Original link: https://www.hellobtc.com/kp/du/07/3969.html
Author: UnChained Conversation / Source: Vernacular Blockchain
Produced | Vernacular Blockchain (ID: helloBTC)
Founded in 1972, Sequoia Capital is just 50 years old this year. In the field of global venture capital, Sequoia Capital is the undisputed leader.
Since its establishment, Sequoia Capital has successfully invested in giant companies such as Apple, Cisco, Oracle, and Google, witnessing the shining moments of legendary companies one after another.
This article is from UnChained’s conversation with Shaun Maguire and Michelle Bailhe, two partners of Sequoia Capital. The former started five companies and successfully three, and the latter started at McKinsey and later served as the team leader of the Silicon Valley Creative Lab.
The vernacular blockchain has organized, translated and excerpted the interview content. For the full version of the video, see the link at the end of the article.
Interview highlights:
• What is Sequoia’s long-term view and argument for the crypto industry
• How different our lives will be in 20 years thanks to blockchain technology
• How Sequoia decides whether to invest in the entity behind the project or the token
• Does involving venture capitalists go against the spirit of decentralization
• How Michelle sees the macroeconomic environment affecting crypto assets and whether this cycle is different from previous cycles
• What should crypto projects focus on and what business models they should pursue
• How crypto founders should always do the right thing, even without clear rules
• The future of the metaverse and how to define it
• Crypto industry mental model and stage of global implementation
01
What is Sequoia’s long-term view and argument for the crypto industry
Moderator: I heard that Sequoia has launched a $5/600 million crypto fund. According to the news, the fund is for the layout of crypto assets in the next 20 years, so what is it specifically?
Michelle: The crypto industry is quite mature in terms of technology and application. Interestingly, the question we’ve been asked lately is whether our beliefs have changed, and the answer, of course, is no. Namely, cryptoassets create an entirely new asset class and computing platform, and there will be business units that serve these assets at the same time. You know that many financial businesses develop Dapps on decentralized platforms in a combination of centralization and decentralization, so we have been continuing to invest in these projects, including the Layer2 infrastructure and applications at the core layer, and expect that in the next 20 years We will see more good developments during the year.
02
What has become after 20 years of blockchain-based life
Moderator: What do you think our life will be like in the next 20 years?
Shaun: First of all I think it’s hard to say. You know predicting what crypto assets will be used in the next 20 or 30 years, similar to predicting how the Internet will be used in the 90s in the 70s.
I personally think that all money in the next 20 years will be digital, for example the dollar may become a digital tool for governments, and the adoption of decentralized currencies will increase significantly, especially in developing regions of the world.
The current state of Uniswap is a good example of where you can run some very high volume business forever with some very simple code, no need for people to maintain it, just release the code and it’s there. I feel like there are plenty of examples of this that give me a glimpse of what the future will look like, but you know, it’s hard to be too specific.
Michelle: I totally agree with Shaun, I imagine something like the Internet, which is fundamentally an information revolution, so it’s hard to predict. Just as we couldn’t predict what the internet would become today, no one could have predicted that Google/Mobile internet would happen today, but they were born.
Now we can book taxis on our phones, book hotels anywhere, like we couldn’t understand at the time. But a clear trend is that billions of people will have more information than they did before and the cost of sharing information/transaction information will be much lower, which I think is consistent across all businesses, except it’s hard to say exactly out what form it will take. And you know that today’s Internet services are not the same in terms of censorship, regulation, I think, this does not mean that the old will disappear, but we will have more options.
03
Sequoia’s decision on project entity/Token investment
Moderator: At present, many successful large venture capital companies are mostly from the old investment model. Now this kind of start-up company or VC is very similar to the centralized company. In order to adapt to this new investment model in the new decentralized world, some restructuring, Investing a lot of Tokens, etc., are they really decentralized?
Shaun: I agree with you, but there are many differences in the crypto industry, although there are many similarities between crypto and traditional businesses, such as you agree that you need to hire engineers and product people to help build the best PR, product, you need to give Paying and managing them , building a crypto company has many similarities to building a traditional software business company.
But it’s really not like what people think, you know Sequoia has been around for 50 years, the biggest wins in early investing were Apple and Atari and some other hardware companies, and then in the late 80s early 90s Sequoia invested the most The successful ones are Internet infrastructure companies. We all know cisco as an example, but what we don’t know is the core infrastructure of oracle. Whether it is really decentralized is not a superficial model actually.
Moderator: Let’s talk about your investment in crypto projects now. There is a centralized entity behind many protocols, so you can choose to invest in the project’s Token or the equity of the centralized entity that started this decentralized project. For example, I know you Invested in filecoin, so I’m sure you can choose to invest in filecoin Token or protocol labs, how do you decide?
