The Breakdown - The State of DAOs With Syndicate’s Ian Lee

Episode Date: January 26, 2022

This episode is sponsored by Nexo, Abra and FTX US.    Today on “The Breakdown,” NLW is joined by Ian Lee, co-founder at Syndicate. Syndicate helps groups tap into Web 3 tools to transform investing and capital allocation. Today Syndicate announced their Web3 Investment Clubs that effortlessly turn any Web 3 wallet into an investment DAO. In this conversation, they discuss: Ian’s background and how he got interested in DAOs Why the tooling for DAOs wasn’t ready in 2018 Key 2021 milestones for DAOs How DAOs interact with the existing legal structure  Why democratizing investing can transform the world  What’s coming for DAOs in 2022    - Nexo is a powerful, all-in-one crypto platform where you can securely store your crypto. Invest, borrow, exchange and earn up to 17% APR on Bitcoin and 20+ other top coins. Insured for $375M. Audited in real-time by Armanino. Rated excellent on Trustpilot. Get started today at nexo.io. - Abra is proud to sponsor The Breakdown. Join 1M+ users and Conquer Crypto with Abra, a simple and secure app where you can trade 110+ cryptocurrencies, get 0% interest loans using crypto as collateral, and earn interest with up to 14% APY on stablecoins and 8.15% APY on Bitcoin. Visit Abra.com to get started. - FTX US is the safe, regulated way to buy Bitcoin, ETH, SOL and other digital assets. Trade crypto with up to 85% lower fees than top competitors and trade ETH and SOL NFTs with no gas fees and subsidized gas on withdrawals. Sign up at FTX.US today.   Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Time” by OBOY. Image credit: lemono/iStock/Getty Images Plus, modified by CoinDesk. Join the discussion at discord.gg/VrKRrfKCz8.

This idea of, isn't there a more network-native community-driven model for investing in these technologies that are fundamentally network-native and community-owned, there must be some better model for that, that is both more network-native, but also more compliant and safe than previous models like the ICO model. Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexo.io, Abra, and FtX, and produced and distributed by CoinDesk. What's going on, guys? It is Tuesday, January 25th, and today I am joined by Ian Lee of Syndicate.

Now, before we get into that discussion, if you are enjoying the breakdown, please go subscribe to it, give it five stars, review it if the app you listen. to as reviews, or if you want to dive into the conversation in a much deeper way, come join the Breakers Discord. You can find a link in the show notes, or you can go to bit.ly slash breakdown pod. Also, disclosure, as always, in addition to them being a sponsor, I also work with FTX. So, I am joined today by Ian Lee. Ian has been in the crypto space in investing and product role since 2014. He helped IDEO start their first crypto fund and for the last couple years has turned his attention to Daos. Ian is the co-founder of Syndicate Protocol and here's how Syndicate describes itself on its website. Today's models for investing are leaving many people out of what

gets built in the world, by whom, for whom, and where. Syndicate democratizes investing, empowering communities to raise and invest capital like never before. It's a future that's more open, free, and fair. In short, Syndicate is trying to use the tools available via Web 3, in particular DOWs, to make group-driven investing much faster, easier, and more distributed. And that is something that I hugely, hugely support. In this show, we're going to talk about the history of DOWs, what the last year did in terms of increasing the profile of DOWs, what people are working and thinking on currently,

in other words, the current state of DOS, and what might be coming this year. Syndicate have also just announced their Web 3 investment clubs, a process which could make investing with a group of peers easier and faster than ever before, and so we dig into that as well. Finally, before we dive into the show, another disclosure. I was a very small investor in the community round that they held about a year ago, but as you can probably tell, that comes from a pretty deep conviction in what they're trying to do. So with all of that said, let's dive in to this conversation with Ian Lee from Syndicate. All right. Ian, welcome to the breakdown. It's great to have you here. Yeah, this is my first time, I think. So I'm really excited to spend some time with you and your listeners. Yeah, it's interesting. You know, I had kiddo number two with a toddler last year. And I actually kind of put pause on interviews for a while just because it was like more, even though there's such a different type of a thing than kind of sitting down and doing my own show, they require their own thing. But kicking off the new year, going to do a lot more interviews. And I'm excited to have you here.

here to help start that. So today we're going to be talking about Dow's in a lot of different ways. And, you know, but before we do that, I want to just get into your history with the crypto space a little bit. And you kind of bring that story up through how you started what you're working on now. But let's talk about where you kind of entered crypto and kind of what were you working on first for the, you know, your first, first slate in the space. Yep. So I've been in crypto full time professionally for eight years since 24. I got my start when I was at Citigroup's venture arm called City Ventures in Palo Alto. And back in 2014, they assigned me as the new guy to go look at this emergent thing called Bitcoin

because there were a bunch of developers and entrepreneurs starting to build in that space, but no one was actively looking at it across the bank. And having studying open software for about a decade before that, I immediately realized that what I was looking at was not a coin, actually an open fintech stack. And the implications and potential for that were profound, especially as related to the banking industry. And so I became hooked, started promoting or pushing for Citigroup to start investing in Bitcoin and other kind of related initiatives, and became the head of crypto and blockchain at the bank, starting from 2014 all the way through

when I left in 2017. In 2015, so pretty early on, I met this team. team at IDEO that was starting a cryptode division. And having been a designer myself, I saw the potential for what they call human-centered or user-centered design and product development to play a really significant role in the development and adoption of this technology. And so I helped that team start in 2015. It became IDEO CoLab, which is continuing to this day. I ended up joining it in 2017 full time after leaving Citigroup and helped them actually end up spinning out a crypto venture fund called IDOCLABentures in 2018 and helped run that for three to four years, actually, until recently starting syndicate.

