We have recently the three part Digital Oak Series on Passionware and Web 3. This lays out our investment framework for the new Web3 world beyond "crypto" as an extension of our overall thesis and approach to this new market category. We at Benson Oak Ventures see ourselves not as a crypto fund but a Fund focused on Web3 opportunity as a new $60 trillion category, with a core thesis around Passionware.
Below we distill the 3 part series into a “Tweetstorm” version for bite-size thoughts. Full version available on Substack.
Stay tuned for Bonus Tweetstorm outlining our investment approach.
Part 1: Passionware and the Web3 Revolution
NFTs are the currency of the new Web3 world, serving as operational business infrastructure, providing engagement with fans & users and business model flexibility and scale. In short enabling "everyone to be a business".
1/ Over the last 30 years, the Internet has eaten the physical world but it has largely followed the macro-trends of the "old economy" in enabling new, centralized players to control the pipes, payments, access, and match-making.
2/ NFTs enable the creation of new economies which with growth and scale, will embody all the components of physical economies - production, market-making, development and even investing and trade between them.
3/ Digital proof of ownership make possible decentralized economies that do not require a middle-man to decide whether you have ownership, permission or provenance. NFTs are the smart arbiters of ownership in and access to the "club".
4/ NFTs are "Ownership legos" packaged into smart contract and developers, creators and fan can build new experiences around them. The result is a true ownership economy for benefit of both micro-sellers (SMBs) and buyers (B2C) and everything in between, as ownership takes on whole new meaning
5/ Pure digital native platforms (a.k.a decentralized economies) engender direct relationships between creators and fans, including access to developers, investors, suppliers and basically all elements of "old world" economies.
6/ NFTs fulfill three vital components: (i) Creation of new assets, (ii) Seamless Access and dispersed Ownership. As the need for middle-man dissipates, lines will start blurring.
7/ Their combinations mean any product can be created from an idea and by anyone, easily accessed by fans who spread the word on their own, enabling a market-network through dispersed ownership of the new economy via a token. As Mark Cuban has outlined, royalties are the lifeblood of NFTs.
8/ The brainchild of Gary Vaynerchuk - VeeFriends - is an economy of its own. Its digital art in the form of NFT gives access to GaryV himself, plus ownership rights to the artworks which Gary intends to brand the BEEP out of". Three overall products in one, and they can be traded on secondary markets. This GaryV economy is wholly made possible by NFTs.
9/ The new “entrepreneurs as contributor” are paid to follow their passions: they can play and crush in a game, choose topics for their favorite podcaster, curate art, make cool videos, and so on. Axie Games, Yield Guild Games are examples of this Passionware economy at work.
10/ There will be a whole new category of "Me-commerce", as individuals or clubs earn directly from their contributions to a decentralized network. Digital-only platforms will thus be driven by millions of these new “me-commerce” entrepreneurs where everyone is a business.
11/ NFTs enable the creation of new economies and, as they grow and scale, will embody all the components of physical economies. The combination of digitally native micro-economies and global communities underpin the investment framework for Web3.
Part II - Me-Commerce: Everyone is a Business
NFTs drive new business models, driven and adapted by the community, not the centralized platforms. Anyone can become an entrepreneur "as a contributor", or as we at Benson Oak like to call it "Me-commerce".
1/ Humans, we have the aspiration to control our own lives and be free of dependence on others for economic livelihood. We want to be capital - not labor. We are all entrepreneurs by our very nature.
2/ With Covid accelerating changes, people increasingly are working at home, to earn with their passions and any type of skill. Why? Because we can.
3/ Just as software ate the world, "blockchain will connect the world" unleashing true Passionware at global scale, reach and magnitude, resulting in new definitions of both entrepreneurship and consumerism.
4/ Web3 ownership ‘Lego’ bricks will create new "communities" from the ground-up, with accessibility to a new playing field where products and services can be created, consumed and invested in by all
5/ As communities multiply and combine with an increase in ‘me-commerce’ entrepreneurs, new economies are formed — with early projects bootstrapped by their early backers with funding and most of all word of mouth.
6/ As digital apps, marketplaces, services and goods proliferate to support these new economies, their market size grows, unleashing network effects as the distinction between buyer, seller, investor and promoter blurs, accruing exponential value to all members of the community ("Growth and Scale").
7/ The magnitude of this opportunity is represented by the convergence of all actors and the merging of how we think about consumers and businesses, effectively creating a shared ownership framework that has no historical precedence.
