future. So, it’s fully on-chain. We don’t need to mirror it. A lot of people have been asking us about mirrortables and mirrorshares, and we’re able to show them, you actually don’t even need to mirror it. You can go directly on-chain, and directly live in the future. You don’t need that bridge anymore. You can sever all ties to the antiquated past, if you want to.
And one thing we’re so excited about is, this relates to your question of the token, so, underneath the hood of Syndicate’s are ERC20s to represent the ownership shares, which means now they’re composable with every other tool in the ecosystem that you might want to use. So, for example, the ownership shares can be plugged into Snapshot for governance. So, now communities can make determinations based on their holdings. You could even provide another startup that’s getting launched, could provide exclusive access or airdrops to investors in a highly related syndicate.
Imagine, for example, a new fintech startup saying, I want to offer my investment to all the early investors in Stripe. They could do that with Syndicate automatically. So, under the hood, by moving your cap table on-chain, your ownership shares on-chain, what you get is the ability to compose this with the entire rest of the ecosystem. So, we unlock the full power of composability because these shares are ERC20s. That being said, it’s of course up to the managers to remain compliant.
So, we keep transferability disabled by default, as one example, to ensure that the investment clubs are compliant. But the composability you unlock is really, really phenomenal, and essentially it gives these ownership stakes superpowers to access the rest of the ecosystem.
Okay, so, the reason the tokens are non-transferrable is to prevent issues around, I don’t know, just anything involving probably illicit activity of some sort, or, like, anti-money laundering, or stuff like that. Is that the reason for that?
It’s related to the investment club regulations. So, the investment clubs can’t have more than 99 members, and they also can’t have passive holders. Everyone must actively participate. So, if you transfer these to, say, a Smart contract that’s fully autonomous, it’s not clear how that Smart contract can actively participate. We make it easy for users to remain compliant, so we keep that disabled by default. If they work with their own lawyers, and the lawyer has determined what they can and can’t do, then of course, they’re welcome to use the protocol in the way that they’ve been advised.
But we make it easy to remain compliant. So, we provide a happy path to ensure that the investment clubs are set up correctly.
Yeah, investment club regulation, like membership interest can’t be, you know, traded and stuff, like, on secondary markets. And so, that’s a big part of, you know, ensuring that this tool is helping people maintain that status.
Okay, but since there’s, like, a limit of 99 members, so, let’s say the three of us are in some investment club that already has 99 members, and somebody leaves. A new person could join the investment club. Is that right? And they would just get a new ERC20 token.
Yeah, typically what happens, what we’re seeing, is a lot of these investment clubs, they organize themselves as different seasons. So, they’ll have, like, Season 1, Season 2, Season 3, and the membership in each season will change, actually, every season. Some people will kind of continue, but then they’ll introduce some new members, and some old members will kind of, you know, like, not be a part of it. We’re finding that that’s actually, like, the very common pattern with investment clubs, with Syndicate.
But you know, yes. Could someone, you know, leave an investment club for whatever reason, or, and whatnot? Yeah, and then at that point, you know, someone else could be admitted.
All right. So, in a moment, we’re going to talk more about the backstory behind this, but first, a quick word from the sponsors who make this show possible.
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Back to my conversation with Ian and Will. How did you come up with the idea for these investment clubs, the Web3 version?
Ian, you want to go for it? We’ve been talking about this for the last four years. So, there is…yeah. It’s…
Well, actually, maybe, why don’t we do this, because I was going to ask you next how you two met and started working together, but maybe that’s a better way to start off, yeah.
Yeah. So, Will and I met when we were both at IDEO’s crypto team in 2018. This was the beginning of 2018, and back then, right, it was a world of difference in the crypto space. It was just on the back of kind of the ICO boom, and then crash, right? And you know, it was kind of, actually, like, the beginning of the crypto bear market. What was interesting in particular with respect to investing at that time in crypto was, you know, the ICO wave, in my mind, at least, really introduced this fully democratized, decentralized, and permissionless model for investing.
Now, obviously, there were a lot of things about it that were not good, specifically from, like, a regulation perspective. But what happened, interestingly, in 2018 was that the pendulum swung really hard the opposite direction, and it kind of, like, recentralized around, like, the SAFT model, which, you know, persisted for over a year after that. And what I thought was kind of always weird about that was, well, wait a minute, like, these technologies that are being developed are intended to be owned in a network-native way by the community of users.
