Arianna Simpson of Andreessen Horowitz joins Nick to discuss The Crypto x AI Convergence, the Truth About Stablecoins, Tokens vs Equity, and Whether NFTs Will Make a Comeback. In this episode we cover:
- Stable Coins and Their Impact on Crypto
- Geopolitical and Regulatory Risks for Stable Coins
- Crypto’s Role in the Financial System and Emerging Use Cases
- Investing in Tokens and Equity
- Institutional Adoption and Market Cycles
- Challenges and Opportunities in the Crypto Market
- Founders and Their Impact on Investment Decisions
- The Future of NFTs and Emerging Technologies
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The host of The Full Ratchet is Nick Moran of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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0:17
Arianna Simpson joins us today from San Francisco. She’s a General Partner at Andreessen Horowitz, a multi-stage venture firm investing across seed through growth. a16z crypto has raised more than $7.6 billion across four funds, and the most recent was $4.5 billion in 2022. Prior to Andreessen, Arianna was the Founder of Autonomous Partners, an investment fund focused on crypto and digital assets. She has invested in notable companies including Mysten Labs, Phantom, Blackbird, and Talos. Arianna, welcome to the show!
0:54
Thanks so much for having me. It’s great to be here.
0:56
Yeah, it’s a pleasure to have you. Can you just quickly walk through your background and your path to becoming a VC,
1:03
sure, I kind of fell down this, this journey a little bit by accident. I initially became interested in crypto following a trip I took around Southern Africa. I ended up in Zimbabwe, and when I was there, I saw kind of the aftermath of the really dramatic hyperinflation that they’d experienced following kind of reckless printing of money by their president, slash dictator, Robert Mugabe. And when I came back to the US, I was discussing what I’d seen with a friend of mine, who was kind of an early Princeton math and computer science guy, and he was telling me about how, you know, Bitcoin was sort of, in a way, the opposite of the, you know, you could never have that sort of hyperinflation with Bitcoin, because there was a fixed supply. And I had never heard of Bitcoin at the time. This was 2012 or early 2013 and but I was very curious, and so I started reading the Bitcoin white paper, and that was kind of my like aha moment. A few months of reading and research later, I was I was pretty hooked, and so I decided I wanted to move into the industry full time. And that kind of led me down the investing journey, initially, just kind of on my own, and then helped launch a fund, and then launched a second fund on my own, again exclusively focused on crypto, the latter and and then joined Andreessen almost six years ago.
2:34
Amazing, so you read the white paper. Have they figured out who Satoshi is at this point?
2:38
Well, Rumors abound, as always, nobody knows for sure, or at least most people don’t know for sure. But I think that actually kind of adds to the mysticism, I think in a way, Bitcoin in particular, has become a bit of a religion, and having that sort of lack of specificity about the origin story, I think is actually very valuable, in a way, and yeah, certainly adds to kind of the the lore of the asset.
3:05
100% Well, good. Can you give us kind of an overview of your thesis? Yeah.