Michelle: Most of the time, the problem we have to solve is consistency with the founders. We will require matching tokens, which is very important. There are now examples of inconsistent incentives, which can lead to unsatisfactory results. Of course, non-encrypted assets are just broader technical applications, so we always have to try to promote equity shareholders and negotiate the share and proportion of Tokens, etc. .
Tokens are widely used in cryptoassets these days, and I actually have a lot of different things in my head, some that look more like commodity relationships, used to stabilize or secure the network (like bitcoin or ethereum or whatever) the native token of the Deal discounts or other things you like with supermarket points or airline points.
You have other stuff, you have Dogecoin, or whatever else you want, so what we say Token really depends on the business and what they’re building, if it’s something like bonus points, you know We probably don’t care because these have no value to us because we’re not users that necessarily transact on them, we may only care about being an equity shareholder in other cases, we may really care about the app or both One, and then for the first layer, it’s just the rights of the first layer, which is where the value accumulates, so its scope depends on what’s being built and how you deal with the attitude of some members of the crypto community .
04
Does involving venture capitalists go against the spirit of decentralization?
Moderator: Had to ask a follow-up question, because obviously, you know Sequoia invests in startups like door dash or airbnb, and you’ve probably heard some crypto entrepreneurs say that decentralization means they There will be tokens that incentivize different workers, so when you think about how a certain product or service can be offered on the internet, how do you decide it makes more sense? Whether provided by a centralized entity or in a decentralized manner, or when do you plan to invest in crypto companies?
Shaun: This kind of thinking has been prevalent for the past 20 years, so now it’s a little bit uncertain, the main difference is whether to put ownership of the early network in the hands of users to help incentivize early program bootstrapping. So there will be some differences at the very beginning, but the final state doesn’t matter, like you know airbnb, let’s say you have a decentralized airbnb, and you give up 50% of your stake as a token to incentivize early users and early Hosting and all the things you have when you get to a certain size, but the competition is also endless, people like to use the best product, and a good product means having the most customer base, having the most liquidity, having more Good service etc so I’ll just say the only difference is if you give up ownership early on to help incentivize usage but at the end of the day you have to have a better product because if your product is not better than the alternative people will leave and go to the next thing. So I think this is actually something that a lot of web3 companies don’t pay attention to.
Michelle: I agree, this craving for the idea of unfettered decentralization is gaining ground, and I think when you really dig into it, running decentralized stuff is actually inefficient, it requires more computing resources and more coordination to Make sure to do it well, so our expectations for it to be fulfilled over time are actually quite a luxury.
You want to use it for the most important things, and that’s as important as the pursuit of stateless freedom, you know, the store of value and the public information network, and you don’t want some government or some company you know to be the only one People in control, so it’s kind of like a common problem that humanity has always faced, people are always looking for how best to organize the government or the people, you can centralize democracy or you can make it more decentralized, but it requires a lot of cost and a lot of participation, So for the ultimate desired result, while optimizing for decentralization for ease of access or speed among other things, a centralized business model is employed .
As another example, someone said that if you think about what Google is doing, or if the problem you’re solving is changing the existing advertising business model, then you know some web 3 startups are a big threat to Google. Billions of people getting free information and funding it with advertising is a great way but it’s hard to do that by charging those people if all you want is not getting private information not selling it advertising and you probably need something with more security and control then you’re not going to pay for billions of people to have access to the same information they can’t afford but it’s probably a smaller group that has access It, so actually it’s just different options, so we think it allows for centralization, or this blunt decentralization tool is always at all costs . I’m happy to use something centralized because that’s probably cheaper and more convenient.
05
How Michelle sees the macroeconomic environment affecting crypto
and whether this cycle is different from the previous cycle
Moderator: There are too many recent news, let’s start talking about the bear market in general! Bitcoin was launched during the last global financial crisis in 2008. Crypto assets mostly exist in a roughly 0% interest rate environment in the US, so what do you expect to happen in the next year? Where do you predict we are in the crypto industry right now?
Michelle: I think it’s just to get people ready when they see things, and in the crypto industry, the crypto tree has grown taller. So it also oscillates harder when it gets hit, which doesn’t mean it’s going to go away, or like the dollar amount, maybe there’s more but the value goes down because they’re bigger. The changes and volatility during this period will feel bigger than before, and that’s because we have more users, more dollars, more liquidity, more attention from regulators that crypto assets have never had before , so it’s really just trying to get people ready.
And crypto assets always go through cycles , but this one might have some unique elements that make it feel different and be prepared for that, and I think it really depends on the business you’re running, as to how you should react, you know Some of these may have been active in the past few years with a lot of retail transaction activity, you know they may need very low cost to plan a future environment, the difference is that retail interest may decrease, but not zero, but more than It used to be less and you’ve seen a lot of the big public companies that do brokerage trading has seen a huge drop in volume since last year obviously because last year was an all time high but that doesn’t mean it’s going away but you just have to Plan for that difference, so that’s what we’ve been trying to talk to our founders about is recognizing that it’s a different environment and if you continue to do what you’re doing the last two years, you’re probably going to You’ll find yourself in quicksand very quickly, so recognize that the environment has changed and plan accordingly for some people you’ll know , focus on certain product areas or hard transitions, it also depends on who you are What to think, but the message we just want to convey is that this is a different plan, a plan that can be a priority.