Why is it that the capital that invests in these network technologies are not also network-native, right? And so, that kind of question was something that Will and I started researching. At the time when we met, we also did a deep dive into decentralized social networks, back in 2018, and what the future applications of those might be. And the conclusion of that, which, we ended up designing this pseudonymous decentralized social network in early 2018, was that the primary application…there were two major insights.
The primary application of a decentralized social network was actually for the purpose of decentralized testing and democratizing investing. And we looked at that, and we were like, that’s kind of interesting. Why is that the case? The second insight, though, from that work was that the infrastructure was not ready and the market wasn’t ready for that idea. DeFi wasn’t really, like, a thing. There were a number of primitives that didn’t exist, that Syndicate or an idea like it needed before that would be possible.
And so, you know, once we came to that kind of assessment, Will and I said, well, let’s go, you know, work on some other stuff. Will went to another startup to focus on a number of things, including decentralized identity. I, you know, continued in the DeFi space, and with IDEO, continuing to invest and incubate startups, and in 2020, we started seeing these primitives get landed in DeFi, that really started to harden, right?
And Will and I took a look at them, and sort of said, wait a minute, if you take some of these primitives and you kind of mash them together, and then you mash them with the decentralized social network that we had conceived four years ago, we now think Syndicate is possible. And that’s when we started working on the architecture for it, in late 2020. We arrived upon something that we thought would work, and then we formally set up the company, and went full-time into it in early 2021. So, it’s been about a year since we started working on it.
And so, you mean working on the investment club, Web3 Investment Club idea?
No, on Syndicate in general as a company. I mean, you know, we have a much broader kind of ambition and road map from a protocol and product perspective than investment clubs, but investment clubs are the first tool on top of the protocol that we’re opening in public beta, that we’ve been incubating in private beta with over a dozen communities over the last six months. And in the coming months, we’ll be, you know, releasing more and more infrastructure and tools for Web3-native investing and DAOs.
So, is that kind of what the main mission is of Syndicate DAO?
Yeah, we’re definitely laser-focused on investing DAOs, as a company. We believe that investing DAOs are the future, and we think that it’s really, really important to get it right. So, that’s where all of our effort is, is around. That being said, every DAO that manages assets I some capacity is an investing DAO. So, DAOs that are holding their native token, or DAOs that are holding stablecoin reserves, are implicitly-investing DAOs. So, we have a very specific focus, but a very broad market available to us.
And so, the name is Syndicate DAO, but you called yourselves a company. So, it’s a centralized company that is called a DAO?
So, we essentially have, in the long term, plans to become a DAO. Right now, we help people set up DAOs. We do want to be a DAO ourselves, and that’s certainly something that we spend a lot of time thinking about. Syndicate does intend to launch a DAO at some point, and we intend to go into that. The thing that we saw, starting and running DAOs ourselves, was that getting the initial state of the DAO right is incredibly important, because once you launch a DAO, it’s very, very difficult to change.
We are going to be very deliberate and very careful, and very intentional about how we set up our DAO, because we want to make sure that we do right by the whole community of Syndicate users.
Yeah, Syndicate is the development company that is building this infrastructure. As Will mentioned, you know, we intend for our technologies to be decentralized and community-owned, hope to one day launch our own DAO. Also, some people refer to DAOs on Syndicate as Syndicate DAOs, so there’s kind of, it’s a little confusing, but it also sometimes works really well. So, yeah, it’s, you know?
Yeah. I guess, are those like syndicates on AngelList, and is that kind of, basically, just, like, a proto version of the Web3 Investment Clubs?
I think that some people do sometimes look at us and think of as maybe, like, a Web3-native version of, you know, different tools that AngelList also provides. Will should definitely go into this, but I mean, I think that’s kind of, maybe a more near-term analogy, and skeuomorphic analogy, but you know, we’re trying to really build, like, Web3-native infrastructure for both investing and DAOs generally.
And so, I think kind of, the way we think about Syndicate is a lot different. Will, you should share your, you know, vision on this.
Yeah. Yeah, definitely. So, by making Web3-native investment clubs, we think that the investments that these clubs make and how they operate will look dramatically different than what came before. One analogy we use a lot internally is that the disruption of investment clubs to venture capital will be similar to the disruption of YouTube to the film and media industry, where YouTube and Syndicate both are cases where you dramatically lower the cost of setting these things up, lower the difficulty, so it’s much, much faster to do so, and increase the distribution.