3:11
So I would say that at the firm, our thesis is kind of always evolving. You know, looking back a few years, we had a thesis around the importance of layer one blockchains, and the role that different blockchains were going to play in kind of building out the ecosystem. I think that thesis largely kind of came to fruition. And over the last few years, we’ve thought about kind of the the next generation of of crypto as the third generation of the internet. So you kind of had the first wave of the web, which was really centered around open source technologies, and, you know, had a lot of good principles and ethos behind it, but was not great on the usability front, a lot of you know, you kind of had to be a tech nerd early on in order to use the early internet. And then we had kind of the modern consumer internet as we know it, which was a lot more user friendly, but really wasn’t, you know, basically involved a lot of walled gardens and didn’t necessarily always have the best interests of the users in mind, because a lot of companies were sort of profiting off users’ data and things like that, without really giving much back to the user. And so our kind of high level thesis is that crypto brings the third generation of the internet, where you kind of combine the usability of the modern consumer internet, but with the open source ethos of the first generation of the internet. Now, of course, within crypto is a broad space, and there’s a lot of different sub categories that we think a lot about. I would say I’m currently very much in the form of or in the in the place of thinking through my stable coin thesis, because I think obviously. That is a huge category that has really emerged over the last few call it 18 months. It’s a category that we’ve thought a lot about for a number of years, but really couldn’t reach mass scale until more recently, because we weren’t in a place where we had cheap enough or fast enough transactions to be supported or to support a kind of massive scale industry, until more recently, and so now, I think we’re very much in the thick of forming our precise thesis on that category. What I’ll say for now is it’s really exciting to see a sub sector of crypto that is being used for real world use cases payments across the globe, bringing down costs dramatically for people who need to move money internationally or even within the confines of their own country. And so I think that’s also spurring a lot of other use cases of crypto that are kind of adjacent to stable coins. So yeah, I’m personally spending a lot of time thinking about that at the moment. At the moment.
6:03
What would you say has been the unlock that has allowed stable coins to rise the way that they have and become kind of the hot topic of the moment?
6:13
Yeah, I think it’s really primarily an infrastructure issue. Because, you know, while people were saying, oh, crypto is great for international money movement. It really wasn’t great until you could bring the cost down dramatically. So if you look back a few years, you know at in high traffic moments, you could be spending $10 to send $100 on Ethereum, which obviously is not practical. That’s in no way better than the existing system in many ways, it’s worse. So until we were able to make, you know, throughput rapidly available and cheaply available, it just didn’t make sense. But now we’ve reached a point where the infrastructure is good enough, it’s fast enough, it’s cheap enough that we can really see these, you know, blockchains used for this kind of use case. And I think it’s, it’s really taking the world by storm. I mean, I’m, you know, often in the room with traditional financial institutions, and they’re using stable coin transfers on a daily basis, which is pretty incredible, considering a few years ago, that would have been like a non starter.
7:25
I mean, that is the definition of disruption, right when the cost side of the equation drops to a level that it can be adopted in an unprecedented way, that’s when things tend to explode. What? What was the technology unlock there that makes those transactions much more cost efficient, you know, versus the very expensive sort of traditional Ethereum Bitcoin transactions.
7:53
Well, it was really a combination of improving scalability in existing blockchains and also adding new chains. And that was generally, for example, through the explosion of new layer twos, in some cases, even layer threes that are kind of building one level above the base chains, like L ones, I say layer ones, which are things like Ethereum or Solana, and then you have things like optimism or arbitrum or others that are building one layer above in the stack. And so it’s really kind of a combination of scaling improvements in some of the existing layer one blockchains and adding more and more blockchains that are kind of sitting one tier above,
8:46
you know, I feel like reserve asset risk and liquidity mismatch risk may be underestimated at the moment when it comes to stable coins. You know, somebody exchanges their currency for a stable coin, right? Like the stable Coin Company has to then either create a reserve, right, or as they’re pegging that and they’re exposed to potential runs. You know, what do you think about those risk centers for stable coins and how they can be mitigated.
9:25
Well, in many cases, the stable coins are backed one to one, so that risk is really basically non existent. You know, obviously there’s a lot of attention on the regulation surrounding stable coins. Obviously, the genius bill which was passed earlier this year was was a big step in the right direction there. So I think in in a similar way that these kinds of of things are regulated for the traditional banking industry, we’re going to see, you know, continued attention there. So in general, I think the risk. Of that, you know, systemically are pretty low at this point.
10:04
How do we deal with geopolitical risk? Right as stable coins scale across borders and become kind of this global payments layer,
10:18
can you say more about what you mean by that?
10:21
Yeah, so in in a lot of respects, you know, stable coins are becoming a standard that many are relying on. But you know, there’s, there’s geopolitical uncertainty. There are countries that you know may adopt policy that prevents transactions. Is that a challenge for some of these stable coin companies to overcome?