And during that time from 2018 to 2021, we were just talking about this before starting the recording, but that was the beginning of, a pretty long bare market in crypto. And during that time, we were investing, incubating a bunch of crypto startups, whether it was in the DFI space, the NFT space, or otherwise. And from that, learned a lot about the future of this technology, what its potential applications were, obviously had a lot of insight from starting the crypto division at IEO, you know, three years before that and obviously my time at city group. And one of the biggest areas of potential from all of my years of research was this space that people refer to as Dow's and the future applications of that technology. And in 2021, actually, well, going backwards a little bit, in the middle of 2020, when

COVID came around and there were actually like not many things to invest in because the world sort of was at a standstill, I started programming some things in solidity on Ethereum, not really intending to come up with anything in particular, but ended up arriving upon some of some primitives that became really interesting and connected to some of my previous research four years ago in the area of decentralized social networks with my co-founder Will, who I met at IDO. And it was around kind of mid-2020 that we started going more deep into the architecture of what eventually became syndicate. And we'll talk about that more, I'm sure, which utilizes Dow's specifically in the area for the purpose of investing. And so we formalized

that company in early 2021 and have been focused on it ever since. Amazing. So I want to talk about the, the insights or the market gaps that led you to want to jump from observing DAOs, investigating Dow's, you know, even potentially funding some into actually kind of building infrastructure. I mean, first of all, what was the thesis or the sort of fundamental insight about DAO's that got you excited and had them as this thing that you were paying attention to? And then sort of secondly, what was the need that propelled you to actually kind of create something in that space. Yeah. So Will and I in 2018, or very early in 2018, we started looking

into the design of a decentralized social network and what the applications of that would be. Now, if you think about that time, it was just after the ICO wave in 2017 and well before when DFI started to become a thing. So it was kind of this really interesting moment where it was the peak of the or the bottom of the bear market, if you will. And a lot of people were disillusioned by a lot of the things that, you know, happened in 2017 and before that, including like the Dow in 2016, right? And so one of the, there were two major insights from the social networking research that Will and I had done.

The first major insight was that the primary application, one of the biggest applications for a decentralized social network was for the purpose of radically transforming investing and how investing can and will work, really democratizing that capability and that process and that set of tools to more and more people around the world. And that was super interesting

because, again, if you think about 2018, right on the back of ICOs, I mean, ICOs have this, obviously, from a model perspective, were not correct or at least safe from a compliance perspective, but it was radically open and permissionless in terms of enabling more people to invest in the development of these network native technologies.

The second major insight, though, was that the market wasn't ready for an idea like that. And that was largely because at the time, certain pieces of infrastructure, which later started getting late in 2000, 19 and 2020 around DFI were not yet available in 2018. And so we took that, those conclusions, and we ended up actually putting this idea on the backburner, you know, going into, so Will ended up going to a startup in the decentralized identity space.

I went, you know, continued to invest at IDEO and working with a bunch of defy companies. And over the, you know, following two years, we ended up seeing that a lot of the foundational elements and infrastructure that were required in order for an ideal like syndicate to exist, ended up getting put in place in 2019 and 2020. And so that's why we started working on it again in 2020 after seeing these primitives because syndicate or an ideal like syndicate was now possible. Now, a little bit of the inspiration. So those were kind of the insights, but as far as like the inspiration to it,

you know, when I started investing in the space, I saw this amazing potential for protocols and crypto and Web 3 to really democratize access to, you know, these powerful technologies and tools that previously were excluded to, you know, certain people or organizations that can form them, right? And that's really what brought me into the space in 2014, initially with Bitcoin. Now, one of the things that always, I guess, irked me was that these technologies that were being developed and invested in were fundamentally network native, fundamentally decentralized, and fundamentally wanted to be owned by the users and co-operators of the network, right? But circa 2017 and 2018, especially, the capital that was investing in them was not that. It was actually fairly centralized and in many ways skeomorphic with how the traditional

investing world works even to this day, right? And so this idea of, isn't there a more network-native community-driven model for investing in these technologies that are fundamentally network-native? and community own, there must be some better model for that, that is both more network native, but also more compliant and safe than like previous models like the ICO model. And so I have been thinking about that for many, many years. Some of that, some of those insights and those opportunities came from the work that Will and I had done in decentralized social networks.

And it was, you know, 2020, after D5 made all these things possible that weren't possible before, that we then realized that, hey, the timing was right. A model like this could exist. And this is the best time to now start that and take that into the world using, you know, the framework and technology of DOWs, which in our view is now sort of in its next, phase of evolution, you know, starting with the Dow and then you had this next phase where Dow's, you know, Dow technologies were really like these generalized pieces of infrastructure for anything. And now I think, you know, this current wave that we're on is really Dow technologies

that are more verticalized and specialized in syndicates case around, you know, investing Dow's, but you also see a lot of other Dow technologies that are more verticalized around like payroll like Utopia or treasury management like Lama and others and many more that are starting to pop up more recently. So there's a lot to unpack there. I want to come back to the sort of, you know, spectrum of different use cases that are starting to emerge as we head into 2022. But one of the things that I think is interesting to go back to is this connection between things that we learned and observed during the ICOs and sort of what the industry figured out next. And there's two things that I guess I want to press in on. The first was ICOs as a mechanism for showing this incredible

