Most people have experienced the internet only through Web 2.0: online applications, the social web and software as a service form the fabric of our lives.
But even as other technology rapidly evolves, basic web infrastructure has remained largely unchanged since the turn of the millennium. Lately, many have championed web3 as the internet’s next phase, but the term encompasses so much territory, conversations can be rather diffuse.
We’re still years away from web3 capturing major market share, and there are valid concerns that its complexity will daunt consumers and regulators. However, our research indicated that the investment landscape is growing increasingly competitive as venture capitalists become more educated and less skeptical.
To get a clearer sense of where the market is, we reached out to several active investors to find out where web3 stands and what the future holds:
To make things as clear as possible, we asked each respondent to share their elevator pitch: How would they describe the technology if they were trying to convince a skeptic to invest?
Starting with the potential consumer appeal of cartoon apes, we tried to find out what specifically attracted them to invest in the semantic web and where they’re currently seeing demand. “I initially got into web3 through verifiable credentials and data provenance in the enterprise market,” said Atul Ajioy, a partner at Horseshoe Capital. Several others said they started exploring the space after developing an interest in crypto.
In addition to discussing potential applications in advertising, fintech and enterprise apps, respondents shared their advice for web3 founders who are hunting for funding, along with their concerns about factors that could stall its development. Finally, we asked each respondent: What are skeptical web3 investors missing?
“I never met a skeptical investor who actually understood what was going on. If you get it, you’re probably strapped in and ready to go,” said Lior Messika, founder and managing partner, Eden Block.
“At this point, web3 has proven itself as more than a phenomenon — it is the foundational layer of the metaverse.”
Please give us your web3 elevator pitch: What is it, and what role does it play in today’s internet framework?
In two sentences: Web3 is the key to the real metaverse. Web3 will house our financial institutions, social interactions, personal identities and much, much more in the not-so-distant future.
Expanding: When I look at web3, I see an amalgam of decentralized infrastructure capable of powering a new world. The two most distinct properties of web3 are composability and decentralization. Firstly, crypto networks are swallowing up value and creating environments where every possible form of on-chain value interlinks and interacts with the other. Web3 has the unique ability to create tangible value systems out of value systems that remained intangible for millennia. It unlocks a world where our social capital, reputations, and historical interactions are given indelible and truthful assets — which often get priced into a market powered by decentralized protocols.
Web3 is where all decentralized systems will learn to interact with each other, building on the security and value (thus network effects) of a broader ecosystem. It will be multilayered and multifaceted, supported by completely new infrastructure. Our applications will need to relay data reliably, transfer data completely privately, store data and maintain high levels of availability — all on decentralized rails. In web3’s short history, we’ve already seen how centralized infrastructure can be a dangerous tradeoff.
What made you decide to get into the space? Cartoon apes and blockchain games don’t yet have broad consumer appeal: Where are you seeing demand for web3 products today?
Web3 symbolizes a massive societal shift, infused with innovation and supercharged with values. I dove headfirst into the space when I understood that we’re in the midst of a cultural revolution enabled by technology — not the other way around. Crypto and web3 is our technological answer to a societal problem that has plagued us for millenia, so I think that it’s natural for us to treat this movement with respect and passion.
On products: Some of the most powerful web3 products that we’re seeing these days are intensely focused on ownership, creation and other contextual features that ultimately amount to our digital identities. Funnily enough, we’re already starting to see how crypto products are taking hold of our culture and of our shared attention. In the metaverse, your “pfp” is not only a skin of sorts but the key to another dimension. The individualism this basic feature enables over time explains the frenzied NFT market, which will undoubtedly remain a large part of web3 and the metaverse. The technological basis for NFTs will unlock disruptive value systems across gaming, fashion, social and creator economies.
On a less obvious note, coordination in large, decentralized groups (DAOs) will require streamlined frameworks and transparent value systems. As communities grow and scale into multibillion-dollar networks, decentralized governance becomes very difficult. Colony and Coordinape will enable the next generation of DAOs through specialized tooling and automated frameworks for governance and incentives.
What kinds of applications can we expect to reach the market in the near future? Where are you placing your bets, and can you name a few companies to watch?