10:52
It may become so in the future, I would say, at the moment, you know, a lot of the you know, it sort of depends, yes, like if, if a Chinese company were to become the number one issuer of global stable coins, then that might open the door to certain kinds of risks, just because, if it was controlled, for example, by either the Chinese government or A Chinese company, which is therefore also kind of potentially controlled by the Chinese government, then that might, you know, open the door for some risks, because they might be able to kind of affect the issuance or other things related to the stable coin that might cause issues. Currently, I don’t, again, I don’t see that as as a big risk, but it’s something to kind of keep an eye on. What is
11:45
the biggest bull case on stable coins moving forward?
11:50
Probably that they become, you know, the the number one way of moving any kind of money digitally. I think it’s, it’s very likely that that’s the direction that we’re trending in. I think over time, the costs, which are already extremely low, are going to continue to trend down. Which, you know, depending who you are, is a good or a bad thing. Obviously, if you’re somebody who makes money by, you know, shaving a few basis points off transactions, then that is a less good thing for you, although hopefully you end up making it up in volume, because you’re doing such dramatic volumes that even a tiny, tiny sliver of the money that you’re moving is a huge amount of money over time, but It ends up being generally very good things for consumers or businesses who need to move money internationally, because obviously they’re able to do so in a way that’s cheaper, faster, and, you know more, yeah, faster and not limited by banking hours. Because obviously, if you’re able to send money and have it arrive a few minutes later, or even a few seconds later eventually, then that’s a very attractive proposition. If you’re sending an international wire, sometimes it can take a week, which feels crazy in this day and age. So I think seeing, you know, the better part of all global money movements happening in in stable coins is kind of a big part of the bull case. Now, of course, that also means that there will be all sorts of other financial products that will be kind of built on that infrastructure, but I think of kind of that as the epicenter of that bull case. Great.
13:43
You know, we jumped right into stable coins. But I’d love to zoom out to crypto, you know, at a higher level, higher altitude, for a minute. You know, crypto has had it at least a decade now to kind of find product market fit. There’s been a lot of false starts. I mean, I’ve been hosting this show for, Geez, 12 years or so, and we’ve had a lot of folks that were bearish on Bitcoin but bullish on blockchain and a variety of things, you know, over time, nfts, Metaverse, etc, web three, you know, today, what would you say are the two, three use cases where it’s clearly the best tech tool, and what are maybe some of the the hyped up predictions that have conclusively failed to find real sustained utility? Sure.
14:31
Yeah. I mean, obviously stable coins, I would say, is the number one that’s really working and has a lot of utility that’s not related to anything speculative. I think crypto is sort of demonstrating itself as a new version of the financial system, and I think that’s very interesting, because over the years, many investors, ourselves included, have kind of looked for a. There are use cases. And I think at least at this moment in time, it’s really looking like the new financial Rails is the path forward. Now that doesn’t mean there won’t be other things kind of built on crypto rails in the future, but I think in terms of what’s working now, that’s really where we’re seeing the majority of the activity. And you know, that’s a huge use case. I think it’s it’s easy to be like, Oh, well, is it just for finance? And it’s like, No, probably not, if we’re looking at like a 10 or 20 year horizon, but in the near term, that’s probably where we’re going to see the most adoption. And I think that kind of forks off in a lot of different directions. Obviously, we’ve seen kind of the rise of prediction markets. Is another category that’s very interesting and also has a financial basis, but is kind of fundamentally different in nature than something like stable coins. But, yeah, you know, I think obviously this is generally happening outside of the US, due to regulation here, but also the rise of things like perps markets and things like that, other forms of trading which have kind of taken off like crazy in the last few again, call it 12 to 18 months. All of those, I think, are indicative of the fact that in its current phase, crypto is really a broadly financial tool which takes many different forms in many of these different subcategories. Yeah, I think there are other more nascent, exploratory categories that are very interesting but have yet to kind of be developed, which are, you know, things like the intersection of crypto and AI, and again, like even there, there’s generally a financial underpinning. And so, for example, to give a concrete scenario in which the two converge, you know, obviously now the large AI companies are very data hungry. They’re kind of, in many cases, concerned that they’re running out of new data. And one thing that crypto is very good at is incentivizing people to perform some sort of action through financial rewards. And so we’re seeing companies built around this idea of, okay, let’s use crypto incentives, either by paying folks in stable coins or in our own native token to get them to go and collect novel forms of data. So for example, that could be wearing a GoPro on your head while you wash dishes, and selling those to AI companies that are building robotic agents, physical agents, who will actually do physical tasks like that. And the interesting thing there is that if you have a high quality data set, it’s pretty much certain that you can sell it. There’s, there’s really no question on the demand side. And so that makes it a very interesting market to pursue. So you know, again, there’s, there’s, crypto is playing a financial role here. It’s also a role of of kind of incentives and categories like that are starting to emerge, but obviously they’re still quite early.