appetite for early stage investments, right? I mean, one of the things that made them so attractive to so many people is since basically the beginning of Web 2, you heard about people discovering this early technology, becoming rich from investing in it. And, you know, people were understanding it. They were joining those networks really early, but never had that chance to be in on something early, right? So there's this sort of pent-up demand for this type of investing opportunity. That's one part. A second part was this notion of the idea of decentralized networks transforming a lot of aspects of the world, including social networks, for example. And it felt to me like one of the things that happened between call it the sort of end of the ICO boom and defy summer was a refocusing of the

industry, the part of it that had sort of survived the culling to really kind of financial purposes. It was almost a return to routes around, you know, how capital flowed between people and things. And it feels to some extent like that was sort of part of this next wave of Dow's coming up is this honing in on the financial use case, the civil. simple, you know, the incredible number of things that we do as people that just require better coordination of pools of money and decision making around that money. I mean, does that resonate? Is that sort of something that you had observed as well? Yeah, 100%. I mean, I think that these technologies, right, I mean, Dow's are not a new technology. I mean, they've been, you know,

conceived or even in certain cases implemented as early as 2016 or even before that. But I think that very much like NFTs or some of these other implementations of Web3 and Crypto, the way to think about them does evolve over time. And I think that Dow's, you know, had this very kind of pure, purest kind of view many, many years ago where it was like fully decentralized, fully autonomous organizations, right? and that then shaped a lot of how those technologies were built and how they were applied. The way that I think that Dow's as a technology are emerging is, in my mind, better framed actually as a social financial technology that enables human beings and financial capital to coordinate seamlessly together on the internet more efficiently. And when you look at it that way, right, DOWs are not always fully decentralized. There's a spectrum of decentralization with respect to DOWs. I mean, some of these DOWs are just small group chats, right?

Small groups of friends that know each other well and they're using this technology to coordinate between each other, you know, very seamlessly. The other thing is that they're not necessarily fully autonomous. There is actually a spectrum of autonomy from full automation or, autonomy to, you know, more kind of, you know, less autonomous, meaning like it's just manual or human coordination between a few group of people, again, like on the opposite in something more like a group chat. And so when you look at Dow's as this kind of social financial network technology, that actually reframes kind of how this technology can be used

and the applications thereof. And I think that that is starting to become more apparent to people. And therefore, opening up the design space for DAOs in terms of all of its different applications, which I think we're just going to start to see and more and more this year and the years ahead. So, yeah, this is absolutely the next thing I want to get into is especially kind of what the legacy of 2021, and what people learned about Dow's kind of key inflection point moments. But before that, I haven't even, you know, we're 15 minutes in and I haven't even give you the chance to just, you know, give the quick pitch on syndicate and exactly what

syndicate does for those who are paying attention, you know? Yeah, so syndicate is something that, as I mentioned, we've been working on for quite some time now. I mean, formally for about a year. And actually, January of this year's, it's one year anniversary as a formal. company. What we are doing is we're using and building Dow technologies and Dow infrastructure and tools to transform the investing world and make the investing world more community-driven, more equitable, more accessible, more effortless, and more social using these technologies.

We are enabling people, communities, even investment funds that exist in today's world to use this technology to, you know, not only dramatically make investing more accessible to everyone, but also evolve its capabilities to even be more capable based on the composability of Web3. And so we're on this long-term mission to, you know, transform investing and bring more people into it because, as I mentioned earlier, when you have capital and investing that is highly centralized into these technologies, that ends up excluding a lot of people from the process of investing and building those technologies and therefore the world that we're all going to live in if Web3 ends up becoming like the next Internet as we all, or at least we

certainly believe it will be. And so we're on this long-term mission to do that. Obviously, it's really complex. There's a lot of, you know, things to figure out. not just from the technology perspective, but also from like a compliance and regulation perspective, right? And Syndicate, you know, we are working really, really hard to build tools that enable users of Syndicate to maintain and, yeah, maintain compliance so that they protect Dow's and their members. because, you know, we think that a lot of the tools, well, the tools that we could build, if we were to just release it into the wild without those considerations, you know, that's great, but it's not sufficient because in order for DOWs to really go mainstream, they're going to need to fall within existing kind of legal frameworks and regulatory frameworks

so that they end up, you know, being able to stand the test of time and achieve the mission that they're ultimately on. And we want to make sure that users of syndicate, you know, actually can achieve their end goals, which is going to require us to do the right thing as best we can from a compliance and legal perspective. How much is inclusivity of people on sort of these investing frontiers a justice issue versus a just markets work better

when more people participates issue versus. versus something else. Like what is sort of from a motivational standpoint? How do you guys think about that? Yeah. I mean, it's probably all of the above and more, right? And I think that, you know, having been in crypto for eight years, like, I do believe, you know, this was when I was at Citigroup looking at Bitcoin, that this technology has the ability

to bring people into this technology and building this future world in ways. that previously they've been excluded. And that fundamentally is not only a better thing in terms of really creating like the impact, the end impact that this technology promises, but it's also the right thing to do. We view the technologies and infrastructure and tools that we're building at Syndicate as kind of very much in line with the spirit of Bitcoin, crypto, and Web3, in the sense that we're following those same principles, but applying that specifically into the world of investing. And when you look at investing specifically as an industry, right,

having been an investor for, you know, eight years, I've come to learn firsthand that investing is incredibly powerful. In ways that actually I didn't even appreciate years ago, in that it shapes and decides in a way by allocating resource who builds what, what those things get built for, and whom those things get built for and where, right? So it literally shapes the future world by investing in what gets built in that future. And we need more people to participate in that process to help shape the world that we all live in. And if we exclude more people or let, you know, the existing models continue to exclude more people, it's not going to be built.

