op·por·tu·ni·ty cap·i·tal·ist
/ˌäpərˈt(y)o͞onədē/ /ˈkapədləst/
noun
noun: opportunity capitalist; plural noun: opportunity capitalists
An individual who, instead of working a traditional job, spends time contributing to decentralized protocols/projects/products to gain equity/skills/relationships. An iteration of the VC but at a smaller meaningful scale that is not purely return motivated.
Venture Capitalists Sowed the Seeds
There is no doubt that Venture Capital fueled the industrial age allocating captial to long shots that reaped rewards, changed the fabric of society and shaped our day-to-day lives. Let’s dive into how we got to the present-day venture firm, how it differs from the original implementation and a brief timeline. This will lead us to some of the next questions and predictions.
What is Venture Capital?
It’s a form of private equity. The equity is secured from liquidity providers(wealthy individuals and corporations) and used to fund early-stage projects(start-ups) after the seed stage. These ventures are usually high risk and high reward with a low efficacy rate. It is a mutual agreement between the founders of the project and the VC firm, the founders would often not be able to scale without the funding and support. The VC firm's business is based on a certain percentage of its bets will be extremely successful and go to the IPO stage where they can exit to secure the gains. Rinse and repeat.
History of Venture Capital
Originating in the early 1900’s it was nothing like it is today. The majority of the population did not have the capital, information or resources to participate in the above description. It was the very wealthy individuals and families who created these investments. The next cohort of Venture Capital came after World War II(~1945). George's Doriot is termed the "father of venture capitalism" and founded ARDC in 1946 to encourage private-sector investment in businesses run by soldiers returning from World War II. This kicked off the next era of innovation, although the structure was more like a public company compared to the VC firms that exist today. This cohort fertilized the seeds that grew into separate spin-offs and morphed into a variety of different models.
Timeline
├── Early 1900's : Wealthy inividuals & familys
│ ├── J.P. Morgan
│ └── the Rockefellers
│
├── 1945 : American Research and Development Corporation
│ ├── Georges Doriot
│ ├── Ralph Flanders
│ └── Karl Compton (former president of MIT)
│
├── 1958 : Small Business Investment Act of 1958
│ └── The Small Business Investment Act of 1958 provided tax breaks that helped contribute
│ to the rise of private-equity firms
│
├── 1960s : venture capital came to be almost synonymous with technology finance.
│ └── The Firms were primarily focused on companies were exploiting breakthroughs in electronic,
│ medical, or data-processing technology
│
├── 1970s : growth of the venture capital industry was fueled by the emergence of the independent investment firms
│ ├── Kleiner Perkins
│ └── Sequoia Capital
│
├── 1973 : leading venture capitalists formed the National Venture Capital Association (NVCA)
│
├── 1980's : From just a few dozen firms at the start of the decade, there were over 650 firms by the end of the 1980s
│
├── 1990's : World Wide Web
│ ├── Netscape and Amazon (company) were founded in 1994, and Yahoo! in 1995. Each funded with venture capital
│ └── The Exit: Internet IPOs—AOL in 1992; Netcom in 1994; UUNet, Spyglass and Netscape in 1995; Lycos, Excite, Yahoo!,
│ CompuServe, Infoseek, C/NET, and E*Trade in 1996; and Amazon, ONSALE, Go2Net, N2K, NextLink, and SportsLine
│ in 1997
│
└── 2000 : The Dot Com Crash
Today
As you can see, reading this now and using this network of networks. The internet did not die, it grew into a vast luscious forest where any person could become a VC with a LinkedIn profile and acronyms that a PHD has never heard of:
With the flood of venture capital owning non-trivial stakes in what we call Crypto or Web3, what originally was the gasoline for the fire may have sucked the oxygen from the room. Arguably the model just changes, or there may be room for a subset of Venture Capital. The argument is that capital is no longer the scarce resource that a product/protocol/project needs.
Is a Network a Business?
Why was the preceding section so important to the concept we introduced in the title? Without knowing how our lives were built by a sea of capital, the most valuable resource at the time. We may not have the context we need to see the similarities between early company formation and how it compares to early network growth in the present. From wealthy elites to tens of thousands to around a million today, this shows the idea of venture capital scaled to the masses, and it scaled because there was an ever-growing amount of companies being built. Mostly due to technological innovation as we saw from the 90s until now. With every stage of innovation, there is a cross-over from the old to the new that overlaps and is not as efficient as it could be but with time, it is optimized.
As we are seeing by the information barrier being removed with the internet coming of age, there are coordination abilities sprouting to life that couldn’t have been possible only a decade before. While networks have always existed, the internet taught us that they could be managed at a global scale by clusters of nodes.
Companies, in general, operate very well with their hierarchical structure and processes. For the majority of the last couple of centuries, this has been the most efficient way a business operation could exist. Notwithstanding the downfall of bureaucracies today(a story for another time) and the bloat they now endure, companies have their place in the world of today and yesteryear but will a better option be available soon? It depends on the context.
Networks were missing one key attribute to become a vehicle for groups to coordinate in the same way that a company operates. While they were much more nimble and resilient than a company, they lacked the important necessary ingredient ‘value’. Particularly natively packaged trustless transfer of value between the different nodes within the system. In the last 10 years, this has become increasingly available. First with Bitcoin, then with smart contracts and now the products being built around these valuable primitives.
This is now the golden era of experimentation, iteration and invention of what is possible with these new tools to coordinate and operate between nodes or entities spanning continents. We have only just touched the surface of what is possible. We now have a large number of Venture Capitalists, debatably the majority of them merely providing capital coupled with an explosion of ideas from an ever-growing pool of entrepreneurs. If a network is now suitable to be a vehicle for a business and there is an abundant supply of the former two. What is the real scarce resource?