18:07
And you know, as you talk about the convergence of AI and crypto, you give us a good like consumer example of data collection, what are the sort of overhyped, under hyped areas between the convergence of the two,
18:23
something I think is still under hyped, unless you’re kind of in certain pretty niche circles, is the intersection? Well, I’m kind of going to give you an answer that is, in a way, both overhyped and under hyped, in the sense that, you know, obviously there’s a lot of talk of stable coins, a lot of talk of AI, a lot of talk of of agentic payments. Or maybe not in the general public, but at least in my circles. And I think, you know, people are throwing out all these buzz words, but what those actually mean in practical terms is still a little bit amorphous. I think we’re going to figure it out in the next, you know, call it two to three years. And what’s interesting to me is the fact that, you know, we basically built the internet for people, and actually historically, have gone to great lengths to avoid bots. We didn’t want bots. Everything is, you know, anti bot. You Why do you have to enter Why do you have to fill out CAPTCHAs and things like that? It’s all to avoid bots, which is what agents fundamentally are from using the internet. And I think now we’re going to see kind of a pretty dramatic reversal of that, where actually the bots are doing the majority of the crawling of the internet, and you as a user are maybe interacting with a single interface like a chat GPT or something like that. So while all those those words that I mentioned are kind of floating around and over hyped, in a way, it’s actually still very unclear exactly what the new version of. Of the internet is going to look like and how agents are actually going to be interacting with what have historically been websites designed for people. Because obviously, if you’re designing something for an agent, it’s going to the optimal design is going to look quite different than if you’re designing it for a person. And so I think while there’s a lot of discussion of these terms, there’s very little specificity around what the kind of new versions are going to be and what is going to need to be re architected in order to kind of serve the new, the new needs of users, which, you know, of agents on the behalf of users, really.
20:41
I mean, it’s, it’s a really interesting point, you know, the bots and the agents, because we’re seeing, kind of, the business model for the Internet changing before our eyes. I think Sam Altman mentioned a few days ago, they’re introducing advertising on open AI. And I was doing some clot analysis earlier today, and I reached my token limit. And, you know, it’s just interesting to think about the business model of the internet, and, you know, incentivizing or creating payments based on the number of calls and and the amount of processing that’s being done, which is kind of a re architecture of the way that monetization works today.
21:26
Yeah, absolutely. And, you know, in the same way that there were business models that were entirely new and internet native that had never existed before, things like affiliate models and things like that that didn’t make sense pre internet, there’s going to be new business models that have to be designed around this kind of new agentic future. And you know, I think very likely stable coins will be one of the primary methods of payment for that, because it’s a lot easier to give your agent a wallet with some stable coins and parameters around how they can spend it, rather than trying to give them your credit card, which is specifically designed to not allow for non human usage.
22:14
Let’s talk about the investing side a bit. So tokens remain a somewhat controversial investment vehicle in venture do you invest in tokens and equity or both?