Instead of, in the Web2 world, these investment clubs were often in-person meetings in town halls, now it’s taking place in Discord and Telegram in the Web3 world. Likewise with YouTube. Instead of reaching audiences via television and networks and film distributors, you’re now able to go directly to your audience as well, on a global scale. It’s hard to say how the world will be different, given how no one can anticipate what changes will come about from this kind of product.
But we do think that the investing DAOs on Syndicate will look very different than the traditional investing DAOs. They will be much more community-driven. They will be much more open. They’ll be much more accessible, and the types of investments they make will look very different. So, it’s something that we’re excited about. It’s one of those, like, known/unknowns. We have no idea what the future will look like, but we do know that it will be very, very different.
A good example is that, you know, of the dozen or so groups that we’ve announced launching, and that have been helping us build this investment club product, over 50 percent of them are investing DAO and investment clubs on Syndicate that are women-led or all-women DAOs. And you know, these DAOs are bringing more women and other communities that traditionally haven’t participated at the same scale in Web3 into Web3 and into investing in Web3.
And that’s, like, really amazing, and we love that, you know, we can support missions like that, because that really aligns with kind of, like, what we’re hoping Syndicate will do long term, at a global scale. Another example is, like, you know, we have two DAOs, one called Morii Music DAO, and then another is DAO Jones, and both of those are actually led by communities of creators in the NFT, and in Morii’s case, specifically the music NFT space.
And so, it’s a bunch of, like, music NFT collectors, creators, you know, technologists, that are coming together very passionately as a club to invest in more NFT creators, right, and invest in their own community. And we think that that’s one of the most amazing things, is that this tool is a community-driven tool for communities to invest oftentimes in their community to develop and to help grow it, and you know, bring it more and more into Web3. So, we’re really, really excited about, you know, seeing that already, on Syndicate.
And I wanted to ask about, you know, that fact you mentioned about how about 50 percent of the groups that are already working with you in their investment clubs or investing DAOs, about how they’re led by women. Why do you think that is?
That’s a good question. I mean, part of it is, like, we are sharing and communicating a mission of democratization and empowerment for communities, and we’re showing it, right, at all levels of our company, and the product. You know, we have a lot of really incredible women leaders at Syndicate, and we’re hiring more by the day, but also, like, in terms of the partners that we work with and look for, we’re really looking for, especially during the private beta phase, where we’ve been incubating this for six-plus months, we’ve been looking for really values-aligned, mission-aligned, long-term partners to work with, right, who are going on this journey together with us, to make a difference using these technologies in the world, for people and society.
And so, I think that that’s, you know, that has attracted certain types of communities and people to come to us organically. And you know, we’re meeting more every day, actually, as we share more about what we’re doing, and honestly, it wasn’t, like, intentional. We just kept working, finding new partners to work with, and as we got ready for launch, we got everyone together, and it was like, oh my God, you know, 50 percent of these groups that we’re working with are either all women or women-led.
And it’s really cool to see that, and we hope to work with, you know, as many communities as possible, who honestly deserve access to these kinds of tools and opportunities. So, you know, that’s a big part of why we’re doing what we’re doing.
I love it. I love it. I find that so fascinating, and…yeah. I’ll try to reach out to some of them to ask them some questions. I actually wanted to go back to what we were discussing, about how you guys think that DAOs will be as disruptive to VC as YouTube was to film and television. So, hilariously, while I was doing the research for this, I saw this CoinDesk article with the headline “Will DAOs Replace Crypto Venture Capital,” and I, you know, couldn’t help but notice, Syndicate has received 20 million dollars in Series A funding from Andreessen Horowitz, IDEO CoLab Ventures, Coinbase Ventures, Variant, CoinFund, Scalar Capital.
I mean, these are all VCs. So, you know, why do you think that they’re interested in investing in you, if this is going to be disruptive to them?
Okay, so, I’ll maybe take that one, as a former, you know…and still, I, disclosure, I’m still a venture partner at IDEO, but I was one of the co-managing partners of that crypto fund for four years, right, and I come from that space. I think a few things about this. So, I guess, you know, to address one of, just, kind of those things specifically, what we are doing here is actually trying to attempt to solve a really massive, difficult, complex, seemingly-intractable problem in society, around inequality of access to investing opportunities at scale globally, that in our opinion is driving inequal opportunities and inequality in many different ways, right?
