It’s no shock that Katie Haun is a serious proponent of NFTs or non-fungible tokens. The previous federal prosecutor who at this time co-leads the highly effective crypto observe of Andreessen Horowitz, has been a pupil of the know-how since not less than 2018, when a16z first backed Dapper Labs, which is now quite valuable.
On the time, Canadian-based Dapper Labs was recognized for a collectible digital cat sport known as CryptoKitties that baffled these exterior the crypto group. This yr, Dapper broke out thanks to a different providing on its blockchain known as NBA Top Shot that permits sports activities followers to purchase and promote collectible spotlight clips — but even that could be a use case that may appear minor within the grand scheme of issues, Haun prompt Thursday night time at a San Francisco event hosted by this editor.
Certainly, throughout our sit-down, she defined why she thinks NFTs’ considerably concentrated consumer base is about to blow up, and she or he shot down the concept that economics will accrue to a small variety of creators who flip to NFTs for earnings. She additionally defined an innovation that a16z launched that permits the heavyweight agency to nab a 20% low cost on the tokens that now make up 75% of its crypto bets (moderately than offers involving fairness), and she or he mentioned with us whether or not all enterprise companies will or ought to turn into registered funding advisors as a16z did in 2019. Excerpts from our wide-ranging dialog observe, edited for size. You may also take a look at the complete interview under.
On what a16z tells its buyers about its varied bets on NFTs — and what the unifying thread is:
I believe essentially NFTs are going to dramatically change the enterprise mannequin for the web for customers and content material creators . . Why is it essential for customers? [For example] proper now, in case you purchase a “Fortnite” pores and skin, what if the sport goes below? . . . [Now consider that] you’re a gamer and you may take your good to a different platform; you should utilize it anyplace. That’s actually highly effective for customers. It’s placing energy instantly again in [their] fingers . . .
It’s additionally nice for content material creators as a result of they will program these tokens, these digitally scarce items, to get monetary upside in all future transactions [and cut out middlemen who take 30% today in the process]. Think about what that does for the creator economic system. [People are focused today on digital art but] I believe subsequent yr at the moment, we’ll be speaking about music and what boundaries can come down within the music world.
Haun went on to say that she’s truly fairly centered on music-related NFTs proper now and used singer-songwriter Billie Eilish to spotlight what might be doable (and is already happening, in some circumstances) with musicians and NFTs:
[Eilish] was sort of found on the web by a bunch of followers. But did these early adopters, her actually true followers who made her well-known, did they share in her stardom? Not a bit. Actually, not solely did they not share in her stardom, their expertise was worse as she blew up. Ticket costs went up. The strains obtained longer at stadiums, and live performance venues are bought out for her. Now think about if the individuals who found her and made her what she was within the early days . . .what if by way of an NFT or a wise contract they might have held one thing that associated to Billie Eilish’s success? [It could] be that she information a track to Spotify however then creates a companion sensible contract NFT that entitles followers to particular entry to exhibits without end, or to tour together with her, or maybe entitles them to future parts of her royalty streams. Now abruptly, these followers share within the financial upside, as a substitute of simply document labels and attorneys and middlemen.
On whether or not the economics will finally look a lot the identical for creators as at this time, with a small quantity reaping a lot of the monetary rewards as has occurred, for instance, with Twitch, the place an information leak confirmed that 1% of streamers see half of all revenue:
Katie Haun, talking at a StrictlyVC occasion on November 11, 2021.
It’s nonetheless very early days for these enterprise fashions. . . .[But] one factor about crypto structure distributed techniques is that you could make a residing, and we’ve seen this with NFT’s already. You don’t need to be Beeple and get actually wealthy to make a residing. I personal a few NFTs [including by a] feminine artist who stop her job and who applications digital artwork that I purchased on OpenSea. She has programmed a wise contract that if I promote [these NFTs] to you, she would get a portion of that sale, and in case you then circled and bought them to an viewers member and possibly they appreciated it in value, she would get royalties off that sale, whereas proper now she will get nothing if it’s bodily artwork.
We talked concerning the widespread notion that NFTs are taking off fueled by a small subset of moneyed patrons with money to burn, whilst most People wrestle to pay their payments. On this entrance Haun mentioned that she understands why individuals may view NFTs as an indulgence for the wealthy however famous that it’s early days for the know-how.
I believe it’s actually essential with NFTs to not choose the present state of innovation by the top state of innovation. I fully perceive what you’re saying. I’ve seen it myself. But I additionally see [parallels], by way of standing symbols, within the bodily world, the place many People are struggling, [while] others can afford luxurious automobiles and Rolexes, so I believe the digital world is not any completely different. And like there are luxurious bodily items, there are additionally fundamental items that folks wish to personal in the actual world that aren’t ostentatious, [and] I believe you’ll begin to see extra of these [more basic goods] developed digitally.
Sooner or later, we switched gears to debate a16z’s deal movement. Right here, Haun prompt that two of her board seats, with Coinbase and OpenSea, allow her to see plenty of what, and who, is on the rise within the crypto world.