22:27
Yeah, we invest in both. We’ve been long time token investors and tokens have done very well for us in general. I think the reason for that is because they are the critical atomic unit of a crypto network. And so if you are not investing, well, first of all, a token is required to make a real crypto network work, because if you don’t have any value at stake, there is no reason for the participants of the network to remain honest. And so a token network without a token is really just a database. So if you don’t have a token, investing in much of this base like doesn’t really make much sense. I would say, however, that some crypto adjacent companies will never have a token, and that is fine because they need to be more centralized, in which case, you know, for both regulatory reasons and other reasons, it doesn’t make sense for them to have a token. In those cases, we invest in equity, and that’s perfectly fine, like we are. We are certainly open to both. But I think I personally would find it very challenging to invest in the space and not be able to invest in tokens. And fortunately, the the firm has kind of had a long time view that tokens were a critical, you know, way of participating in the space and owning a piece of a network. And therefore, you know, we’ve been doing investments in token form for a long time as well.
24:12
Are ICOs back now? Arianna, you know, and and if so, you know, what are, what are the token launch practices that should be retired, you know, because there has been some bad behavior and the converse of that, you know, what are the best practices if, if somebody is launching a token,
24:30
yeah, you know, I’m not sure we really want them to come back, or at least not in in their original form. Look, I think that the challenge is that is largely a regulatory challenge, because ultimately, you know, a lot of the ICOs that came around the first time weren’t really, did not always do things, by the book. Let’s put it that way. So I’m, I’m hopeful that, you know, we can get to a point. Place where people are able to build their networks in a way that is compliant. And I think, you know, the industry is very much looking forward to, hopefully, a piece of legislation being passed in the next you know, let’s call it six months, which would really help delineate what is allowed, how tokens are classified, what the path to progressive decentralization looks like for people to be able to legally launch tokens in the United States. So all of these kind of topics are very much being discussed in DC. And you know, the current administration is very, very much friendlier than what we’ve seen in the past towards the industry and so on the whole, I’m hopeful that we can get to a good place. But yeah, some of the tactics of past ICOs should remain, indeed in the past.
25:54
I mean, should traditional venture in, just traditional tech companies non crypto, be adopting some of these innovative techniques when it comes to selling equity, you know, selling something that’s more liquid, something that’s more transactable, instead of just the traditional model.
26:11
Well, I think, as always, there are pros and cons to everything. I do think it’s likely that over the coming years we see an increasing trend of tokenizing equity, an important thing to remember is that, you know, if you have equity in a company that’s not valuable, just by tokenizing it, you don’t really get anything. So, you know, you can’t say, oh, here’s an asset that nobody wanted. Now, let’s put it on a blockchain and like, voila. Obviously, that doesn’t really work. So I think you have to kind of keep that in mind, and there are other considerations as well. For example, the fact that companies generally launch a token a lot sooner than companies go public also has its pros and cons. In some ways that can be positive, because employees and investors and others can get earlier liquidity, maybe after a few years, as opposed to 12 years like they might get if they’re waiting for a company to IPO. But at the same time, that also has has challenges for the company itself, because that means that they are kind of a startup that’s also trading publicly, and that’s not always a good thing for the long term, you know, health of a company. So I certainly don’t think that it’s a panacea. We shouldn’t be, you know, moving everything without regard for, you know, we shouldn’t use, oh, let’s put everything on a blockchain. Let’s tokenize everything as kind of the magic bullet solution to everything. I think, as all technologies, these are valuable tools that can be really beneficial in the right circumstances, but can also have trade offs. That’s true of any technology. And so I think, as always, you know, we need to kind of consider that there are pros and cons, and weigh those accordingly for each specific situation.