Within the broader context of web3, we see tremendous growth across two distinct layers in the stack — infrastructure and applications. Unlike TCP/IP (a core piece of internet infrastructure that cannot be monetized) at the dawn of the internet, decentralized protocols and baked-in incentive systems make running decentralized infrastructure extremely valuable. Technologies like the Pocket Network manifest this in full force, with billions of relays per week. The Pocket Network provides decentralized infrastructure to an entire ecosystem — and compensates its node runners handsomely for the work. At the current state of relays, the forecasted annualized revenue of the network is in the hundreds of millions.
Another core piece of infrastructure for web3 is Biconomy. The Biconomy team is building transactional infrastructure for the decentralized web. Its platform abstracts away crypto transaction complexities for both developers and users. Biconomy has built a series of products that cater to developers building applications in web3 — as protocols continue to grow into mass producers of on-chain services, developers need tools to streamline their operations and integrations to allow for mass scale.
On the application layer, I believe that we’ve only begun to scratch the surface of interoperable value systems within the broader web3 space. Through decentralized finance, we will one day price, value and monetize every single form of capital that can be linked to us on-chain. Our favorite art pieces will pay off our mortgage on lending protocols, and our “likes” will become financial assets. In simple terms, decentralized finance will kick-start the great monetization of everything. Protocols like Vega Protocol aim to enable decentralized derivatives at scale through fair and efficient markets.
Another trillion-dollar opportunity in DeFi relates to a massive elephant in the room — since markets need stability to remain competitive and efficient, DeFi has largely sacrificed decentralization for stability, opting for the USD as the main underlying collateral for a huge portion of the market. Protocols like Float offer an alternative, by creating a low-volatility asset that can remain completely decentralized. Without a truly decentralized collateral in DeFi, web3 is at risk.
Can you share a few of your top concerns? What are some of the pitfalls that could prevent web3 from realizing its potential?
Firstly, it must be understood that decentralization has to be the basis for all true innovation in...
But even as other technology rapidly evolves, basic web infrastructure has remained largely unchanged since the turn of the millennium. Lately, many have championed web3 as the internet’s next phase, but the term encompasses so much territory, conversations can be rather diffuse.
We’re still years away from web3 capturing major market share, and there are valid concerns that its complexity will daunt consumers and regulators. However, our research indicated that the investment landscape is growing increasingly competitive as venture capitalists become more educated and less skeptical.
To get a clearer sense of where the market is, we reached out to several active investors to find out where web3 stands and what the future holds:
- Lior Messika, founder and managing partner, Eden Block
- Atul Ajoy, partner, Horseshoe Capital
- David Chreng-Messembourg, founding partner, LeadBlock Partners
- Randy Glein, founder/partner, and Sam Shapiro, principal, DFJ Growth
- Mercedes Bent, partner, Lightspeed Venture Partners
- Jai Das, co-founder, president and partner, Sapphire Ventures
To make things as clear as possible, we asked each respondent to share their elevator pitch: How would they describe the technology if they were trying to convince a skeptic to invest?
Starting with the potential consumer appeal of cartoon apes, we tried to find out what specifically attracted them to invest in the semantic web and where they’re currently seeing demand. “I initially got into web3 through verifiable credentials and data provenance in the enterprise market,” said Atul Ajioy, a partner at Horseshoe Capital. Several others said they started exploring the space after developing an interest in crypto.
In addition to discussing potential applications in advertising, fintech and enterprise apps, respondents shared their advice for web3 founders who are hunting for funding, along with their concerns about factors that could stall its development. Finally, we asked each respondent: What are skeptical web3 investors missing?
“I never met a skeptical investor who actually understood what was going on. If you get it, you’re probably strapped in and ready to go,” said Lior Messika, founder and managing partner, Eden Block.
“At this point, web3 has proven itself as more than a phenomenon — it is the foundational layer of the metaverse.”
Lior Messika, founder and managing partner, Eden Block
Please give us your web3 elevator pitch: What is it, and what role does it play in today’s internet framework?
In two sentences: Web3 is the key to the real metaverse. Web3 will house our financial institutions, social interactions, personal identities and much, much more in the not-so-distant future.