I believe we’re very privileged to sit down proper on the middle; we have now a entrance row seat within the ecosystem and that’s as a result of each Chris Dixon and myself have been on the board of Coinbase for a few years now . . and so they have Coinbase Ventures . . . and there are few crypto initiatives on the market that don’t pitch Coinbase Ventures. OpenSea is one other board that I’m on proper now and so they’ve achieved these document volumes and so they’re the biggest NFT market on the earth and so they’re additionally doing enterprise investing, so proper there, simply by way of our connections to those sort of giants within the area, we have now deal movement as a result of they’re seeing offers [and] we’re seeing offers.
After all, crypto may be very world [and at this point] we’re really world. I’d say not less than 50% of our investments on this final crypto fund have been worldwide, so we have now to not sit again and relaxation on our laurels of ‘Oh, we’re on the board of Coinbase and OpenSea.’ We now have to be actually open-minded about completely different initiatives in numerous nations . . .[where many founders have] by no means heard of Andreessen Horowitz. I believe we take that as a right simply being right here, however [elsewhere in the world] they’ve by no means heard of [us]. They don’t know our worth.
It requires us to go get on a airplane [in some cases]. [We’ve also] pioneered a delegate program the place we delegate our proof-of-stake techniques to members worldwide, whether or not that’s NGOs like Kiva and Mercy Corps, [or] corporations like Deutsche Telekom, or whether or not it’s universities like Stanford and Berkeley and plenty of different universities around the globe [including] Technion College in Israel . . .we’re not resting on our laurels [in the expectation that] as a result of we’ve had nice deal movement, it would proceed. {The marketplace} for crypto buyers is widening for positive.
We additionally talked about why the agency is investing a lot in tokens, together with instantly over-the-counter. We puzzled if a16z will get any sort of most popular standing in these offers. We additionally puzzled what has pushed the agency’s shift away from extra conventional fairness offers like Coinbase and OpenSea, and whether or not it was crypto founders themselves who started pushing again towards these preparations. Stated Haun (who, by the way in which, famous that fairness offers haven’t gone away totally however that they’ve escalated in value as extra VCs are begun to compete for them):
If an over-the-counter desk that may give me most popular charges, let me know as a result of I haven’t discovered one. [No,] with over-the-counter, we’re simply shopping for it spot; we get no particular therapy. If something . . . we’re very acutely aware of not shifting the market the place it’s a real over-the-counter [investment] and the founding father of a protocol may not even know we’re an investor.
In different circumstances, generally protocols will desire a explicit enterprise capital investor, though that’s altering quickly and we must be nimble and account for that. However what we’ve achieved in a few of these circumstances, the place a protocol founder actually needed us to be concerned is, early on, name it three years in the past within the token setting, they’d give us a reduction. However that grew to become very unpopular within the crypto ecosystem. [People wondered] why ought to VC buyers get a reduction over the group?
One of many issues we did [to address that concern] is [say], ‘Give us a lock up then. We’re 7- to 10-year affected person buyers; we’re not working a crypto hedge fund. So if we wish to lower cost — name it a 20% low cost — in alternate, we might be locked up for 4 years or, in some circumstances for years, even longer and generally shorter. That’s one innovation that we dropped at completely different token offers. So we have obtained reductions generally, however the factor is that we’ve additionally achieved plenty of work for a few of these protocols the place we obtained a reduction in alternate for lockup. . .
Although Haun has been requested this earlier than, we additionally inquired about her seats on the each the boards of OpenSea and Coinbase, two corporations that look like a collision course, provided that OpenSea is an NFT market and Coinbase, the cryptocurrency alternate, extra lately introduced plans to additionally create a sort of NFT market. Actually, Coinbase CEO Brian Armstrong mentioned throughout an earnings name final week that he thinks the marketplace for NFTs might rival or even be larger than Coinbase’s cryptocurrency enterprise.)
We puzzled how she navigated this difficult terrain, and even whether or not Coinbase may purchase OpenSea. She dismissed the final query with a head shake. As for the 2 colliding, she had this to say:
That’s a pessimistic view. I truly don’t agree that they’re on a collision course. To start with, I’ll say that what Coinbase’s plans are they haven’t even introduced but. They solely introduced that they’re exploring doing one thing within the NFT area, however we don’t even know what but will probably be.
One factor that I bear in mind Brian Armstrong mentioned years in the past, once we began seeing opponents come into the alternate area . . . he mentioned ‘That is truly nice.’ And I assumed to myself, What am I lacking? And he mentioned, ‘This simply means the pie is rising. This simply validates our entire thesis. This can be a large alternative, and others see it.’
[Similarly] the NFT area is so huge that I believe there’s completely room for a lot of gamers and I really feel very lucky to be on the boards of two really-cutting edge corporations that may play on this area. I don’t agree that they’re on a collision course. Actually, if it performed out that means, if the ecosystem evolves that means, that shall be one thing I’d have to handle, as a former federal prosecutor.
As for whether or not extra enterprise companies could have to turn into registered funding advisors in the event that they wish to be taken significantly by crypto founders, Haun declined to say so outright however she prompt it could make sense.
Look, each single crypto devoted fund is is registered as an RIA. There are actually a lot of them on the market, and so they’ve all registered as RIAs. It looks like a prudent factor to do the place the regulatory standing is so unsure if you wish to maintain tokens.
