M31 Capital Web3 Opportunity Fund

Today we're proud to announce the launch of our newest fund! A $100M fund focused on Web3 protocols building out a fully decentralized and user-owned internet

Oct 06, 2022

Allow me to sum up 30 years of internet history in 3 sentences:

> Web1 (1990 - 2005) created a revolutionary global information sharing network that promised an ethos of decentralization, open protocols, and peer-to-peer communication... but suffered from a horrendous UX.

Web1 let you read content (e.g., Wikipedia)

> Web2 (2005 - 2020) the internet's current era onboarded billions by improving UX at the expense of your personal data, photos, and privacy which became the stolen property of Google et al. who capture monopolistic profits selling it to the highest bidder.

Web2 let you read & write content (e.g., Twitter)

> Web3 (2020+) the newest era uses blockchain tech for the best of both worlds: preserving privacy and allowing value to flow to users WITHOUT sacrificing the efficiency, convenience, and user-friendliness of your favorite products & apps today.

Web3 lets you read, write, & own content (e.g., Audius)

Ownership Economy

That "own" part is huge because it fundamentally changes the economics of the internet.

> Web1 notoriously had no commerce since it didn't have a native internet currency like Bitcoin or secure payment rails. The "Original Sin" of the internet.

Web1 > No Economy

> Web2 companies like Facebook found a way around this by monetizing your eyeballs and selling that data to advertisers, spawning the toxic ad-based revenue model: leveraging online attention to drive offline sales.

Web2 > Attention Economy

> Web3 uses blockchain tech to enforce strong property rights over your digital assets, giving you true ownership over things like your like blog posts, music files, photos, IP, domain names, metadata, Tweets, etc. for the very first time.

Web3 > Ownership Economy

Today, you provide everything that makes the internet valuable but capture zero profit because you don't actually own any of the content you create.

Twitter owns your tweets. Google owns your data. Facebook owns your pictures. ICANN owns your website domain. Spotify owns your music distribution rights.

Web3 platforms like Audius allow independent musicians to reach a billion listeners & directly monetize their music without record companies taking 80%
DAOs like Tiki let users choose whether or not to sell anonymized personal data instead of centralized companies like Google selling it without permission.
Decentralized networks like Hivemapper let users earn into an ownership position by contributing value to the network.

Web3 products allow you to earn and keep Big Tech's Trillions for yourself.

Digital Property Rights

Prior to Bitcoin, it was not possible for something to be both digital and impossible to reproduce. Songs, for example, were infinitely reproducible with just a quick 'right-click, save'.

Bitcoin gave us strong property rights over one type of digital asset: money. And now Web3 is extending those blockchain-based property rights to other types of digital assets: tweets, photos, videos, blog posts, data, domain names, intellectual property, patents, music royalties, and YES, also overpriced JPEGs.

NFTs (pls don't cringe) give you ownership over a single asset like a particular tweet, song, or website domain. Ownership over something you create.

Example: Publishing a blog post on Mirror creates an NFT confirming ownership over that article. The author can then monetize the post with "pay-per-scroll", realtime micropayments instead of one lump-sum annual subscription

Tokens like HNT, LPT, & AUDIO, on the other hand (fungible tokens), represent ownership over a shared platform. Ownership over something you earn.

Example: Anyone who helps build the Hivemapper network by installing dashcams gets paid in HONEY tokens, essentially earning into a "sweat equity" position

Web3 Landscape

So far, the winners of Web3 have mostly been the boring, unsexy, backend internet infrastructure you never think about: indexing (GRT), file storage (FIL), compute (AKT), bandwidth (POKT), wireless networking (HNT), video transcoding (LPT), etc.

But now that most of the internet's core infrastructure has been decentralized, devs are finally able to build the fun stuff on top!

Audius = decentralized Spotify
Huddle01 = decentralized Zoom
Drife = decentralized Uber
Mirror = decentralized Substack
Radical = decentralized Github
Braintrust = decentralized Fiverr
Diamond = decentralized Twitter

These decentralized apps couldn't get built without decentralized infrastructure like ENS, Livepeer, & IPFS first. But now, user-friendly apps like these are ready to onboard the next (aka: first) billion users into Web3.

Web3 Tailwinds

The tech is ready at the exact same time the Web3 sector also has some major tailwinds behind it:

Immunity from Macro: Tech pure-plays like Huddle01 are naturally less impacted by rate hikes, QE, and other monetary policy changes
Geopolitical Instability: Web3 tech like Sentinel is hitting all time high usage in Ukraine, Russia, & places where internet access is restricted
Real World Use Cases: Protocols like Render & Hivemapper use blockchain tech to solve real world problems that Web2 can't
Regulatory Support: Decentralized tech like file storage protocols face less regulatory resistance as countries compete for tech leadership
Increasing Censorship: Deplatformings, cancel culture, shadowbanning, depersoning (a la China)... censorship is having a renaissance. Web3 solves this.
Gig Economy: Web3 tech benefits from the increase in remote work, globalization, and gig work (e.g., Uber). Enables you to work from anywhere and for anyone
Inflation: Companies worried about rising costs are migrating to Web3 since no fee-taking middlemen means a lot of Web3 tech is cheaper than Web2

Over $16.2bn of institutional capital poured into Web3 just last quarter alone:

Conclusion

The global internet is an extraordinary thing and, I believe, a huge net benefit to humanity. But it has failed to deliver on a lot of its most important promises: open protocols, peer-to-peer communication, user privacy, decentralization.

Web3 reasserts the importance of those properties by encoding them as the default setting and for the first time allowing users to fully capture the value they create online.

Since M31 Capital launched in January 2020, DeFi & Web3 have been our sole focus, with early Web3 investments in projects like Helium, Filecoin, Render, Fluence, and others.

With the M31 Capital Web3 Opportunity Fund we'll be able to increase our support for projects building this rapidly emerging, user-owned Internet. The fund will invest primarily in liquid tokens across both the infrastructure and application layers of the Web3 stack, and our investment strategy remains the same: support these protocols on- and offchain to ensure they win.