Expanding: When I look at web3, I see an amalgam of decentralized infrastructure capable of powering a new world. The two most distinct properties of web3 are composability and decentralization. Firstly, crypto networks are swallowing up value and creating environments where every possible form of on-chain value interlinks and interacts with the other. Web3 has the unique ability to create tangible value systems out of value systems that remained intangible for millennia. It unlocks a world where our social capital, reputations, and historical interactions are given indelible and truthful assets — which often get priced into a market powered by decentralized protocols.
Web3 is where all decentralized systems will learn to interact with each other, building on the security and value (thus network effects) of a broader ecosystem. It will be multilayered and multifaceted, supported by completely new infrastructure. Our applications will need to relay data reliably, transfer data completely privately, store data and maintain high levels of availability — all on decentralized rails. In web3’s short history, we’ve already seen how centralized infrastructure can be a dangerous tradeoff.
What made you decide to get into the space? Cartoon apes and blockchain games don’t yet have broad consumer appeal: Where are you seeing demand for web3 products today?
Web3 symbolizes a massive societal shift, infused with innovation and supercharged with values. I dove headfirst into the space when I understood that we’re in the midst of a cultural revolution enabled by technology — not the other way around. Crypto and web3 is our technological answer to a societal problem that has plagued us for millenia, so I think that it’s natural for us to treat this movement with respect and passion.
On products: Some of the most powerful web3 products that we’re seeing these days are intensely focused on ownership, creation and other contextual features that ultimately amount to our digital identities. Funnily enough, we’re already starting to see how crypto products are taking hold of our culture and of our shared attention. In the metaverse, your “pfp” is not only a skin of sorts but the key to another dimension. The individualism this basic feature enables over time explains the frenzied NFT market, which will undoubtedly remain a large part of web3 and the metaverse. The technological basis for NFTs will unlock disruptive value systems across gaming, fashion, social and creator economies.
On a less obvious note, coordination in large, decentralized groups (DAOs) will require streamlined frameworks and transparent value systems. As communities grow and scale into multibillion-dollar networks, decentralized governance becomes very difficult. Colony and Coordinape will enable the next generation of DAOs through specialized tooling and automated frameworks for governance and incentives.
What kinds of applications can we expect to reach the market in the near future? Where are you placing your bets, and can you name a few companies to watch?
Within the broader context of web3, we see tremendous growth across two distinct layers in the stack — infrastructure and applications. Unlike TCP/IP (a core piece of internet infrastructure that cannot be monetized) at the dawn of the internet, decentralized protocols and baked-in incentive systems make running decentralized infrastructure extremely valuable. Technologies like the Pocket Network manifest this in full force, with billions of relays per week. The Pocket Network provides decentralized infrastructure to an entire ecosystem — and compensates its node runners handsomely for the work. At the current state of relays, the forecasted annualized revenue of the network is in the hundreds of millions.
Another core piece of infrastructure for web3 is Biconomy. The Biconomy team is building transactional infrastructure for the decentralized web. Its platform abstracts away crypto transaction complexities for both developers and users. Biconomy has built a series of products that cater to developers building applications in web3 — as protocols continue to grow into mass producers of on-chain services, developers need tools to streamline their operations and integrations to allow for mass scale.
On the application layer, I believe that we’ve only begun to scratch the surface of interoperable value systems within the broader web3 space. Through decentralized finance, we will one day price, value and monetize every single form of capital that can be linked to us on-chain. Our favorite art pieces will pay off our mortgage on lending protocols, and our “likes” will become financial assets. In simple terms, decentralized finance will kick-start the great monetization of everything. Protocols like Vega Protocol aim to enable decentralized derivatives at scale through fair and efficient markets.
Another trillion-dollar opportunity in DeFi relates to a massive elephant in the room — since markets need stability to remain competitive and efficient, DeFi has largely sacrificed decentralization for stability, opting for the USD as the main underlying collateral for a huge portion of the market. Protocols like Float offer an alternative, by creating a low-volatility asset that can remain completely decentralized. Without a truly decentralized collateral in DeFi, web3 is at risk.
Can you share a few of your top concerns? What are some of the pitfalls that could prevent web3 from realizing its potential?
Firstly, it must be understood that decentralization has to be the basis for all true innovation in...