The world is not going to be built for everyone that lives here. And so that's why I think it's really important. The other thing that's really important is obviously investing, you know, as a either primary or secondary output creates a lot of wealth for people that are involved in that process. And, you know, again, if you exclude, you know, people from that process, it's going to drive greater inequality in our society. And I just don't think that that is sustainable. And so we need to work on improving that situation, not just for those people, but frankly, for everybody to maintain kind of like sustainability in our society. and at least in my opinion, that is a big reason why I'm doing this. I love it.

I mean, it's certainly a huge part of why I've always been interested in the space and I'm interested in DAWS as well. I want to talk, you know, I want to bring it up to kind of the state of DAWS now, what people are exploring in 2022? But first, what do you think were some of the key moments for DAWs in 2021? Obviously, there was a sort of significant phase shift between, I think, the beginning of the year and the end of the year. And when it comes to what portion of the crypto conversation was centered around them, how many people were thinking about them, how many people had participated

in some way, what do you think were kind of the key moments of those shifts? Yeah, so I think 2021 was actually the year of NFTs. And, you know, starting in early 2021, you know, there was a lot of excitement around them, which still is, you know, persisting to this day and continue to evolve. I think that DAOs as it related to 2021 were actually either a secondary output or writing on a lot of that excitement and energy around NFTs. So what you saw circa like the mid of 20, middle of 2021 were these really interesting experiments and projects like party down, party bid around, you know, group buying of NFTs. And, and, you know, and sharing ownership of NFTs, which I think was really interesting.

That, in a way, actually inspired, in my opinion, thinking more broadly about how DAOs could coordinate people and capital together to buy stuff together, right? whether for oftentimes actually non-profit purposes like things like Constitution Dow, which attempted to buy the U.S. Constitution and then donate that to a museum, and many other things that we're actually seeing even right now around shared purchases and shared ownership or turning the ownership of some of these items or things, whether in the digital space or in like an NFT or in the in the meat space into something that is like a public good.

And so I think that that's kind of where DAWS are at the moment is actually riding off of a lot of that excitement around NFTs. But I think that higher level, when you take a step back, as I mentioned like, I think that the framing and thinking around DAOs is starting to evolve again, where there are actually different archetypes of DAOs. So previously in 2016, there was one particular mental model for Dow's. And then I think that post-2016 with the Dow, it started to build off of that and again, still take a very particular mindset, which is a decentralized autonomous organization. And, you know, around the defy area of 2019, 2020, right, Dow's meant like protocol treasury effectively.

And that then sort of layered on with the NFT thing, like these group buying things and whatnot. But I think that that DAOs are going to take, like they're going to enter this new phase where actually there's going to be many different Dow archetypes ranging from, you know, protocol treasury DAO's, if you will. these group purchase DAOs, but also many other things like service DAOs, which are starting to pop up all over the place, investment clubs, which is something that, you know, Syndicate has been working on, and we just released a product for that. And many other, many other Dow types that are going to emerge in the next, you know, two to three years, which I think is really going to expand the design space and application and potential for DAO. generally.

Do you think that there, I mean, with that many different use cases, is it the type of thing where there'll be actual fragmentation in terms of how they're implemented or designed or, you know, what will be the common thread? And maybe if it fits, that might segue to my next question, which was kind of on the state of the legal or compliance side, how they, how DAO's fit within the existing public policy framework or business legal framework, which I know is something that you guys spent a lot of time on. Yeah. I think to your point, the Dow market is already starting to have this Cambrian explosion as well as, in many ways, fragmentation of different tools.

And I think that that's actually a really exciting and good thing at the moment in terms of the state of the Dow space. I think there should be more tools. I think there should be actually more fragmentation or more experimentation in the Dow space because, to your point, there are so many. potential applications and uses of this framework or technology that the space should explore every single thing and find what the real potential of this technology is. Where I think this then leads, though, which we're starting to see some early signs of, are consolidation or some hypotheses around where the most valuable implementations or applications of this technology are.

And I think that there are a couple different areas. One area is around this broad area that you can consider like DAOs as the future of work or organizations. So you're seeing lots of really interesting tools, like as I mentioned, Utopia, which, you know, enables Dow's to pay contributors. You see things like coordinate, for example, which is enabling Dow's to acknowledge and reward and compensate contributors on chain and various

other things. So that's a really interesting space because we're starting to see more and more organizations that should have or would have previously formed as companies now formed natively as Dow's on the internet, which is really fascinating. The other area that I think Syndicate in particular is a part of is around how Dow's can better coordinate capital, either internally or externally or both, whether for investing purposes, treasury management purposes, or what have you. And so there are a lot of really cool tools there, even beyond syndicate, like in the treasury management space with Lama, Reverie, or many of these others. And I think that those tools are also going to become increasingly important as more capital,

you know, again, flows via DAOs or more organizations get creative natively as DAWS on the internet. And so we're going to start to see collaborations between those. You know, Syndicate is already starting to work with a number of those that I've mentioned, actually. And I think what's really exciting is that we're going to learn, you know, more about in the same way like defy and NFTs, what are the core kind of primitives and pieces of infrastructure, applications, tools, et cetera, that we're going to start to build around. And other people are going to start to build around. And I think probably starting in the second half of this year, that will start to happen. And I think Dow's as like a space and as a category

will really start to take off in the same ways that we've seen, for example, NFTs and previous to that defy take off in the Web3 space over the past number of years. NXO is a trusted and easy to use crypto platform where you can buy cryptocurrencies at the touch of a button and start earning up to 17% annual interest that is paid out daily. They support all of the major assets on the market and even allow you to swap one asset for another or borrow cash against your crypto without selling it. Nearly 3 million people in over 200 countries trust NXO with their digital assets. So whether you're just getting started or you're a season pro, get the most of your crypto today with NXO at NECO.com.

