When forming investment theses and considering investments in early-stage start-ups, I rely on a well-structured and recognized process. The standard VC script – what's unique about the team? Does the product solve the problem? Are there network effects? How about compounding?
In light of FTX's implosion and a broader loss of faith in CeFi, however, our investment committee at Seed Club Ventures has begun to emphasize a project's ethics, principles, and the role it may play in shaping the future of crypto and web3, and therefore the world.
A decision-making framework I've previously neglected but found helpful in navigating these moral ambiguities is asking myself, "how will historians judge this decision?" and "how will historians describe our current era?" These questions are helpful in my personal life, especially when concerned with decisions that have moral and ethical implications.
What Is Our Current State?
We're living at an inflection point in human history, where two dominant and conflicting visions of how organizations (nations, governments, and corporations) should be operated are engaged in a war. Balaji's Network State and Dalio's Changing World Order explain this phenomenon by contrasting the Chinese and American regimes.
The decline of an empire (USA) and the rise of another (China) has never happened in our lifetime. China has risen to become a global superpower as strong, if not stronger, than the US. Notably, China has achieved this through a very different political order – one which embraces Confucianism (super hierarchical), Legalism (all things under one leader), and Taoism (opposites must balance). Concurrently, the US is struggling with military overextension, bad finances, inflation, decadent leadership, and internal conflicts. In particular, they face a disaffected populace incapable of engaging in constructive dialogue about their collective vision for the future.
Equally, globalization and the rise of the internet and the digital economy have prompted a move away from border-driven power struggles to economically-driven power struggles. The ongoing Russo-Ukrainian war well evidences this, and the threat to Armenia's sovereignty has meant I've felt this personally. Consider Russia, Turkey, and Azerbaijan's difficulty in overcoming Ukraine and Armenia, two considerably smaller countries, through military might. Much of the impact of these wars on the international stage is discussed with respect to the local economic impact.
The Web3 Opportunity
The power of private corporations is not lost on the political elite, and nations already use companies to influence the social mindshare and political narrative. It's also no secret that the country which unlocks the next wave of innovation in energy and artificial intelligence will likely accrue unimaginable power.
Crypto and web3 offer an alternative vision of the future, in which currency and economic activity are governed by code.
At Seed Club Ventures, we extend these ideals to organizations themselves – we believe the most successful organizations of the coming century will be open and transparent. My comrade, NiMA, often espouses that what open source did to software is about to happen to the corporations that run our world. We're therefore focused on investing directly into organizations building in a more open, autonomous, and decentralized way (DAOs) or in projects building the infrastructure, guardrails, and tooling for such organizations (DAO infrastructure and tooling).
As investors focused on early-stage projects, our key emphasis is naturally on the team. Not only whether they have the necessary tenacity and knowledge to reach product-market fit and to build an enduring business, but whether we share values of open standards, open source, and open participation.
In this context, I firmly believe historians will judge us positively – we're doing our best to create a more inclusive and equitable world that will inevitably drive greater innovation.