8/ The nice, neat patterns we know as "history" where every actor has its distinct place in the economic ecosystem will dissipate as "ownership legos" merging interests, growing the economic pie via use of a digital token. Community stakeholders are thus more bound by the digital worlds where they share identities instead of national flags or specific professions.
9/ Investment products around Me-Commerce are manifested by social tokens such as Rally. The @DesoProtocol provides everyone their own social token in which users can invest and promote and earn.
10/ Today's generation - and the next - are digital first. For this ‘me-commerce’ generation, blockchain and shared ownership will quickly become taken for granted and will be simply obvious for the digital-first generation.
11/ VC's must adapt to the new frameworks where the value of networks, creativity and support will be the essential differentiators as capital becomes increasingly commoditized by a long-tail of me-commerce financiers.
12/ For the first time, anyone can be a business on a global scale. That is passionware. It is an entire new category "reshaping" industries and "changing the notion of firm" by empowering anyone to start, grow and scale a business.
Part III - The VC Opportunity in Passionware
Its all about the take-rate. As take-rates are eviscerated, the TAM for online marketplace and e-commerce products in Web3 will increase 10X from $6 trillion today to $60 trillion in the next two decades.
1/ This 10x increase will be fulfilled by the new wave of me-commerce entrepreneurs and SMBs, who can start, grow and scale businesses to reach consumers all over the world.
2/ Digital convergence will generate enormous economic growth and network effects with these new economies via: (i) Digitalization of Existing Economies (ii) Creation of New Economies via Digitalization (iii) Digitalization of the Entrepreneur.
3/ Web3 growth has been propelled by enormous investment into infrastructure over the last five years. Just like the investment in Internet and mobile in the 90s and early 00s, this investment is now enabling Web3 products and services to enter the mainstream and enable adoption.
4/ The pace at which existing economies will digitize is directly correlated by the removal of rent-seeking intermediaries. The higher the take rate, the more ripe for disruption and thus a leading indication of “how fast” a new economy can grow as its stakeholders simply click to the new world.
5/ “How big” the market can eventually be is a function of the current market size, but also the new market opportunities being created as value accrues to the creator and more players enter the space because they are no longer put off by high take rates.
6/ As we digitize, many familiar markets will simply be transformed to the new world, greatly expanding their output and efficiencies -- running the gamut from content to fashion to services to gaming to real assets such homes, cars and land.
7/ We are now seeing the earliest adopters of Web3 from those asset categories that did not have an Web2 online outlet, thus the early adoption of NFTs among collectibles, digitize artwork, digital land, and in-game items. Marketplaces such OpenSea and Rarible and projects such as BoredApeYacht Club and Desperate ApeWives
8/ Alignment and shared ownership will also engender entirely new markets of goods and services. Many of these markets will be outside our current imagination, spurred by an explosion of ingenuity, built on digital convergence and stakeholder alignment, underpinned by NFTs and tokens.
9/ Whether we are wearing glasses or not to navigate these "new worlds", the basic operating system will be the same -- relationships will be direct and value can be earned, spent, borrowed or invested interchangeably, without the need for a centralized actor.
10/ The results is a ‘Me-Commerce’ generation of individuals can become their own unicorns. This will serve to increase economic output (and again without middle-men taking a cut) by building businesses that leverage the above -- digitizing existing assets and creating new assets.
11/ Brands will be diving into Web3 and digital goods will transform backward into the physical world - similar to how Web2 e-commerce brands reinvigorated old world retail in many markets. Already happening with Gucci, Burberry and McDonalds and DigitalBits with its blockchain for brands.
12/ Decentralized economies are formed organically from the bottom-up. The explorers of the Web3 utilize technology and code and their crew consists of communities driven by common affinity and passion for the world they share. These fast-moving digital explorers drive rapid first product launch, reducing the need for capital - and, in turn, reducing risk significantly.
13/ All stakeholders act together with shared ownership, orchestrated and aligned by a common token in a free market open to anyone with a digital wallet. They thus all contribute to a virtuous circle, massively increasing the overall pie and TAM, rather than seeing the market reduced in scope and volume through take-rates, as in the old world.
14/ The shared ownership model of Web3 brings opportunity for VCs - but requires the right approach. VCs must show entrepreneurs they are long-term supporters and value-add investors and not quick-flippers. Reputation and credibility are key, as well as knowledge and experience.