28:05
So I’m not a crypto investor, and I don’t really have a view on where we’re at in the cycle. I’d be curious to hear where you think we’re at, what inning, so to speak, you think we’re in. But what I have noticed is a lot of the pitches that I have seen, because I do look at some crypto pitches, you know, it’s, it’s technology and solutions that I’ve seen before, like they’re recreating some existing blockchain solutions, you know, that have been done in the past. And of course, we have famous tech examples, like Google was the 19th search engine. So first, being first to market doesn’t mean you’re going to be the winner, but you know, how do you find signal? You know, when you’re looking at a technology that’s been done before, and what’s, what’s a clear sign to you that a project is genuinely differentiated from from previous efforts
29:01
well oftentimes, oftentimes, we’re investing quite early, and so I look very much to the founders. That’s kind of where I focus my attention, personally. Obviously, there are many different styles of investing, and where I tend to focus is really finding the best teams. I think, you know, we’re always we’re fairly open minded in terms of which categories to invest in, because as an investor, it’s very difficult to fully predict the future and know which categories are actually going to be successful. But what is a bit easier, or at least more you can build more of a practice around is finding the best teams. And the reality is, like in this business, you are only as good as the entrepreneurs are, because they’re the ones who are really doing the hard work and really building the the industry. And so. So your job is primarily to just find the best entrepreneurs and then help them be successful. So in many cases, you know, we are investing before the Tech has been fully built, or in some cases, built at all. And so our focus is really investing in the people. Now, of course, you can go really deep, and we have many engineers and many very technical folks on our team who help us to diligence, both technology in the cases where it has been built, and also the founding teams to understand, sort of why they are thinking of making certain architectural choices or things like that. So obviously we do go, go deeply in the weeds of kind of whatever there is, but in some cases, we’ve invested, you know, when, literally, it was like two guys in a pitch deck. So in those cases, you know, we’re kind of just assessing them. So yeah, you know, I would say we’re looking for a pattern of excellence, and that can manifest in many different ways. It could be having gone to a great school, having worked on a really high performing team. It could be being in a very prestigious unit in a cyber security military environment. It could be having built a very well known or well respected open source project. So whatever that that could mean is just generally, this person has produced top tier work in the various environments that they’ve been in before. Also look for depth in terms of how extensively they have explored the idea maze. So how deeply Do they understand their industry. Do they have great answers, even in cases where they’re not sure of something yet, but they have a really solid pattern of thinking and a process for coming to the right conclusions. Are they somebody who other great talent is impressed by and wants to work for? So do we think they’ll be successful in recruiting other great people to join their team. So there’s kind of all these different things that often help us arrive at a at a decision, returning to your earlier question of kind of where we are in the cycle. Obviously, that’s very difficult to forecast from a financial perspective, and so that’s not really focus on. Get out your crystal ball. Tell us all the Unfortunately, our our GC will have my head, no, but, but I think what, um, what I can say that’s different and interesting about this cycle is that so far, a lot of the, I would say the vast majority of the energy has really been coming from the institutional side, and that has been kind of a departure from past cycles, which were really driven by primarily retail energy. We’re seeing a huge amount of interest and uptake from financial institutions of all different kinds, and retail participation in the market has been much more limited. You know, it has always gotten to the point in past cycles where every taxi that you get in, the driver is like telling you about the crypto asset that they bought, or, you know, my cousin’s friend is texting me for token recommendations or things like that. And none of that has really transpired, or certainly nowhere near the levels that we’ve seen in the past. I think, you know, that’s potentially a good thing in that the market feels a bit more sober. But I do think that may also, you know, just be a function of kind of where we are in that process. But you know, we’ve been talking about institutional adoption and the entrance of these more traditional financial players into the space for many years now, and it’s exciting to see that it’s actually happening now in a much more robust way than it was in the past. Previously, there were, you know, many pilots and like some of these activities were limited to the to the innovation group within a financial institution, but very little was actually being used, like in production, and now we’re seeing that shift. So overall, I think that’s, you know, very much a positive side for positive sign for the long term presence, robustness and seriousness of the industry
34:25
does compute become more of a constraint as AI data centers compete for chips and infrastructure?