Today's episode is sponsored by Abra. Join over 1 million users and conquer crypto with Abra, an all-in-one, simple and secure app where you can trade over 110 cryptocurrencies. Get 0% interest loans using your crypto as collateral and earn interest with up to 14% APY on stable coins and 8.15,000. percent APY on Bitcoin. Visit Abra.com or download the app from the Google Play or Apple App Store today. Abra, Conquer Crypto. The breakdown is sponsored by FTX. FTX is the safe, regulated way to buy and sell Bitcoin and other digital assets.

Trade crypto with up to 85% lower fees than top competitors. FTX US is also the only leading exchange that supports both Ethereum and Solana NFTs. You can trade NFTs with no gas on FTX US. and gas is subsidized when you withdraw off the platform. Help support the breakdown and visit FtX.us today. That's FtX.us. Let's double click on the point that these things that might have started as some other type of organization are now starting with DAWS and use that as a segue to talk about how it fits with the legal

structure. I mean, so let's talk first, I guess, the benefit of a DAO versus an LLC, you know, in that context. just, you know, again, because I want people, there's a lot of folks out there who are still just kind of wrapping their heads around this. And then second, you know, there's obviously a lot of different efforts to figure out how to make these sort of new types of structures play nice with existing rules or even, you know, helping build new rules to make sense for them. But how is that coming together in your view? Yeah, this is a really complicated topic that, you know, our team at syndicate is working through. really, really deeply. And so I guess a few insights here.

I think that DAOs are, this is maybe my own personal opinion, that DAOs are not a replacement to existing LLC or legal entities or like organizations, actually. Like, and I think that this like narrative or positioning that like Dow's versus LLCs or DAO or LLCs is not right in the sense that I think that DAOs are more of like a technology framework and LLCs and other things are actually just legal frameworks and they're orthogal to one another. And so when you look at it that way, right, what is a DAO? A DAO is a technology, as I mentioned, for coordinating human beings and capital on the internet natively. And that's

can be used for a lot of different, you know, applications, uses, or even like organizational, if you will, archetypes, right? That could be for the purposes of a company, creating a company and managing company. That could be for the purposes of investing. That could also be for the purposes of, you know, a oftentimes company that creates and offers services. Or even a organization, whether it looks more like a nonprofit or something that manages an open source not-for-profit technology or protocol. And so I think that the better way to think about how to fit this together is actually like, what is the purpose of the organization that is using Dow technology?

what is it that Dow technology is helping enable or improve for that organization as it relates to its mission and purpose? So, for example, is it making it, you know, the investing process easier, cheaper, better, or more capable? Is it making an organization, you know, better, easier, cheaper, or more capable in terms of like starting or managing itself, right? And then once you figure out that, the question is, what is the Dow infrastructure, what is the best out infrastructure for enabling that particular use or archetype of Dow? And then at the very end, if necessary, and frankly, I think that oftentimes it will be necessary, what legal structure can then be best leveraged and applied to that organization? to provide that Dow or that organization, whether it's an LLC, an LP, a nonprofit, an association, or something else, or a trust organization, what legal structure then best provides that Dow with the legal capabilities in the real world, whether it's like limited liability

protections, the ability to get Fiat bank accounts, the ability to file taxes or whatever, that best supports that use because actually, like, I think if you go the opposite direction, and that's happening a lot right now, which is like people are force-fitting DAOs into LLCs or C-Corps, that's not always the best approach, actually, depending on the use case application or mission of that DAO. And so instead, you should start from like, you know, an end goal perspective and then work your way backwards into the technology infrastructure that's required and then ultimately into the legal structure that is required for that archetype. And I think that, you know, this is going to be part of the hard part of DAWS for DAWS to reach

mainstream. But I absolutely think that, you know, this is what is going to be required in order for Dow's to create enduring technology and enduring organizations that end up making an impact at a wide scale. Super interesting. We could talk about this all day. There's so much to dig into. But one of the things I wanted to make some time for is I know you guys have an announcement

that I think was just announced this morning. So I'd love to hear a little bit more about that. Yeah. So we have been working really, really hard to figure out both the technology, infrastructure, and tool, as well as the supporting legal framework. for this tool. And so we've been building this for the last six months in private beta with a bunch of communities in Web 3 and investors in Web 3. And recently we just launched the first tool into public beta on syndicate protocol, which is what we call Web3 investment clubs.