And so, to do that, like, it’s not sufficient, in our opinion, to create a Smart contract, deploy it, and kind of hope that it goes well. We are in this for the long term, and we’re going to do this the right way, as long as it takes to do it well, and do it right. So, to do that, we need a lot of patient capital. We need values-aligned partners who can help us, and actually bring not only capital, but actually, like, really important capabilities and expertise and networks to this project to make it as successful as possible.
So, you know, partnering, for example, with IDEO, which is actually where Will and I met and we incubated this thing, but also partnering with, like, teams like Andreessen, who have been incredible in terms of helping us think through all the legal, regulatory considerations when designing this protocol and product and stuff, to get it right. But you know, we’ve also brought probably more than any other crypto project at this point in time, more than 300 founders, builders, creatives, people in our community, other investors, into this project.
Like, we have the, you know, head of the financial inclusion at the Gates Foundation, who is also a part of this, and many others like them that are contributing to this. This is going to be a long-term effort, to do this, and the conversation was very interesting, right? When we were talking to a lot of these VCs, like, you know, are they aligned with us, or do they not see what we see? And I think that, honestly, if you’ve been in this space long enough, you know that the writing’s on the wall.
Like, you know that, like, the traditional models for investing today in Web3 are skeuomorphic to Web3, and that the native model for investing in Web3, in our opinion, and I think our investors who decided to come on this journey with us also realize that the native model is very likely a DAO model. And so, what does that mean? It means that it’s inevitable, and rather than kind of, you know, hide from that, let’s just go for it together, right, and do it right, and do it together.
And so, you know, is it going to completely disrupt venture capital? Will should definitely comment on this, because maybe he’ll have a different and spicier take, but maybe I’m a little, you know, traditional in this sense, that I think that it will disrupt and transform venture capital, but that doesn’t mean that certain players, or especially forward-thinking ones, won’t be able to successfully transform and transition to this new model.
And I think that, you know, a lot of the groups that have come on this journey so far, and many more that will come along the way, like, they’re going to actively kind of, like, work on that, and there are a number that we’re already working with, that are planning to do that. Like, in the same way that, you know, Web2 VCs are now transitioned to become, like, crypto Web3 VCs, I think the next logical step is that Web3 VCs will actually become investing DAOs, in some way, shape, or form, in the next five to ten years.
Yeah, and before Will gives his two cents on this, I just, because we keep using this word, and I’m not sure everybody will know what it is, skeuomorphic. And feel free to correct my definition here, but I guess it’s, like, applying kind of, like, the way things were done before just to this new technology, whereas, like, you know, something that’s, like, more native to it would not be skeuomorphic. It’s not like you’re imitating.
You know, it’s like, something skeuomorphic is when the internet was first created, and I used to do this, because I used to work at publications like Newsweek.com and TheWallStreetJournal.com, and NewYorkTimes.com. You would just put the publication on the web. And so, that’s kind of, like, an example of something that’s skeuomorphic, but I don’t know if you have a better definition, before…
No, that’s right. I mean, yeah, skeuomorphic would be, like, yeah, let’s put a venture fund on the blockchain, right, and these things. And to be honest, like, that is, like, going to happen. So, skeuomorphism, it has a purpose, like, you know, as far as transitioning to the more Web3-native world, but like, even when you take, like, for example, an investment club, and then put it as a DAO on-chain on Ethereum, right, even though that is in some ways skeuomorphic, right, what Will was mentioning about how the infrastructure underneath that that powers it on Syndicate, and how it’s composable with Web3, that starts to unlock these Web3-native capabilities, like, out of the box, that you wouldn’t have if you just left that thing on Web2.
And that’s a big part of how these skeuomorphic models are actually going to likely seamlessly transition, or more seamlessly transition to Web3-native models in the future.
Okay, so, yeah, Will, do you want to give your take on…?
Some of our investors, when investing in us, literally said to us, I know I’m putting myself out of business, but having a stake in the future is so important, that I am going to fund this anyway. So…but that being said, I mean, people still go to movie theaters. It’s just that movie theaters are a ton less important than they were before. What we’ve already been seeing in the venture capital space is the commodification of capital.
So, if all money is the same, and you’re given a choice between a fund that’s offering you a million dollars or 99 values-aligned crypto users, operators, angels, I think that that choice becomes very obvious. The way venture capital firms have been competing has been to develop more and more services around recruiting, legal, compliance, things along those lines, and that has value. I think that will always have value. I think that if Syndicate is successful, like, the VC funds that add value will still survive, just like really nice movie theaters still survive.