34:35
I think there will be, I think that will be true, but only for a time. I mean, historically, there, whenever there was kind of a scarce digital resource in the history of technology, you see a period where it’s not readily available. And then over the course of a few years, typically five, the costs come down dramatically. And then you. Have a glut of it, which which typically then leads to other forms of innovation, because people are like, Oh, well, now that computer is really cheap, like, we can do all these different things with it that weren’t really possible before, or at least not at scale. And I mean even crypto, like what we were saying earlier about stable coins now being able to take off because throughput on blockchains is readily available and is very cheap. What happens then you see people using stable coins for payments in a way that they just weren’t before. So I think yes, there will probably be a crunch in the next couple of years, but after that, I think it’s going to be an entirely solved problem, and we’ll never think about it again, and it will seem crazy that there was ever even a time when this was a concern.
35:48
You know, Ariana, as you look across companies like mist and labs, Phantom, Blackbird, Talos, you know each in very different parts of the ecosystem. Are there any patterns or insights that have emerged that kind of change the way that you evaluate new investments.
36:06
That’s a very good question. I’m kind of in the process of a of a thorough review of my own portfolio recently, and I’ve been thinking a lot about this question. So yes, I would say that. Again, returning to the topic of the founders. I think founders who are incredibly deep into whatever it is that they’re building is a necessary, but not sufficient ingredient for success. And what I mean by that is of the companies in my portfolio, and also our portfolio as a team, where we’ve seen the most success, they tend to be ones where the founders deeply, deeply understand their industry, to a you know, level of specificity that is actually really hard to find, and that seems like kind of an obvious, you know, take but you’d be surprised how many folks, particularly in an industry like crypto, which can kind of attract different waves of people in response to sort of the financial hype cycles, Finding founders who really, really deeply understand what they’re building and the constraints and problems and opportunities of their specific sub industry is critical. So to give you an example that that is concrete, I first met the Talos founders when, again, they were, as I said, two guys in a pitch deck. They hadn’t built anything yet, but the two of them had worked to they were both technical, both had impressive academic credentials, and then had worked together at a company called Broadway technologies, which basically built financial infrastructure for the traditional financial market. So they had worked there for many years together, so they knew each other very well, and then, you know, basically came and said, We want to build a similar financial and technical stack for crypto. So here you have two guys, obviously incredibly smart, deeply technical, understand the rails of what they actually intend to build, and are basically taking the playbook that they saw in action at Broadway’s technologies and bringing it to the traditional basically wanting to create connectivity between the traditional financial institutions and this new crypto market. Now that’s also a category in which having a deep understanding of traditional financial markets was critical, and that’s not going to be true of all kinds of crypto founders. For example, if you’re building an NFT marketplace, you don’t need to understand anything about the traditional financial market. That might be more of a hindrance than anything else. But if you’re going to be selling into the biggest financial institutions in the world, you better believe that you’re you’re going to need to understand what these people care about. How do you do testing like you can’t have a product like that and have it fall over. You need to have perfect reliability. You need to have top engineers who understand how to build these things. Anton, the CEO, had also spent time at AQR, where he had built, you know, very technical systems in a hedge fund context. So again, founders who have kind of the right DNA for that and have thought really deeply about the problem set, I think the version of that that applies to each of the different scenarios is what I look for. So in the case of Blackbird, Ben Leventhal has been an entrepreneur focused on restaurant tech for his entire career. He started a food and nightlife blog called eater in New York in the early 2000s then he created Resy, which he sold to Ameri. Express a number of years ago. And Blackbird is his, you know, third act in which he kind of takes the benefits of a blockchain and brings them to to help solve some of the issues that he’s seen in the traditional restaurant tech market. So for example, you know, some of the big platforms, like DoorDash and things like that, are useful to restaurants, but they can also be kind of extractive, because ultimately they kind of set the rules. The restaurants have very slim margins, and they’re having to give a big chunk of those away to the apps, but also have to kind of tolerate it in order to survive. And so, you know, you see kind of the points of friction there. So Blackbird is kind of turning that model on its head and actually giving ownership in the network to the diners, people like me and you who go out to eat, and then also to the restaurants. And again, you know,
40:57
he’s, what does that mean, bringing ownership to the restaurants and the diners.