Web3 investment clubs are basically this tool that enables a group of friends, a group of investors, or Web3 community to spin up an investment club as a Dow using syndicates protocol. And what's interesting about it is, as I was mentioning, right, figuring out going backwards from a particular use case and then designing the infrastructure and then designing the right legal framework to wrap around that, that is exactly what we've done with investment clubs. So actually, investment clubs are a particular kind of legal structure. And you can go to the SEC's website and see how they talk about investment clubs, which is that actually, like, investment clubs have been around for thousands of years. The first investment club in history was, at least recorded history, was in Texas in the late 1800s during the Wild West, where presumably cowboys or people during that time came together in like a saloon and maybe like, you know,

clubbed their money together to invest in something together, right? Maybe it was like building something in their local town. And investment clubs ever since then have actually continued. Oftentimes what investment clubs look like are, you know, people in a local town or community that get together, maybe at their community center or a restaurant or something. They're often friends, people that know each other really well. In the technology world, a lot of times they look like, you know, groups of angel investors that co-invest together with each other over many years.

And basically what they do is they gather together traditionally in person and share ideas about things that they could invest in together as a little group, right? And those structures, which are investment clubs, in the traditional world, are completely, like, regulated or completely legal. And in fact, like, provided that they meet certain rules as set forth by the SEC, like they are actually not regulated by the SEC, provided that they meet certain guidelines. Like, for example, less than 100 members, no carry or performance fees, everyone participates in decisions. everyone knows each other, no public solicitation, you know, et cetera, which we've outlined on our website and you can sort of see all these materials. And so what's really fascinating about that is that what investment clubs are in the traditional world, they are community-based, community-driven

investment clubs, right, to invest in things oftentimes like stocks, real estate, or other business endeavitors. Now, what has... not happened is that that model has not been modernized for the internet or especially for Web3. And as more investing moves onto the internet, and in particular natively onto the internet via Web3, we can now modernize investment clubs for Web3. And that is exactly what we've done with this first product, which is enable people to run investment clubs natively on Web3 as Dow's on Syndicate. And so you can create this down a matter of seconds with your friends.

You can buy NFTs, tokens, even invest in startups. You can also get bank accounts, get legal entities, file taxes, issue K-1s, via a partnership that we have with our friends at Dula and many, many more things. And so it gives people the peace of mind to basically run these investment clubs and not what is currently happening today, which is people are yolling. into a wallet or a multi-sig to buy an NFT or invest in something. And this now, you know, takes that and gives them professional tools for free to do that. So in the analog in the physical world, is the biggest difference as compared to like a fund, for example,

because I've seen in addition to the sort of yoloing Web3 natively that you're describing, I've also seen the opposite. I mean, going back to ICOs, you know, there were something like 600, 700, 800 hedge funds formed, right? And it was mostly because, you know, person X makes some money because they were early to Bitcoin or Eith. All of their friends and family are like, oh, can I give you some money? And so they're like, oh, I guess I'm a hedge fund now, right? Is the biggest difference, you know, in these investment clubs that there's not the same distinction between limited partners and general partners where there's carry and fees and all those things? It's just purely people are contributing capital to make a shared decision or a shared set of investment decisions.

Is that the big difference? Yeah. I mean, look, I, you know, have helped. You know, I started my own crypto fund back in 2018 and with IDEO. And, you know, those things are great. They work well. It's just that they're very expensive and take a ton of time and effort to start. And so if you're willing to go through that effort and time and have the money to do that,

then to get the benefits of, for example, having passive, you know, capital providers, IE, limited partners, as well as, you know, charge carry and performance fees, then people can still do that. It's just really, really expensive, right? I mean, average, I don't know what it is today, but like, you know, I would expect on average, it costing anywhere from $50,000 to $100,000 to set up a crypto or crypto hedge fund or crypto VC fund and at least six to 12 months, oftentimes upwards of 18 months to actually get something like that out into the market. And so an investment club is a different, you know,

structure. There are, you know, limitations, constraints, and tradeoffs, obviously, namely to your point that there is no carry. There is no investment. manager and that everyone participates in the decision making of the investment club, which means it's not like a hedge fund or VC fund where there's an investment manager that is making all the decisions on behalf of the limited partners. In the case of investment club, everyone is just coming together, effectively like a general partnership. And they are together making decisions together.

Now, you know, people can propose idea. Anyone can propose ideas, but everyone is involved in the decision making of that club. And so, you know, making those tradeoffs, right, like the things that come with that, though, the advantages of that, these things can get spot up a lot faster. There's a lot less, you know, regulatory overhead associated with that, provided that they meet those guidelines. And so it's as a construct much more accessible to more people. And that's a big part of why we chose to make this our first product and tool on top of syndicate. It's actually the thing that.

So we, you know, we haven't had any conversations about this specifically in the past. But this is the thing that I've been asked about ideas for probably more than anything else around investing in the crypto space. The number of friends that I've had who are like, I really want to get a group people together to do like basically just a proxy for a fun. They don't want to go through the rig and roll that you just described, but they do want to be able to get people aligned to deploy more than they could just on their own. They want the social experience of it. They want to make

their money go farther. They want to like, you know, have a have a shared context with a bunch of people who think the same way they do. They're often geographically distributed. You know, the last person that I talked to was a friend who's had to spend a lot of time in Europe over the last couple years because of his startup. So it's just, I think it's pretty interesting that that's what you guys honed in on. Are there going to be any limitations at the beginning in terms of who can spend them up? Is it going to be totally open at the, you know, or kind of how are you thinking about that? Yeah. I mean, just to point out, well, maybe maybe just quickly comment on that. You know, we've been working really hard, both internally, but also with a number of partners, like, you know,