But it won’t be the only channel for getting money, and it will be a…most capital, we believe, will be raised via investing DAOs, and then you’ll fill out your round with a few, like, traditional VC funds for the services they provide. So, instead of a case where the majority is from VC funds and a small amount is from angels, and users, and operators, we believe that model will flip, where the majority of it is from the users and partners that you work with, and then a small amount is from traditional funds.
I wonder if the reason that Andreessen is raising this 4.5-billion-dollar fund now is to just sort of get in while it’s good, and then, you know, if they see the writing on the wall, they may know in the future they may not be able to have such big funds. But anyway…
I don’t have any information of their future plans, but I do have to say that Andreessen is an extremely long-term, aligned partner. That’s one thing that I think traditional funds will use to compete, is that if the funds are long-term partners, and they stick with you for a long time, that is also a value add, in a space where so many people are thinking short term, and Andreessen is one of those people, for sure, as is all the investors on our cap table. We chose them for that reason.
Right. Yeah, I mean, clearly, you know, the list is definitely all people who are all in on this space. So, Will, I did want to ask you also about this kind of, like, other thing you’ve got going. You’ve had quite the ride as the creator of Adventure Gold, which is part of the Loot system, and I was wondering if you had any take-aways from that experience, you might want to kind of give the audience a little bit of background, because it’s really interesting, and explain how you think it might be relevant to DAOs and investment clubs, as well.
Absolutely. Yeah. The Loot ecosystem and Adventure Gold is definitely an example of the future that we’re already living in. The future is already here, just not evenly distributed, and Loot is one of those futures. I recently wrote a history of Adventure Gold that people can find on my Twitter, @WillPapper…
Yeah, but can you just kind of recap it a little.
Yeah, absolutely. So, to give some background, Adventure Gold is an in-game currency for the Loot ecosystem. So, Loot is an on-chain, essentially, RPG game, where at a time when so many NFT projects were promising these super-unrealistic road maps, we’re going to have a full game built in three months, et cetera, et cetera, Loot was, here’s a bunch of items you could use in a future game. That’s it, and it was the role of the community to add those primitives.
Some people added in characters. Some people added in land. I added in an in-game currency, and Adventure Gold definitely exceeded my wildest expectations. I wrote it in four hours at an airport, and did not, I’m just so grateful for the community adoption that it’s received. I think that one of the most important take-aways from Adventure Gold is the importance of…so, one of the really best aspects of it is the importance of widespread distribution, because it was a fair launch.
I gave every single token away to the Loot community. I didn’t reserve any for myself. I had Loot, sure, but I didn’t reserve any special portion, and I had an infinitesimal portion of the supply. Because it was so widely community-owned, there are so many people helping out with Adventure Gold, or integrating it into what they’ve built, and that is really incredible, that by giving it away, people find it useful, and people that start to contribute back to the ecosystem.
So, that’s one really, really important take-away. The second one, and yeah, I’ve talked about this in the past, but it’s definitely worth emphasizing for anyone thinking about launching a DAO, is once your tokenomics are set, they’re really difficult to change. So, make sure that you get the tokenomics right up front. With Adventure Gold, I gave it all away, where every Loot-holder could claim. I had no idea how big it would get. So, I didn’t have any, like, long-term investing built in, for example.
If I’d known how big it would get, I would’ve added that in, and now we are adding that in, later on. The community members are building out code for that right now, but if I’d had done from the beginning, I think that would’ve been significantly more helpful. So, the biggest thing that we help DAOs with at Syndicate, one is the finding their community and their purpose, and they should have an extremely specific and clear purpose.
So, in this case, the purpose for Adventure Gold is an in-game currency, and the community is the Loot ecosystem. That’s very, very clearly defined. The second thing we do is we help them define the initial tokenomics, and that varies a ton, based on the goals of every community, but the initial tokenomics, once launched, are really, really, really hard to change. So, we help DAOs a lot with getting it right and giving them flexibility to adapt down the road.
But we have upcoming community products, not part of the investment club launch, but already available in private beta, that work to create a set of best practices around community-building and tokenomics for DAOs. So, we definitely see our role in the space at Syndicate as setting the standard. Adventure Gold was a personal project, it wasn’t related to Syndicate, but many of what I saw from it and many of the lessons I learned apply really well to it.