41:01
So basically, as you go out to eat, if you’re a consumer, you, as you pay using Blackbird, you earn tokens, and those give you the model’s little complicated, but basically, there are, there are two different tokens. One is the equivalent of an airline mile, call it, and that you can spend. That is called Fly, and you can spend it exactly. And then there’s another token which actually confers ownership into the network. And that is, you don’t spend it in the same way, but that gives you an actual stake in the black Blackbird network. And that is, yeah, the token basically is kind of conferring ownership to both users and restaurants in the network. So, you know, again, returning to the point here, I think, is that finding entrepreneurs who have that level of depth and obsession with their particular subcategory is like the key unlock. Now, obviously, there are markets that are better than others, so you know, you certainly need to overlay a great market together with a great founder. Unfortunately, if, if the market is bad and the founder is great, they may have an okay outcome, but they probably won’t have a great one. But if you can find the marriage of a great set of entrepreneurs and a great market, then that’s, you know, where the the real magic happens.
42:30
You’d mentioned nfts, what? What’s the future for nfts?
42:34
Um, I think they’re a little bit on hiatus. And what I mean by that is, I think they will come back. It may take a while, and I think they may be used in very different forms than what the initial, you know, market looked like. It may not have anything to do with digital art. It may have entirely different utility, but I think it’s a it’s a very interesting and useful concept. So I think, you know, we’re just sort of in a in a space between different cycles. And I think eventually somebody else will come up with a use case that will seem obvious in retrospect, because many of the best ideas do, but, yeah, so I think they’re dormant, but certainly not gone forever.
43:25
Ariana, if we could feature anyone here on the show, who do you think we should interview and what topic would you like to hear them speak about?
43:31
Well, I think to mention one of my founders, Anton from from Tallis, would be great. I think so many founders are interested in how, as a young startup, you can start selling into, you know, big companies, whether they’re financial institutions or anybody else, and they’ve done a phenomenal job of that over a relatively short amount of time. So I think there would be a lot to learn from them on that topic. Perfect.
43:59
What book, article or video. Would you recommend to listeners?
44:03
I’m reading a very interesting book called The Maniac about John von Neumann, which I think is it’s very original in that it’s kind of like a novel, but it’s very much based in history. It’s beautifully written and interesting for anyone who is curious about, you know, a pillar of the history of technology and computers in particular.
44:30
Cool, two more quick ones to wrap up. Do you have any habits or behaviors that are a secret weapon
44:37
sleep and exercise? Sounds super basic, but I sleep a lot. Thankfully, I’m able to do so. I know a lot of people wish they could sleep better, but, you know, I’ve got the whole they eat sleep, and the whole stack and, yeah, I think exercise is critical for my ability to function. I think it keeps me energetic and. Clear headed. So highly recommend everyone figure out whatever kind of exercise they like doing and and find a way to stick to it perfect.
45:08
And finally, here, what’s the best way for listeners to connect with you and follow along with Andreessen?
45:13
Probably Twitter. So we have a a 16 Z crypto specific handle on on X, yeah, I always forget it’s called x now and and then myself. I’m also on Twitter at Ariana Simpson.
45:28
All right, she is Ariana Simpson, the firm is Andreessen Horowitz, welcome to the new cycle of crypto. I hope you’re ready for it. And Arianna, thanks so much for joining us today.
45:39
Thanks for having me great to be here.
45:46
All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guest know about it. Share your thoughts on social or shoot them an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over, prepare, choose carefully and invest confidently. Thanks so much for listening.