a number of partners, both on the like FinTech side as well as like the legal side to get this right. So we are opening this tool into public beta. You know, I think by the time that this podcast airs, it'll already be out. You know, people do need to use this responsibly and compliantly. There are so many, you know, different permutations and variations and unique circumstances with respect to, you know, both in the U.S. but also abroad and mixes in between, like, how this, you know, can and should be used. And so it's really incumbent on users to consult their own counsel, legal and tax and whatnot to make sure that, you know, they are using it correctly and they're comfortable with it. But provided that they are and they're following,

things correctly, then this tool is as publicly available as possible. What's really fascinating to your earlier point is that a lot of the groups that we've been building this in private beta with are oftentimes like two different communities. One community is like a group of angel investors that have already been investing together. You know, they just, you know, fine, for example, spinning up an SPV or spinning up like a traditional fund is just too expensive, especially in Web3 and it's like too slow, right? I mean, to spin up an SPV, it often costs like minimum $10,000 and several weeks. And so as a result of that, they don't do a lot of things. You know, they just pass on the opportunity because it's just too much effort and too much cost, right?

And so that's kind of like one one group of people that we see that are excited about syndicate. The other group is actually a lot of like founders and creators in the Web3 space that, you know, like they've built a lot of experience. They've built a lot of credibility, great reputations and relationships. They're already, you know, in many ways, acting as like angel investors into new, you know, crypto projects, NFT projects, or whatever. And they built like this, this tribe in a way, like this group of friends, right? And very naturally, they kind of say, well, what if we came together and we helped more people in our space kind of get off the ground in the same way that,

you know, other people helped me? And, you know, we think that we can actually help them, maybe even more because we empathize with them because we were one of them or we are one of them, right? And so that is actually like a lot of who we think this product will actually end up serving and be most useful to are founders in the NFT space or founders in the DFI or DAO or crypto space who want to help other founders. And we see this model where, you know, traditionally, right. And this has been happening, by the way, outside of Crypto and Web 3 for decades, where a lot of times, like, startups or projects in Web 3, they'll raise some capital and they'll raise it like primarily from VCs, right? And then they'll open up this like small

round for strategic angels and whatnot. We think that the future is actually going to flip that model upside down where actually in the early days, maybe not like when it gets to the scaling phase and whatnot. But in the early stages, a majority of the capital will end up coming from community, like community of users, community of founders and other builders in the space. And then there will actually be like a smaller allocation for strategic VCs. And then, you know, in the later stages, the VCs will get more and more involved as like those projects need kind of traditional capability. But it actually makes sense to, for a lot of these Web3 projects, to actually invert that to get the community involved early as opposed to later on.

And investment clubs, we think, could be a key part of accelerating that change, which I think, honestly, is a better thing for Web3 and the projects that are built within it. Yeah. I mean, you know, there's always this discussion in venture capital about finding aligned capital. But the reality is that the proxy has normally been like venture capitalists who have a long horizon view and experience with companies as early as yours versus your actual users, for example, like the actual people who are, you know, trying to overcome, you know, network effects, you know, or bootstrap network effects with you. And that shift, I think, makes a lot of

sense, you know, just you could very easily see how most projects become user funded initially because it's sort of effortless to. And at the stage that they're building, they actually don't need sort of venture capital style or even angel rounds, you know, but that once you get to scale, obviously, that's a different ballgame, you know, there's a whole different world of capital

that's needed as you grow a company than at the beginning. Exactly. And I think that this is, you know, part of our viewpoint, which is traditionally users have, you know, in the way that you just described it, traditionally users have been very disorganized in Web3 and on the internet, right? They've just been kind of out there. You know, it's hard to find them because they're not really organized.

And so I think that we think that investment clubs could actually be a part of how users and different members of the community start to organize collectively to invest in these projects in the early stages and invest in them compliant, right? Which is, we think like, like when, especially when you compare, right, the 2017 ICO wave, right? That was in many ways like the purest model. But I think that with this new kind of organizing structure of investment clubs and Dow's, you can now have like users organize as investment clubs as Dow's, you know, in Web3. and then start to, you know, attract projects to them.

So a good example of this is like, you know, we have these 12 or so DAOs that were announced as private beta users that helped us build this product. One of them, for example, is this group of people called Mori Dow, Mori Music Dow. And then there's another one called Dow Jones. And actually, what's really interesting about those, those two is that they were created by a bunch of creators and collectors in the NFT space in

different areas. Like Mori Music is a bunch of people that are really passionate about the music and FFT sector. And they've been, you know, creators in that behind the scenes and investors and collectors in that behind the scenes. And now they've formed this, you know, Dow called Morning Music Dow in Synegade, which is this investment club to invest in more music, NFT, creators, and projects, right? And so that's a really interesting example of where

this, you know, fairly like niche community of creators, founders, builders, users, partners in this very, in this one particular area is now formed as an investment club. And

I think that, you know, we're going to see many, many more of these things. And as a result, like think about now if you're like an NFT project or creator, who do you want to go to if, you know, you want to get the support of, you know, your quote-unquote community or, you know, whatever is you will hear about groups like more in Music Dow, which is a collection of people in this space. And you can now align yourself with groups like theirs and others at the early stages to get kind of the support, advice, you know, resources that are particular to your area

that you need. And I think that like, you know, that if we're right, is going to, is, it's only going to expand. And it's going to be really, really interesting when there's, like, imagine, not thousands, but potentially millions of these, like, very specialized communities of builders, creators, users that have organized as investment clubs as Dow's in Web3 is actually now you can more easily coordinate and connect with these communities when you're starting your company a Web3 project. And that did not, you know, exist before, but now is possible. And I think is actually like welcome evolution of how projects will get funded in Web3 going forward. One more question about this. And it may be.