And I’ve written quite a bit on the history of Adventure Gold and the composability. So, anyone who wants to dive in, I work to make those lessons as accessible as possible to anyone considering starting a new DAO.
All right, so, you kind of hinted at some of the other stuff you’re working on. I don’t know if you want to give even more of a preview, but just in general, where do you think DAOs will go in 2022?
Yeah. So, there are two sides to Syndicate, the investment process and the community. The investment process is what we’ve been laser-focused on for the past year, creating just a fantastic end-to-end experience for setting up and managing investment clubs, and we’re really happy with the results of that. 2022 is when we’re thinking a lot about community. How do we help these DAO communities build really, really strong ecosystems? How do we help them grow, how do we help them adapt over time?
We already have a membership NFT product launched that can upgrade over time, as community members make more contributions. That can then give them all sorts of really interesting perks and bonuses to recognize them for their contributions, and we’re also thinking a lot about how to build a community around Syndicate as well, a community of developers and an ecosystem of people who can take part in building on top of Syndicate’s protocol, as infrastructure.
So, that’s a lot of what we’re thinking about for 2022, and all of that is already in testing. It’s already built. It’s just not rolled out publicly quite yet.
Ian, did you want to add anything?
Yeah, I mean, I think, a couple things from, like, a market perspective. So, I’ll kind of mention two trends that we think are really interesting now with infrastructure like Syndicate that’s rolling out, right? One is, like, what happens in a world where there are hundreds of thousands, or millions, or tens of millions of investing DAOs? You know, the investing world has been, as Will mentioned, like, in this multi-decade transformation towards more and more commoditization, but also decentralization, even before Web3.
Like with AngelList syndicates, and rolling funds, and all these things, right? I mean, that’s a part of, like, this kind of broader historical arc, and DAOs, we think, are just going to take that to the logical extreme. And so, in this world where there’s millions of these things out there, but not only millions of investing DAOs, but the fact that they’re programmable and they’re composable with one another. Like, Syndicate DAOs on Syndicate Protocol are composable with each other.
That’s going to enable really incredible things, possibilities that you just do not see in Web2, where DAOs can actually start to coordinate with each other programmatically on Web3 networks. So, that’s kind of, like, one area of research that we think is really, really promising. The other area that I think is just as interesting is, Will was kind of alluding to us, you know, what is an investing DAO, really, and what is even investing, really?
Like, is investing specifically meaning, like, the investment of money and financial capital, or can investing actually be broadened to mean investing time, talent, energy, resources, attention, those kinds of things. And in that context, right, like, you can actually open up the design possibilities and design space for what investing means, and therefore what an investing DAO is and can become. So, a good example is, like, we’ve been working with this DAO called Vector Dao, that, you know, has launched on Syndicate.
Vector DAO is a group of designers in the Web3 space that work with different Web3 projects, and it’s a club of people, kind of, but they’re not investing capital. They’re investing time and talent, and that is really exciting to us, because you were asking earlier, like, how are we going to increase access and participation given in existing structures. We think that there’s something really big there, where there are people who can invest capital, but there are also people who can contribute time and talent.
And there will be models, DAO-native and Web3 models, where those two things, capital and labor, can come together. And you know, lots more to come on that front, but that should give you a sense for how big potential I think Syndicate could tap into in the years ahead.
Wow, I love it. That’s very fascinating. I cannot wait to hear more about that. All right, you guys, this has been such a great conversation. I have just really enjoyed it. Where can people learn more about each of you and your work?
Absolutely. So, you can go to Syndicate.io to get all the information on our investment clubs and set one up. It has everything you need to get started, and it only takes around 45 seconds to spin up a club. So, very, very easy to do, definitely check it out. I’m on Twitter, @WillPapper. Ian is on Twitter, @IanDAOs, and of course, Syndicate is on Twitter as @SyndicateDAO. So, definitely check us out. Twitter is where we tend to post updates, and the web site is where you go to set up a club.
Perfect. All right. Well, thank you both so much for coming on Unchained.
Thanks so much.
Thanks so much for joining us today. To learn more about Ian, Will, Syndicate DAO, and the Web3 Investment Clubs, check out the show notes for this episode. Unchained is produced by me, Laura Shin, with help from Anthony Yoon, Daniel Nuss, Mark Murdoch, Shashank, and CLK Transcription. Thanks for listening.