06
even if there are no clear rules
How Crypto Asset Founders Should Always Do the Right Thing
Moderator: Then the last point I want to ask you in your post is that you said to build a sustainable business token, but not a business model, what kind of business model do you think will work in decentralization?
Michelle: You know Tokens are really cool inventions, like there’s some really cool stuff in terms of regulatory dynamics, and you know there’s a lot of really interesting stuff about finding this way to really get incentivized, rewarding users, rewarding early developers places and a lot of people will use them again for real value, like ethereum or bitcoin and many other things like that, it’s really useful in stabilizing and securing the network, and a few others that you know it works place, but there are many other items that have no real value.
There’s been a lot of excitement in the crypto craze of the last couple of years, maybe things are on the upswing, everything is trading, you might see a lot of growth, and then you think, gosh, we’re doing something amazing , it is working.
But once the interest rate environment changes and it starts to flow out of the market, when the liquidity is not there, you see the value of the project disappear, which is where a lot of projects are now.
It’s like you can’t see if there is such a business model by looking at the rise of Token, just like without Token, if you just keep getting valuation growth from investors, but a lot of other health indicators don’t exist, It doesn’t mean the business model is real, so to really understand what the actual business model is, what is the product or service that people are actually paying you for, how does it work, and then how does it relate to the asset , that’s It may or may not be relevant to the business, which is an important question.
07
The future of the metaverse and how to define it
Moderator: Do you have any expectations for what the Metaverse will become? Do you think VR, AR has to be a part of it or do you think it doesn’t need to be right now, everyone is talking about the metaverse and I don’t think there’s a good definition, so I’d love to hear your thoughts.
Shaun: Oh my gosh, you’re asking me hard questions! The metaverse comes to my mind, and I agree that there is no good definition of the metaverse at the moment, other than reading Neil Stevenson’s book and loving the metaverse he describes, apparently the one we ideally live in. Anyway I think there could be two different ways of the metaverse, one is just the next big phase shift of the internet, it’s hard, don’t even know what that would be, but like when the internet evolved from today to the unknown In the future, I will call it the metaverse.
And I think some type of spatial component might be one of the important attributes, like we invested in a company called gather that can build maps easily and you know you can link maps together like an office, That way you can have a bunch of remote crypto companies. You know, it’s like they’re teams based around the world, but their offices can be like digital Tokyo, where you can walk from one crypto company to another, maybe like a shared game room, that kind of feels like connecting people from different parts of the planet, but they can walk digitally from one space to another and talk to people, so these organizations are not based on geography but in cyberspace Idea to organize, it’s like I hope that metaverse finance which is very strong in any field is just like that.
08
Crypto Industry Mental Model and Stages of Global Landing
Moderator: We talked at the beginning that there is a 20- or 30-year vision for the crypto industry, but Michelle, one of your blogs listed the S-curve of the application of blockchain technology, can you give a brief overview Woolen cloth?
Michelle: The early stages of this curve look like nothing is happening, as you know crypto is a silo, it’s very disconnected from other resources, the on-ramp just for assets is still a clunky flow of information, you know It is difficult to obtain data from other Internets on the chain in smart contracts, so although the island is necessary to exist, there is very little that can be done.
Overall, as the island continues to grow in terms of users and funding, more crypto-asset-native applications will be built to serve this universe than anywhere else.
It’s more likely that the world of incumbents starts to connect here and starts to meet those needs and then we have to move to phase two because the infrastructure has improved a lot, you know from the dial-up phase to the broadband phase to now 5G , we are right now, those core infrastructure layers are significantly improved, orders of magnitude faster and cheaper . And we’re starting to build more connectivity between on-chain and off-chain applications through the liquidity of assets and information, and I think it’s hard to see where we’re going in the phase we’re just starting.
Because the core infrastructure has to be worked out first, it’s like the foundation of a building, you really have to start at the bottom, and then we get to internet-scale users and you can start to get really big applications. So what people often miss is that going through that growth curve, you think, wow, this company or product has grown amazingly, but I’m sure it’s now dead. When we have 4 billion or more crypto users, you might think it’s a long way off, but when you start to see trillion dollar companies or two trillion dollar companies, it’s not the same because they really do a kind of A very important way to serve an internet-scale population, so we think we’re still in the early stages of Phase 1 and maybe just looking to get into Phase 2, but it’s still really early days.
Original video link: https://www.youtube.com/watch?v=KXINL12PftA
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