We don’t need Loggers and Logging, We need Fertilizers
There’s now a gap opening between the end user and the business vessel that we call a network. Let’s start with what a network needs; First and foremost, it needs a reason to exist. Be it a decentralized state machine, a more efficient way to distribute trustless value or simply to exchange dog pictures(or coins). It needs infrastructure, it needs people using it, and it needs a community of individuals with a purpose. Money can only buy a certain amount of this for a limited amount of time before reality starts to seep through the cracks.
What will not be as obvious today as in hindsight is when the fog clears that the ecosystem within a network, the roots, the passionate individuals and the presence is what fuels it. Without it, there is just a piece of technology left by the wayside after the funds are extracted. Like a hole in the ground of a decommissioned gold mine. Speaking of such.
A story comes to mind of a small gold mining town. On Alta Mountain within the Little Cottonwood Canyon in Salt Lake City, Utah, During the early days, the sawmills operating at Alta required vast amounts of logs. Trees were felled in such great numbers that the slopes were practically denuded of timber by 1884. With the removal of the trees, there was little to hold back the accumulated snow. During the winter of 1873-74, a disastrous snow slide swept down from the mountain and destroyed about one-half of the town. Sixty persons reportedly lost their lives in the main blocks of the town. A fire followed the avalanche, and between the two destroyers, the town was almost completely wiped out. Other avalanches and fires swept through the town in the following years. In 1885 a slide swept down from Rustler Mountain, partially destroying the town. This history acts as a metaphor, a story about greed, unfamiliarity and lack of thoughtful foresight that resembles what we might be seeing now within these networks. This is for good reason, what seemed like fiction only a couple of years ago is now a small ecosystem within the forest VC created. What this means is there is an opportunity to fill the gap between the extreme event of failure and death that is resonant in the early days of the venture as it grew away from wealthy elites and before it became what it is today.
The Opportunity
Opportunity exists in this gap. We are now seeing a shift where a role is emerging out of necessity. After the dust began to settle in 2019 after the crash of early 2018, to the foreign bystanders it looked like “that whole crypto thing” had been a fad. Undeniably it even looked that way to lots of passengers still aboard the 2015,16,17 bus as the seats emptied during 18/19. But many seeds were starting to sprout with one thing missing - believers, skills, and passionate individuals to use those skills. While the majority of the initial building was done by regular employees and founders, similar to existing early-stage ventures. They needed new roles like Validators, Community Mods and Builders to build upon the networks that were being designed and constructed. During that time, Zaki Manian designed one of the few ecosystem growth campaigns designed to recruit, train and eventually employ(not in the traditional sense) - The Incentivized Testnet. It would allow any individual to permissionlessly enrol and join a game based on the operation of running validator nodes to protect the network being built. It may seem strange reading this now but similar to mining Bitcoin way back in the day, you could barely find enough people to join the testing phase. Because now, with the hindsight of seeing the value of the networks(In physical, philosophical and by value), it is a no-brainer. The equity earned by participating in these early games allowed the participants to own a meaningful stake in the network.
This was the beginning of these types of opportunities. We started to see other such examples, like early digital art collecting with the narrative of unique scarce timestamped sealed packets of data(NFT’s) and working group roles within DAO’s. Notably missing is farming, While an innovation in mechanism design for the time, this does not fall into the same category as above because it was a somewhat different breed of user who ultimately extracted value with this endeavour. It was one who was versed in the knowledge barrier of the next participants.
The Opportunity Capitalist is what a network needs. They are defined by values and are involved in jumpstarting these networks for learning, ideals, equity share and for the improvements they provide compared to previous and current systems. Monetary gain is a secondary motive, most value accrues from the journey. Networking and training are just as valuable due to these skills not being defined or available when acquired. This insight gives skills and knowledge that compound and leads to future opportunities. It should be noted though that this is not scalable by design. To give meaningful value back to the network, like any social network, is the capability for a single person to nourish relationships and provide their most valuable assets - attention and time. Realistically the individual becomes ineffective after around 5 networks and neutralizes the value for each one added to the attention list, at worst, it is destructive to their presence within the other networks.
Due to the value being time and attention instead of capital. These networks naturally grow and overlap these opportunity capitalists even though the immediate breath is small, have an exponential effect due to the overlap between nodes within the multi-layered mesh
This is the real hyperstructure being built. The one that will sew the fabric of our digital lives, products and relationships together. While this role was essentially created in 2019 while the ecosystem is a very unique subset of participants, over the last few years we have had a change within the idealogy of new participants. They come from TradFi (traditional finance), and startup world and bring with them the processes and organization. Trying to inadvertently coerce these networks to fit a mould of familiarity. This may not be the approach that will drive these networks forward and could be detrimental to Opportunity Capitalists.
We now enter the do-or-die stage of the OC, do traditional values overthrow the progress being made using traditional resumes filled with buzzwords and political correctness OR do we step outside our comfort zone and have anons with a track record of soul-bound achievements to take the reign? Likely somewhere in the middle.
Home Sweet Home
Although nomadic by nature, OC’s need a home and there are a couple of prerequisites that must be considered:
Credible neutrality: the home must be agnostic as tribalism is ever prevalent in most networks. Strong values but open to ideas.
Organic: there must be no foundation, investors, SAFTs. The network had to have been built by contributors because they shared a vision, not due to incentives provided by another entity higher up the pyramid.
while there may be a multitude of projects that fit these needs, it’s hard to find them due to the nature of ideals and lack of easy capital. Canto and 0L are a couple of examples of such networks.
I would love to have your opinion about this concept!!! Please reach out and let me know. This is part of the-future-of-work-with-zoz series
Cover Image
The image above(like my PP) is created with abraham.ai - an AI artwork generator SEED: opportunity capitalist
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