still be a work in progress, but how do these sort of investment clubs interact with accredited investor laws? Very good and difficult question. So, yeah, we've spent a lot of time on this. Obviously, like, we're not, we cannot be, you know, people's lawyers or giving, we're not giving legal advice. But we have put a lot of effort into designing this tool to work with existing, you know, regulations, including accredited investor laws. And so here's, you know, what we've found and, you know, related to investment clubs. So investment clubs themselves, and this is not specific to syndicate, right? This is true about investment clubs as they've existed before the internet. And previously when, you know, they were like in the wild west in

saloons and stuff like that or in your, you know, local towns community center, which is that investment clubs can have accredited and non-accredited members. You know, a lot of these, again, like investment clubs that meet up at community centers or restaurants over the last number of, you know, decades or hundreds of years, they had unaccredited or non-accredited and accredited people where they would like, you know, look at different stocks and pool their capital together primarily to, you know, reduce or spread out risk as well as reduce transaction costs, right? Because, you know, instead of making like, you know, 50 trades across 50 people, you instead batched your money together and made one trade, right? And so that was totally fine,

as long as, and here's the key rub, that the asset that is being invested in by that club allows non-accredited people to participate. And so as it relates to Web 3, which obviously has these new types of assets in the forms of tokens, NFTs, but also the same assets like startup equity, right, where you're investing in a safe round or a priced equity round or something like that,

the requirements around who can invest in those assets, whether it's an ERC 20 token an NFT or startup equity applies also, you know, in a similar way to these investment clubs on syndicate. So what does that mean? Well, if the NFT requires accredited investors to participate, then the investment club must be accredited. And therefore, all the members of the investment club must be accredited. I mean, this is true not just with syndicate, but just investment clubs in the real world or the traditional world. If the total total token requires accredited investors, then the investment club must be accredited.

If an NFT or a token doesn't require that, then the investment club does not need to be accredited and can therefore have non-accredited members. Now, the one kind of area where this is often the case, though, is startup equity. So with startup equity, right, those can, you know, traditionally, you know, typically only be invested in, especially in the U.S., only be invested in by accredited investors. And therefore, you know, in the case of in particular start of equity, investment clubs must be accredited and therefore all their members must be accredited. And that, unfortunately, is just the way things are at the moment. You know, we, you know, hope, I think along with many others, that there will be

ways to broaden access to non-accredited people to invest. in, you know, startups because that's, frankly, where a lot of wealth is being created and that needs to be shared more widely among people. But, you know, that is what it is. And, you know, therefore, people should be following those rules accordingly. Super interesting stuff. What, you know, by way of wrapping up, because I've had you here for an hour now, you know, what are you hopeful for? What do you think 2022 is going to do in terms of the Dow conversation? What are you expecting from this year? I think that DAOs have largely existed as more of like a, you know,

experimental technology. And there's been incredible, I guess, explorations over many years. But I think that what I'm really excited about is how Dow technology can be productized. And when it becomes productized, really start to reach more people. people and make big impacts in the real world in ways that only Dow technologies can. And so whether that's in the investing world, like what we're building in the financial management world, like some of these treasury management or payment systems or payment tools, or whether that's in like just, you know, the future of work and organizational spaces,

like this kind of Dow's company model, I'm really excited about that because that's when you start to see Dow's do things that are just 100 to a thousand that's better than traditional infrastructure. And I think that what people will start to see, hopefully this year,

but definitely by next year, if we do this correctly as an ecosystem, is that people will be, inspired by what Dow technologies can do and realize that this is not like this ephemeral thing, that this is not like this experimental piece of technology, but it's really profound. And maybe one of the most profound technologies to come out of the Web-Free space. Because when you apply, again, a technology that enables human capital and financial capital to coordinate, natively on the internet,

a thousand X better, that can change a lot of things in the world and hopefully in really, really positive ways that we haven't even seen yet. Awesome, Ian. Well, super excited to have you here,

really excited about the Investment Club product and I'm already thinking about who I'm going to ping first to explore. Hell, I kind of have a Dow in the name, right? The breakdown. So we'll see what happens. Oh, hey, there we go. That's a major alpha league there.

Yeah, all right. Awesome. Well, thanks so much again for the time and all the hard work. And look forward to seeing what happens. I have to have you back to report on progress in a couple months. Yeah, thanks so much. And I'm excited to have you back on this podcast, you know, doing more podcasts going forward. All right, guys, just a really quick wrap up at the end of that.

I have to say that for me, Dows have always made the most intuitive sense compared to basically anything else in Web 3 after Bitcoin. The idea of people coming together to pool resources to allocate in a specific way is just, I believe, one of the most fundamental types of human social engagement. It extends from a business activity to a social activity, to a community activity, and so on and so forth. I think that many of these early DAOs that you're seeing are just going to be experiments and they'll probably fade away. And that's for me why this infrastructure is almost even more important than any one spot example. Ultimately, I think there is a latent human behavior that is going to find its way into Daos and help them become a key part of the

landscape in the years to come. In either case, I hope you feel like you understand the space more after that conversation. Thanks again to Ian for joining me. Thanks again to my sponsors, nexo.io, Abra and FTX for supporting the show. And thanks to you guys for listening. Until tomorrow, be safe and take care of each other. Peace.